IT Sector: the most active investor

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BY : Samuel RegatoDecember Fri, 2020

The information technology (IT) sector consists of companies that produce software, hardware or semiconductor equipment, or companies that provide Internet or related services.

The three major industry groups in the IT sector are :

  • Software and services
  • Technology hardware and equipment
  • Semiconductors and semiconductor equipment

These three industrial groups are further divided into industries and sub-sectors.

Information Technology Sector: Investment Activity  

In recent years, the information technology sector has been the focus of a great deal of investment activity. In the last 3 years in Europe, there have been 4073 investment rounds and 1131 acquisitions. 

One of the most recent rounds of funding in the IT sector, announced on 19 January 2021, was received by KONUX, a German software platform for the rail sector, which uses intelligent sensors and machine learning for the efficient maintenance of track devices. Konux raised €65m in a round led by Sanno Capital.

One of the latest acquisitions announced so far, on 12 January 2021, was the acquisition of Orbus software, a UK-based IT and business transformation software company by Silvertree Equity.  

The most active investor in the sector in Europe is 3i Group Private Equity.

3i Group : Approach

3i Group, based in London, is currently one of the leading international investment managers focused on private equity and infrastructure.

From an infrastructure perspective, they are focused on sectors adjacent to utilities, transport, communications and energy.

From a Private Equity perspective, sub-sector specialisation is at the core of their investment strategy. They invest in four main industry sectors: business and technology services, consumer, healthcare and industrial.

So far 3i Group has completed 455 financing rounds, 95 acquisitions and 175 exits.

Within the IT sector, they are focused on the following sub-segments:

  • Intelligent outsourcing
  • Testing, Inspection and Certification (TIC)
  • Governance, risk and compliance
  • Education and training
  • Pharmaceutical business services
  • Vertical application software
  • Human resources outsourcing (HRO)

The image shows the sub-sectors in which 3i Group invests:

IT Sector: the most active investor

They invest in companies with a value-added service offering, backed by intellectual property and sufficiently focused to differentiate themselves from large companies.

Typical holding period for investments is 3-5 years, although they may hold investments for longer depending on the investment strategy.

Financially, they invest in companies in Europe and North America with an EV typically in the range of EUR 100-500 million and with international growth potential.

Geographic area of interest:

IT Sector: the most active investor

Currently, within the IT sector, they have 6 companies in their portfolio: BVG, Evernex, FormelD, Arrivia (formally I.CE.), JMJ and Magnitude. Their past investments include very interesting companies such as Cívica and ERM, among others.

As we have seen throughout the post, the information technology sector is a very attractive sector in which there are private equity firms such as 3i Group, which are very interested in the investment opportunities that exist in this sector.

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