Market Spotlight - La French Tech 2018: Global Change in a Local Market
Welcome, to the world financial symposiums. Market, spotlight, webcast, series, today's. Conference, will start in a moment the. Wfs, is dedicated. To educating, technology. Leaders through, webcast, like these and the, growth and exit strategies, conference series Eldon, London, New York Silicon. Valley and other tech and financial, centres around the world the. Speakers, and sponsors, of these live events, we'd like a who's who of industry, leaders to, learn more about our live events, for CEOs, owners, and investors or, to, access our library, of on-demand, spotlight. Webcast covering. Markets, like IP security, elf. Tech gaming, and more please, visit, wfs. Calm. And now, let's join today's market, spotlight, webcast. Good. Morning, Grafton, or good evening Joe global audience, I am. Jabez Denis vice. President, of mergers, and acquisitions, at the chorim group I'm based. In Paris in charge of M&A advisory for software and IT services, firms. Before. Johnny quorum I was an entrepreneur and CEO stood, firms based in Prague it. Is terrific to be working, with the world financial symposium. For this market spotlight, on French tech M&A, our. Agenda, today we start with in in a research report, presented. By my colleague Becky hill I was, presenting, overview of the dynamics, evaluations, and the recent deal flow of the French tech M&A market, after. That we'll. Move to, what should be an excellent panel discussion, where, I'll be joined by a Linda quantity go ahead of Satar ventures, jean-francois. Riba through investment. Director of is AE and martin. Record executive. Vice president of, strategy and M&A at Gemalto. Before. Handing the presentation, to becky let. Me say a few words about quorum. Quorum. Is headquartered, in Seattle and have seen in Paris Berlin, London. Zurich, and Amsterdam, it, focuses, on studying software companies. And has, closed over 300, transactions, of which. About 180. Will cross-border. Here, you can see a few examples of quorum, deals that involve the French seller or buyer. In. Quorum webcast we. Often cite the global, supply crunch, as the reason that is driving buyers, and sellers across borders, to. Explore, the impact of that crunch in France, market. Many believed to be self-sustaining. And hand, it over to Becky from, chorim's research, team. Thanks. To bear-like. The global market as a whole French, M&A hit a peak in 2015. Decreasing. A supply began to run low however. The number of acquisitions made, by French acquirers, held steady through 2016, and 2017, if. Is showing the slightest of increases, last year driven, by activity from buyers across sectors, note. That the total number of tech deals from those buyers remain small only. About one per year even. As a French company there is no one French firm you're sure to sell to with. Few M&A opportunities, during the year French buyers like, buyers around the world have, had to look outside their borders sixty-two. Percent of French acquisitions, over the last five years have been a cross-border. When. We break down that number further we see that most deals are done with other European nations particularly. UK, Germany. And the Netherlands however. The United States remains the top destination, for French tech acquires on, the. South side we see that the majority of French companies, will be acquired by foreign buyers again. Underscoring, the need for a global process which. Can increase your valuation, and open up your company to a world of opportunities. The. United States remains the top partner for French South Side's acquiring. Over a quarter of French targets over the past five years in. Europe, we see similar patterns as the UK Germany and the Netherlands remain at the top of the pack. When. It comes to valuations, French, software companies are often stuck on the low end with, over half the exit value since 2013, under two times revenue, but. As the graph moves into higher valuations, what it doesn't show is a change in biogeography, the. Top four valuations, for French software companies including, one at 19, times revenue were, all in deals with American buyers. Undervalued. At home French, companies I go global in their buyer search can also find their tire, arrogant style multiples, now let's, break down some deals starting. With our connected, health trend right, Medical Group from the Netherlands, acquired team of scabs for sixty two point five million in December of last year to edit 3d shoulder, surgery technology, to right suite of implanting, inventories in the. United States sack set research, systems, about GSM in March last year for just over two hundred and five million to. Create scale and brings you some drift systems, into a broader market. Highlighting. A smart logistic seal geolocation, and, logistics, bathroom, also logistic, was acquired by Brazilian, map link to drive the creation of new more efficient solutions for customers in, the.
