Renforcement de notre équipe « Technologies et Services industriels »
Investec a le plaisir d’accueillir Matthias Odrobina au poste d’Associé au sein de l’équipe allemande et en tant que membre senior de l’équipe internationale dédiée au secteur des technologies couvrant l’Europe, le Royaume-Uni, l’Afrique, les États-Unis et l’Asie. Il apportera des conseils M&A sur les opérations transfrontalières.
Matthias apporte une expertise sectorielle approfondie dans le domaine des technologies industrielles (avec un accent particulier sur les industries intelligentes, les logiciels B2B et la transformation numérique).
Il possède plus de 20 ans d’expérience auprès des conseils d’administration et des CEO dans le cadre de fusions, d’acquisitions, de cessions, de financements et de rachats, avec une spécialisation particulière dans le secteur industriel, les logiciels B2B et les services aux entreprises.
Contact: Matthias Odrobina
Retrouvez l’entretien de Michel Degryck, Managing Partner, dans le numéro de NextStep n°22 de juin 2025 consacré aux cessions d’entreprises détenues par des fonds d’investissement.
Les cessions des entreprises détenues par les fonds se font toujours au compte-goutte malgré la pression des investisseurs pour le retour de liquidité et l’allongement de la durée de détention firtant avec les sept années en moyenne. (…)
Extrait :
“”– Michel Degryck, Managing Partner, InvestecLa situation est très contrastée selon la taille des entreprises. Sur le large cap, les transactions sont gelées car les cibles sont plus exposées à l’international et aux incertitudes de l’environnement macro-économique, d’une part et à la raréfaction des acquéreurs potentiels à des valorisations conformes aux attentes des cédants, d’autres part.
Dans un marché des fusions-acquisitions de plus en plus exigeant, la question de la « préparation à la cession » (exit readiness) prend une importance croissante : stratégie, indicateurs clés, equity story, vendor due diligence – comment l’intégration précoce de la planification de la cession dans le développement stratégique de l’entreprise devient un facteur clé de succès.
Que peuvent réellement apprendre les dirigeants et propriétaires d’entreprise des rois du deal – les investisseurs en capital-investissement – en matière de préparation à la vente, afin de rendre les résultats de cession plus prévisibles et optimaux ?
Dans cet épisode de What’s up, Corporate Finance?, Thorsten Gladiator, Managing Partner chez Investec, et Sebastian Markowsky, Managing Director, échangent avec le journaliste économique Michael Hedtstück sur les enseignements que les entrepreneurs peuvent tirer des fonds de private equity en matière de préparation stratégique à la cession.
Les questions clés abordées :
- Que peuvent réellement apprendre les entrepreneurs des « Kings of deals » – les investisseurs financiers – en matière de préparation à la cession ?
- Existe-t-il un décalage manifeste entre la perspective à long terme adoptée par les fonds de private equity pour préparer leurs sorties et les horizons de planification M&A des dirigeants d’entreprise ?
- Quels sujets doivent impérativement être clarifiés en amont d’un processus M&A, plutôt que d’être laissés à l’appréciation de l’acheteur potentiel ? Dans quelle mesure est-il essentiel de bien répéter l’equity story et la présentation du management ?
- Quelle est la réalité pour les entreprises de taille intermédiaire ? Dans quelle mesure les dirigeants sont-ils prêts à s’inspirer des pratiques des fonds de private equity ?
Cliquez ici pour écouter le podcast :
What’s up, Corporate Finance? est un blog et un podcast du Finance Think Tank Network. Grâce à des analyses régulières et des décryptages approfondis sur des sujets liés au private equity, private & venture debt, corporate & investment banking, M&A, au financement et au restructuring, ils décryptent l’univers de la finance d’entreprise avec expertise et passion journalistique.
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The landscape of IT Managed Services is undergoing a significant transformation. As the sector experiences a notable uptick in consolidation, growth and innovation, we are taking a closer look at five key trends that are shaping the future of Managed Services in the Netherlands. This insight is part of our 2024 IT Services report.
5 Key trends in the Dutch IT Managed Services market
1. Market Momentum
The Dutch IT Managed Services market is on a fast track, with robust growth projections. By 2025, the market is expected to achieve a compound annual growth rate (CAGR) of 10.2%, reaching a valuation of €12.4 billion. This momentum highlights the increasing reliance on IT Managed Services within the Dutch business ecosystem, reflecting broader global trends in the digital transformation of industries.
2. SME Dominance
Small and medium-sized enterprises (SMEs) are the backbone of the Dutch Managed Services market, accounting for over 60% of the industry. This dominance underscores the critical role that SMEs play in the national economy, leveraging IT Managed Services to enhance competitiveness, streamline operations, and mitigate risks associated with technological disruptions.
3. Data Defense
With cybersecurity increasingly at the forefront of IT strategies, the Dutch market is no exception. The cybersecurity segment within Managed Services is projected to reach €3.5 billion by 2025. Notably, in 2022, approximately 39% of companies in Europe reported experiencing at least one cyberattack, highlighting the crucial need for robust cybersecurity solutions.
5. Hybrid Solutions
For larger organizations, hybrid IT environments are becoming the strategic choice. These solutions combine the benefits of on-premise and cloud-based systems, optimizing access and enhancing security. Hybrid environments facilitate a more agile response to business needs, offering a scalable approach to managing complex IT infrastructures.
Looking Ahead
As we continue to analyze the evolving IT landscape, the pivot towards IT ‘as-a-service’ models is increasingly apparent. These models offer compelling advantages, including financial stickiness and adaptive capacity, which are essential in today’s dynamic market environment, and also key drivers for both buyers and investors.
