A newly released report from Mergermarket concerning M&A trends in the first half of 2019 has shown that M&A in the technology sector has reached new highs. So far, 1,307 deals have been recorded in the technology sector this year, equating to 15.9% of deal activity by volume in 1H 2019, its highest half-yearly share on Mergermarket record.

In fact, in recent years tech M&A has reached record levels but what are the reasons for the industry’s popularity?

The HVAC industry is considered to be very stable at this moment in time. Many experts believe the outlook for both buying and selling parties will remain positive. As public interest and government regulations continue to push for energy-efficient designs and products, deployment of more advanced cost-effective HVAC systems has increased. This is expected to drive consolidation of HVAC organisations as they look to increase their ability to scale and grow in both commercial and residential markets. Despite uncertainty surrounding a possible recession, there has been no signs of slowing in the M&A industry amongst HVAC businesses.

The global HVAC market is projected to grow at a compound annual growth rate of 5.7%, to reach a value of $183bn by 2025. The growing commercial sector and rapid urbanisation worldwide are driving the demand for HVAC services and equipment. Furthermore, even manual industries such as HVAC must change with the times, and as a result they are being integrated with next-generation technologies such as IoT sensors, remote control systems and hybrid HVAC united, as a way to further reduce energy consumption - this is another factor which is anticipated to contribute to the global market expansion.

Key Industry Trends

•        Smart HVAC: The growth of IoT has allowed us to control, monitor and interact with a range of systems and appliances like never before; HVAC systems are beginning to incorporate this technology. These advanced HVAC systems will include the likes of repair notifications that let you know when repairs or maintenance is needed, remote access that have remote capabilities, and self-regulation which feature new sensors which help the system regulate itself and determine when and where in the building it is most needed.
•        Sustainable Building Design: Sustainability is a primary consideration when designing new buildings, often referred to as green buildings design. HVAC is a key component in green buildings design as it is one of the primary energy consumers. The increased focus on sustainability has led to several advancements in the industry, such as ventilation systems using more use of natural airflow to lower the energy consumption of the facility. HVAC systems using alternative power sources and using new building materials that help to maintain a more constant temperature in the buildings where a powerful HVAC system isn’t necessary.
•        DeVAP HVAC: DeVAP (Desiccant Enhanced Evaporative) is changing HVAC as we know it. These systems provide cooling by using an evaporating cooling system which turns water into evaporation and causes the surrounding air to cool down. DeVAP systems also remove humidity from the surrounding air. They provide the same dry, cool air offered by traditional air conditioners. However, DeVAP systems consume considerably less energy and contain no harmful refrigerants.
•        Geothermal HVAC: These take advantage of consistent temperatures underground to cool and heat buildings. Using water running through underground tubes, these tubes are either heated or cooled by the temperature of the ground. This water then travels to an indoor unit, where a fan, pump, and compressor are used to deliver cool or hot air to other parts of the building.

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The global industrial wastewater treatment market was valued at $10.6B last year, and industry experts expect this figure to reach $16.6B by 2026 – at a compound annual growth rate (CAGR) of 5.8%. The global market is propelled by factors such as diminishing freshwater resources and stringent regulations related to emissions and treatment of industrial waste. Industries such as food, petroleum refining, textile dying, and power plants are some of the main contributors to industrial wastewater. 

Over recent years, new water recycling and process technologies have begun emerging, some include membrane bioreactors, wastewater monitoring and control systems, and granular sludge treatment processes using engineered microbial structures. Increasingly stringent wastewater discharge controls and tighter water quality requirements, nutrient removal, trouble maintaining complicated systems while keeping prices down are the major hindrances for the industrial wastewater treatment market. 

Key Industry Statistics

• North America (35.5%) is expected to be the largest player in the industry, owing to the presence of huge infrastructure in the oil and gas sector, mining and strict regulations against wastewater treatment. Europe is the second largest accounting for 31.2%.
• The largest segment of the wastewater treatment industry goes to power generation, which accounts for 62% of the total market share. Mining holds 30.6%, while chemicals hold 7.4%. 
• Elsewhere, coagulants are anticipated to register the highest growth rate in the industry, at a rate of 6.4% through to 2026.

