Clifford Chance

TMT corporates vote for M&A in Europe

Whilst their longer term focus may be on M&A opportunities in emerging, high-growth markets, in the near term, technology, media and telecoms (TMT) companies are considering how best to take advantage of opportunities that currently exist in Europe.

Nearly 60% of respondents to Clifford Chance's European M&A: On the road to recovery? survey from the TMT sector believe that Europe currently offers the most attractive growth opportunities globally across the next two years. 

Two-thirds of the sector respondents say that the main driver for TMT M&A in Europe is to secure unique know-how, expertise and technology and to eliminate IP risks. Europe's durable strengths, which include a highly developed infrastructure (41%), were cited by sector respondents as a feature which makes the region an appealing deal-making destination.

The survey, conducted by the Economist Intelligence Unit (EIU) on behalf of Clifford Chance, canvassed the views of senior executives at close to 400 large companies globally from a wide range of industries, including the TMT sector. Over one-half of companies represented in the survey have annual revenues in excess of US$1 billion.

A significant proportion of respondents (50%) state that socio-economic uncertainty in Europe is actually increasing their appetite for M&A deals and 19% say that it is having no effect on their plans and that their companies remain highly interested in Europe.

The current economic context actually causes Europe to be seen by TMT players as offering more reasonable pricing compared to other regions, such as Asia and the United States, with around 30% suggesting that European assets are undervalued, and a further 25% saying valuations are about right.

After Europe, the Asia Pacific region is seen by TMT senior executives as offering better M&A prospects, well ahead of both North and Latin America and the relatively fast-growing markets of the Middle East and Africa.

Half (50%) of sector respondents prefer a traditional deal structure if carrying out M&A in Europe over the next two years – double the proportion (22%) that identified joint ventures or partnerships.

Commenting on the results of the survey from the sector's perspective, Clifford Chance's global head of TMT, Joachim Fleury, said:

"Although Europe has traditionally been seen as a very mature and almost saturated market, the financial downturn appears to be have brought Europe back as an important market to consider for M&A, increasing the TMT sector's appetite for deals in Europe. 

Together with the attractions of Europe's highly developed infrastructure and the significant and steady free cash flow of European targets in the TMT sector, it is no surprise that a majority of TMT companies who responded to the survey expect to buy in Europe in the next few years."