For more information and our full 2024 IT Services report, please contact Maurits Odekerken or Ron Belt.
Interview
As we enter 2024, the M&A landscape shows signs of recovery, albeit cautiously.
In the episode of the February 20, 2024 of No Ordinary Wednesday, Jeremy Maggs in conversation with Investec experts Jürgen Schwarz, Marleen Vermeer, and Kilian de Gourcuff, Investec’s Head of Cross-Border Finance and International Advisory Charles Barlow, on what key sectors, trends and risks to keep an eye on in 2024.
Click here to listen to the podcast:
Where does opportunity lie for dealmaking in 2024? (investec.com)
Hosted by seasoned broadcaster, Jeremy Maggs, the No Ordinary Wednesday podcast unpacks the latest economic, business and political news in South Africa, with an all-star cast of investment and wealth managers, economists and financial planners from Investec. Listen in every second Wednesday for an in-depth look at what’s moving markets, shaping the economy, and changing the game for your wallet and your business.
Listen to the best of No Ordinary Wednesday: https://www.investec.com/en_za/focus/no-ordinary-wednesday-with-jeremy-maggs.html
Sustainable underlying trends, attracting interest from all market participants, coupled with high risks and investments in the development phase are paving the way for a thriving market.
The European M&A market for industrial software continues to be fuelled by consolidation across all end market segments. Ongoing trends of digitalization within the industrial sector, increasing convergence of sectors and the demand for more (factory) automation to counteract the increasing shortage of talent are just a few selected trends contributing to the growing interest from private equity firms and strategic players crossing sector and geographic borders.
Software as a solution to competition gaps
The advancement of Industry 4.0 implementation, integrating digital technologies into the manufacturing process, positions digitalization at the core of most sectors. Compliance with this trend has become inevitable for companies striving to stay at the forefront of innovation. Both micro- and macroeconomic trends, such as skilled labor shortages, ESG policies, and reshoring of complete production plants, are accelerating this process. Meanwhile, safeguarding assets is essential as the industrial system becomes more (cyber)connected and online. The German industry, accounting for approximately 25% of the country’s GDP, is considered critical infrastructure, emphasizing the need to ensure data integrity.
Market interest from different strategic angles
Software has always attracted various buyer pools with different strategic interests. Financial sponsors are particularly interested in recurring and scalable revenues combined with high-profit margins. In contrast, strategic players seek capabilities expansion and the “softwarization“ of their hardware (IoT). The industrial software market demonstrates sustainable growth underpinnings, with optimizing and modernizing the IT landscape being more crucial than the hardware itself.
Deal examples:
Growth capital unlocked for Desk by Software Partners Group
“SPG is a partner that combines excellent technology know-how and buy & build expertise, which will enable us to reach the next stage of our buy&build journey.” Volker Schneider (CEO, Desk)
wenglor sensoric group acquires Berlin based AI and Image processing Start-Up deevio
“With the acquisition of deevio GmbH, we have this opportunity to further strengthen our expertise and capability in the field of machine vision. In recent years, deevio has developed a great deal of know-how in using AI and data science for image processing applications within the automation industry, which is a considerable advantage for us.” Rafael Baur (Managing Director, wenglor)
Data (analytics) driven production: The new standard
New levels of data accessibility have been achieved, with standard APIs implemented across the entire IT landscape of the industry and collaboration between industrial technology providers. Data lakes are formed through a multi-sourcing policy from (digital twin) machinery and sensors, the IT architecture (ERP, MES, etc.), and human-generated data (quality management, observations, etc.). Recent technologies, such as AI, cloud computing, and predictive models, enable the treatment and analysis of the vast amount of generated data. Decision-makers now have access to aggregated and qualitative information for data-driven decisions.
Deal examples:
Majority investment of FSN Capital in Lobster
“In a world of exponentially growing amounts of data, complexity of data flows and application stacks, Lobster offers easy to use, economic and powerful software solutions to integrate data, applications, and processes of all forms and variations.” Robin Mürer (Co-Managing Partner, FSN Capital Partners)
The same old challenge… – make or buy
The ultimate question in growth strategies making companies consider M&A as an option is whether to make or buy. The combination of high development costs (in time and opportunity) but risky success rates is the primary rationale for market activity within (industrial) software to expand its capabilities and/or geographical footprint. The principle of Moore’s Law is still true in today’s technology ecosystem. Rapid cycles leave no room to develop everything in-house, acting as a catalyst for market activity.
Deal examples:
“Best Practice IT Solutions’ cloud-based software will complement Aptean’s current Food & Beverage ERP offering and enhance our ability to serve beverage companies.” Duane George (GM, Aptean)
“By bundling the expertise of tisoware and Persis, we create a uniquely comprehensive HR ecosystem for our customers. Together with solutions for access and building security (Security) and for optimizing production processes (MES) in the context of Industry 4.0, we offer an overall workforce portfolio for medium-sized enterprises in the DACH region.” Markus Steinberger (CEO, tisoware)
Our industrial software index outruns other indexes
Since 2019, the Industrial Software Index has risen almost threefold, while the main Industrial Technology sector has doubled. A new all-time high has been reached for market capitalization.
The main macroeconomic events over the last 5 years have similarly impacted all indexes, but industrial software market capitalizations seem to recover more quickly.
Valuations for listed industrial software companies, both EV/EBITDA and EV/Sales, remain high, with forward multiples at ca. 11x sales FY2024.
So, industrial software – hot or not?
Most checkboxes are ticked for answering the question positively:
- High valuations are fueling market activity.
- Growing interest, both from financial investors and large software consolidators.