Water infrastructure has experienced several ups and downs. While the majority of market stakeholders were interested in business collaborations, natural disasters created a range of problems for water treatment manufacturers. Most of the top players have become focused on integration of advanced technologies to develop smarter and more effective solutions for water treatment and management.

The value chain for water and wastewater treatment equipment market is expected to witness changes in terms of investments, innovations, advancements and business opportunities. New technologies, business models and technologies are expected to be introduced, especially to support the changing requirements for water treatment. 

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The global corporate training market is projected to grow at a compound annual rate of 9.8% and reach $114 billion by 2022, according to industry experts. Furthermore, a combination of economic, regulatory, demographic and technological forces is reshaping the labour market and forcing employers to increase the speed and efficiency with which they train employees. Meanwhile, ongoing changes in how people consume information and engage with educational content have unlocked new opportunities for innovative training companies to significantly enhance the learning experience. These factors have led to a strong interest in training firms, with much of the interest over the last few years coming from players outside the industry, who wouldn’t traditionally be linked with training.

Some of the high-profile acquisitions coming from adjacent markets include recruitment companies looking to use training as a way to strengthen the marketability of their talent pools and help employers bridge the skills gap. For example, in May 2018, Adecco Group announced it was acquiring General Assembly, which provides courses in web development, coding, and other digital skills. A few years earlier, LinkedIn enhanced its training capabilities by acquiring Lynda.com, an online education company. Penn Foster also partnered with EmployBridge, a large commercial recruitment company, to provide online courses to EmployBridge employees for free.

Furthermore, several factors over the last decade have given employer-sponsored training an increased share in the market. The most significant is that the ever-shortening technology is cycle is accelerating the rate in which certain skills become obsolete. As a result, employers are being driven to make investments in hiring, training, and re-training qualified workers. Increasing regulations and changes to the policy are contributing to the industry, increasing demand for regulatory and compliance monitoring training.

Key Industry Trends

·     eLearning: The increasing use of eLearning has grown to become a multi-billion-dollar market. Factors that have contributed to growth in eLearning include the rising costs of instructor-led, classroom-based training as well as the need for continuous, life-long learning. Awareness and compliance training were two of the first to use eLearning, however sophisticated platforms have made even soft skills training a practical reality for this approach. Add to that the potential for significant cost savings, and it’s not difficult to predict the continued expansion of eLearning for years to come.

·     Training being used to attract and retain employees: Training is increasingly being viewed as an employee incentive, along with perks such as healthcare and retirement benefits. Employees appreciate that access to training will help them hone their skillset – as well as developing new skills. This also helps businesses retain employees, a recent poll found that more than half of all currently employed adults are either actively searching for a new job or are at least passively entertaining other career opportunities. Using training is a way to help develop your employees while keeping them engaged and productive. 

·     Skill gaps continue to grow: According to a report by Payscale Research, 33% of employers had positions open for over six months due to a lack of skilled or qualified candidates. As such, companies must take it upon themselves to provide future employees with the training and development opportunities to meet the demand of the role.

·     Convenience: With the ever-increasing rise of technology, more people are demanding that training is easily accessible. They expect learning to happen at any time, in any place. As the vast majority of people use smart phones, this means they don’t have to wait to access training. 

·     Personalisation: Off-the-shelf training programs are on a rapid decline, employees expect training to be relevant to their unique situation. This means adapting content based on factors such as work environment, the culture within the organisation, employee experience, location, and job performance. With eLearning, there is cause for optimism and excitement in the industry that customised training will become the norm. While training improves, so will company performance.

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This is an intriguing time to be involved in the global food and beverage industry. 2019 remains promising for M&A opportunities for several reasons. Giant food companies are on a spree to expand their portfolios with food innovation. Food start-ups and smaller private food companies are looking to cash in on growth and exit strategies. And private equity and venture capital firms are motivated to get their piece of the pie.  

