The document discusses mergers and acquisitions in the context of digitalization, noting that M&A is an important route for companies to achieve transformation more quickly as innovation cycles accelerate. It provides examples of recent acquisitions in sectors like technology, media, and telecommunications to acquire things like digital mapping capabilities, video capture technologies, and messaging platforms. Strategic reasons for M&A include enhancing market propositions, improving customer experience, driving product innovation, and strengthening competitive advantages.

1. European School of
Management & Technology
Open Lecture Series
M&A and Digitalisation
Rachel Empey
31.05.2016

2. Secret – Geheim2

3. Secret – Geheim3

4. Secret – Geheim4
Rev
EV
Devices (Tech)
Connectivity
(Telcos)
IT Serv &
Network
Components (Tech)
Digital Services
(Internet)
Content Creation
& Mgmt (Media)
1.9x
4.7x
% EV
% OpFCF
8.6% 41.8%
41.5%
21.3%
24.2%
21.2%
12.3%
7.2%
6.9%15.2%

5. Secret – Geheim5
From a Voice World to a Data World
Margin
Larger operators earn an over-
proportional share of the
market’s cash flow
Market share
Infrastructure costs
Land grabbing
Hygiene factor
Competition

6. Secret – Geheim6
Visionary
Strategic
Operational
Creating unique market proposition
Fuelling outstanding customer
experience
Driving superior product innovation
…
Enhancing company capabilities
Strengthening competitive
advantage
Increasing market share
…
Diversifying products or services
Optimising cost base
Leveraging synergies
…
"We don’t think innovation
can happen quickly
enough organically;
we're in a window where
M&A is the best route to
achieve that
transformation.“
Jeff Liu, Global Technology Leader Transaction
Advisory Services Ernst & Young

7. Secret – Geheim7
Buyer Target
“Old school” “New world”
Activity Date
Energy
efficiency
GBP
85m
Price
Jun
2013
Digital
maps
EUR
2.8bn
Dez
2015
Video
capture
n.a.
Mar
2016
Buyer Target Activity Date Price
Instant
messaging
USD
19bn
Feb
2014
Face
recognition
n.a.
Jan
2016
Employee
referral
CHF
3.2 – 4.8bn
Apr
2016

8. Secret – Geheim8
stand-alone pro-forma
2
Note:
1 Based on reported results by Telekom & Vodafone, pro-forma calculation for TEF D
2 Combined total customer and revenuenumbers based on pro-forma calculations
stand-alone pro-forma
2
pro-forma
Total accesses (Jun-2014)
In million
Mobile market shares (Jun-2014)1
Market size c. 113 million mobile subscribers
Total revenue (FY 2013)
In EUR billion
37% 35%
28%
< <

9. Secret – Geheim9
Shareholder value
creation
> €5.0 bn
Synergies
Leverage scale to
create the Leading
Digital Telco
Value crystallisation
through significant
synergies
Superior customer
experience
CombinedStandalone
Network
Investment
Enhanced Profitability
&
Free Cash Flow
FCF
CombinedStandalone
Year 1:
35%
achieved
3G
coverage
increased
OIBDA
margin
+2.6%p

10. Secret – Geheim10
OIBDA Evolution (YoY%)Superior customer experience Synergy capture
Leverage scale to
create the Leading
Digital Telco
Value crystallisation
through significant
synergies
Enhanced Profitability
&
Free Cash Flow
-40
-20
0
20
40
2015
Q1
2014
Q1
2013
Q1
2016
Q1

11. Secret – Geheim11
Customers
Partners
Business
Advanced Data Analytics
Internet of Things
Market units Growth areas
IP connectivity Data
“Old school” “New world”

12. Secret – Geheim12
Advanced Data Analytics (ADA) Internet of Things (IoT)

13. Secret – Geheim13
1. 2. 3.
% EV

15. Secret – Geheim15
6019339
313425399
102083579147
eCommerce
1.419
2.815
Telcos
18x
Advertising
based internet
services
Search Online
Home Video
Online TravelOnline
Games/Music
EV
Rev
12.6x 22.6x 17.7x 24.8x 75.7x 26.8x 15.3xEV/OpFCF
EV/Rev 2.0x 2.7x 5.4x 8.9x 4.9x 9.7x 6.0x