Tietoevry: Fairly good price for Bekk

Translation: Original published in Finnish on 12/23/2025 at 7:00 am EET.

Tieto sells its Norwegian consulting business, Bekk, at a fairly good price. The sale did not come as a direct surprise, but we had expected divestments from other business areas. The company will use the proceeds  to reduce debt and distribute funds to shareholders. We lowered our estimates in line with the transaction, but next year would have been an interim year in terms of revenue development anyway. However, significant cost savings will support the result next year. We reiterate our EUR 18.0 target price and Reduce recommendation for the share. In our view, the valuation of the share remains neutral.

Norwegian consulting business to be sold at a fairly good price

Tieto announced in early December that it had agreed to sell Norwegian Bekk Consulting AS to private equity firm Axcel for a debt-free cash purchase price of around 140 MEUR. The purchase price will be subject to customary adjustments at the time of closing, and the transaction is expected to close in Q1'26 according to the company's estimate. The company will use the proceeds from the transaction to reduce debt and distribute funds to shareholders. We estimate that a relatively good capital gain will be recorded from the sale, which is, however, naturally a one-off item. In our view, the sale will not affect the dividend paid for the current year, but it will reduce indebtedness and improve the possibilities for paying additional dividends in the coming years. The company stated at its Capital Markets Day that it was considering divesting businesses, so the sale was not a surprise. However, we had estimated that the company would most likely divest some of its Tieto Indtech businesses. The divestment is justified by the fact that the business did not appear to have significant synergies with the rest of the group. In addition, the selling price seems neutral or even good. The transaction valuation is 11x EV/EBIT and an attractive 1.6x EV/Sales based on LTM figures. The consulting business is an IT services business, which has suffered the most among Tietoevry's various segments in recent years, and in that light, the price is good.

2026 gap year for revenue growth; savings support the result

We lowered our forecasts due to the Bekk divestment. We removed the business from our forecasts starting in February. Bekk's LTM revenue was 1,056 MNOK and EBIT was 150 MNOK (~90 MEUR and ~13 MEUR), representing about 5% of the group's revenue and a slightly larger portion of its earnings. Even without the divestment, 2026 would have been a transition year for organic revenue development, in our view, although we expect profitability to improve slightly, driven by the significant cost savings (115 MEUR) initiated this year. We forecast the company's revenue development to be organically 0% (reported -4%), +2%, and +3%, respectively, in 2026-2028. In addition, we expect the adjusted EBITA margin to be 13.8%, 14.1%, and 14.3% in 2026-2028. Thus, we expect the company to fall short of its financial targets (>5% growth and >16% EBITA-%). The company held a Capital Markets Day in November, where it typically explained when and how it expects growth and profitability improvements to materialize, and our comments on this can be read here.

Tietoevry is correctly priced turnaround company

Tietoevry is in a way a turnaround company, as growth and the profitability turnaround are yet to be proven, which limits the valuation. However, with the Tech Services transaction, the company's structure was simplified, and the remaining parts are positioned in the market's growing sub-segments. Tietoevry is now a more purely international company offering software, development and consulting services. According to our forecasts, the adjusted P/E and EV/EBITA multiples for 2026 are 12x and 11x, respectively, while the reported corresponding multiples are 16x and 13x. Roughly two-thirds of the 2026e non-recurring items are "justifiably" adjustable non-cash PPA depreciations. The multiples are 20-30% below international peers. We consider the company’s valuation neutral. With our estimates, the dividend yield will be 4-6% in the coming years, which somewhat limits the stock's downside. A higher acceptable valuation would require better visibility into revenue growth and further profitability improvement.