Through the year 2023, the global higher education market is expected to grow at a compound annual growth rate of more than 12%. There are several factors driving positive growth in this sector, from the high demand for technological innovations to the surge of internationalization. 

The global real estate environment is off to a strong start for 2019. While uncertainties regarding trade, Brexit, and other geopolitical tensions linger, we have yet to see any major weaknesses in real estate markets. The sector continues to attract capital and pricing levels are holding steady thanks to strong capital flows. 

Real Capital Analytics (RCA) reports that acquisitions of income-producing commercial real estate last year rose by 3 percent to $963.7 billion. That is the third highest annual total on record behind 2007 and 2015.

The Multifamily Sector

Multifamily housing is expected to continue to attract sustained investment and debt capital. Multifamily demand remains steady and is driving up rent prices as younger generations are being priced out of home ownership and older generations are downsizing. The top three emerging markets to watch in the United States for multifamily housing this year are Phoenix, Portland, and Tampa Bay.

Workforce Housing

The growing need for workforce housing is also driving the market for multifamily housing. In fact, workforce housing has actually outperformed the overall multifamily market in each of the last four years.According to a report by CBRE, workforce housing has brought in nearly $375 billion in investment over the last five years. That is more than 51 percent of the total for all multifamily asset classes.

Tech, Retail & E-commerce

Real estate fundamentals remain strong amid trends surrounding urbanization, retail, and ecommerce. Suburban markets are adapting to technology and becoming more urbanized with added focus on community-oriented retail concepts. Retail stores and shopping malls are undergoing an identity transformation, as retailers are adjusting their real estate needs to accommodate omnichannel experiences, especially in the U.S. and Europe. Additionally, e-commerce companies are adding smaller, satellite facilities to their networks of regional distribution centers as a reaction to the demand for fast, low-cost shipping.

Tech firms and flexible space providers continue to have a major impact on the global real estate market this year. Flexible space providers are targeting their focus on larger enterprises. More and more firms are leasing shared spaces. And as employees become more mobile, companies are adapting and coworking is becoming more popular. Coworking is primarily focused in high-wage markets and cities with a large number of professional services companies. Coworking spaces in tech markets are nearly double that of other markets.

Mixed-use real estate is also going to remain a significant opportunity, with the convergence of retail, office, residential, hospitality, and community-focused spaces. This adaptation is causing a shift in the types of tenants that properties are accommodating, resulting in shorter lease agreements.

REITs and Mergers & Acquisitions

Investors are expected to continue to diversify into secondary markets in search of yield. This includes real estate investment trusts (REITs), which have recently increased valuations and pay healthy dividends. Global REITs are projected to outperform other sectors and deliver strong returns in 2019. The property sectors among REITs expected to see the most M&A activity this year are industrial, self-storage, data center, multifamily, and student housing. Experts also predict the possibilities of some deals in the hotel REIT sector.

The year 2018 outperformed 2015’s prosperity for global commercial real estate investment in the current cycle, with a five percent increase in global investment volume. The U.S. accounted for 52 percent of global transactions. A total of six investors from Canada, France and China invested a record $41 billion in U.S. entities.

The value of U.S. entity-level transactions increased threefold last year, driven in majority by cross-border investment. Toronto-based Brookfield acquired Forest City Realty for $11 billion, making Brookfield the second-largest property owner in New York City, led only by the city government, and boasting a NYC portfolio worth around $32 billion. In 2018, Brookfield also acquired the second-largest U.S. mall owner, General Growth Properties, for $15 billion. Both Forest City and GGP were publicly traded REITs. 

Global Hotspots

International property is sustaining its 2018 performances as a remarkably popular market. Some of the top cities for real estate investment in 2019 include Lisbon, Toronto, Dallas-Forth Worth, Melbourne, Singapore, Berlin, New York City, Vancouver, Raleigh, Montreal, Tokyo, Madrid, Osaka, and Sydney. Specifically, the city of Lisbon has been noted to be the 2019 investment capital of Europe. This is due to increased tourism, a growing economy, and competitively lower pricing.

