Media and Technology – ICT Market Update Global Vision Backed by Local Knowledge

Media and technology – ICT market update Global vision backed by local knowledge

Q1 2021 Contents 3 Introduction 3 Deal activity 2020 – a focus on ICT 4 Looking forward

5 Sector spotlight 5 Fibre networks 6 5G mobile networks 6 Unified communications

8 Market data

9 Selected credentials

10 Sector team 11 Further credentials Introduction

RSM has a successful track record for advising Deal activity 2020 – a focus on ICT clients in the wider media and technology 2020 has been a year of consolidation in the information and communications technology (ICT) sector which includes unified communications, sector with larger corporates and private equity (PE) platform investments continuing to expand through acquisition. Key transaction drivers have been: geographical expansion; enhancement of cloud services, 5G, Internet of Things (IoT), product and service capabilities and an attractive cross-sell opportunity. alternative networks, connectivity and Total deal activity in the UK for the year was down by 18 per cent, however, the resilience of ICT cyber security. We have a specialist team within the media and technology sector is emphasised with the number of transactions only of corporate finance experts with strong reducing by 5 per cent from 206 in 2019 to 195 in 2020. relationships with key corporates and private Q2 2020 was the sole quarter where deal activity was down on 2019, falling from 46 down to 29 transactions. This was anticipated due to the UK lockdown in March, creating uncertainty equity sponsors in the sector. This RSM in the market and stalling investment decision making until Q3 as the UK began to recover. update covers sector deal activity, key issues in transactions, key M&A transactions and a spotlight on unified communications and Reported deal activity by quarter mobile and fibre networks. 80

0 Q1 Q2 Q3 Q4

2019 2020

Media and technology – ICT market update Q1 2021 3 The activity backlog continued to unwind into Q4 as businesses gained a greater understanding of the commercial risks, mid-term economic impact and potential capital gains tax (CGT) changes accelerate exit strategies.

An immediate requirement for greater adoption of cloud technologies within the SME market has accelerated the digital transformation process. With SMEs now moving along the transformation curve at greater pace, long term higher value and sophisticated services are expected to be consumed in a shorter investment horizon.

This resilient and growing downstream demand has led to a robust M&A market comprised of both financial investors and strategic corporate buyers.

Looking forward

5G rollout A 5G national infrastructure will have far reaching impacts across virtually every sector. Touted as the key element to unlocking the true capabilities of Industry 4.0 frameworks, the high-speed and low-latency networks are expected to provide new levels of productivity. The innovation potential introduced by the infrastructure is estimated to add £158bn to the UK economy over the next 10 years through job creation and new business opportunities. Alternative networks

Digital transformation A consequence of the UK government’s aim to deliver a gigabit economy by 2025, coupled with increasing performance demand from end point users has resulted in Digital transformation remains a key area of business focus. The International Data the underlying demand for ultrafast, fibre networks to grow year on year. Corporation anticipate that corporate spend will be in excess of $6tn by 2022. The dynamic state of current working environments will accelerate this spend. Underwhelming build rates of incumbent operators has transformed the market opportunity for smaller, fragmented network builders. With access to capital being Increased PE presence the largest constraint on future growth, long term investment funds have injected significant financial resources, seeking to disrupt a once homogenised market. The long In 2020, PE deal volume in the sector is ahead of the prior year (c15 per cent). Within term recurring revenue models of network assets in combination with extensive build the PE market there are record levels of uninvested capital. Therefore, we expect PE opportunities will continue to be an attractive opportunity for investors. to continue to invest a significant proportion of this capital in media and technology.

Media and technology – ICT market update Q1 2021 4 Sector spotlight

Fibre networks Market share of live connections 50% The emergence of alternative network providers has caused major disruption to a historically homogenised sector. Deployment of new high-speed, high bandwidth infrastructures has created a key point of differentiation for new operators to 40% deliver high performance solutions in B2B and retail markets. 30% The proliferation of new providers has been well received by consumers with the market share of other Internet Service Providers (ISPs) growing to 13 per cent of 20% total connections in 2019, representing c3.5m connections.

