A study by Crescendo Finance and PAC identifies the acquisitions of 382 French NSEs between 2019 and 2023. After rising until 2022, the number of sales and valuation multiples fell last year.
How many French NSEs have been acquired between 2019 and 2023, at what valuation multiples and by whom? These are just some of the questions that have been precisely answered by Crescendo Finance, a specialist in M&A support, and the research and consultancy firm PAC. They identified 382 deals involving digital services companies in France over the past five years. In 75% of these cases, the deals were carried out by French or foreign competitors, with the remainder being carried out by investment funds. Among the latter, bpifrance, BNP Paribas, Keensight Capital and Capza were among the most aggressive. Among the NSEs that made acquisitions, Magellan Partners (9 deals), Accenture (9), Koesio (8) and Xefi (5) stood out. The rankings change, however, when we look at the volume of sales acquired, with Sopra Steria (€376.5m), Accenture (€311.4m) and CGI (€245.9m) on top.
The NSEs that positioned themselves as acquirers targeted companies with revenues of less than €15m. Their targets with revenues in excess of €100m accounted for just 5% of their transaction volumes over the last five years. This illustrates the fact that these strategic investors prefer smaller structures, whose size makes them easier to integrate. For investment funds, it is the proven maturity of the business model that counts. Only 19% of their takeovers of French ESNs involved structures with annual revenues of less than €15m. This proportion rises to 29% for companies with annual revenues of between €15m and €50m, 19% for those with annual revenues of between €50m and €100m, and 33% for those with annual revenues of over €100m.
Smaller French ESNs are generally prized by their competitors for their ease of integration. (Illustration: PAC/Crescendo Finance)
When we look at the chronological evolution of the French NSE M&A market, we see that its growth in volume has been constant from 2019 to 2022, with an exception in 2020, the year of Covid. In 2023, this growth slowed, with a total of 88 deals (22 of which were carried out by investment funds), compared with 10 more the previous year. The curve for valuation multiples has followed a similar trajectory. In the case of NSE buyers, the highest valuation by revenue multiple was reached in 2021 (1.55 times), while the highest valuation by EBIDTA multiple was reached in 2022 (13.9 times). In 2023, they fell to 0.99 times and 11.7 times respectively. At the same time, the valuation multiples proposed by investment funds have also fallen: 1.11 times both EBITDA and sales in 2023, compared with 1.62 times sales and 13.4 times EBITDA in 2022, their highest levels in 5 years.
Read the article here: https://www.lemondeinformatique.fr/actualites/lireamp-les-rachats-d-esn-a-la-loupe-depuis-2019-94085.html
