However this environment is changing fast. In particular, we are now seeing the emergence of more disruptive, agile and dynamic home-grown technology companies. These are driven by entrepreneurs (especially repeat entrepreneurs) who are willing to go further than in the past in terms of scaling their companies, including expanding into major foreign markets like the US and Asia.
This changing mood has, in part, been driven by a new state-led willingness to promote the tech sector. Last year the government announced a €11bn investment fund to finance disruptive technology innovations, a fund managed by the public investment bank Bpifrance. The fund has already invested in a string of tech companies, ranging from early seed businesses through to much larger companies, and is currently responsible for more than a third of all investments in the sector.
The result is that we now have a far more dynamic tech sector, and I believe this trend will only continue as the government wants large and small businesses alike to work much closer together and collaborate.
In parallel, there is an increasing number of funds willing to invest in French tech businesses. There is for instance a growing number of foreign growth equity funds (including major US ones) writing bigger cheques to fund more aggressive expansion strategies.
We see several drivers which will underpin a very vibrant M&A market in the future.
Firstly, we are seeing increasing interest from private equity in the tech sector which remains highly fragmented in areas such as software. Secondly, major French industrial players - and potential strategic buyers - are starting to realise that it might be a better strategy to buy existing tech companies rather than develop their own tech capability in-house. For instance, Accor Hotels has acquired many platform and software companies in the hospitality space.
And thirdly, we are seeing an increasing number of foreign buyers acquiring French companies in the sector. Indeed, out of the top 10 TMT transactions in France last year, only two involved French buyers with a notable increase in interest from US buyers.
But could these attitudes be about to change? The biggest trends in the market are undoubtedly the move towards the cloud and big data. Managing data, security, business intelligence and mobility have become key drivers in the IT market, and we are now entering a new era of cloud and big data services adoption, with huge innovation.
In Spain this trend has been demonstrated by a number of recent deals in the market such as the €250m sale of Itconic, one of the largest data centre, connectivity and cloud infrastructure solutions providers, to Equinix, the global interconnection and data centre company. The Carlyle Group acquired Itconic in 2015 and invested heavily in expanding capacity and connectivity in its five data centres.
This deal is undoubtedly a sign of things to come. In Spain right now around 80% of data is not in the cloud, but within ten years that number is expected to be completely reversed.
Big data and data analytics are becoming more interesting for acquisitors. Last year Indra acquired Paradigma Digital for €70m at 17x EBITDA, and more recently Boston Consulting Group acquired Kernnel Analytics, a specialist in business intelligence for the banking industry. There are many strategic and private equity buyers looking for these niche companies with large customers in their portfolios.
The multiples in this space are the highest in the industry driven by increasing demand for these services, a limited talent pool and high EBITDA margins (over 25%).
As a result we expect the largest domestic IT providers and foreign players to enter these markets by buying talent and acquiring other providers. In turn, we expect increasing interest from private equity groups outside Spain with investors from both across Europe - in particular the UK, France and Germany - and the US, entering the market. And this is also a great opportunity for us at Clearwater International given both our global connections with private equity and our local presence in discovering and engaging with young mid-cap IT companies.