Media and cleantech transactions stagnate — M&A activity in industrial services increases

Accor­ding to our evalua­tions and expe­ri­ence, the 3rd quar­ter tends to be charac­te­ri­zed by fewer finan­cial state­ments — proces­ses are often exten­ded in this phase until the annual finan­cial state­ments are prepared in order to enable an effi­ci­ent company tran­si­tion without inte­rim finan­cial statements.

In fact, in terms of the number of tran­sac­tions, 2013 was rather a quiet year in the media sector. On the other hand, there were some very striking light­house tran­sac­tions with a signal effect for 2014: Acqui­si­tion of the scien­ti­fic publisher Sprin­ger Science + Busi­ness Media by finan­cial inves­tor BC Part­ners in June 2013 for EUR 3.1 billion, acqui­si­tion of Scout24 Group by US finan­cial inves­tor Hell­man & Fried­man (EUR 1.4 billion for 70 percent); partial exit of Axel Sprin­ger regio­nal news­pa­pers and TV program guides to Funke Medi­en­gruppe for EUR for 70 percent); sale of Axel Springer’s regio­nal news­pa­pers and TV program guides and women’s maga­zi­nes to Funke Medi­en­gruppe for EUR 920 million (subject to appr­oval by the Cartel Office), partial exit of finan­cial inves­tors Kohl­berg Kravis Roberts & Co (KKR) and Perm­ira from ProSiebenSat1 (proceeds: just under EUR 2 billion). And in the agency envi­ron­ment, conso­li­da­tion has progres­sed further and further, with the focus of the major networks shif­ting more and more to Asia, to agen­cies with a high level of digi­tal exper­tise, and to indus­try specia­lists, bswp. from the health care sector.

Deve­lo­p­ments in the clean­tech sector vary greatly in some cases from segment to segment. In the recent past, the nume­rous insol­ven­cies in the rene­wa­ble energy sector in parti­cu­lar have made inves­tors and capi­tal provi­ders more cautious. In gene­ral, there are curr­ently only a small number of attrac­tive targets in the mid-cap area for finan­cial inves­tors, for which high purchase prices are then usually deman­ded. In addi­tion, many mid-sized clean­tech compa­nies are diffi­cult to iden­tify and are often still early-stage, making them more attrac­tive to the VC market. Many busi­ness models have yet to prove them­sel­ves and are depen­dent on poli­ti­cal decis­i­ons, which has a nega­tive impact on deal acti­vity as many inves­tors curr­ently prefer stable industries.

In the media sector, the trend applies in parti­cu­lar to Germany, where there were even decli­ning deal numbers compared to the previous quar­ters as well as compared to Q3 2012. Howe­ver, this may also be due to the light­house deals, which demand a lot of atten­tion from the M&A depart­ments of the compa­nies invol­ved and accor­din­gly less capa­city is available for other deals (acqui­si­ti­ons).

In the clean­tech segment, the solar indus­try in Germany in parti­cu­lar has suffe­red greatly. An end to this deve­lo­p­ment is not yet in sight, espe­ci­ally since there are also strong poli­ti­cal discus­sions about the rising price of elec­tri­city and the feed-in tariff, which is important for inves­tors, adding to the uncer­tain­ties. In the other segments, Germany is tradi­tio­nally well posi­tio­ned, e.g. in the auto­mo­tive indus­try. in energy effi­ci­ency, mecha­ni­cal engi­nee­ring or mobi­lity, but still some­what behind other count­ries as an M&A market. German clean­tech compa­nies are usually well mana­ged and inter­na­tio­nally orien­ted, but are often not percei­ved as such. Ther­e­fore, there is poten­tial for incre­asing tran­sac­tions in Germany in the medium term, espe­ci­ally with the invol­vement of private equity.

Regard­less of the sector, we expect a very lively M&A market in 2014: the earnings of previous years are available to corpo­ra­tes as acqui­si­tion currency, as are their own mostly highly valued company shares. Banks are ready with favorable terms and full balance sheets for acqui­si­tion finan­cing, and 2013 was a record year for fund­rai­sing in the private equity envi­ron­ment. In this respect, a lot of capi­tal is looking for attrac­tive assets. And rarely have there been so few “crisis indi­ca­tors” on the hori­zon during a bull market phase.

In the clean­tech sector, conso­li­da­tion in rene­wa­ble ener­gies will conti­nue until prices and capa­ci­ties have norma­li­zed inter­na­tio­nally, espe­ci­ally for solar modu­les. A reco­very of the indus­try also depends on how the poli­ti­cal frame­work condi­ti­ons regar­ding feed-in tariffs deve­lop in the indi­vi­dual count­ries and thus on the gene­ral demand. Germany has a pionee­ring role in the field of rene­wa­ble energy as a result of the nuclear phase-out, which will have a posi­tive impact on invest­ment and the gene­ral busi­ness outlook in this area in the medium term. As the leading loca­tion for green tech­no­lo­gies in Europe, Germany’s importance as a target coun­try for M&A tran­sac­tions will conti­nue to grow and incre­asingly attract foreign investors.

For indus­trial services, we expect deal acti­vity in the indus­trial services sector to conti­nue to rise, driven by the upward trend in the over­all M&A market. Howe­ver, you have to take a closer look at the indi­vi­dual segments. In the faci­lity services sector, for exam­ple, provi­ders can bene­fit from the energy tran­si­tion by offe­ring sustainable products in energy opti­miza­tion. Inno­va­tive solu­tion provi­ders increase their market value and thus become inte­res­t­ing for major play­ers. Another aspect is the mini­mum wage, which will contri­bute to conso­li­da­tion. Service provi­ders who cannot pass on wage increa­ses to custo­mers quickly become targets for takeover.

For the media envi­ron­ment, we expect many tran­sac­tions in the area of (a) Digi­tiza­tion of busi­ness models (Big Data, mobile distri­bu­tion, special inte­rest TV chan­nels) (b) Deve­lo­ping adja­cent reve­nue streams (tran­sac­tion reve­nue, coupo­ning, etc.); and © Further agency consolidation.