An Update on the Acquisition Market

Though the thoughts are focused on the European market, Insider sees many similarities, so here are some highlights from an Invidis article on the M&A market (translated to english from German).

At its peak in 2021, digital signage integrator valuations jumped to 10-14x the EBITDA multiple, compared to 5-8x a few years ago. And technology or software companies started charging well in excess of 20x or double digit revenue multiples.

In the summer of 2022, digital signage company valuations have adjusted to the new economic realities. The good news is that the fundamentals of the digital signage industry have not changed and acquisitions continue to be successfully completed.

Four reasons why the digital signage industry remains interesting for investors:

  • First of all, there continues to be a fundamental growth trend in the digital signage industry with annual growth rates of 10-14%. Also, there are no signs that the trend of increasing digitization of physical spaces such as retail stores, offices, schools or event venues will abate any time soon. However, in the current political and economic environment, there will be some (significant) bumps along the way, but the underlying growth trend is solid.
  • Second, most industry players are established, 10- to 20-year-old companies that are profitable and don’t rely on hyper-growth models with the vague hope of profits sometime in the future. That might seem a bit boring, but at times like this, investors prefer a little more substance and less growth imagination
  • Third, many of the original founders and entrepreneurs have reached a point where they are beginning to think about succession and further growth opportunities for their businesses. The past few years have been used to prepare the finances and corporate structures for handover to new owners.
  • Finally, the industry is still very fragmented, giving investors a clear buy-and-build concept.

Basically, we see no reason why investments in digital signage companies should slow down significantly or even stop. However, deals could become more difficult if sellers continue to insist on high valuations and investors become extra cautious about valuations and risk. Ultimately, investors are looking for “the believers and the doers,” and there are quite a few of those in the industry.

Insiders Take: Though a different market, Insider sees many of the same themes in our US market.  M&A is still robust, but buyers are becoming more strategic and selective in their investments.

If you have a perspective, let us know at info@billboardinsider.com.

 

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