Micropole: These companies in the digital sector are good to buy on the Paris Stock Exchange

(BFM Bourse) – Companies in the ESN sector are often the target of takeover bids. In the last two years, no less than ten operations have been recorded. The Paris dimension is gradually losing its representatives, due to the lack of new IPOs in the sector to renew the crowd.

Takeover operations have proliferated in the software and digital services sector in recent years. They are often initiated by the founding directors of companies concerned with the help of investment funds.

Digital transformation consulting companies, IT service companies and software publishers are often at the forefront of these acquisition operations. Very fragmented in France, this sector is full of many potential targets, especially small companies that may interest the big players in search of a technological brick, a particular knowledge or an additional lever to grow. Also, the age of the captain contributes to the acceleration of consolidation actions. In most companies in this sector, the captain on duty is always the founder of the entity where he is the master of the board.

Scrap estimates

Companies in the sector experienced a difficult performance in the stock market in the first months of the year, which offered predators the opportunity to get their hands on weak and, above all, inexpensive prey. “The first half of 2022 will not be easy for the listed ESNs (digital services companies, editor’s note). , for some, very important drops” reports Sid Bachir, analyst at EuroLand Corporate.

The specialist pointed in particular to the poor performance of Atos, whose capitalization has fallen by more than 70% since the beginning of the year. The decline was less marked on the side of Alten (-19%) or Capgemini (-15%). In a context of a low trend in stock markets, takeover bids (OPAs), for their part, thus continue a sustained pace.

Within two years, the ESN universe was completely transformed with several mergers and acquisitions. The year 2020 was very prosperous in this area, especially the difficult acquisition of Altran by the French IT giant Capgemini, the justice system still intervened to order compliance with the offer.

Other operations are launched by the specialist in exploitation and data analysis Business & Decision, the European leader in health software Dedalus (formerly Medasys) or Dalet, Cohéris or EasyVista, in the year 2020. The IT services company ITS Group such as Harvest, the software publisher for the financial and wealth advisory profession, also said goodbye to the Paris Stock Exchange in the last two years. The founding directors of the two companies are assisted respectively by Ardian and Five Arrows (a subsidiary of Rothschild & Cie).

The founding directors at work

The end of 2020 is marked by the start of takeover bids in two stages, such as Devoteam and Groupe Open operations. The founders of Devoteam company favored the support of KKR fund to delist their company. A first offer of 98 euros was made but it did not meet the expected success. A year later, these same initiators offered a generous offer of…168.50 euros per share to achieve their goals.

Groupe Open is the subject of a takeover bid under conditions similar to those of Devoteam. Again, the founding directors accompanied by an investment fund (in this case Montefiore Investment) are in charge. But the proposed price of 15 euros per share did not release people, only 71% of the capital was contributed. For the blameless shareholders, their patience has been rewarded since thirteen months later, i.e. at the beginning of 2022, the same Open Group is targeted again with a more generous offer from the promoters behind the first that suggestion. The argument of an offer this time of 33.50 euros made the most reluctant minority shareholders bow. In April 2022, Groupe Open left the Paris Stock Exchange, after 24 years of presence.

A wave of takeover bids to follow?

The wave of takeover bids continues in 2022. The beginning of the year, for example, was marked by the merger between the Canadian company CGI and the French company Umanis. Founded in 1990 and listed on the stock exchange in 1998 at the height of the tech bubble, under the name of Europstat, Umanis covers the fields of Big Data and AI, integration and cloud infrastructure, etc. The variety of services offered by the French has attracted the envy of the Canadian group seeking to consolidate its presence in France.

Sopra Steria, for its part, announced at the end of July that it entered into exclusive negotiations with the management of CS with a view to acquiring a majority block representing 29.7%. ESN occupying the French top 10 will thus increase to 65.3% of the capital of its target, the other shareholders (IRA Holding and the founders of Novidy’s) have made the sale of their shares.

This acquisition of a majority stake will be followed by the filing of a simplified takeover bid at the beginning of 2023, with the aim of obtaining the capital balance. So Sopra Steria intends to strengthen its position in the defense and security sector with the acquisition of CS Group and its technological solutions to ensure the security of operations and critical missions of customers.

“As the rankings of ESNs include fewer and fewer companies due to take bids (almost 10 in the sector since 2020), and IPOs in the sector have become rare, the list now offers a reduced option which should benefit some discounted files such as Micropole (which currently pays 2.7x the EBIT expected for 2023) or those that offer good visibility such as Sword Group and Infotel”, concluded EuroLand Corporate.

Sabrina Sadgui – ©2022 BFM Bourse

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