- Sustainable market movers, with both strategic and financial rationale, are dictating most transactions.
Investec Industrial Technology
The Investec Industrial Technology index tracks daily developments in sectors such as Flow & Process Control, Robots/Motion, Electronics/Control / Connect, Integrated providers, Measurement/Vision Tech, Industrial Software, Intralogistics/System integration and Machinery.
The index includes valuations, growth projections, profitability margins and other metrics.
Would you like to learn more about valuations, buyer activity and current opportunities in the market?
Please do not hesitate to contact us.
You can find more information on our website at Industrials | Investec
Renforcement de l’équipe TMT de Investec
Investec a le plaisir d’annoncer l’arrivée de Sebastian Markowsky en tant qu’associé basé en Allemagne. Sebastian Markowsky renforcera l’équipe TMT, au sein de laquelle il intervient principalement en M&A et en corporate finance dans les domaines des services informatiques, de l’édition de logiciels, de la transformation digitale et du marketing digital.
Sebastian possède plus de 15 ans d’expérience en matière de levée de fonds et de transactions M&A tant en Allemagne qu’à l’international.
« Investec offre une solide plate-forme et un portefeuille de services très complet permettant de soutenir les entrepreneurs du secteur technologique du mid-market. Avec Investec à nos côtés, nous pouvons offrir à nos clients européens une gamme très complète de solutions variées et ciblées ».
Sebastian Markowsky, Associé, Investec
« Je suis ravi d’accueillir Sebastian. Sebastian apporte une un grande expérience de banquier d’affaires dédié aux Services IT et la transformation digitale. Son arrivée nous permet de renforcer notre équipe, dans un contexte où les enjeux digitaux prennent une place croissante dans tous les secteurs que nous couvrons.«
Ervin Schellenberg, Associé et membre du board, Investec Europe
Avant de rejoindre Investec, Sebastian a été responsable de la stratégie d’un éditeur de logiciels de gestion de la compliance aux États-Unis. Auparavant, il a est passé par différentes banques d’affaires en Suisse, et chez GP Bullhound, et a commencé sa carrière en M&A à la Deutsche Bank AG à Francfort.
La passion de Sebastian pour les technologies de l’information, la transformation digitale, et le marketing digital, se reflète dans les relations clients qu’il apporte (entreprises du mid-market, start-ups, acteurs du private equity, acteurs du capital développement, et des family offices).
Il siège actuellement au conseil de surveillance d’Advanced Blockchain AG, une société cotée à la Bourse allemande qui se consacre à l’incubation de projets de blockchain. Sebastian apporte une grande connaissance et de nombreuses connexions au sein du marché des nouvelles technologies, tant au niveau allemand qu’au niveau international.
Financial restructuring for Shareholders & Lenders
Helping clients to navigate uncertainties while putting their businesses back on track
Interview with Jürgen Schwarz, Managing Partner of Investec about Restructuring with the help of a M&A process:
- How did the market change in recent years?
- What is your approach?
- Giving an example
This video answers these questions and give you an idea and overview in a few minutes.
Sale from insolvency
Due to our pan-European presence and track record we are well placed to advise on international and cross-border restructurings.
Our international sector teams implement more than 50 transactions p.a. and in many sectors they know the active buyers, the acquisition criteria, the behaviour of individual decision makers. We also have an up-to-date overview of the market prices paid, which vary considerably over time and depending on the positioning in the sector.
Investec has direct access to numerous international equity and debt capital providers and has carried out numerous restructurings ranging from approximately 10 million Euros to several billion Euros.
You know your company best but selling it to a suitable buyer at an attractive price is often a major challenge.
Interview with Ervin Schellenberg, Managing Partner of Investec about finding the right partner for medium-sized companies:
- How to find the right partner for a medium-sized company?
- Is my company ready for a transaction?
- What is the equity story?
- Giving an example
This video answers these questions and give you an idea and overview in a few minutes.
Our wealth of experience from many years of successful transactions and our access to relevant decision-makers in national and international buyers ensure the best possible result for you.
Investec has the core competences required to sell companies and has successfully completed hundreds of transactions across all major industries.
Financing and Market trends | 2023
Why the German industry has a great need for investment.
German industry is facing significant challenges, including the effects of digitalization, the shift from analogue to digital business models, the need for environmental protection measures and sustainable production processes, as well as demographic change, which is leading to a shortage of skilled workers and an ageing workforce. In order to successfully master these processes, significantly higher investment efforts are required than in the past.
Digitalization and Industry 4.0: At present, Germany ranks at best in the middle of the EU in terms of the use of digital technologies in the economy1. German industry must invest in digital technologies and automation to remain competitive. However, in order to catch up with comparable countries, IT and digitalization investments in Germany would have to double or triple from EUR 49 billion to EUR 100 to 150 billion annually. In the SME sector alone, digitalization expenditure would have to increase from EUR 18 billion in 2019 to EUR 35 to 50 billion per year.
Sustainability and environmental protection: Companies are increasingly focusing on environmentally friendly technologies and processes in order to achieve sustainability goals and reduce their environmental impact. These investments not only serve to protect the environment, but also contribute to long-term competitiveness. A recent study commissioned by KfW puts the climate protection investments required to achieve the goal of climate neutrality by 2050 at around EUR 5 trillion or around EUR 190 billion per year1. This enormous sum makes it clear that considerably greater efforts will be required to achieve the target than has been the case to date.
Read the complete Insight here.
Author: Sebastian Lawrence, Henry Barnes and Kwanele Mokgohlwa | Technology Investment Banking
At Investec, we see huge opportunities open to DevOps companies, across both software and services, and the investors backing them. As the industry continues to develop, we also expect the sector to heat up with more M&A opportunities on the horizon.
