TECHNOLOGY, MEDIA, TELECOMMUNICATIONS
The innovation driver
The TMT sector is one of the industries driving innovation and digitalization. The companies in the TMT sector serve to accelerate processes through software, AI or machine learning and provide services & content to meet the entertainment, and information and communication needs of consumers. Also because of its size, the TMT market is very significant for private equity investors.
A digital market – continuously reinvented
After continuous growth, 2022 is a year of transition from growth to consolidation, integration and process improvement and the significant impact of geopolitics.
TMT is the driver of digitization. Digitization is helping the technology sector to grow, while media companies are operating in uncertain territory, even though new streaming services are offering quality content, sports events in particular are moving the masses, and new products are emerging. The telecommunications industry in Germany is also undergoing significant change. The traditional telecommunications business is collapsing: Prices are falling, especially in mobile communications. Value enhancement potential in the actual core business must be implemented quickly; the time factor plays a decisive role alongside innovation and cost reduction.
The media landscape is changing. Amazon Prime, Netflix, DAZN and other modern streaming providers are changing market realities, especially in filmed entertainment. New products, supported by technology, can mean significant revenue growth. Especially for live sporting events, the possibilities due to low latency with 5G are enormous and first products are emerging which will be provided as add-ons to the existing portfolio. The Corona crisis has also transformed the consumption of information services. News services are changing the form of communication, and the acceptance of premium services/paid content is increasing.
The telecommunications industry, not only in Germany, is undergoing a transformation, including the topics of 5G, fiber-optic expansion (Fiber-To-The-Home), SDN (Software-Defined Network) or internal changes such as cloudification and consolidation of IT systems, some of which are outdated. In addition, the complexity of the legal framework and its compliance increases. Telcos are on the lookout for the 5G killer applications. 5G campus networks could significantly change the B2B business of telcos, creating new ecosystems where many stakeholders from different industries need to cooperate. Infrastructure deals in particular have been dominant in Europe over the last two years.
Companies must develop dynamic business models for new ecosystems
For TMT companies, the current challenges of market and political dynamics mean that a wave of consolidation could be imminent. Future-proof business models must be aligned with the changing needs of end customers in the B2X area in order to better exploit the diverse opportunities for growth and digitization.
In the technology sector, new ecosystems are emerging such as in Industrial IoT, in charging infrastructures in the mobility sector, in 5G and fiber, in connected vehicles, in smart cities and even in critical infrastructure. New technologies such as AI, machine learning, 3D printing are giving rise to new business models. The metaverse also promises a new billion-dollar market.
Technology companies are increasingly interested in the content-driven media & entertainment market. Advertising & marketing companies will have to adapt accordingly and new opportunities will emerge. Startups can act strategically and become targets of larger players.
Telecommunications companies are partly trying to invest in the media & entertainment environment so that the TMT industry converges. The aforementioned trends 5G and fiber rollout, in combination with DaaS (Device as a Service), Industrial IoT, will shape the market and force companies to become more cooperative. In addition, pricing of services is a major challenge in all B2X areas.
Insights: IT Beyond Business – Recognizing Opportunities from Technologies
IT systems and data must not only function correctly within a company, be scalable, secure and resilient, they must also interact flawlessly with external systems from other companies within an ecosystem. Large and medium-sized companies must learn to work together with SMEs and smaller startups in this regard. For private equity investors, this creates a wide range of opportunities for a buy & build strategy and attractive investment opportunities, as there is a high level of fragmentation in many submarkets.
Startups and SMEs can operate in the media & entertainment market through a strategic approach, serve niche markets, in some cases exclusively, and thus become targets of private equity investors or larger players. New opportunities are being created, especially in connection with 5G technology.
In telecommunications, many new providers have appeared in the market in the context of radio access network, 5G, EDGE computing or SDN, which have reached a good target level that can be very interesting for PEs. Niche software, such as holographic communication, are also potential targets for strategists or financial investors.
Finally, it should be mentioned that the TMT area will be very affine in terms of consolidation. Disruptive technologies will change the market significantly, so continuous market monitoring will be crucial as innovation cycles shorten and market conditions change rapidly.
Our industry expertise
Focus of our project experience in the sub-sectors
- Software (e.g. eHealth, mobile apps, ERP, ECM, CRM systems, SAP archiving, Industry 4.0, automation, law firm and insolvency software, cloud security, education, cybersecurity, banking & finance software, HR management, unified endpoint management, mobility services, blockchain, payment, identity & access management, access systems, analytics & marketing, imaging, travel management)
- Hardware (e.g. IT Security, Firewall, Cloud, Computer Boards, Virtual Machine Equipment, KVM Switches, Hardware Sensors, Opto-electronic Modules, Sound systems, Person tracking, Optical Instruments)
- IT services (e.g. software-based BPO for HR departments, IT consulting with specific assets, hosting & data centers)
- IT consulting (e.g. Connected Car, digitalization, IT strategy, digitalization strategy, governance & compliance)
- Tech Distributors (e.g. Value Added Software, Reselling, Email Archiving aaS, Automation and Managed Services, Backup & Storage, Internationalization)
- E-commerce (e.g. B2B, B2C, supply chain, retail, automotive, customer journeys)
Media & Entertainment
- Advertising & Marketing (e.g. Website Tracking, Analytics, Marketing Automatization, Media Monitoring)
- Information Services (e.g. Information & Business Education)
- Online Media (e.g. Business Education, Online Monitoring)
- Cable & Broadcasting (e.g. Air Traffic Control)
- Integrated Telcos (e.g PMI, Digitalisierung, Prozess-Optimierung, Migration)
- Fixed-line Carriers (e.g. PMI)
- Wireless Providers (e.g. Digitalisierung, Prozess-Optimierung)
- Telco equipment & services (e.g. Prison Telecommunications)