Spectris’s board agreed terms on a GBP 3.8bn equity value tie-up with financial sponsor Advent yesterday (23 June), meaning all eyes are now on KKR’s next move.

KKR has already had one offer rejected and investors are pricing in the possibility it will make another, with Spectris’s shares trading slightly above Advent’s GBP 37.63 per share bid.

But with a premium of 85% already on the table from Advent and limited valuation headroom, KKR doesn’t have much room for manoeuvre, according to analysis by The Morning Flash.

Advent’s bid values Spectris at 18.5x adjusted EBITDA for the year ended 31 December 2024, according to the deal announcement, well above peers.

Oxford Instruments and Renishaw, which a have similar growth and profitability profile to Spectris, trade at 10x and 13x EBITDA for the comparable period.

That’s roughly in line with where Spectris itself traded shortly before Advent’s interest was disclosed.

Large cap peers Agilent Technologies and Halma, which are looser comps with superior margins, trade at 19x and 22x respectively.

Advent’s offer is also at the high end of historical bid premiums on large and mid-cap European technology businesses since 2004, according to analysis by The Morning Flash.

Among the largest premiums previously paid are OpenText’s 2022, GBP 1.8bn equity value acquisition of enterprise software consultant Micro Focus, at a 98% premium, and Qualcomm’s acquisition of AI chip producer Alphawave, agreed earlier this month, at a 96% premium and an equity value of USD 2.4bn (GBP 1.8bn).

While it’s common for strategic bidders to pay high premiums when acquiring smaller peers, because of the opportunity to find synergies with their existing operations, it’s rarer among financial sponsors.

One of the largest premiums in the European tech sector was conducted by Advent itself when it acquired Laird, a technology and electronics business, at a premium of 73% in a GBP 1bn equity value deal agreed during 2018.

It subsequently broke up the business, selling off Laird’s key divisions separately.

EQT last year paid a 67% premium for Keywords Studios, a provider of services to the video games industry, in a GBP 2.1bn equity value deal alongside co-investors CPP Investments, a Canadian pension fund, and Temasek, a Singaporean sovereign wealth fund.

Considerations around valuation and historical premiums indicate there’s only likely to be headroom for a small, incremental offer increase from KKR – if there is room for one at all.

Advent’s decision to go large and go early has put it firmly in the driving seat for now.

Shares in Spectris closed yesterday at GBP 37.98, 1% above Advent’s offer.