Organisations are under increasing pressure to innovate and deliver new digital experiences to their customers, partners and employees. As they seek to respond to these challenges, companies are realising the importance of efficient software development and deployment, coupled with new working practices that bring teams together effectively.
DevOps aims to solve these issues, bridging the gap between software development and IT operations to deliver applications and services at high velocity. The importance of DevOps is clear when you consider the high growth forecasts for the market – which is expected to grow at a 20% CAGR from 2020-2026 with an estimated total market size of $18 billion by 2026.
As Investec’s advisory team for the Technology sector, we see huge opportunities open to DevOps companies, across both software and services, and the investors backing them. As the industry continues to develop, we also expect the sector to heat up with more M&A opportunities on the horizon.
What is DevOps?
Combining the words ‘development’ and ‘operations’, DevOps is a combination of practices, tools and philosophies that increases an organisations’ ability to deliver and deploy software applications and services at high velocity.
A DevOps approach removes the barriers between development and operations divisions. These formerly siloed teams, often merge into a single team where the engineers work across the entire software development lifecycle and have multidisciplinary skills.
You can visualise a DevOps process as an infinite loop, comprising six phases (the software development lifecycle or SDLC):
- initial process planning
- software code creation
- integration and delivery
- testing
- deployment
- monitoring and management
Enterprises are looking to DevOps to exploit modern technologies across their application lifecycle. The result of this is shorter release cycles and time-to-value, higher-quality, better consistency, reliable deployments and increased agility.
By automating the software development pipeline, it becomes possible to ensure the reliability and stability of an application after every new release. When the applications perform correctly in production, companies reap the benefit of greater customer satisfaction.
M&A Activity Is Picking Up
According to IDC, over 500 million new digital applications and services will be developed and deployed by 2023 – the same number of apps that have been developed over the last 40 years. With such high demand, it’s no surprise that M&A activity has been growing over the past few years.
While M&A activity has historically been dominated by trade buyers, interest from the private equity community is increasing – and now accounts for 40% of deal volume.
As the DevOps market continues to rapidly expand in an already fragmented and competitive market, we expect this to drive increasing sector consolidation as large and better funded acquirers look to increase their capabilities.
We expect the services providers to be net beneficiaries of the DevOps market growth; in particular, those that have demonstrated significant technical expertise and achieved stellar growth. Both trade and PE-backed assets recognise the need for talent, resulting in increased M&A consolidation for scaled, high-end consultancy assets in the market.
There is significant room for further services businesses to enter the market, particularly as the software landscape is continually evolving – which is why we expect further M&A consolidation to occur in 2022.
Read our report for more insight.
Authors: Sebastian Lawrence and Grace Baiju | Technology Investment Banking
The global Video Gaming market has boomed in recent years, with games like Fortnite capturing millions of daily players. As our latest report shows, deal flow has remained strong through the pandemic, and has not showed any signs of slowing down.
When it announced the $68.7 billion acquisition of video game company Activision Blizzard this January, Microsoft made the market sit up and take note.
The largest acquisition ever made by a technology company, the deal turned Microsoft into the third largest gaming company in the world by giving it ownership of franchises such as “World of Warcraft”, “Call of Duty”, and “Candy Crush”. Announcing the news, Microsoft CEO Satya Nadella said that gaming “is the most dynamic and exciting category in entertainment across all platforms today”, and will be central to the development of the metaverse.
Microsoft is not alone in its excitement about the future of entertainment. The Video Gaming market is rapidly expanding in terms of deal flow, with the past two years seeing healthy amounts of activity despite challenging economic conditions.
That’s why, notwithstanding a difficult IPO market, we expect gaming to be one of the sectors that rebounds quickly as public markets re-open. We also anticipate that M&A activity will remain active as the industry continues to consolidate.
Like many sectors, gaming is adapting to a changing world.
As our latest market update finds, some of the latest trends have been beneficial to gaming companies. With consumers spending more time gaming, the number of global players has been growing steadily.
There has also been more consolidation. It’s not just the world’s largest technology companies like Microsoft that are interested in the sector – the last few years have seen a wave of M&A activity by other trade players and private equity firms.
Nevertheless, there are a few challenges ahead. Video gaming is expected to feel the effects of inflation on consumer decisions – after all, lower disposable income is likely to be a drag on game sales. That said, the industry’s subscription models are likely to prove more resilient than purchases of individual games.
How do investors value gaming companies?
There has been a wave of dealmaking for Video Gaming companies across both private and public markets. 2021 saw roughly 30% more deals and an average 45% increase in transaction value from 2020.
For Video Gaming businesses that are looking to build a premium valuation, it’s important to note that investors tend to look at both financial and non-financial metrics. Bread-and-butter financial metrics such as revenue and earnings growth are obviously crucial, but when it comes to gaming there are plenty of other factors that potential investors are likely to consider.
With strong tailwinds such as the fast growth of mobile gaming, expectations for the Video Gaming sector are buoyant. As the second half of the year begins, investors may find that the game has just begun.
Read our report for more insight.
Thorsten Gladiator, Managing Partner Investec: As corporate finance advisors, we see the importance of ESG in general and sustainability aspects in particular in almost every transaction, both in M&A situations and in financing mandates.
Equity and debt investors place a strong focus on ESG compliant investments in the interest of their financiers and / or due to investment criteria that are binding for them.
