M&A and Digitization – Two Mutually Reinforcing Factors
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The document discusses mergers and acquisitions in the context of digitalization, noting that M&A is an important route for companies to achieve transformation more quickly as innovation cycles accelerate. It provides examples of recent acquisitions in sectors like technology, media, and telecommunications to acquire things like digital mapping capabilities, video capture technologies, and messaging platforms. Strategic reasons for M&A include enhancing market propositions, improving customer experience, driving product innovation, and strengthening competitive advantages.
M&A and Digitization – Two Mutually Reinforcing Factors
- 1. European School of Management & Technology Open Lecture Series M&A and Digitalisation Rachel Empey 31.05.2016
- 4. Secret – Geheim4 Rev EV Devices (Tech) Connectivity (Telcos) IT Serv & Network Components (Tech) Digital Services (Internet) Content Creation & Mgmt (Media) 1.9x 4.7x % EV % OpFCF 8.6% 41.8% 41.5% 21.3% 24.2% 21.2% 12.3% 7.2% 6.9%15.2%
- 5. Secret – Geheim5 From a Voice World to a Data World Margin Larger operators earn an over- proportional share of the market’s cash flow Market share Infrastructure costs Land grabbing Hygiene factor Competition
- 6. Secret – Geheim6 Visionary Strategic Operational Creating unique market proposition Fuelling outstanding customer experience Driving superior product innovation … Enhancing company capabilities Strengthening competitive advantage Increasing market share … Diversifying products or services Optimising cost base Leveraging synergies … "We don’t think innovation can happen quickly enough organically; we're in a window where M&A is the best route to achieve that transformation.“ Jeff Liu, Global Technology Leader Transaction Advisory Services Ernst & Young
- 7. Secret – Geheim7 Buyer Target “Old school” “New world” Activity Date Energy efficiency GBP 85m Price Jun 2013 Digital maps EUR 2.8bn Dez 2015 Video capture n.a. Mar 2016 Buyer Target Activity Date Price Instant messaging USD 19bn Feb 2014 Face recognition n.a. Jan 2016 Employee referral CHF 3.2 – 4.8bn Apr 2016
- 8. Secret – Geheim8 stand-alone pro-forma 2 Note: 1 Based on reported results by Telekom & Vodafone, pro-forma calculation for TEF D 2 Combined total customer and revenuenumbers based on pro-forma calculations stand-alone pro-forma 2 pro-forma Total accesses (Jun-2014) In million Mobile market shares (Jun-2014)1 Market size c. 113 million mobile subscribers Total revenue (FY 2013) In EUR billion 37% 35% 28% < <
- 9. Secret – Geheim9 Shareholder value creation > €5.0 bn Synergies Leverage scale to create the Leading Digital Telco Value crystallisation through significant synergies Superior customer experience CombinedStandalone Network Investment Enhanced Profitability & Free Cash Flow FCF CombinedStandalone Year 1: 35% achieved 3G coverage increased OIBDA margin +2.6%p
- 10. Secret – Geheim10 OIBDA Evolution (YoY%)Superior customer experience Synergy capture Leverage scale to create the Leading Digital Telco Value crystallisation through significant synergies Enhanced Profitability & Free Cash Flow -40 -20 0 20 40 2015 Q1 2014 Q1 2013 Q1 2016 Q1
- 11. Secret – Geheim11 Customers Partners Business Advanced Data Analytics Internet of Things Market units Growth areas IP connectivity Data “Old school” “New world”
- 12. Secret – Geheim12 Advanced Data Analytics (ADA) Internet of Things (IoT)
- 13. Secret – Geheim13 1. 2. 3. % EV
- 15. Secret – Geheim15 6019339 313425399 102083579147 eCommerce 1.419 2.815 Telcos 18x Advertising based internet services Search Online Home Video Online TravelOnline Games/Music EV Rev 12.6x 22.6x 17.7x 24.8x 75.7x 26.8x 15.3xEV/OpFCF EV/Rev 2.0x 2.7x 5.4x 8.9x 4.9x 9.7x 6.0x