EMEA deal pipeline ‘robust’ as private equity firms look for SaaS exposure

'M&A is still taking place – despite geopolitical uncertainties and overall market volatility,' said Merlin Piscitelli, chief revenue officer for EMEA at Datasite.

Good morning Eurohubsters, Craig McGlashan here with the Dealflow.

We are off to a bit of a slow start to the week in terms of confirmed deals, but there is a “robust pipeline of deals in the works”, according to M&A technology provider Datasite.

Watch this space. The EMEA region is looking particularly healthy from an M&A perspective, according to the firm, topping the global growth of just 6 percent.

“M&A is still taking place – despite geopolitical uncertainties and overall market volatility,” said Merlin Piscitelli, chief revenue officer for EMEA at Datasite. “In fact, new deals in EMEA, especially asset sales, purchases and mergers, on our platform are up 16 percent year-over-year through the first eight months this year. And because these are deals at their inception, rather than announced, this means there is a robust pipeline of deals in the works.”

These deals will typically reach completion in six to nine months.

The increase in EMEA activity is across several sectors:

Real estate – 55%
Industrials, transport and defence – 31%
Leisure – 20%
Consumer – 14%
Financial services – 12%
TMT – 10%
Life science/healthcare – 5.5%

Resetting the clock. While growth in the TMT sector might be at the lower end of the figures, Battery Ventures is betting on the industry, particularly enterprise resource planning (ERP) software.

The Boston-based private equity company sold Forterro, a provider of enterprise resource planning (ERP) software for the industrial mid-market, to Partners Group for €1 billion in March after a 10-year hold period. But in late August, Battery announced a “significant” reinvestment in London-based Forterro, with the aim of helping to define Forterro’s new acquisition strategy.

“We’re resetting the clock from an investment point of view,” Battery principal Zak Ewen told PE Hub Europe’s Nina Lindholm.

Battery plans to use this reset to pursue strategies such as transitioning the business to a subscription revenue model more aggressively than during the previous hold period.

“Having Partners Group behind the business provides a lot of firepower for future M&A ambitions,” Ewen added. The fresh firepower will target companies that are able to bring new functionality to Forterro, rather than “pure play” ERP software companies.

Such growth would be part of a broader expansion in the sector.

The global ERP market was $43.72 billion in 2020 and is estimated to reach $117.09 billion by 2030, with a compound annual growth rate of 10.0% from 2021 to 2030, according to a recent report by Allied Market Research.

You can read the whole of Nina’s interview with Zak Ewen here.

Entering the space. While Battery seeks to push Forterro towards a subscription model, Synova has gone straight to the source by announcing an investment in Unity5, a UK-based provider of software as a service (SaaS) solutions. Synova has invested alongside Unity5’s co-founders, who will retain a stake in the company.

Unity5 is based in Exeter, England and provides real-time enforcement and permitting software for private parking companies and local authorities to manage parking, traffic and environmental regulations. The company has delivered a compound annual growth rate of 42% over the last three years.

“The business has performed strongly over the last few years driven by the growth and increasing complexity of its underlying markets, together with the strength of its SaaS proposition, which delivers exceptional quality and service to its expanding client base,” said Alex Bowden, partner at Synova.

Synova is a private equity firm headquartered in London with an office in New York. The firm has been investing since 2007 and typically invests between £15 million ($17 million; €17 million) and £150 million in companies valued between £20 million and £250 million.

That’s it from me – we’ll speak again on Tuesday.