The Changing M&A Landscape
Despite obvious concerns around Brexit, the M&A landscape in the ICT sector looks as vibrant as ever, with unprecedented levels of private equity investment driving transactions, ensuring that there has been growing pool of trade buyers for ICT resellers. In addition to the increase in the number of ‘buy & build’ resellers, there are four other areas driving competition and value for the most strategic assets; convergence, expertise, digital transformation, and internationalisation.
There have been numerous deals between traditionally telecoms focused resellers acquiring IT and managed services providers (including serial acquirers Daisy, Chess and Adept), and IT and managed service providers acquiring traditional telecoms resellers. As convergence grows across a wider range of solutions, it adds to the diversity of the buyer pool. A good example is the number of deals involving managed print providers, many with private equity investment, who want to acquire ICT expertise, opening up a new convergence horizon between these two industry sectors.
Currently we are seeing far less focus on cost synergies from buyers, as most are looking to acquire expertise (either in the form of people or technology assets). There have been numerous deals driven by acquiring expertise that can deliver long term strategic growth to a previously asset lite telecoms resellers, with examples including Southern Communications acquiring MyPhones, and Vodat acquiring Axonex.
Another area that is driving sector M&A is digital transformation, with Sabio being a prime example of a traditionally ICT focused reseller building on opportunities in digitisation with the acquisitions of Rapport, flexAnswer and Callware.
Finally, it is a barometer of the health of the UK ICT sector that despite Brexit there is still no shortage of overseas buyers for even relatively small ICT resellers. We recently completed a transaction for a client, Network Telecom, who was acquired by a German private equity backed Dutch unified communications provider (Enreach), who felt that having a UK platform was essential for any pan-European provider. German owned Cancom continue to acquire UK assets, most recently Novosco, and US buyers continue to look for UK targets (Vonage acquiring New Voice Media, and EvolveIP acquiring the Voice Factory being two examples).
As we said back in 2011 “we continue to get more calls from prospective buyers than sellers, and………….there are a number of new entrants buying into the sector and the cycle of consolidation rolls on”. With the current appetite for investment in the sector, the options open to you are broader than at any time in the past 10 years. With the right planning and preparation we have great conditions to realise your ambitions for your business.