UK cross-border Software & IT Services (SITS) deals dwindle

Cross-border M&A activity plummets in Q2 but strategic deals complete
Although Q2 transaction numbers collapsed, as many transactions were initially frozen or terminated entirely, Silverpeak has seen activity in the market begin to rebound with a number of highly strategic transactions announced in June. The SITS market, in particular, has been seen as robust and a beneficiary of any long-term impact of COVID-19, as reflected by the share prices of SITS businesses recovering strongly in the public markets and already returning to pre-COVID-19 levels.

Strategic M&A transactions remain resilient
Despite the fall in M&A activity, completed transactions in Q2 appear to be those with strong underlying strategic rationale. Perhaps the most notable transaction in UK SITS was the acquisition of London-based Eggplant, by NYSE-listed Keysight Technologies, in a deal valued at $330m. Keysight is seeking to build out a testing software portfolio of high-quality recurring revenue, to complement its existing testing hardware business. The transaction is rumoured to have taken place at a valuation of c. 10x Eggplant’s 2019 revenues.

IPOs surprisingly robust
Despite a fairly poor volume of European IPOs in 2019, there has since been an uptick in the first half of 2020. The highlight in the European SITS market was the $200m+ IPO of Pexip, a video conferencing service and Zoom competitor that could only be described as a “COVID-19 beneficiary”. While the remainder of 2020 remains uncertain, with the highly unpleasant combination of winter flu and COVID-19 resurgence on the horizon, there continues to be a stream of announcements of major upcoming SITS IPOs – especially in the US.

IndustryViews Corporate Activity Q2 2020 270720

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