RE: ASOS NOW TOP EUROPEAN M&A TARGET21 Jun 2023 21:56
Retailer Asos, Software Firms Top European M&A Targets in Poll
Fast fashion retailer Asos Plc and firms in the sought-after software sector are now the most likely takeover targets in Europe.
That’s according to a quarterly M&A survey by Bloomberg News, which named the UK online-only firm, along with Switzerland’s Temenos AG and French IT services provider Atos SE among top picks. A handful of the region’s telecom companies were also mentioned in the informal poll of 24 M&A desks, analysts, brokers and fund managers.
Asos shares have slumped 83% since the start of 2022, and the company was the UK’s worst performer last year as it struggled with soaring costs and rising debt. Deal speculation has been heating up recently after the Sunday Times reported Turkish online retailer Trendyol made a £1.4 billion ($1.79 billion) approach in December. Billionaire Mike Ashley’s Frasers Group Plc also recently raised its stake in the company, which is undergoing a turnaround plan.
There are some good synergies available for Frasers, according to Liberum analyst Wayne Brown. Asos “owns the Topshop/Topman brands which, if shown some love and improved design focus could do very well for Frasers,” he said. The Asos platform could also sync well with Frasers websites including Missguided, he said.
While Asos is a new addition to the top picks in the survey, Temenos and Atos have featured before. Swedish private equity firm Nordic Capital is still pursuing the Swiss banking software maker after rival buyout firms dropped out, Bloomberg reported earlier this month. Atos is under the radar as it is due to split into two units this year, with BFM Business recently reporting that talks over a sale of the legacy business are ongoing with Czech entrepreneur Daniel Kretinsky.
The sector has been attracting significant interest from private equity firms. Silver Lake Management looks set to acquire Germany’s Software AG after Bain dropped out of a bidding war, while Bain separately made an offer for Switzerland’s SoftwareOne Holding AG last week.
Software companies are popular among buyout firms due to their attractive cashflows and the good visibility of subscription sales models, according to Goodbody analyst George O’Connor. “Software names like Software AG and Temenos have long-established customer bases and, with it, a great opportunity to drive improvements in cash,” he said. “Legacy tech names will also carry lower valuations as the market chases ‘the new,’ like Nvidia.”
The interest comes during a difficult year for dealmaking in Europe amid disparate price expectations and difficult financing markets. M&A in the region so far this year is down 51% from the same period last year, to about $333 billion, according to data compiled by Bloomberg.
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