While the Build Digital UK target of a national ‘full fibre’ network has softened, fibre 10% to the premises (FTTP) remains the primary technology adopted by the majority of operators. Ofcom’s 2020 summer update indicates FTTP coverage has now - reached 4.2 million premises, representing c14 per cent of total premises and a 2013 2014 2015 2016 2017 2018 2019 c20 per cent increase on 2019. BT Sky Virgin Media TalkTalk Others Demand for greater consumption capabilities is evident with broadband data consumption having increased tenfold since 2013, increasing at c35 per cent compound annual growth rate (CAGR) from 2015 to 2019. Increased adoption Monthly fixed broadband data consumption (GB) Average download speed (Mbps) of smart home technologies and over the top content distribution models will continue to drive demand and support the transition of users from slow, low cost 350 350 technologies to high-speed alternatives. 300 300 250 250 200 200 150 150 100 100 Demand for greater consumption 50 50 capabilities is evident with broadband - - data consumption having increased 2013 2014 2015 2016 2017 2018 2019 tenfold since 2013. Data consumption Average download speed

Media and technology – ICT market update Q1 2021 5 5G mobile networks However, the decision to ban the sale of 5G equipment from Huawei has been escalated to ban installations from September 2021. While the 5G diversification strategy As the UK exits the deepest recession since records began, the expansion of 5G has sought to clarify the future regulatory landscape, operators face a challenge of capabilities is expected to be a key driver for economic recovery. Forecast to revolutionise overhauling infrastructures with compliant vendor technologies. the ways in which individuals, business and machines communicate while unlocking new processes to provide new levels of economic stimuli. With delays expected for the sector’s largest network operators, businesses could seek to accelerate adoption with specialist, localised B2B networks. 5G Testbed and Trial programmes have demonstrated the opportunities of the high- speed infrastructures across a wide range of sectors including: transport; manufacturing; The B2B technology services providers will play a key role in delivering new networking healthcare and tourism. As of June 2020, around 70 5G technologies, products and architectures, innovating software applications and managing integrations to optimise applications have been trialled. local infrastructure environments.

Unified communications

The unified communications market has undergone a transformational shift in the last decade as demand for a cloud-based service suite has permeated the market. Subsequently, traditional consolidation models have looked to add new integration capabilities and diversify its partner programmes to provide greater coverage of a modern business ecosystem.

As a result the market is projected to grow at a c13 per cent CAGR as businesses seek to deliver greater operational mobility and enhance the customer experience.

While historical growth has predominantly originated from large corporates, the permeation of digital strategies and their growing prioritisation across the SME sector has provided new levels of market robustness.

Media and technology – ICT market update Q1 2021 6 Key downstream drivers for adoption Key M&A drivers

Future proof Internal productivity Product and service innovation and in-house capability infrastructure

Workforce collaboration Service innovation Depth of customer base and supplier dependencies

Customer/ employee experience Contracted revenues, renewal rates and churn

With coronavirus forcing the rapid adoption of new technologies amongst the SME base Key transaction risks and accelerating cash flows, market sentiments have remained positive and M&A activity has continued.

Both large corporates and PE firms have been actively deploying capital through focused buy and build strategies as they target a highly fragmented and diversified market. Revenue recognition – in line with market practice

Working capital and client billing cycles

With coronavirus forcing the rapid adoption of new technologies amongst Evolution of contracted income the SME base and accelerating cash flows, market sentiments have remained positive and M&A activity has continued.

Media and technology – ICT market update Q1 2021 7 Market data

Deals in the sector

Date Target Acquirer Deal Value (£’m) 02/12/2020 Comvergent Ltd Solutions 30 SE Confidential 10/11/2020 Babble Cloud Graphite Capital Partners 90 16/10/2020 GTT Communications I Squared Capital 1,579 14/10/2020 Spectrum Internet Limited Infracapital Partners LP Confidential 02/10/2020 Connect Total Communications Radius Payment Solutions Confidential 28/09/2020 Zzoomm Plc Oaktree Capital Management LP 100 19/08/2020 Liberatis Limited (54 per cent Stake) DIF Capital Partners 25 12/08/2020 Sunrise Communications Liberty Global 5,492 31/07/2020 Bigblu Broadband Eutelsat 39 29/07/2020 Community Fibre Warburg Pincus LLC and Amber Infrastructure 400 27/07/2020 Metaphor IT, DoubleEdge and ProfessionalFoehn LDC 30 07/07/2020 ARCC Communications KN Circet Confidential 03/07/2020 OneWeb UK Government and Bharti Global Confidential 01/06/2020 Glide Student and Residential Limited Alinda Capital Partners LLC 200 07/05/2020 Virgin Mobile Inc and Telefonica O2 Holdings Virgin Mobile Inc/ Telefonica O2 Europe 10,050 06/05/2020 Fibrus Networks Limited Infracapital Partners LP Confidential 21/01/2020 FibreNation Ltd and Bolt Pro Tea CityFibre Infrastructure Holdings 200 16/01/2020 Arrow Business Communications MML Capital Partners 110 07/01/2020 ITS Technology Group Aviva Investors Global Services 45

