Merger and acquisitions advice firm Magister predicts European technology firms will enjoy a strong 2013, with at least one achieving a $1 billion (€780 million) valuation through a sale, IPO or fundraising activity.
However, it is next-generation technology firms that are set to reap the benefits, rather than traditional players, the advisory firm cautions. Momentum behind next-generation firms has been growing for several years, with European firms delivering half the value of US venture capital-backed exits in 2009 and 2010 - $15 billion compared to $30 billion respectively – despite significantly lower venture capital investment - $6 billion compared to $25 billion.
“European investors typically enter at roughly half the valuation that US venture capital funds do, and exit at similar valuations as in the US,” notes Victor Basta, managing director of Magister, explaining that the “quality of start ups in Europe has increased enormously,” as a rising number of serial entrepreneurs in the region has helped new technology firms to grow rapidly.
Magister believes there are seven European next-generation technology firms capable of breaking the $1 billion valuation barrier in 2013 – personal loan firm Wonga; payments outfit Klarna, app firm MindCandy, music service provider Shazam, collaboration tools firm Huddle, restaurant delivery company Just Eat, and Rovio, which created Angry Birds.
All seven display several key factors Magister believes is necessary for success, including using big data analysis to focus on the business model, high levels of social engagement, and greater availability of affordable talent in Europe relative to Silicon Valley.
”Europe always lagged the US when it comes to early achievement of stratospheric valuations. The playing field is now much more level, with European companies arguably better at exploiting particular aspects of the commercial potential of the Internet,” Basta says.