New investors drive surge in TMT M&A activity in Europe

LONDON - April 30, 2019 - PRLog -- European fibre broadband operators, datacentre businesses and telecom operator carve outs are attracting new sources of capital which is driving competition for assets between strategic, private equity and institutional buyers in an already buoyant sector for M&A, according to leading TMT bankers.

"We are seeing cheaper capital from infrastructure funds which positions them strongly as credible buyers versus traditional financial buyers," said a managing director of TMT at a major bank talking to news provider TMT Finance. "Debt capital also remains available for well understood sectors such as the telecom sector."

Telecoms, fibre, datacentre and other digital infrastructure carve-outs and consolidation are at peak levels, with the pipeline of deals in software, fintech and IT services also especially buoyant, say leading TMT investment bankers and M&A advisers, ahead of TMT M&A Forum 2019 (http://www.tmtfinance.com/merger) on May 21-22 in London.

"The most exciting M&A opportunities within the TMT sector are in netco and serveco separation, and fixed mobile convergence transactions," the banker added.  "Additionally, there are certainly opportunities as infrastructure investors become more relevant in the sector."

Favourable M&A market conditions in the first quarter of the year have also seen activist investors putting pressure on fixed European incumbents to streamline their businesses by carving out their infrastructure operations. Notable examples include Elliott Management pushing for the separation of Telecom Italia's landline network against the wishes of majority stakeholder Vivendi, and Norwegian private equity firm Constructive Capital pushing for Telenor to spin off its mobile masts.

TMT M&A volumes in 2019 are on course to be three times the level compared to the past two to three years, say leading TMT advisers. The sector performed robustly in 2018, with a number of deals easily surpassing the E5bn mark, including Comcast's E42bn takeover of Sky, and Vodafone's E18.4bn acquisition of Liberty Global's German and Eastern European cable assets.

In a recent video interview (https://www.tmtfinance.com/blog/who-leading-fibre-and-dat...), Darragh Stokes, Senior Managing Partner, Hardiman Telecommunications, explains that there are several reasons for the uptick so far in 2019.

"The rapid growth of digital infrastructure investment – in particular from new standalone fibre broadband operators and datacentre investment from non-telco businesses, including real estate businesses and other non-tech businesses, is being driven by soaring demand," he says.

Furthermore, investment interest for digital infrastructure is also broadening and "traditional buyers" are finding themselves battling with new entrants, such as pension funds, which are seeking solid, long-term returns, says Stokes.

"When we look at transactions taking place, we definitely have interest from the large operators… we have interest from private equity, and there's also interest from the infra funds and the pension funds," he said. "The more cogs or operating wheels there are, the less attractive the asset will be for infra and pension funds. The more growth potential, then the more the strategics will be interested. Depending on where the particular opportunity is on that growth curve to stable returns, that's going to determine who is going to spend what, and where," Stokes comments.

To discuss the key strategies driving M&A activity in the sector, key leaders from fibre, datacentre and communications infrastructure investors are meeting in London for Europe's biggest annual TMT M&A event on May 21-22– TMT M&A Forum 2019. These include: TDC Group, Zayo Group, Equinix, Telefonica, DATA4, Eurofiber, CyrusOne, Orange, Cityfibre, Hyperoptic, Gigaclear, Six Degrees, American Tower, Cellnex, Deutsche Funkturm, Keppel DC REIT Management and many more.

Leaders from infrastructure investment speaking include: EQT Partners, OMERS Infrastructure, Antin Infrastructure, Arcus Infrastructure Partners, Allianz Capital Partners and Providence Equity Partners.

For more information go to: https://www.tmtfinance.com/merger/europe/programme