Media and technology – ICT market update Q1 2021 8 Selected credentials

Babble Cloud

RSM has a long-standing relationship with the team at Babble Cloud, a unified Comvergent communications and contact centre solutions provider. Since they were backed by LDC in 2017, RSM have provided due diligence support to the team RSM’s M&A team advised the shareholders of Comvergent on their sale on six acquisitions (including Diva Telecom, Arden Group, Lake Technologies and to Solutions 30 SE, a EuroNext Paris listed leader in solutions for new Corporate Management Telecom) in the last two years and the subsequent technologies. Comvergent is leading provider of 5G build and maintenance sale to Graphite Capital in November 2020. services for telecoms networks. RSM worked with Comvergent over several Babble will continue with their buy and build strategy as they push ahead with years, advising on its acquisition of TJ Telecoms in 2015 and ultimately acting plans to become a £100m revenue business. as lead adviser to the shareholders of Comvergent.

The acquisition provides Solutions 30 with a platform for UK growth.

Vaioni

RSM’s M&A team advised the shareholders of Vaioni Group on their Arrow Business Communications investment by Panoramic Growth Equity. Vaioni Group Limited is an award- winning connectivity and WAN provider, using its ultra-reliable National RSM has acted for Arrow Business Communications for several years. Ethernet Platform, V.E.N. In 2020, provided due diligence support on the acquisitions of Altinet The investment from Panoramic, a leading equity investor in fast-growing, (IT security and storage services) and Click Networks (Cloud and IT Managed entrepreneurial companies, will enable Vaioni Group to accelerate the Services). Arrow Business Communications is a fast-growing telephone and business’s growth strategy. IT services provider backed by MML Capital Partners.

These acquisitions will continue to help Arrow to strengthen its IT capability.

Media and technology – ICT market update Q1 2021 9 Sector team – ICT

James Wild Rob McCarthy Alex Pike M&A, Partner Due diligence, Partner Due diligence, Partner T: +44 (0)7748 840 351 T: +44 (0)7502 936 780 T: +44 (0)7436 268 473 [email protected] [email protected] [email protected]

Media and technology – ICT market update Q1 2021 10 Further credentials

ACAL ENTERPRISE SOLUTIONS ACORA HOLDINGS LIMITED AGENCI AGGREGATED TELECOM ANANA LIMITED NVM Palatine Private Equity Palatine Private Equity Palatine | Beechbrook Horizon Capital

Acquirer/ NVM Acquirer/ Palatine Private Equity Acquirer/ The Bunker Secure Hosting Acquirer/ Selection Services Acquirer/ Sabio Limited Debt Debt Debt Limited | Santander Debt Debt

Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Buy-side DD

Sector TMT- IT support services Sector TMT- IT Consultancy Sector TMT- cyber security Sector TMT- IT services Sector TMT- Contact centre technology

BABBLE CLOUD AVESTA AVOCIS AXONEX CALNEX SOLUTIONS PLC HOLDINGS LIMITED

Acquirer/ CMS Distribution Limited Acquirer/ Capita Acquirer/ Vodat Communications | Acquirer/ Dvorak Bidco Limited Acquirer/ N/A Debt Debt Debt HSBC Debt Debt

Service Buy-side DD Service Buy-side DD Service Buy-side advisory Service Buy-side DD Service Reporting Accountant

Sector TMT- IT hardware reseller Sector TMT- IT contact Sector TMT - telecommunications Sector TMT - unified Sector Engineering and Electronics - management services communications and telecommunications network test and measurement telecom provider solutions

