Tech, Media, Telecoms

Advisers who understand your sector

Large tech players have substantial cash reserves available for acquisitions and are willing to pay for the right businesses as they look to build and consolidate in areas including Software-as-a-Service, Artificial Intelligence, Machine Learning, Data Analytics, Digital and Performance Marketing, and IP-based technology.

PE firms are also showing a very high interest in the sector, due to opportunities for high growth and the access to recurring revenue streams that the tech industry provides.

How much are companies worth in the Technology, Media and Telecoms sector?

The following 3 graphs will give private business owners a broad indication of the value of their business:

1. The Enterprise Value to EBITDA* multiples on which comparable listed companies are trading

TMT graph 1 - reversed

 

At the end of H1 2019, the global, all market average Enterprise Value to EBITDA multiple for listed TMT companies was 13.8x. This was greater than for the previous six months and slightly up on the previous year, when listed TMT companies were trading on a multiple of 12.5x. Within the TMT sector, trading multiples varied between 7.7x and 19.1x across the range of sub-sectors. Smaller businesses generally traded on lower multiples.

* EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation
† Note, the Enterprise Value to EBITDA multiples above are for listed businesses, and it is generally the case that privately owned businesses are valued at a discount. Listed company data was accurate at 01/07/2019

 

2. The multiple of EBITDA paid by acquirers of comparable businesses

TMT graph 2 - reversed v2

 

The average multiple of EBITDA paid globally in TMT transactions has declined slightly over the past few years. It currently stands at 10.4x. When reviewing these multiples we break out businesses in the range $5-150m, as they tend to have unique attributes which affect their valuation. Smaller businesses have generally been sold on lower multiples.

3. The volume of M&A transactions and acquisitions

TMT graph 3 reversed v2

 

In H1 2019, there were 3,459 transactions globally in the TMT sector. This is slightly down on the preceding 6 months, when there were 3,538 transactions. Although slightly declining over the last few years, the high number in the last 6 months suggests demand for TMT businesses remains buoyant.

 

For further information as to how these valuations and statistics are computed, and their impact on your transaction, please contact us.

Key tech, media, telecoms market updates:

1

Cutting edge tech forces change

Cutting edge technology will continue to disrupt as AI, quantum computing, big data, robotics and blockchain start-ups continue to enter the market and big tech companies look to innovate. Existing firms will have to work hard to adapt their operating methods to keep up with such dynamic market conditions. Non tech firms looking to integrate with this technology account for 48% of UK M&A activity.

2

China slows down but potential positives

China’s TMT sector is in a slump. With several company specific crises, increased regulation and deteriorating trade relations with the US, the growth of recent years is slowing.  Although influencing cross border M&A, with China implementing policies to reduce limits on foreign ownership in the automotive, banking, securities and insurance industries, the outlook for M&A appears somewhat positive.

3

Lack of cyber security breaching deals

Cyber security is becoming more important in M&A deals, as the potential for a breach or issue can put a deal in serious jeopardy. Forescout Technologies Inc. completed a survey across seven countries of 2,700 IT and company decision makers, with 53% reporting their organisation had encountered a critical cybersecurity issue or incident that endangered a deal.

4

5g may trigger adjacent acquisitions

5g technology was released in the UK at the end of May on the EE network with Vodafone quickly following suit and the other two major telecoms players planning a release before the end of the year. With the potential effects 5g technology can have on adjacent industries, for example streaming video and music services, a report by EY predicts a 10% increase on telecom M&A activity in the next 12 months compared with the long-term average.

5

Traditional TV set to decline

OFCOM reported that traditional TV watching makes up 69% of all TV watching time, but that this is rapidly declining as online streaming platforms continue to grow. There has been a drive by traditional media companies such as the BBC and Disney to compete with the likes of the now established online streaming providers such as Netflix, Now TV and Amazon Prime. 

6

PE firms more active in tech & telcomms deals

Private equity buyers are, on occasions, outbidding trade buyers. The big 5 tech companies are being challenged by private equity, who are utilising their dry powder and leverage capabilities. This contrasts with 2017 which saw certain private equity firms losing out on the big deals to the cash-rich, tech firms.

Please note data sources compiled by Corbett Keeling