High M&A activity in TMT sector

After 2013’s resurgence making TMT sector the most active in Baltic M&A, by the end of Q3 2014 the deal value is just 2.1% away from matching the annual 2013 total

Global TMT (Technology, Media & Telecommunications) sector saw transactions worth USD 494.8bn during the first three quarters of 2014. This value represents a strong 20.4% increase compared to the same period last year, and marks the highest TMT value on Mergermarket record (since 2001) for a Q1 to Q3 period. After 2013’s resurgence making TMT sector the most active, in Q3 2014 the deal value is just 2.1% away from matching the annual 2013 total.

TMT has been a solid deal driver for global M&A value this year – it is the leading sector by value with a market share of 19.8% of total global M&A value

In terms of global deal value, TMT targets have attracted the most deals during any Q1-Q3 period on record. The 1,934 M&A deals so far this year represents 290 more transactions than during the same period last year (1,644 deals). TMT has been a solid deal driver for global M&A value this year – it is the leading sector by value with a market share of 19.8% of total global M&A value, and it is also the second most active sector by deal count.

Telecom M&A has been the dominant sub-sector targeted with USD 264.1m worth of assets acquired in 2014 so far, representing 53.3% of the total TMT value. Along with two large deals in US – acquisition of Time Warner by Comcast (USD 68.5bn) and acquisition of DirecTV by AT&T (USD 65.5bn) – Europe’s consolidation in the sector continued and helped the sector to see its value so far already surpass the whole of 2013 by 3.7%. Europe’s telco’s M&A value increased by 18.5% to USD 78.4bn during Q1-Q3 2014 from USD 66.2bn in the same period last year.

All three main regions have seen a higher deal count and value in the technology sector, which was also the most active sub-sector based on the number of announcements. Asia-Pacific has already seen more deals and a higher deal value than the whole of 2013 with 295 deals valued at USD 36.9bn, up from 246 deals worth USD 36.6bn.

In terms of regional breakdown, US lead the show with the 54.4% of total value of TMT transactions globally (see below), with Europe and Asia following. Principally, we could enjoy the same trends in the Baltics and CEE – TMT sub-sector M&A held 54% share in the Baltics alone.

The key areas, drivers and challenges for TMT M&A market for 2015:

• Telecoms: Further consolidation will definitely take place. Obviously there will be many in-sector transactions but most likely we will see much more FMC (Fixed-Mobile-Convergence) cases. The challenging question is ‘who will drive the next wave of consolidations – fixed or mobile operators?’.
• Infrastructure ownership: Many operators should be realising the value from towers and other such assets, but new network sharing models, and thus – joint ventures, will be seen, whereas investing into 4G (or already 5G?) and NGN should be challenging goal for market players.
• Convergence and media: Players will face more issues with delivering the content while leveraging the network – battle for profits from multimedia services and content will continue.
• Future of TMT: Most of the business models in telecom and media have become mature and exhausted, market will be driven by those players who will succeed in investing into innovation and adjacent markets, whereas technology is driving transactions from the cloud to M2M.
• Deal financing: We will see return of Private Equity, LBOs and IPOs, but can small regions (e.g. CEE, Baltics) really benefit from increasing equity tickets of “full-of-dry-powder” PE’s?
• Regulation and risk: How government policies and regulators can facilitate competition, innovation and growth?

For more information on M&A opportunities in the TMT sector please contact Mr Peep Põldsamm:

PEEP PÕLDSAMM +37254510100 Send Email