Shield sector focus: TMT

Telecommunications, Media and Technology

The TMT sector comprises a wide spectrum of segments, including fixed-line telephony, mobile communications, telecommunications equipment, publishing and printing, broadcasting, e-commerce retailers, software, computer hardware and semi-conductors.

Shield Corporate Finance's TMT team has wide-ranging experience in the sector. Recent Shield deals include:

Sale of leading accountancy software firm Exchequer Software to IRIS
MBO of TDSi, one of the world's leading manufacturers of access control security systems, from Upperpoint Manufacturing
Sale of a specialist software company serving the educational sector
Sale of a mobile data solutions business
Sale of an electronic repair services group
Company valuations for the merger of a web hosting company and a video communications service provider

In addition, Shield bankers have worked on a range of TMT deals involving major companies such as Thales, Racal and Bull in their former employ.

TMT sector M&A comment

In 2006, TMT was one of the most active sectors in terms of both volume and value, comprising 13% of European deal volume and 12% by value (Mergermarket). This level of activity is fuelled by the pace of technological change throughout the sector.

TMT M&A activity has picked up steadily in recent years, after a lull following the collapse of the dotcom bubble in 2000/1. According to Dealogic, nearly $200bn worth of global electronics related M&A deals were completed in 2006, compared to $177bn in 2005 and $115bn in 2004.

In 2006 there were over 30 TMT deals with a value greater than $1bn including BellSouth's acquisition of AT&T for $89bn, Nokia's acquisition of Siemens' carrier related business for $30bn, Alcatel's acquisition of Lucent Technologies for $13bn, Yell Group's acquisition of Telefonica Publicidad for $3.6bn, YouTube's acquisition by Google for $1.6bn and Ripplewood's acquisition of Reader's Digest for $1.6bn

The key word in telecommunications these days is convergence, driven by the digitisation of data. The movement of all types of information to the digital domain, aided by the explosion of broadband connectivity, has opened new market opportunities for fixed-line, mobile, satellite and cable operators, while in the media industry content and brand strength continue to grow in importance.

So the boom in TMT M&A activity is set to continue. Many potential acquirers have significant cash positions and there are few signs of the speculative excesses of the late Nineties. Deal values are still seen as reasonable and tech stock prices generally have been improving but are not yet irrational. As technology advances at an ever-increasing rate, leading to new products, services and industries, extra impetus will be given to M&A activity.