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There has been a steep incline in private equity investors buying SaaS (software as a service) companies over the last five years with PE firms investing in, recapitalising, and outright buying numerous SaaS companies. In fact, private equity accounted for 2.5% of all private equity portfolio acquisitions in 2018.

So, what are the reasons for private equity firms investing so heavily into SaaS companies?

While ongoing geopolitical uncertainties could present challenges in 2019, the overall outlook for the global retail industry remains optimistic. In the world’s top retail market, the United States, retail sales are predicted to grow more than 3 percent to exceed $5.5 trillion. But for the first time ever, China is expected to outperform the U.S. in retail sales. China is forecasted to see a 7.5 percent growth in retail sales this year, reaching $5.6 trillion.

The outlook for the global construction market for the year of 2019 remains positive, with an expected five-percent sector-wide growth in revenue. Robust economies, low interest rates, and increased infrastructure spending are key factors behind the increased confidence. The world’s fastest growing market is the Asia Pacific region, due to growing investments in China and India’s construction sectors. In North America and Europe, growth is being driven by new technologies in already strong construction markets. Also, a number of South American and Middle Eastern countries may see their markets recover in the coming year and have the potential for growth in the future.

M&A Momentum

Mergers and acquisitions for the construction industry are poised to follow the vigorous deal activity of 2018. Construction tech startups raised $1.27 billion in venture funding in the first three quarters of 2018 alone. Public companies were seeking growth. There was increased interest in individual sectors such as energy. Private equity firms were actively buying and selling. Another significant factor was a need for ownership changes due to a growing retirement-age population. These trends are predicted to continue throughout 2019.

Tech Startups

Construction technology startups are expected to continue to have a considerable impact this year. This industry segment has seen more than $10 billion in funding over the past 10 years, with most of the money coming from early-stage venture capital deals. As these tech companies evolve, bigger firms are making full acquisitions. One strategic reason behind these large acquisitions is for companies to procure more talent in a more efficient manner, which in turn is anticipated to drive business growth.

Smart Cities

Society is seeing a heightened focus on infrastructure upgrades and the creation of smart cities. In 2016, smart-city tech spending reached $80 billion globally. By 2021, spending is expected to grow to $135 billion. Smart cities use Internet sensors and other technologies to connect elements across a city to gather data and enhance the lives of its residents. Partnerships between private and public companies are helping governments incorporate new technologies in an increasingly urbanized world. The advent of smart cities was initially seen in Europe, and now the U.S. has begun to integrate technology into urban infrastructure.

Offsite Construction

The quickly growing modular construction market is projected to reach $157 billion by 2023. The capability to build taller modular buildings is reaching new heights, with some buildings stacking up to almost 20 stories. This offsite type of construction is addressing certain industry needs, such as the need for skilled labor, the need for affordable housing, and the need to complete projects more quickly.

Connected Construction

A rapidly emerging trend that many investors are watching closely is connected construction. Companies are incorporating technology into construction sites to save time and money. Bluetooth connectivity is driving the emergence of new worksite tools that can be tracked, monitored, and even deactivated. Mesh networks are enabling sites to be fully connected to wireless networks in order to streamline processes around obstacles in the way of man-hours, status updates, supply deliveries, blueprint consultations, and more.

These emerging technologies have prompted several recent acquisitions, just to name a few.

• Autodesk Inc. purchased construction productivity software company PlanGrid for $875 million.
• Autodesk also spent $275 million to buy BuildingConnected, a networking platform of more than 700,000 construction professionals.
• Trimble bought construction software company Viewpoint from Bain Capital for $1.2 billion.   

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Value-based Care

Quality, affordable healthcare remains an important issue for people all over the world, from Europe and the United States to Asia and Africa. As global healthcare spending continues to skyrocket, people are demanding more bipartisan policies from their political leaders to address the problem. This is why value-based care solutions are starting to play a major role. The industry is undergoing a shift in focus from treating illness to achieving and maintaining wellness. These solutions are more productive and less wasteful, as they aim to avoid unnecessary testing and interventions. Up until now, this role has been typically driven by health plans, but physicians and health systems are getting more involved in the full spectrum of care. All of these elements of value-based care represent huge growth opportunities in the digital healthcare coming-of-age, with various forms of technology as the major impetus.  

