Advent will test the appetite of the private equity market with the sale of IDEMIA – 09/01/2022 at 18:42

by Julien Ponthus, Mathieu Rosemain and Emma-Victoria Farr

PARIS / FRANKFURT, Sept. 1 (Reuters) – The advent will test the appetite of the M&A and private equity market this fall with the upcoming multi-billion dollar listing of digital security firm IDEMIA.

If confirmed, this sale of IDEMIA would take place in a context of tighter financing conditions for funds and fears of recession.

Investment banks Goldman Sachs and Rothschild have been commissioned by Advent and the sale is expected to begin very soon, sources familiar with the matter told Reuters.

Goldman Sachs, Rothschild, IDEMIA and Advent declined to comment.

From the seller’s perspective, the timing of what should be the largest private equity deal is far from ideal.

Since the beginning of the year, the Nasdaq has lost about 25% and the European technology index has lost more than 30%.

A rising interest rate environment is never conducive to valuations in the tech sector, with investors favoring safer sovereign bonds to the detriment of high-growth companies.

Tighter monetary policies and a slowing economy in both the US and Europe have created a more difficult environment for banking unions, penalizing buyers’ ability to raise funds and participate in sales processes.

In the second quarter, major US and European banks spent hundreds of millions on leveraged loan write-downs in their accounts, and the bill will rise this year given the funding they have pledged to provide.

Sources who have analyzed the upcoming sale of IDEMIA point out that the digital security company is difficult to assess as a whole and that some potential buyers may only be interested in biometrics and encryption activities and ignore the activities of security, SIM cards and systems. of payment.

According to sources, biometrics and cryptography assets are valued at 3 billion euros and SIM assets at around one billion.

Accurate assessments will only be established once acquisition candidates have access to company data.

IDEMIA, supported by Bpifrance, produces facial recognition products and biometric identification products, as well as identification tools for border control.

The company works in close collaboration with national agencies for the verification of travelers’ identity and the control of irregular immigration.

Due to the sensitivity of these activities, the successful candidate for the acquisition of IDEMIA will also have to get the go-ahead from the government.

“There are several French and American authorities interested in protecting their respective proprietary technologies (…) it will not be an easy task for industrial groups (wishing to acquire IDEMIA),” said a source close to IDEMIA.

The French government, which also seeks to attract investors, has strengthened its control over foreign investments, both by lowering the threshold required for their government authorization, and by expanding the list of sectors deemed strategic.

Since IDEMIA has a very international clientele and its current owner is foreign, the government may not require the buyer to be French, the sources say.

(Report Julien Ponthus, Mathieu Rosemain and Emma-Victoria Farr, French version by Matthieu Protard, edited by Sophie Louet)

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