Red Text space another, one of our top ten tons Wolters, Kluwer acquired, operational, risk management past, firm and they belong to admit further into the global compliance market in february. Of this year canadian network monitoring and analytics solution provider Expo acquired. Customer experience, has room a cilia for about thirty two million to help operator this keep pace to the quickly changing industry, and to, deploy infrastructure, than the 5g disruptive trend in an. Entirely domestic, meal in January of this year which. FAA was bought by Sodexo, and another trend is driven bricks two kliks composite, commercial, moving. Into the UK the top require of fresh companies, clarinet. Acquired, IT infrastructure, services, provider gear Denise to expand and strict notice international, footprint. Finally. Germany's, Senate acquired product lifecycle management, software, solutions, for motor seonyu's, the, six point five million to complete its PLM solution portfolio. There's. No crystal ball for M&A, so, when we look at the upward trends in funding in investment, yields it's, impossible, to say anything but that the future of French companies, in the M&A market was, right so, long as they stay map to the trends driving the tech market board. Thanks. Becky I'd like. To have each of our panelists, introduce themselves, and, their firms, starting. With you Ellen. I'm. A lender Quentin and I, am go heading, south. On corporate, ventures, which is the corporate, venture arm of the. French the, International. Safran. Group which, is a major major. Aerospace. Equipment. Manufacturer, group very. Well known for aircraft. Engines, aircraft. Cables, ml aircraft. Seats etc so. Sutphin ventures we've. Been created, three years ago to, invest. Minority. Shares in, startups, which have developed technologies. Or business model with. Which the group can work and, cross-fertilize, the. First aim, of saffron venture, is to be a strategic. Opening Ovation, tool so. When we invest we make sure that not only we bring money but, also we, bring knowledge, of, our, space, industry. Our space. Clients, our space, technologies. Knowing. That of course we invest also in products which are not in aerospace but, which technology. Can go, to our space having. Said that we. Are a pure font, in the sense that we, are regular. Investor, we. Have an envelope of 50, million euro, to invest, the tickets, between one and five million. Typically. In Series A Series B, in, France but also international. Of course we. Only, make. Co-investment. With, strategy. Or financial. Investors. Excellent. Thank you very much Ellen now to usual, Cosmo hello, Isabel, everybody. Very. Pleased to be with you I'm Jacques Vallee vasu and i'm an investment director, with eje either, a we call ourselves a French, tech, entrepreneurs, and we, have a very strong, DNA, both, in in tech and in entrepreneurship.
It, Was a 420g. That it back from 2010. The time company has been created. By for, entrepreneurs. Of the digital. Economy, kayako, Cisco, who sold, this company, PriceMinister to, Rakuten. Refurbisher. Who sold. Company, Virgin, Mobile - LTS and different. Repos as chairman, of silence on which is all very recently, to the casino, group fourth. One is oil Oh a your mobile, extract and these guys want t the design, to create an entrepreneur, which is the, phone that really supports. Entrepreneurs. Underwear. Then the software area to, develop with, backing from people, who just, don't bring only, items, in but also right well as much as possible and for that which. Is very unique as easily we've, created a, very strong ecosystem of, LPS. Which are entrepreneurs. Themselves so people who sold, their companies, at backers, and this network is very very, wrong. And efficient, but, as today we put more than hundred. And thirty and foreigners which, probably makes us the largest entrepreneurs. Fund in Europe and for sure is very unique in France our team is based in Paris, and New York we've, got two different branches one, is a VC, activity, we got the part of the team, that works on VC, deal with, a focus on Series, A and the, other activity. Is worth equity, activity, focused. On on small caps and what, we do is to hold we we do tech growth so it injecting, fresh, cash in, companies, that have already gained, some maturity so it's not like state ventures we will focus on a profitable. Company and also. Branch is a growth, breakout, strategy, is, to take, over a minority. Partner to. Capture a lot of companies, in order to clean. It and make it ready for a new phase of development of, the company for. Myself part of this growth equity team and my. Background is I breed because I work in tech companies as well as in the different. Thank. You very much, and finally. To, our strategic acquirer, Martin. So. Martin, McCourt head of strategy and M&A, and CMO, at Gemalto, Jamal, sue is where, three billion euro, revenue, company, and, serial. Acquirer we. Probably do about half a dozen deals, a year on, average, I've. Been doing that for almost. A decade now we. Do three, types of deals typically, we, buy. Tech startups, to, get technology, breaks that. We don't. Feel we, could develop internally. We. Buy companies to. Increase our market access to, a specific customer group or geography and then. Every so often me by growth platform, so moving out into an adjacent business. We, try and buy a leading. Player to, establish a beachhead in a new market, thank.
