Tech Exit Transaction Multiples

Over the course of 2017, a day didn’t go by when you don’t hear a prize European Tech company getting snapped up by investors outside of the geography: Zenly was acquired by Snapchat; Chauffeur Privé was bought out by Daimler; Shazam was taken over by Apple.

Following this observation, our point here is to unravel the dynamics of the European Tech M&A market, to identify the profile of buyers and to know more about the valuation models they are guided by. The long of the short is that there is (unlike America) very little appetite to go public and/or to explore the LBO avenue in Europe: the vast majority of entrepreneurs use M&A as exits in Europe. Numbers are 91% trade sales; 4% LBO’s and 5% IPO’s. As the nature of the market cannot be changed in the short term, the single most important issue impacting transactions are valuation criteria.

Trade sales and M&A are one of the key factors impacting the financing of the European Tech Startup ecosystem, as sales/exit proceeds are often reinvested in the very same ecosystem. Corporate acquisitions play a large part in this economy and subsequently in the financing of Innovation and developments in Europe. We have sensed in our capacity as a leading European Tech Investment Bank and advisor to both large corporates and entrepreneurs / startups, that the question of valuations and liquidity is central. Moreover, it has become strategic issue in the conduct of business and in entrepreneurial attitudes.