June 2019: Knowledge Economy M&A and Equity Market Update

By Ramone Param, Director, Equiteq

Major deals profiled include Capgemini’s acquisition of Altran, Tieto’s acquisition of EVRY and CVC’s acquisition of Teneo.
The Equiteq Knowledge Economy Share Price Index rose over the month.

Capgemini and Altran create a global digital transformation leader with strong ER&D capabilities.

Target: Altran is a France-headquartered provider of engineering and R&D services.

Buyer: Capgemini is a France-headquartered global provider of consulting, IT services and digital transformation.

Deal value: €3.6bn (1.2x TTM Dec-2018 revenue)

Deal insight:
The purchase of Altran will enable Capgemini to take a leading position as a service provider focused on engineering, research and development (ER&D) as part of the digital transformation of industrial and tech companies. The acquisition is a milestone transaction for Capgemini that builds on previous deal flow in areas like digital media, cyber security and financial services consulting. This includes the purchase last year of digital consulting firm LiquidHub, which was acquired for €400m from ChrysCapital. The buyer followed this acquisition with the launch of Capgemini Invent, which combined Capgemini Consulting and expertise in technology and data science. The new brand comprised LiquidHub, innovation consulting firm Fahrenheit 212, as well as creative design agencies Idean, Adaptive Lab and Backelite. The acquisition of Altran, along with these recent acquisitions and restructurings, better positions Capgemini against growing digital transformation competitors like Accenture, Cognizant and the Indian IT services players.

Tieto’s acquisition of EVRY creates a leading Nordic digital transformation player.

Target: EVRY is a Norway-headquartered tech and consulting company.

Buyer: Tieto is a Finland-headquartered IT services and software company.

Deal value: NOK 13.2bn (1.0x TTM Mar-2019 revenue)

Deal insight:
The deal is a landmark consolidation in the Nordic technology services space and creates an important European IT services player. The transaction is part of a global trend of consolidation within IT services and software, as digital players look to create broader digital transformation solutions for their clients. The Nordic region is a market that has a reputation for being strong in digital consulting with foreign players investing in the region. The acquisition of EVRY follows Tieto’s purchase of three smaller Nordic businesses last year and EVRY’s initial public offering in June 2017. The deal will better position Tieto and EVRY for larger client contracts against growing foreign competitors.

Teneo will expand and develop its position as the world’s leading CEO advisory firm with its partnership with CVC.

Target: Teneo is a US-headquartered global CEO advisory firm.

Buyer: CVC Capital Partners is a Luxembourg-headquartered global private equity and investment advisory firm.

Deal value: $350m

Deal insight:
Teneo was previously owned by private equity BC Partners. Since its investment, Teneo has tripled its headcount to 800+ people globally and also nearly doubled its EBITDA. This has been achieved through a blend of organic growth and nine acquisitions. These acquisitions included the purchase of strategic communications business Quay Advisers, which expanded the business into Australia.

CVC’s investment will enable further growth of Teneo and follows other recent notable private equity investments in knowledge economy assets. This includes Bain Capital’s acquisition of Brillio and OMERS acquisition of Alexander Mann Solutions. These deals are representative of continued interest in quality knowledge-intensive assets from high-profile financial buyers with strong levels of capital available for fresh investments.

Selected Knowledge Economy M&A announced in June:

Source: PitchBook, S&P Capital IQ and company press releases

Knowledge Economy Share Price Index

Source: S&P Capital IQ

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