You For that my. Question to each of you what. Are the challenges and opportunities that you see for. The france-based, acquires, or, investors, in today's global market let's. Start with you Ellen. So. This. Question is actually very very wide so I'll take just a few angles. And. Maybe the first angle, is, on. The. French. Startup. Scene, is. France. An, attractive. Market. For, investors, I, believe. Yes I believe, yes for, many, reasons, namely. First. In terms of technology, we don't have to be shy French. Market, is a. Very. Very good quality for. Technological. Development. Thanks. To our universities. But also our. Research. Centers which are were, quite known, and, the. Global, ecosystem, which is developing. And accelerating. In. Promoting. Technology. And startup. Creation, so. For that angle for the technolon, goal I think France has, to be seen by investors, we have, however. Difficulties. In, our startup, I would say that our CEOs. And, our teams, are probably, today. More. Focused, on the technology, rather, than the go-to-market it's, probably. A. Weakness. Of a French entrepreneur. Although. I tend. To believe that they are. Getting better and better in that sense too. Think, more of the, market needs rather, the, technolon. Goal another. Good, aspect, of, France, French. Ecosystem. Or French, investment. Is the price. For. The moment French startups. Are still wait, she per than, us. Startups, at the, same quality, I would say it's, also an, opportunity to. Invest in friend started if. We don't look at the French sort, of ecosystem but rather the, French invest. Or ecosystem. I, think. That one issue, and, it's. Not really an issue but, it's a characteristic, and, it's. A characteristic. That we. Have seen also, in other market, the. Investors, tend, to only invest in their own country. And this. Is a pity, because, technology. Are now worldwide, and, not. Only, looking at what, happens in our country, is, really a pity, in terms of mind. Openness, and even real. Benchmark, and in. That sense corporate. Venture, like Earth that also demands. Or. G. Of course it's a dress of copper, adventures or more, global, and I. Think it's a it's a good approach to have thank, you for that comprehensive overview, of the investment, that started, seen in France, what. Challenges, and appears to do is Deidre Pascua. Offer. There are many challenges. That I guess, the main one is to be less, shy about, four fronts and in for corporates, which, is the French market I feel, is is ready and is well structured to to be very active. You've, gotta cooperate with healthy, balance sheet and deep pockets and very willing. To to, do acquisition. They've got some experience. And, also they are tech. Conscious, right now they, know that the market, is definitely global. So this. Was not the case maybe five, or ten years ago but right, now I feel they're ready and also. On the, financial, side the, funds also are already, 2 min vessel to. Provide, financial, solution, at every stage of development for tech companies that there used to be a lot of early-stage, venture, firm now you finally, stage venture fund and we. Were one of the first funds to open the growth equity, activity. In France and now. We can, see why your son's doing also, type. Of growth, equity activity. For, for tech companies each. Of them as a very different, angle the, Alta, is a dry powder and, the ethnicity. And knowledge, and how to, support. Egg companies is there, so paint, challenge is Engler the world know about that and, of course doing, the deals it's, real marketing, that we do and need to do more towards, ceo's, let's. Excellent, more. Mature market, more money available and, more expertise, and, also nicer, stories mentioned, puro few interesting, gives from. Large, cooperator that, make an interesting acquisition. Pressure, corporates, like michelle a. Loader or black cycle in the UK visual. About, risotto, and, armies and their. Recently, CAF, you just bought one of our portfolio, companies key, book and this, is very, exciting because it very, very, interesting and mature it, shows it's very virtuous. That's. Very exciting, Martin. How. Do those, challenges. And opportunities, look from, your side of the table I think, one practical. Difficulty, is that, were, based in France or. Europe and a. Lot of tech firms are. In the u.s. that, if not on the west coast lack. Geographic. Proximity, is, a bit of a handicap in sale processes, because. Typically, you. Know the first time we, get to, meet some of these companies is at. The management presentation, and there's only so much you can do with the, PowerPoint, slides when. You don't meet people I, don't. Know if other companies, or arranged like organized, like us but, we don't have. M&A, people, spotted, around the world is, essential, corporate, team that does all of the M&A and that, lack of an. Informal. Contact, earlier. In the process is. Definitely a handicap, and, what. I've actually seen, as, a reaction, to that is more and more kind of savvy tellers, or organizing, like fireside.