For business sellers as well as CFOs, this has pricing and process consequences:
- A clearly defined and documented ESG strategy creates confidence among investors and the company’s other stakeholders
- The same applies to the (early) implementation of legal requirements for sustainability reporting (CSRD)
- A focus on sustainability aspects provides positive differentiation features compared to competitors and can thus have a value-creating effect
- The lack of a corresponding strategy can lead to price discounts in the valuation as well as higher financing costs
- In the due diligence phase of a transaction, lack of ESG information leads to prolonged processes, higher management burden and the withdrawal of investors with clearly defined ESG investment criteria
The following article from AIM – Advice in Motion highlights the various aspects for medium-sized companies and shows examples of successful ESG strategies.
Opportunities and challenges of sustainability for smaller and medium-sized enterprises
The sustainability performance of a company today is the decisive factor for its competitiveness tomorrow. In this context, medium-sized companies in Germany in particular are faced with tasks whose extent has not yet been fully recognized in many cases and which involve major challenges in terms of resources, time and expertise.
Even though sustainability is a ubiquitous and much-discussed topic that is omnipresent both in the media and in public debate, it is by no means a new issue. Rather, sustainability has a long and exciting history that spans centuries and has been shaped by various actors and concepts.
Where do the roots of sustainability lie?
As far back as the Middle Ages, the moral ideal of the honorable merchant played a decisive role in promoting sustainable principles. Many a family entrepreneur rightly sees himself or herself in the tradition of the honorable merchant and aligns his or her business conduct with principles such as honesty, responsibility and sustainability.
In the 18th century, the Saxon chief miner Carl von Carlowitz coined the term sustainability in his work « Sylvicultura Oeconomica. » He introduced the idea that forest resources should be managed sustainably by cutting only as much wood as can naturally grow back. What was interesting about Carlowitz’s concept of sustainability was that sustained yield was precisely not antithetical to sustainability. Rather, forestry yield acted as the cornerstone for this oft-cited source of the concept of sustainability. The mining area of the Erzgebirge was simply dependent on the sustainable use of wood for construction, mining and smelting purposes.
Another significant milestone in the development of sustainability was the Brundtland Report, published in 1987 under the title « Our Common Future ». The report defined sustainable development as « development that meets the needs of the present without compromising the ability of future generations to meet their own needs. » Here, sustainability clearly went beyond a purely economic consideration. The report emphasized the need to integrate economic, social and environmental aspects to create a sustainable future.
Since then, the understanding of sustainability has evolved to encompass a variety of dimensions. One key concept is ESG (environmental, social, governance) criteria, which encompass environmental, social and governance-related factors. Differentiation of individual sustainable development goals is achieved through the United Nations Sustainable Development Goals (SDGs), which were adopted in 2015. The SDGs include 17 global goals to promote sustainable development at the economic, social and environmental levels by 2030. These goals range from poverty reduction, health, education and gender equality to renewable energy and sustainable cities.
The SDGs are an excellent framework for linking the principle of sustainability with economic, ecological and social development and provide a suitable orientation framework for a company’s sustainability strategy:
- SDGs as guidelines for sustainable management
- Alignment of products and services with the SDGs
- Business activities can contribute directly to achieving the SDGs
Nowadays, at the current edge of development trends around sustainability, so to speak, ESG expression is thus considered a leitmotif and fundamental approach for responsible and sustainable development. It is about combining economic, social and ecological aspects in order to create a world worth living in for present and future generations.
The individual SDGs are suitable targets for integrating ESG into corporate strategies, as they are more concrete and easier to measure using indicators than the more fundamental ESG concept.
Importance of the midmarket
As the backbone of the economy, the SME sector comprises a large number of companies that operate both regionally and internationally. It is of great importance for economic performance and employment in the country. Around 2.5 million companies in Germany belong to the Mittelstand, in the definition of a small and medium-sized enterprise (SME). These range from microenterprises to medium-sized companies with up to 250 employees, which generate around one-third of total sales for Germany and employ more than half of all employees.
Expectations around an ESG expression of the SME business model arise in a wide variety of internal and external stakeholder groups. Typical stakeholders include shareholder families, employees, customers and suppliers, financiers (EC and FC), NGOs and the media, and to an increasing extent regulatory policy.
The reasons for which companies address ESG requirements also vary. The most common motives include:
- The assumption of ecological and social-societal responsibility,
- Ethical reasons and intrinsic motivation,
- Requirements of customers and employees,
- Cost reduction and expectation of increasing sales,
- Requirements of capital providers,
- And last but not least, the increasing regulatory requirements.
The majority of companies are in the early stages of sustainability management.
Pressure to act and status quo around ESG in SMEs
The pressure to develop and implement ESG strategies is immense and relevant stakeholders are demanding this. In addition to opportunities of an ESG orientation such as cost reduction, successful positioning of the company, revenue and profitability advantages, there are clear business risks of a lack of consideration of sustainability requirements up to the withdrawal of the « license to operate » (violation of regulatory requirements, exclusion from supply chains, lack of financing or perspective withdrawal of insurance coverage).
If, against this background, surveys come to the conclusion that, despite pressure to act and explicit expectations of the relevant stakeholders, only around half of the companies in the SME sector have developed and implemented ESG strategies, the question arises as to why.
A ´decisive factor is the lack of time and resources in many SMEs to deal with the challenges and requirements of sustainability. Time is traditionally a scarce commodity, especially in owner-managed companies. Teams and specialists for ESG strategies and sustainability cannot simply be plucked out of the ground: the market for ESG specialists is empty and salary expectations are correspondingly high.
Support from external consultants is the obvious choice, but here, too, capacities are stretched and for many a large consulting firm it is obvious and more lucrative to advise the large DAX companies with entire teams of consultants before they delve into the peculiarities of the business model of a geographically decentralized SME.