Media and technology – ICT market update Q1 2021 11 CLOUD DIALOGS LIMITED COMPUTERWORLD CONNECT MANAGED DARKTRACE DATONG YFM Horizon Capital BUSINESS SOLUTIONS HOLDINGS LIMITED Summit Partners Equity Partners

Acquirer/ Horizon Capital Acquirer/ Arden Communications Acquirer/ Apiary Capital Acquirer/ Summit Partners Acquirer/ Seven Technologies Debt Debt Group/RBS Debt Debt Debt

Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Buy-side DD

Sector TMT - telecommunications Sector TMT - telecommunications Sector TMT- managed services/ Sector TMT - cyber security Sector TMT- surveillance and IT managed services telecommunications and cyber security

DEVERILL GROUP DOUBLEEDGE PROFESSIONAL EXACTIVE HOLDINGS GLOBAL ROSTERS LIMITED INVESTIS Gresham SERVICES LIMITED LMS Capital LDC LIMITED Horizon Capital Private Equity

Acquirer/ 365IT Acquirer/ LDC (Managers) Limited Acquirer/ Gamma Telecom Acquirer/ TotalMobile Limited Acquirer/ Management buy-out Debt Debt Debt Holdings Limited Debt Debt (MBO)

Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Vendor DD

Sector TMT-IT services Sector TMT - telecoms Sector TMT - telecoms Sector TMT - telecommunications Sector TMT - digital and support communications

LITTLE FISH LLOYDS LONE WORKER OPTIMITY IP SOLUTIONS SOLUTIONS LIMITED LDC August Equity Horizon Capital FPE Capital

Acquirer/ IP Solutions Holdings Acquirer/ LDC (Managers) Acquirer/ Charterhouse Voice and Acquirer/ TotalMobile Limited Acquirer/ FPE Capital Debt Debt Limited | HSBC Debt Data Limited Debt Debt

Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Buy-side DD Service Buy-side DD

Sector TMT - telecommunications Sector TMT - IT managed services Sector TMT - telecom and IT Sector TMT - telecommunications Sector TMT - internet solutions provider service provider

Media and technology – ICT market update Q1 2021 12 PINACL HOLDINGS LIMITED SEVEN TECHNOLOGIES PLAN-NET LIMITED PROTOCALL ONE LIMITED SEC-1 Holdings Aliter Capital YFM Equity Partners

Acquirer/ Acora Holdings Limited Acquirer/ Boston Networks Acquirer/ Connect Managed Acquirer/ Claranet Acquirer/ YFM Equity Partners Debt Debt Limited | Shawbrook Debt Services | Santander Debt Debt

Service Buy-side DD Service Sell-side DD Service Buy-side DD Service Sell-side advisory Service Buy-side DD

Sector TMT - IT managed services Sector TMT - telecommunications Sector TMT - customer Sector TMT - cyber security Sector TMT - surveillance engagement solutions services and cyber security

SOHONET TECHNOLOGICAL VEBER LIMITED SOL-TEC LIMITED TEAMULTRA BUSINESS SOLUTIONS LTD FPE Capital Horizon Capital Palatine Private Equity

Acquirer/ FPE Capital Acquirer/ IT Lab Limited Acquirer/ Computacenter Acquirer/ Horizon Capital Acquirer/ Acora Holdings Limited Debt Debt Debt Debt Debt

Service Buy-side DD Service Buy-side DD Service Sell side advisory Service Buy-side DD Service Buy-side DD

Sector TMT- broadband Sector TMT - IT Consultancy Sector TMT - IT solutions Sector TMT - telecommunications Sector TMT - IT Managed Services service provider

XALIENT HOLDINGS VIGIL SOFTWARE LIMITED

Acquirer/ Infinigate Holdings AG Acquirer/ Boost&Co Limited Debt Debt

Service Sell side advisory Service Buy-side DD

Sector TMT - information Sector TMT - IT managed services security solutions

Media and technology – ICT market update Q1 2021 13 RSM Corporate Finance LLP

25 Farringdon Street Farringdon London EC4A 4AB T: +44 (0)20 3201 8000 rsmuk.com

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