Recently, there’s been a marked shift in appetite and activity for M&A in Europe from the big US multinationals. We see this not only anecdotally from talking to buyers, but also in the data on completed deals. According to our in-house database of tech deals, the proportion of acquisitions of mid-market European tech companies by US buyers has risen each year from less than 10% in 2010 to almost 20% in 2017. More specifically there is a flurry of activity in key sectors where there is real strength in Europe, such as artificial intelligence, with Apple, Google, Facebook, Oracle and others all having made European acquisitions in this space in 2017.
Most US buyers have their M&A teams in the Valley, yet a VP of Corporate Development at a large US enterprise security software company said to me recently: “We need eyes and feet on the street in Europe to spot what’s coming, and spot it fast.” It’s clear the big U.S. tech companies are aggressively headed to Europe in search of dealflow. We see this as a trend that is going to continue at pace as the European tech ecosystem continues to mature and to develop great companies with global ambitions.
From my own perspective I joined FirstCapital three months ago, and a key part of my role is to maintain existing and develop new relationships with US strategic and financial buyers. Before FirstCapital I spent fifteen years in the Valley in senior business development roles working in a variety of companies, all the way from Fortune 500 tech companies with large M&A budgets (including Sony) down to start-ups (including Shazam and Tile). It was my job to open doors and to develop partnerships, and it was always a lengthy process to set up meetings, exchange NDAs and navigate multiple levels of approval to get things done. This simply isn’t the case with FirstCapital. There is an incredible appetite amongst the strategic buyers to meet us, to discuss and follow up on ideas in Europe, and to get deals done. As an example our Chair, Hazel Moore is making a trip to the US in February to present our latest research on the M&A and funding landscape in Europe, including key trends in AI (a very hot topic for buyers) and we just don’t have time to schedule meetings with all the companies that want to meet us!
During my time in business development, I saw first hand the way a company’s product roadmap dictated acquisition strategies. Now at FirstCapital I talk not only to the corporate development teams of buyers, but also to the product managers and business unit heads to understand what’s important to them and where there are white spaces. I’m struck by how increasingly there is a recognition that there is incredible talent and technology in Europe, and an openness to look outside Silicon Valley for ideas.
It is still true however that most European founders do not do enough to make themselves visible and known to potential US acquirers. Our team met yesterday with an EVP of digital business for a global media brand who is actively looking to acquire in Europe, and yet most of the European businesses we discussed as possible acquisition targets aligned with their strategy were not known to them. This is not unusual. We help our clients make connections and develop key relationships, based on our knowledge and understanding of the priorities and criteria of potential buyers. That strategic insight is a core part of our SMART dealmaking methodology and how we are able to drive value for our clients.
All indicators point to a continued increase in trans-Atlantic deals and perhaps we’ll see some new records set in 2018. One thing is for sure: having an M&A partner who understands buyers’ changing priorities and can get you in front of the right people at the right time with the right messages can make a huge difference to the transaction outcome.
"There is an incredible appetite amongst the strategic buyers to meet us, to discuss and follow up on ideas in Europe, and to get deals done".