Best-in-class private equity firms will thrive due to ample buying opportunities available in the European marketplace, and will play an increasingly pivotal role in the technology, media, and telecommunications landscape, according to a report from Pyramid Research.
The report, called Meet the Parents: Private Equity to Play a Prominent Role in European M&A, highlights the trends in the telecom segment that are driving the rethink at the operator level and the factors that are likely to drive a resulting increase in financial sponsor activity.
The report also profiles firms from the PE space and outline the role and resources (both financial and human) that these firms could bring to the TMT table.
Telcos are facing austere times and are readjusting their strategies and organisational models in order to define the road ahead, according to Julian Morrison, research manager at Pyramid.
"The current outlook for the economy as a whole, the telecom industry specifically and the balance sheet woes of operators are the drivers for operator realignment and the subsequent M&A activity that we will see over the next 18 months," says Morrison. "The resulting opportunity pool of ‘unloved’ assets and limited number of buyers is one that provides a clear opportunity for private equity."
Recently this refocusing of resources has also seen several announced and completed disposals, sales and spinoffs.
"Vodafone’s chief executive, Vittorio Colao, has mandated the sale of the majority of the firm’s strategic stakes acquired over the last ten years; Telecom Italia has highlighted its refocus on domestic markets with the sale of HanseNet and BBned; and TDC recently signaled the end of its foray into the Swiss mobile market with the sale of Sunrise for the handsome price tag of USD3.2bn," says Morrison.
Pyramid Research believes that as many as 25 transactions will be completed before the end of the year, which would represent a near 100 per cent increase over 2009 (13 transactions total).
"Growth equity providers could be important partners for operators looking to take advantage of acquisition opportunities and, as operators look to spin off assets, private equity interest could allow them to unlock value currently sitting on their balance sheets," Morrison adds.