AIM – Advice in Motion GmbH
This is where AIM, as an independent sustainability consultancy and partner in the Investec network, can provide effective support. AIM thinks and speaks medium-sized. Their clients include medium-sized companies from a wide range of industries in Germany, France, Portugal, Luxembourg and Switzerland. AIM supports with:
- Creation, coordination and implementation of ESG strategies in medium-sized companies,
- Preparation for mandatory sustainability reporting (CSRD),
- Directive-compliant calculation of the carbon footprint of companies (CCF) and products (PC),
- Preparation of climate strategies, derivation of targets and measures from the climate footprint,
- Communication around ESG and climate protection: avoidance of reputation risks.
Examples of successful ESG implementation in medium-sized companies:
I. Initial situation: Sustainability requirements for a medium-sized company in the wood industry in Germany with around 1,200 employees. In addition to the intrinsic motivation of the shareholders, a major impetus for action arose from the initiative of the industry association, which demands the implementation of climate protection measures for all member companies. Another impetus for action was for the company, as a supplier in the value chain of a large trading house, to support its ambition (climate protection and other social goals throughout the supply chain). AIM supported the development of a climate strategy, the calculation of the corporate carbon footprint and the compensation of unavoidable emissions in order to achieve climate neutrality.
II. Initial situation: market positioning of a 5-star resort hotel in Provence with its own vineyard. A key impetus for action was to reconcile a luxury resort with sustainability requirements and climate change mitigation measures. AIM developed an ESG strategy for the resort. This was based on a selection of sustainable development goals (SDGs) to which the resort can contribute. Corresponding measures were defined and implemented. At the same time, climate neutrality was achieved for the resort by offsetting unavoidable emissions. (AIM has implemented a comparable project with a resort in Portugal, which has since been nominated for the Sustainability Award of the Portuguese Tourism Association).
III. Initial situation: product positioning for a manufacturer of high-quality competition racing bikes from Switzerland. The company wants to make competitive sports compatible with sustainability and climate protection in particular. In order to provide buyers and users of the competition bike with an assessment of the carbon footprint of the racing bike product, AIM calculated the product-related carbon footprint for the bike, taking into account all phases of the life cycle of the racing bike, from cradle to grave.
IV. Initial situation: A medium-sized holding company with around 1000 employees in Germany will be subject to mandatory sustainability reporting in accordance with CSRD for the first time from the calendar year 2024. The extended reporting affects around 15,000 companies in Germany. The company’s sustainability performance will be considered from two perspectives: the impact of sustainability aspects on the corporate business model and the impact of the company’s activities on the environment and stakeholders. At the same time, the company aims to create a comprehensive ESG strategy that brings together all the actions taken to date to support sustainability goals. AIM has worked with the company to develop an ESG strategy that is aligned and parameterized with metrics to best prepare for upcoming sustainability reporting.
The development of company specific ESG and climate strategies and the requirements associated with the expansion of sustainability reporting pose major challenges for entrepreneurs in the SME sector. We support your company effectively in the sustainable transformation to ensure together with you the future and the competitiveness of your company for you and future generations.
Author: Andreas Kuschmann, Founding Partner AIM – Advice in Motion GmbH.
Unlocking Working Capital potential to fuel operational growth
Amidst the aftermath of the COVID-19 pandemic, geopolitical tensions, and persistent inflation, it is crucial for companies to prioritize efficient working capital management (WCM) in order to navigate near-term uncertainty and foster growth during the economic recovery. We identified four key reasons that make WCM crucial:
1. Economic headwinds are expected to be persistent: Despite the recovery of most advanced economies to pre-pandemic levels of output, growth in 2023 is projected to be sluggish. Recent downward revisions in growth forecasts highlight the challenges that lie ahead. For instance, the GDP growth forecast for the EU has been reduced to around 0.75%, a mere one-fifth of the previous year’s growth1. The IMF has also predicted that Germany will be the second weakest G7 economy next year, following the UK, with an anticipated GDP contraction of 0.11%1. Moreover, recent data reveals that the German economy contracted slightly for two consecutive quarters, by 0.5% in Q4 2022 and 0.3% in Q1 20232.
2. Inflationary pressure remains high until at least 2024: The Russian invasion of Ukraine has led to skyrocketing energy and food prices, resulting in persistent inflationary pressures. Additionally, rising material costs and supply chain challenges pose a threat to inventory levels, leaving businesses susceptible to supply shortages and price fluctuations. Although the IMF predicts a decline in inflation in Germany from 8.7% in 2022 to 6.1% in 2023, a return to the 2% target is not expected until at least 2025. Consequently, some companies have turned to forward buying and speculative upstocking. However, this strategy strains working capital and depletes cash reserves.
3. Interest rate peak has probably been reached: Central banks across the world have continued to tighten monetary policy and roll back quantitative easing to defeat red-hot inflation. In Europe, the ECB has raised its key interest rate by 0.25 percentage points to 3.5% in June, marking the eighth consecutive increase since July 2023. This rate-hiking cycle is the fastest in the ECB‘s history. ECB President Christine Lagarde announced further rate hikes in July, indicating an ongoing trend. According to a survey conducted by Bloomberg, it is projected that the peak will be reached at 4% in September 2023. Consequently, financing and working capital is becoming increasingly expensive.
4. Corporate cash flows are coming under increasing pressure: According to PwC, Days Cash on Hand of companies decreased by 10% in 20214. In 2022, the intensified efforts of central banks worldwide to combat inflation by raising interest rates have significantly impacted corporate cash flows. Mounting challenges stem from factors such as cost inflation, supply chain disruptions, and geopolitical events like the war in Ukraine, which have also influenced lender sentiment and global debt markets. In Europe, institutional loan issuance suffered a decline of 42% so far in 2023 compared to the previous year (as of July)5. As a result, the management of liquidity and working capital has become increasingly important.
