China: global GPs look east to capture IT opportunities
The Information Technology sector witnessed growing attention from global PE firms over the last decade.
According to a new report from S&P Global Market Intelligence, during this period the total capital deployed into IT targets grew by 63%, from €72.6bn in 2007 to €118.3bn. In 2017YTD the trend was still rather strong, with capital allocated into the IT sector already reaching €80.2bn, just 3% below the same period in 2016 across 3,442 deals.
In terms of where capital was invested globally, the majority has historically been invested into North American IT companies, standing at €35bn in 2017YTD across 1,579 new deals. This is a continuation of a strong 2016 for North America-based IT targets, that attracted a record €68.6bn of new money from global GPs. IT companies in EMEA and APAC, on the other hand, have been lagging behind with €24.5bn and €19.1bn, respectively.
Pushing EMEA out of the second spot in terms of invested capital in 2015 and in 2016, the APAC-based targets have been attracting more interest from global GPs. 2016 recorded 18% more capital invested into the IT sector in Asia compared to 2015, (€25.8bn to €30.5bn).
Worth noting is the clear shift in terms of where the largest deals were recorded geographically over the past few years. Looking at the top five IT deals globally on an annual basis since 2010, the United States-based targets were always present in the leading ranks.
China started to feature more prominently since 2012, overtaking the US for the first time that year with a €3.1bn deal compared to the largest US deal of just €1.2bn. In 2016, China featured twice in the top 5 deals globally, placing first and fourth, totalling €13.1bn of new capital for the region from just these two deals.
Delving into the deals, the largest purchase of 2016 globally was a Chinese Internet Software and Services company, Qihoo 360 Technology Co. Ltd., which was acquired for €8.8bn in cash with 27.2x EBITDA purchase multiple.
This article is an excerpt from the EMEA Private Equity Market Snapshot, a quarterly review of the private equity market from S&P Global Market Intelligence. To access the full report click here.