Technology, Artificial Intelligence, and Data

Technologies that automate nonclinical duties such as paperwork are being developed to save physicians time and allow them to focus on patients. The implementation of electronic health records (EHRs) and artificial intelligence tools is expected to better connect patients, physicians, health systems, and health plans. Physicians will be able to utilize EHR data to manage illnesses with fewer scheduled in-person appointments.

Virtual care is also an emerging market factor in the changing healthcare landscape. Many people put off doctor visits until their condition worsens, which increases costs such as emergency room expenses. New virtual care technologies are enabling patients to see a physician from the comfort of home. It also means that physicians are able to see more patients. TeleHealth Services is an ideal example of this trend. It uses digital information, computers and mobile devices to access and manage health care services remotely. In the last few years, nearly three quarters of major employer health plans had incorporated TeleHealth software services into their benefit packages.

Tech-enabled medical devices and services are another growing trend. This includes wearable devices, digital therapeutics, and applications that collect and communicate data. Last year, FitBit acquired Twine Health, a health-coaching platform that helps people improve health outcomes while helping health systems, plans, and providers reduce healthcare costs. Last summer, Amazon acquired the online pharmacy PillPack for almost $1 billion, and drug giant GlaxoSmithKline entered into a four-year agreement with the online platform 23andme, the world’s leading DNA-testing-kit resource for consumers. Also in 2018, Roche acquired Flatiron, which uses oncology EHRs to connect oncologists, academics, hospitals, researchers and regulators on a shared technology platform. 

Cloud technology also brings new benefits to the table, such as easy integration of immense datasets, and AI capabilities that analyze data and provide insights remotely. Cloud technology is expected to continue to gain momentum, as data—both big and small—are finally being used in ways that may make a meaningful difference for the healthcare industry.

Healthcare Mergers & Acquisitions (M&A) in 2019

The industry saw ample M&A activity last year, and this activity has already carried over into 2019, with several major deals already closing in January. There are also some big moves in the works that everyone is watching. A proposed merger between retail pharmacy CVS and insurance giant Aetna has drawn much speculation and scrutiny as it still awaits regulatory approval as of this month. Walmart has been in talks to merge with insurance provider Humana, another sign of major retailers attempting to take a stake in the healthcare industry. 

With the growing digital health market and continued pharmaceutical innovations, M&A strategies remain a preferred growth plan for executives and it is expected that there will be lively M&A activity throughout 2019. Southeast Asia has drawn abundant attention, with a 92 percent increase in healthcare IPO volume last year. Plus, the stock exchange in Hong Kong introduced new rules allowing biotech companies to issue shares even before recording revenue or profits. Singapore, Indonesia and Malaysia all have ripe environments for new opportunities. And even despite trade tensions, rising interest rates, and volatile markets, deal-making activity in the region remains forecasted to grow. 

What it Means for You

Whether you are seeking a new investment, looking to grow your company, or considering selling your business, a great deal of financial opportunity lies in the global healthcare industry. 2019 may very well be the right year for you to make a move. If you contact our specialists at Benchmark International, we will use our global connections and mergers and acquisitions expertise to help you carefully craft the ideal opportunity for you and your next venture. 

Uncertainty and speculation are rife over Britain’s departure from the EU but, despite this, it has been a golden period for UK tech. With multi-billion pound exits and venture capital (VC) funding at record highs, it is unlikely that this will come to a halt – instead, there may be a shift in emphasis for the sector as a whole.

Technology start-ups can still thrive post-Brexit due to the reasons why they succeed – they need access to capital, access to talent and access to markets, and post-Brexit Britain should remain well positioned on all three.

A study by Private Equity Info has identified the top 10 industries that private equity firms have been acquiring during 2018. Below is a breakdown of the industries along with why they have been so popular with private equity firms.

Irrespective of the outcome and the eventual deal Britain strikes with the EU, there will be greater uncertainty for businesses in the near-term.