Thorsten Gladiator, Managing Partner Investec: Supply chain issues and increasing (raw) material prices lead to higher funding requirements in working capital. A variety of working capital financing products allows for tailor-made solutions.
Retour d’expérience
Depuis plus de 20 ans, Investec conseille les fonds d’investissement dans leurs projets de cession et d’accélération de la croissance de leurs participations (pilotage d’opérations de build-up notamment) et le cas échéant la sécurisation des financements associés.
Retrouvez le témoignage de Karel Kroupa, Managing Partner d’Argos Wityu, sur sa collaboration avec nos équipes, dont Jean-Arthur Dattée, Associé Investec, dans le cadre de la cession d’I’car-Datafirst, leader français des solutions logicielles destinées aux constructeurs et concessionnaires automobiles, à Providence Strategic Growth :
- Était-ce la première opération menée ensemble ?
- Investec: une approche sur mesure ?
- Quelle est la valeur ajoutée de Investec pour cette opération ?
- Au-delà de la transaction ?
Both financial and strategic investors increasingly submit purchase offers directly to company owners. They are often completely unprepared for such an offer and buyers try to take advantage of this surprise effect.
Both interested parties from the private equity segment and companies themselves are now once again directly approaching company owners or making indicative offers for the purchase of privately owned companies to an extent rarely seen. Due to the ongoing low interest rate policy of central banks, high valuations, attractive growth prospects and high liquidity available for investments, private equity companies are under considerable investment pressure and have therefore significantly increased their direct investment efforts. Similarly, large companies are seeking growth through acquisitions to gain access to technologies and user end markets or to support their record high share prices. Both types of buyers seek to avoid highly competitive and structured transaction processes led by M&A advisors. From the buyer’s point of view, this can optimise the transaction duration and the purchase price – to the detriment of the seller.
Optimise sale price
Recently, we were approached by a business owner who had received an unsolicited offer to buy his company from a larger industrial partner. This original offer was around EUR 28 million. The entrepreneur sought advice because he was unable to assess the offer due to the lack of an accurate idea of the value of his company. At the same time, no preparations had been made for a possible sales process. Although there was a certain curiosity about a sale in terms of long-term succession planning, the topic of a company sale was not (yet) on the agenda due to positive business prospects.
The company had a current EBITDA of around EUR 4 million, attractive margins, a good reputation, and long-standing relationships with an international customer base. As with many SMEs, there was a noticeable concentration on certain customer sectors in this case.
We were able to argue and convince the entrepreneur that a higher sales price usually could be achieved through a thorough preparation of information and documents as well as a competitive sales process. Special attention was paid to the formulation of an attractive « equity story », which was derived from the positioning of the company, its unique selling propositions, and its growth potential. Equally important was a review and preparation of the financial history as well as the short- and medium-term corporate planning, ideally consisting of an integrated P&L, balance sheet and cash flow planning.
After preparing the sales documents, a multi-stage sales process was initiated and structured in which both potential strategic buyers and selected financial investors such as private equity companies and family offices were approached. Relevant company information was first made available to interested parties by means of a teaser and investment memorandum and, in a later step, via an electronic data room. The confidentiality and sensitivity of certain information was always taken into account through the gradual disclosure, which was adapted to the stage of the process or negotiations.
The company was ultimately sold to the original bidder for more than EUR 36 million. This represents a significant improvement over the initial bid – without any material change in the operational or financial situation.
Don’t get rattled
Buyers try to take advantage of the element of surprise by proactively making offers. Such offers are often not only below the achievable market price, but they address companies and owners unprepared. A professionally structured divestment process can increase the probability of success of a transaction and optimise the transaction terms, including the final purchase price, in favor of the seller.
Don’t reveal too much too soon
Sometimes, as advisors, we are only brought into a sales process when talks with the prospective buyer are already underway or – regrettably – deadlocked. By this time, a lot of information has often already been given to the prospective buyer, which tends to weaken the seller’s position. In such a situation, it is important to regain control of the transaction process. By preparing well for the due diligence and by including possible other interested parties in the divestment process, the seller’s negotiating position can be improved. The further process may or may not include the original bidder.
By proceeding in this way, business owners can be sure that they can optimise the valuation as well as better control the contractual arrangements of the final buyer. With a view to a careful preparation and structured implementation of a sale, it is in this respect helpful to involve or cooperate with specialised advisors as early as possible.
M&A in software (as a service)
In recent years, we have seen much M&A in software (as a service). This is due to a mix of Software companies acquiring both (i) functionality and (ii) geographic / customer presence. On top of that, there are notably more buyers due to more active private equity and / or venture capital investors. Both investor types are nowadays executing so called ‘Buy & Build’ strategies.
What particularly struck our attention is the increasing international nature of Software transactions. In our analysis of over 400 Software transactions executed in the past 4 years shows that 58% of the transactions are cross-border. For 2019 this number even stands as high as 68%(!). The picture below shows the geographic locations of buyers that acquire targets headquartered in Europe.
Source: S&P Capital IQ
Larger software M&A transactions have higher valuations
During our analysis of the transaction landscape we also looked at valuations. Similar to what we see in other industries, that larger transactions have higher valuations than smaller transactions. As the table below shows, EBITDA to Enterprise Value multiples, show a correlation with the size of the transaction.