Chats, And, very. Early, pre marketing, on some, of the the companies that come in to market with to, help European. Based buyers get, more comfortable and, familiar with the targets, and especially the management, teams before. A, formal sale process, starts, so. I, think that, maybe one of the bigger challenges for. Us I'm. Fighting for fragile. European, based acquirers, and then, the other one often, historically, has been just valuation. In, that again. American. Tech companies, tend to go for, very high multiples. Multiples. That often. European acquires is not comfortable, paying because. This such an assumption has to be made on future growth whereas. I think you, know you're testing, more in terms of industrial, multiples. So, it takes a little bit getting getting. Used to which, links back to the first point that getting. To know the management, team early, helps. To build confidence, that. What we're seeing in a management presentation, is not just Excel but, there's something, behind that in, terms, of, opportunities. For French requires and, the one point will come to mind will be just the the strength of French. Engineering. Talent, because, we're. Often doing tech. Acquisitions. And it's. Important, to be able to integrate. That into our global. Network and with. Our French R&D, centers and just. The the caliber, of local. Talent is very good which, facilitates. Integrating. New technologies. There are historical, teams Thank. You Morton very, interesting, all of your answers together give. A good outline, of the landscape, now. Let's. Speak maybe more, directly, to the company owners and CEOs, who are listening who, may be considering, investment, or ma-maybe, soon maybe, in the future what, advice do you have for them, Ellen, we'll. Start with you again, if. You are talking to a French investor. Or a French, acquire. Don't. Bother, sell don't. Be too on, the, selling. Marketing. Mode. Because. The. The, French person in front of you, will. You. Would lose re credibility. To this person. We. Are not, as, marketing. And sales men, and women as, American. One I would say and, we. Prefer, having, more. Technical. Discussions. With. Facts in. A sense maybe, more sculler more. Than brilliant is, a bit a stereotype.
This, Is what I feel. The. First is to build trust, with, your, inter. Lecture, by. Being. Focused. On hats, and, technology. And your uniqueness, and of course at the end of the meeting with the French investor, / acquire or if she can tell that you like wine and invite him or her to. Have glass of wine somewhere it will be always. A good idea, wonderful. I like that idea, jean-francois, but. Advisor you have my. Main advice would be for, CEO to be really aware of all these, options and. All the toolkit, they, have basically, first, what, we experienced, over the past years is within. Many heels going quite well the, environment. Say okay I financed, my company a series. B times. We manage sugar for Serie C and say okay let's tell the company this, is true for either gross company not all the companies are either gross, and. It doesn't, mean they are not decent and very, exciting, companies, and with, beautiful, stories, in, that case people, will tend, usually, to to, sell quickly, their company because this is the only way to get, and I, would feel they do, it with a dinner, preparation. So, the, advice is no, other possibilities. You have one, is to really assess where you turn, in your development, cycle as a CEO do. You feel you've done all you want to do or feel, that strong. Potential that, you cannot address because for many reason either you will frighten to do that you, reach 10 million euro and, you feel the, next step is really challenging your, user know to address, that it, would put, your company at risk and, of of course your, money at risk other thing is you have sometimes, investors. That. Want to exceed your cap table and this. Would push you to. Sell your company and, maybe not for good reasons as I mentioned now you've got a financial, solution at every stage as we. Eat ie for example we promote quite a lot o B O's which are the LBO, centered, and focused on, the on the owner which, is the founder and that. Can solve these two main, issues one is, providing. Liquidity to. Historical. Shareholders, and the. Second one is also providing, some cash out for. Entrepreneurs. And with. That it is a new, time for development for the, manager, is more, comfortable, because he has secured. A bit of cash with the, cash out at the time of the transaction and it. Can really assess, first from a strategic, point of view that the development. Of this company, and no, more from, just, because of the content constraint, gdes, on the, cap table and we position, ourselves as the, partner, to, F company, grow. At this university. Age and take, additional risk develop. Internationally. Structure. Yourself to. - to some of the, marketing, that, needs to be done to say the structures therefore for, the financing, point, of view he has to be done through everybody and when two CEOs, - to work more closely with respond. And to assess the opportunity, of working with growth. Equity fund something, of course very developed. In the, u.s. in the UK it's. Very new in, and, we feel it can bring a lot of very nice story into the future. Excellent. Thank. You very much for your comment and insight, Martin, what, advice you have for ceos, considering, selling especially. To a French or European acquire. While. Building on on my previous answer I think the the fireside. Chat approach, the getting, out early. To. Get. To know your, top potential. Acquirers, is time, when spelt because. It's easier, for the CEO, to come, to Europe for a few days and do the rounds, of is a you. Know top half-dozen target, buyers. To. Do it that way than the other way around and so. I think I'd, recommend, that and. Then the second is because, also back to the other point I was making around valuation. Where often. The valuations, that the. Expectations. That are set by cell size bankers, can be high and in, a few cases I've. Just said well that's, the expectation, and not even want to participate in the process and, I've seen a few processes collapse, because, of that it. Doesn't happen often but it does happen, the expectation, is set so high that people say well then I'm not gonna waste my time we're working on the process so, I obviously. This the other approach where the bankers don't say anything at all and. They say will relate the market, to determine what happens so we could all be wasting our time but. Any has been played very carefully, the question of setting expectations of, valuation. Let. Me follow up with a related question after. You've made an acquisition outside. Of France how. Do you retain that. Talent in, a French based acquirer I think. That's actually one of the biggest challenges, and it. Actually pleads a little spit in favor of European. Based startups, because. You know not wishing default the stereotypes, but in the US and particularly. In the west coast there, is so much money, available. Or hoped, for, on the sale of our company.
