Tenzing partners, the M&A boutique, revealed in cooperation with Globalscope, an European Report on Transactions Analysis in the Internet Industry 2013. This report has been prepared and written by Globalscope and Tenzing partners, a member of Globalscope.

In this report, Globalscope covers the main segments of the Internet industry with regard to 2013 M&A activity in Europe. These are: Consumer; Online Business Service; Mobile; Enabling, Analytics and Ad Serving; and Commerce.

In 2013, the Internet industry was characterized by a high level of transactions despite the economic situation in Europe. Mainly driven by private consumption and advertising, the industry perspectives remain bright for 2014.

The major trends in 2013 are fivefold:

• The Internet industry is maturing but still very dynamic: as shown by the growing interest of Private Equity funds for the sector (Hellman & Friedman LLC has agreed with Deutsche Telekom to buy a 70% stake in Scout24 Digital for about 1.5 billion euros), the number of IPOs during not so favourable periods for the so-called risky assets and the number of large strategic investors focusing on acquiring pure online players.
• E-commerce market competition put pressure on generalist given the high customer acquisition costs. The resulting necessity to grow translates in numerous acquisitions, thus the segment represents the biggest share of M&A deals in 2013 (39%) and the highest average deal value : for example, aufeminin.com, one of the largest life-style website in France, has purchased a 60% stake in Paris-based media startup SAS My Little Paris for more than 40 million euros.
• However, niche players grab their share and in order to leverage growth and geographical footprint, need increasing amount of capital and for that matter, Private Equity investors started to implement buy-and-build strategies.
• Pure offline firms lose market share against online retailer for instance. So we expect them to make their move in the coming years or as soon as possible.
• Big data is at the centre of what we call the disruptive technologies. Especially for display advertising, this trend sustain high valuation multiples and major transactions took place in 2013 (such as Criteo’s IPO). That is why Analytics, Ad Serving and Enabling occupy the 2nd position in the M&A activity ranking.
• EU internet companies remain undervalued compared to their US-based peers. Besides market size or investor focus on margin vs. growth, this discount is not justified and large amount of international money is invested in European Internet industry, especially in the Southern countries and Ireland.

The most active M&A markets by country have been Germany and the UK, together equivalent to nearly 45% of the total number of transaction in Europe.

More specifically, Tenzing partners analysed the French, Belgian and Luxembourgish markets and has drawn the following conclusion:

• France and Belux are no exceptions to the consolidation trend in the media segment, we identified the exit of PE funds as an opportunity for future deals: for example, Fimalac (FR) integrated 3 French digital media companies (Allociné, Tfco and Webedia) in 2013.
• We also see bright prospects for the Internet privacy protection. The areas of interest entail online payment and big data analysis respectively. Regarding the payment sector which has seen a lot of innovation by new market players, especially from mobile solutions, incumbents have been pushed on the passenger seat and profit. Nonetheless, they profit from the growing demand of e-commerce. Ogone (BE), an online merchant payment services provider, was acquired by Ingenico (FR) for €360m. It illustrates the industry’s needs for network effect (other instance provided by Mobey (LU) which was sold to Fexco (IRL) at the end of 2013).
• Finally, Meetic (FR), the online dating company founded by Marc Simoncini and which Match.com took over in 2011, pursued its expansion through 3 acquisitions. We can single out the transaction targeting Massive Media, the loss making editor of Twoo.com, an online dating platform in Belgium, for €18,9m. The consolidation in this sector follows the increasing competitive pressure created by the ever rising number of new entrant trough mobile vector.

  In Picture: Daniel Schneider, Partner at Tenzig partners SA