Oddly enough, there also always appears to be a peak at a certain valuation point. In our view (and experience) this point indicates where most demand is. In this particular case, this size preference could be related to ideal ‘ticket’ sizes for private equity companies active in the software market. However, in the end the largest transactions get the highest multiples. Most likely because such deals are more scarce and attract a larger pool of (global) buyers. Private equity is clearly attracted to the sector: it pays off for to build larger software companies by buying (multiple) smaller, cheaper companies.
In the end key drivers for the valuation is probably the solid economic growth of the global economy between 2016 and 2019. So far, valuations peaked in 2018 and considering the current corona crisis, valuations are likely to come down. Software industry valuations are highly influenced by a number of factors including:
- is the business model scalable (internationally);
- how recurring are the revenue streams;
- costs for attracting a new customers;
- limit gross customer churn.
Our database lacks this level of granularity and therefore doesn’t discriminate for these elements.
Majority of software M&A transactions are in the application software space
When we zoom in on the targets per Software sub-segment, we see that the vast majority of M&A in software is within the Application Software space. This category, that aims to optimize software companies’ clients operational activities includes ERP, SCM, HR, BI and Engineering software.
Buyers also prefer B2B Software companies over B2C. This is quite obvious since Application Software is predominantly B2B. Already in 2016 B2B represented 89% of all the transactions. Due to strong year-on-year growth, the segment represents 94% of the overall transactions in 2019.
Increase in Private Equity buyers in software M&A
Over the past years, we have seen a significant increase in M&A activity due to Buy & Build platforms. These platforms are often backed by Private Equity investors or a selected number of strategic (listed) companies. Two examples of such companies are TSS (owned by Constellation Software) and Visma (owned by private equity).
For the coming years, we expect an even stronger increase in number of transactions for software M&A due to:
- More private equity interest;
- Building size and subsequently enjoying scalability leads to higher valuations for the current owners;
- Expanding internationally to build a truly international label, which also leads to a higher valuation;
- Enhancing product / service offering.
Investec’s TMT sector team has developed more detailed research on M&A in Software. Should you wish to walk through our research or exchange thoughts, then please feel free to reach out.
* Analysis is based on Investec’s proprietary database (with input from S&P’s Capital IQ and further desk research), covering over 400 Software transactions from 2016 till 2019. No representation or warranty, express or implied, is made as to the accuracy, reasonableness or completeness of the database.
The market for SaaS (Software-as-a-Service) is expanding at 18,4% p.a. (2016-2020), and is forecast to be worth c. $76 billion worldwide by 2020. There are a large number of small players in this dynamic market, which will continue to fuel market consolidation and M&A activity moving forward. We are seeing both strategic and financial investors aggressively target the sector, which is supporting high (double-digit-plus) EBITDA multiples in the mid-market across Western Europe.
Transactions in the SaaS industry are growing in volume by c. 25% YoY, with around half of M&A deals including Private Equity. The strong appetite from both strategics and PEs for SaaS businesses is being driven by solid market fundamentals and the industry’s attractive business model case, which includes:
- Sustainable fast growth
- Recurring revenues
- High margin potential
- Maturity of the business model: 20-year track record
What is SaaS?
Software-as-a-Service is a software distribution model in which a third-party provider hosts applications and makes them available to customers over the Internet – it is one of three main categories of cloud computing, alongside Infrastructure as a Service (IaaS) and Platform as a Service (PaaS).
By 2022, 78% of all companies will be running their business applications as SaaS
Why SaaS?
Major benefits from SaaS solutions include:
- Limited upfront cost compared to legacy systems
- Reduces operational costs
- Scalable and flexible: easy to add and remove users or functionalities
- Remains modern and relevant: easier and faster upgrades
- Improves working processes
- Allows for collaboration in large or decentralized teams
- Easy-to-use: saves time for setup and training
- Provides easy access to valuable data
- Mobile-optimized
- Connects easily with third-party apps, and allows customized connections
How to value a SaaS business?
The keen investor interest in the sector is translating into high valuation multiples, typically above 4x revenues and 15x times EBITDA on average. This average hides some strong differences between the lowest and the highest valuation multiples, from less than 5x EBITDA for the smallest niche businesses with stable one-man-led operations, up to more than 10x revenues for unicorns. In this context, an entrepreneur or shareholder of a SaaS business may wonder which basis of valuation would be the most relevant for their business?
In most cases, EBITDA seems to be the best proxy for the business’ future cash flow, and thus, for the valuation.
But when the business is growing larger, with a high revenue growth rate (> 50% YoY), EBITDA might be too low (even close to 0 or less), as it is impacted by strong upfront investments which are all expensed in current EBITDA. Owing to the recurring revenue model, the profits will expand significantly as soon as the business matures and starts to spend less on its fast growth. Some strategic acquirers might also consider changing the cost structure of the business while integrating it into their group post-acquisition, which will also heavily influence the EBITDA and the future earnings of the business. In some such cases, it therefore makes sense to use revenues to reflect the value of an SaaS business, more than EBITDA.
Then the sustainability, scalability and transferability of the business will, amongst other criteria, strongly influence the multiple. More precisely, the multiple will depend on:
- The market segment growth potential and the potential growth of the company’s market share,
- the recurring revenues (measured through the annual recurring revenue (ARR), or through the monthly recurring revenue (MRR)),
- the churn rate and the customers’ loyalty/dependence on the solution,
- the total potential value that each customer should create over the whole period of service, measured through the ‘Lifetime Value’ (LTV) and ‘Customer Acquisition Cost’ (CAC)
- the maturity of the business model
- the barrier-to-entry vs the competition
- the age of the technology and the potential technological debt
- etc.