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Channel M&A expert confirmed for DISTREE EMEA

by Stuart Wilson, Friday 15 February 2019

Pradip Somaia, Partner at M&A advisory specialists Regent Partners LLP
Pradip Somaia, Partner at M&A advisory specialists Regent Partners LLP

Next week’s DISTREE Europe, Middle East & Africa (EMEA) hosted buyer channel event brings together vendors, distributors and retailers from across the region for three days of one-on-one meetings and networking opportunities.

Expert speakers and analysts also attend the event to meet with delegates. Pradip Somaia, Partner at M&A advisory specialists Regent Partners LLP, will be available at DISTREE EMEA for one-on-one meetings with delegates interested in learning more about the latest merger and acquisition (M&A) trends.

Somaia stated: “European technology, media, telecommunications (TMT) M&A activity increased by 0.6% in terms of the total number of deals announced in 2018. There were 3,680 deals announced in 2018, which is a new record high, compared with 3,658 in 2017. The total value of deals also reached a new record of US$375 billion. The number of European TMT companies making an IPO increased by one compared with 2017 to reach 98 in 2018.”

He continued: “The ICT channel is increasingly adapting to the growing demand from consumers for new technology. This started with the move from desktop to laptop computers, progressed further with the move from basic mobile phones to smart phones and the introduction of tablets. The latest trend has been the surge in consumer demand for wearable technology in the form of smart watches and health monitors. While these new and evolving markets create huge opportunities, they are not without risk.”

“A sudden change in fashion is one of the pitfalls that can beset distributors who need to be able to provide the latest technology but run the risk of losing a significant revenue stream and potentially being left with unwanted stock if a new product range emerges or a manufacturer withdraws from a market or is acquired. The emergence of new technologies emphasises the need for value added services and technology skills in the channel to enable the distributors to help the manufactures enter the market and to help the retailers or resellers to maximise the sales potential,” Somaia explained.

The demand for value-added services and new product lines is therefore becoming an important driver in M&A in the channel to increase the economies of scale, improve profit margins and rapidly build expertise, according to Regent.

Somaia continued: “The valuation of any business depends on many factors but the primary one is usually the underlying profit of the business. In particular the earnings before interest, tax, depreciation and amortisation (EBITDA) is a frequently used measure. Most businesses are valued in the region of 5 to 8 times EBITDA although the spread can be wider. The actual multiple within this range depends on other factors such as size, growth and reputation or brand awareness.”

He continued: “A secondary valuation measure is the multiple of price to sales (PS) which can act as a guide to what would be a reasonable earnings multiple. For example, a 5% EBITDA margin implies a PS in the range of 0.25 to 0.4 which is typical of a low margin distributor. However, for EBITDA margins of 20%, the implied PS range would be in the region of 1 to 1.6 which is more typical of value added resellers or system integrators. Selective M&A provides a means to increase the underlying profitability and also improve the profit margin by acquiring scale and higher margin business such as value added services.”

Regent Partners, founded 30 years ago, specialises in TMT M&A and has completed many deals in this space. The company will present its latest views and analysis on M&A deals during a workshop at DISTREE EMEA 2019, which takes place in Monaco from February 19-22nd. Delegates can also request one-on-one meetings with Pradip Somaia through their DISTREE EMEA web account.

DISTREE EMEA

To request a hosted buyer invite for DISTREE EMEA 2019 - CLICK HERE

Distributors, retailers and e-tailers confirmed to attend DISTREE EMEA 2019 will have the ability to pre-request one-on-one meetings with exhibitors at this year’s event.

For further information on exhibiting at DISTREE EMEA 2019 to meet channel partners from across the region - CLICK HERE

Exhibitors at DISTREE EMEA hold pre-scheduled meetings with a carefully selected audience of senior executives from the region’s top consumer tech and consumer electronics channel partners. Channel EMEA is an official Media Partner for DISTREE EMEA 2019.

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