(BFM Bourse) – Companies in the ESN sector are regularly the target of takeover bids. Over the past two years, no less than ten operations have been recorded. The Parisian dimension is gradually losing its representatives, for lack of new IPOs in the sector to renew the herd.
Takeover operations have multiplied in the software and digital services sector in recent years. They have often been initiated by the founding directors of the companies concerned with the assistance of investment funds.
Companies that provide digital transformation consulting, IT services companies and software publishers are regularly at the forefront of these takeover operations. Highly fragmented in France, this sector is full of many potential targets, in particular small companies that could interest large players in search of a technological brick, a particular know-how or an additional growth lever. Also, the captain’s age can contribute to an acceleration of consolidation movements. In the majority of companies in this sector, the captain on duty is often the founder of the entity of which he is the master on board.
Scrap valuations
Companies in the sector experienced a difficult stock market performance in the first months of the year, offering predators an opportunity to get their hands on weakened and, above all, inexpensive prey. “The first half of 2022 has not been easy for listed ESNs (digital service companies, editor’s note). , for some, very significant drops” reports Sid Bachir, analyst at EuroLand Corporate.
The specialist points in particular to the poor performance ofAtos whose capitalization has shrunk by more than 70% since the start of the year. The decline is much less marked on the side ofold (-19%) or Get hold of it (-15%). In a context of a downward trend on the stock markets, takeover bids (OPAs), for their part, thus continued at a sustained pace.
For two years, the ESN universe has been in full transformation with numerous mergers and acquisitions. The year 2020 was particularly prosperous in this area, with in particular the difficult acquisition d’Altran by French IT giant Capgemini, justice having even intervened to rule on the conformity of the offer.
Other operations were launched on the specialist in the exploitation and analysis of data Business & Decision, the European leader in health software Dedalus (ex-Medasys) or The valleyCoheris or EasyVistaover the year 2020. The IT services company ITS Group as Harvest, the software publisher for the financial and wealth advisory professions, have also bid farewell to the Paris Stock Exchange over the past two years. The founding directors of the two companies were assisted respectively by Ardian and Five Arrows (a subsidiary of Rothschild & Cie).
The founding directors at work
The end of 2020 was marked by the start of takeover bids in two stages, like operations Devoteam et Groupe Open. Company founders Devoteam favored the support of the KKR fund to delist their company. A first offer at 98 euros has been made but it does not meet with the expected success. A year later, these same initiators offered a generous offer of…168.50 euros per share to achieve their ends.
Groupe Open is the subject of a takeover bid under conditions similar to those of Devoteam. Once again, the founding directors accompanied by an investment fund (in this case Montefiore Investment) were in charge. But the proposed price of 15 euros per share did not unleash the crowds, only 71% of the capital was contributed. For recalcitrant shareholders, their patience has been rewarded since thirteen months later, i.e. at the start of 2022, the same Groupe Open is once again targeted by a more generous offer from the initiators behind the first proposal. The argument of an offer this time of 33.50 euros made the most reluctant minority shareholders bend. In April 2022, Groupe Open left the Paris Stock Exchange, after 24 years of presence.
A wave of takeover bids to follow?
The wave of takeover bids continued in 2022. The beginning of the year was, for example, marked by the merger between the Canadian company CGI and the French company Humans. Founded in 1990 and floated on the stock exchange in 1998 at the height of the tech bubble, under the name of Europstat, Humans covers the areas of Big Data and AI, integration and cloud infrastructures, etc. The range of services offered by the French attracted the covetousness of the Canadian group which sought to consolidate its presence in France.
Sopra Steria, for its part, announced at the end of July that it had entered into exclusive negotiations with the management of CS with a view to acquiring a majority block representing 29.7%. The ESN which occupies the French top 10 will thus rise to 65.3% of the capital of its target, the other shareholders (IRA Holding and the founders of Novidy’s) have undertaken to sell their shares.
This acquisition of a majority stake will be followed by the filing of a simplified takeover bid at the beginning of 2023, with a view to acquiring the balance of the capital. Sopra Steria thus intends to strengthen its position in the defense and security sectors with the acquisition of CS Group and its technological solutions with a view to ensuring the security of operations and critical missions for its customers.
“While the ranks of ESNs include fewer and fewer companies due to takeover bids (nearly 10 in the sector since 2020), and IPOs in the sector are becoming rare, the rating now offers a reduced choice which should benefit to certain delisted files such as Micropole (which is currently paying 2.7x the EBIT expected for 2023) or even those offering excellent visibility such as Sword Group et Infotel“, concludes EuroLand Corporate.
Sabrina Sadgui – ©2022 BFM Bourse
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