A Closer Look at Large-cap European Tech in Public Markets

Photo by Jakob Braun on Unsplash
  • Semis / hardware represent the largest segment. I was slightly surprised as it is not a sector I know well and hence was not aware of its scale. There are several large companies such as ASML, Infineon, STMElectronics in Europe. I suspect that the global nature of the semis, coupled with its manufacturing capabilities, enabled European companies to reach such scale.
  • Consumer Internet is the second largest segment and comprises dominant regional players in classifieds / platforms, food delivery and e-commerce. Whilst there are several new-age players, particularly in food delivery and ecommerce, low-tech classifieds (Adevinta, Scout24, Schibsted) still represent a large portion of this segment.
  • Software segment is the third largest segment with an aggregate market value of c. €235 billion (SAP represents c.60% of the aggregate market value).
  • Majority of the European software companies are “mature-tech” with revenue growth <10%. However, several promising, high-growth companies such as TeamViewer have recently IPOed and reached significantly scale.
  • It should be noted that successful high-growth tech companies tend to prefer a US listing (e.g. Spotify, Elastic), limiting the listing of break-out software companies in Europe.
  • Gaming is the third largest segment with 7 out of 10 companies listed in two geographies (Sweden and the UK). Selected companies include Ubisoft, Embracer Group, CD Projekt, Keywords Studios.
  • Others including (a) Edtech (Kahoot!, Learning Technologies), (b) HoldCo (Prosus), (c) Payments (Adyen) and (d) Ocado
  • Lack of European “FAANG” — There is a clear lack of tech majors in Europe. While the US have their FAANGs and China have their BAT stocks, Europe doesn’t have any tech companies of such scale. In fact, most investors won’t even be familiar with the largest European tech company — ASML, a leading manufacturers of chip-making equipment.
  • “Old-school” Semis / hardware are overweight on the list, similar to the overall sector distribution — As per the aggregate sector distribution, semis / hardware dominate the top 20.
  • Several new-age, consumer internet players dominating — One common theme within the consumer internet is the emergence of dominant regional platforms in various verticals (classifieds, ecommerce, food delivery). Companies such as DeliveryHero, Zalando and Allegro dominate multiple geographic markets, enabling them to reach significant scale.
  • Where are the software companies? There is a clear lack of software companies in the top 20. SAP, Dassault and AVEVA are the only software companies on the list. In contrast to the US, Europe is a tough place to scale a listed software business due to a variety of structural reasons (geographic fragmentation of end markets and smaller IT budgets relative to the US, investor focus on profitability etc).

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