That, The expectations. From the special senior management, can be very high and it makes it hard, for, European. Buyers to. Retain, the management. We just can't meet their expectations. In, terms of retention or future, monies just. The churn, rate among. Startups, of, high-tech employees, on the west coast is high but when you take out the retention, effect so, I think, if in terms of the audience I think it's definitely a point, that and the European, based companies. Can play on is what, is there you know historical, retention, of people. Being like so. What's the churn and. To try and talk through that with, potential, buyers to show that it's a question that's being thought about and addressed because, you know if we buy a 50-person. Startup, and the top management team leaves, to, go to the next startup, because they've always worked to the same VCS and they're, just slipping, from one project to the next then, you're not a very happy buyer so, I think, it's something that CEOs. And, sellers. Need to think about is how, do you get the buyer comfortable. That, the human capital in the business will remain going. Forward. Interesting. But. Do you think the strengths are of. A French acquirer when it comes to talent retention in, the, US for example it's. Tough and in. Fact while I'm in this job we've never done, an acquisition, on the west coast. Mostly. For that reason because, I'm. Very concerned about the ability to retain talent, so, I don't, have an easy answer to, how. To do that now, obviously. Money is. Part of the solution but it's not an eternal, solution, you know you just can't pay very large for tension sums in, perpetuity it, doesn't really work people. Get bored and they want to go on to the next project I think, for younger, people in the team or less senior, people joining. A worldwide group. Mobility. Work in terms of working on different topics, and different locations can, be a poll but I think the concern. Usually. Focuses. On the top team and it's. Not so easy for European, acquirers. To retain them. Well. Thank you as you, say that. Difficulty, translates, to an advantage for French and/or the European, firms considering, an a thank. You to our all our panelists. For participating let's. Go now to some, closing thoughts. As. We. Have heard from, during, the M&A report, and from our panel, France. Has a vibrant, tech M&A scene with. A well-educated talent. Pool excellent. Technology firms and sophisticated. Buyers. French. Tanks tech firms tend to sell for lower multiples. And international, averages, but. International. Buyers in particular are. Willing, to pay a premium for disruptive. Technology, in France. French. Tech acquires are keen to buy abroad and bit so in, 65%. Of the DS over. The last five years they. Would like to acquire more US, companies that are rebuked by high. Valuations, and cultural. Differences, and, as, not, and explain the. Most complex, issue for French an acquisition of us. Pictures, is, staff, retention. Particularly. In Silicon, Valley having. Said that I will panel. Advices, French. CEOs, and buyers to be more self-confident. When acquiring internationally. But. My last word is that with. The increase in funds available, the development, of a more intrapreneurial. Culture, and the. Globalization of the market the. Future, of French. Tech M&A, looks, brighter, than ever, now. Thank you all for, your attention if you. Have any question, please send, it to us and, we, will be pleased. To answer it and. Now. Let's, go to close. We. Hope you enjoy today's online, symposium. If you, have any questions, not answered, please, submit them to info, at w, FS comm, we. Look forward to seeing you at one of our upcoming live. Events in a city near you to. Register for these live events view upcoming webcast, topics or hear, rebroadcast. Of this or other markets, spotlight, events. Please go to wfs. Comm, thank. You for attending today's webcast.