Tech M&A activity picks up across in Europe

There has been a rebound in European M&A deal value in Q2 with a 17.1% increase in deal activity according to Pitchbook’s data, which the market believes signals the start of a slow recovery. 
 
The pick-up in the deal market has been supported by central bank monetary policy easing in Europe, with interest rate cuts by the Swiss National Bank, Sweden’s Riksbank and the European Central Bank. This is the foundation for an improvement in European M&A activity in the near term. 
 
While activity in the European tech deal market is starting to increase, this is yet to be reflected in Ansarada deal room data. In Europe, there was a 20% year-on-year decline in new tech and telecoms M&A transactions to 30 September. 
 
European private equity (PE) dealmaking experienced a significant rebound in Q2, with a 27.3% increase in value, recovering from a challenging period. As valuations recover, venture capital (VC) deal activity continues to improve, with expectations for further growth as interest rates decrease. Larger transactions are gaining prominence, with a significant number of the top 10 largest deals in Q2 involving AI companies based in the UK. 
 
European nations, particularly France and Germany, are actively seeking to enhance their private capital sectors. France is concentrating on policy measures aimed at fostering a robust technology ecosystem.
 
According to Pitchbook data, France and the Benelux region have deployed less than 12% of the capital raised in 2023, with only 13 new funds established in the first half of 2024. This is attributed to the region facing new political challenges.
 
In venture capital, France and Benelux surpassed the UK and Ireland for the first time since 2018 in the second quarter, becoming the top European region for capital raised, as reported by Pitchbook.
 
From January to May 2024, the UK's private capital deal value reached €50.9 billion, exceeding the combined total of €48.7 billion for France and Germany. Despite a forecast in December 2023 for a reversal of this trend, the UK has maintained its lead in 2024. A significant portion of the UK's figure is attributed to private equity deals, such as the €5.0 billion take-private of Darktrace, which has inflated the overall total.
 
Through May 2024, deal value has generally remained lower or flat compared to 2023 figures across all regions. France is showing the largest potential year-over-year declines. The gap between the UK's and the combined total of France and Germany stands at €2.3 billion.
 
Artificial intelligence (AI) and machine learning (ML) have become the second-most-active vertical in Europe, with €6.3 billion invested in H1 2024 and Q2 deal value doubling to €4.2 billion, according to Pitchbook. The UK leads in AI and ML investment, followed by France.
 
In European tech M&A, one of the biggest transactions of the year has been Swisscom’s acquisition of Vodafone Italia for €8 billion. The acquisition aims to merge Vodafone Italia with Fastweb, Swisscom's subsidiary in Italy, combining their complementary high-quality mobile and fixed infrastructures, competencies and capabilities. 
 
This move is intended to create a leading converged challenger in a market with significant growth opportunities. The transaction is subject to regulatory and other approvals and is expected to close in the first quarter of 2025.
 
Another standout deal this year in European M&A has been the $2.7 billion July sale of Exclusive Networks to a consortium involving CD&R and Everest UK HoldCo Limited, which are controlled by the Permira funds. Exclusive Networks is a leading cybersecurity solutions company. This move is intended to support Exclusive Networks' growth and development, with the company's founder, Olivier Breittmayer, remaining a shareholder.
 
Also in July, Francisco Partners and TA Associates, prominent global investment firms, signed a $2 billion agreement to become co-controlling shareholders of Orisha, a leading European vertical software company headquartered in France. TA, which has been Orisha's majority shareholder since 2021, will reinvest in the company alongside Francisco Partners and Orisha's management. This investment aims to support Orisha's continued growth, strengthen its industry leadership through organic growth, diversification, geographic expansion and strategic acquisitions.
 
In Europe, cleantech is on track for a record year, driven by large deals in renewables. It’s expected there will be further activity in cleantech M&A heading into the back end of 2024 due to monetary policy easing and subsequent lower costs. This could support competition among PE firms and corporate acquirers for these assets looking ahead.
 
Looking ahead, despite a few IPOs indicating a potential recovery, the IPO market remains cautious. Smaller funds and emerging managers are gaining share, and PitchBook data shows France and Benelux has surpassed the UK and Ireland in terms of capital raised.