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What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
What Buyers Are Thinking & Doing in Today's M&A Market
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What Buyers Are Thinking & Doing in Today's M&A Market

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Gridley Presentation at DFJ Gotham Annual Meeting

Gridley Presentation at DFJ Gotham Annual Meeting

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  • 1. Gridley Presentation at DFJ Gotham Annual MeetingMay 17, 2012
  • 2. What Buyers Are Thinking & Doing in Today’s M&A Market
  • 3. What are Traditional Industry Leaders Doing in M&A? 3
  • 4. Unprecedented Time for Enormous Value Creation• Traditional Industry leaders are highly vulnerable like never before Open Source Open Architecture Cloud Computing New Business Models• Innovation at record speeds – Approximately $130 Billion of value created in 3 years 4
  • 5. Gridley’s Message on Innovation in Tech Today Traditional Ad Agencies vs. Ad Tech Traditional Media vs. SocialinNetworks Comparative Equity Values ($ billions) Comparative Equity Values ($ in billions) Legend Legend Traditional Leaders Traditional Ad Agencies $70 Emerging Innovators Performance Based Marketing $200 Emerging Threats $40.1 $73.0 Equity Value $30 Equity Values $70 $208.7 $32.4 $182.3 $20 $30 $73.0 $11.9 $12.7 $10.7 $11.7 $8.0 $7.1 $11.0 $4.7 $10.7 $9.4 $3.9 $6.2 $0.6 $3.2 $0.8 $2.7 $6.0 $0.9 $0.4 $1.1 $0 $0 0.0x $2.2 5.0x 10.0x 20.0x 0.0x 7.5x 15.0x 22.5x 50.0x 57.5x $0.4 $1.0 $1.2 Revenue Multiple $0.5 $1.6 $0.4 Revenue Multiple Retail vs. Ecommerce Emerging Companies vs. Traditional Big Data Traditional Retail ($BN) E-Commerce Legend $200 $200 Traditional Leaders $185.2 $208.7 Emerging Innovators $45 $44.6 Equity Value Equity Value $101.2 $100 $12 $12.1 $10.2 $50 $42.4 $34.6 $4.7 $6 $9.4 $34.9 $4.1 $10.4 $14.7 $8.4 $3.2 $3.4 $1.4 $0.9 $1.5 $0.6 $2.0 $0 $0.5 $0.6 $7.9 $0 0.0x 4.0x 8.0x 12.0x 0.0x 1.0x 2.0x 3.0x 4.0x $0.4 Revenue Multiple $1.0 Revenue Multiple Sources: Second Market and CapIQ as of November 25, 2011. 2011 5
  • 6. The New “Kids” on the Block Value Today Revenue Company Year Founded IPO Date # of Employees (Billions) (Billions) 2009 NA $4,000(1) NA NA 2008 Nov 2011 $7,605 $1,610 11,471 2007 NA $1,000(1) NA 75 2007 Dec 2011 $5,850 $1,218 2,846 2006 NA $10,700(1) NA 141 2004 May 2012 $100,000(1) $4,038 3,539 2002 May 2011 $11,415 $617 2,447Older Brothers/Sisters 1998 Aug 2004 $197,320 $38,875 33,077 1995 Sep 1998 $52,604 $12,383 27,770 Source: CapIQ. Company filings. (1) Estimated value. 6
  • 7. How New Kids Are Thinking About & Doing M&A• Strategic value orientation not traditional financial metrics• Tech and team focus – early stage deals• Stock = big component of transaction• Much more comfortable thinking across capabilities (advertising, commerce, social, analytics, payments) as these disciplines converge• Foster early relationships with entrepreneurs and boards that back them What New Kids Are Acquiring 7
  • 8. When New Kids Grow Up – eBay Case StudyeBay made a series of acquisitions, most notably of PayPal, GSI Commerce, Red Laser, Zong, and Milo,that enabled eBay to become a front-runner in the race to become the next generation in-store leader Discover Pay Retailer Nearby Used, online In-store Online scanner retail Virtual goods Mobile Location- based service Better Local Retailers Merchandising / SMB At Home Nearby Used, online Any product Online retail 8
  • 9. A Word About Other Buyers – Traditional IndustryLeaders• Record levels of cash / business performing well• Need to get their attention for M&A• Conservative approach – not “stretch” / not “bet the bank”• Fair pricing if interested• Must be a logical fit – minimal “out-of-the-box” thinking 9
  • 10. A Word About Other Buyers – Later Stage GrowthPE Firms• Very aggressive• Looking for market leadership, good growth, experienced management• Frequently able to compete on price with strategic buyers• Plenty of “dry powder” on hand Fundraising Has Outpaced Investing YTD $120 2011 $97.6 $98.7 $100 Q1 2012 $80 $ in billions $60 $40 $29.6 $20 $12.9 $0 Deals Completed Funds RaisedSource: Buyouts. 10
  • 11. A Word About the New York Scene• New York has become #2 tech hub behind SF Bay Area• NEA & Accel building presence through new offices in New York• New York “core competencies” a target focus for buyers – Brands and consumer retail – Advertising / Madison Avenue – Financials / payments• Serial entrepreneur cycle – team members of formerly acquired companies leave to start new companies – Dodgeball / Foursquare – DoubleClick Mafia 11
  • 12. Top 10 Private Digital NY Sale TransactionsJanuary 2008 – December 2011 (Disclosed deals / rumored pricing available) Transaction Date Acquirer/Target Value (in $M) 1) 06/15/2011 $524 2) 06/13/2011 400* 3) 02/06/2011 315 4) 01/19/2011 296 5) 02/03/2010 225 6) 01/25/2010 200* 7) 09/08/2011 151 8) 06/17/2010 135 9) 08/05/2008 125 10) 09/07/2010 120Source: Capital IQ, TechCrunch, public filings, and press releases. *rumored value 12
  • 13. Advice for Private Company Sellers / VCs withCompanies They Want to Sell• Decent market for good companies – “Flight to Quality”• Lots of lower-quality companies / deals not getting done• Be realistic about price unless most likely buyer is a “New Kid” – otherwise buyers care about earnings and traditional valuation metrics• Be cautious of the speed at which market and buyer tone changes (e.g. ad tech)• When speaking to likely acquirers, stay close to acquirer’s product management team vs. focusing only on corporate development• Keep likely acquirers abreast of material company events such as fund raisings• Actively pursue strategic integrations with likely acquirers – Overlapping customers and/or integrated offerings go a long way• Keep track of M&A heavy-hitters, who often times move to other companies – Former Google M&A head Jason Harinstein now at Groupon – Former Yahoo! M&A head Andrew Siegel now at Condé Nast 13
  • 14. A Word About the IPO Market
  • 15. The Tech IPO Market in 2012YTD• More than half of this year’s U.S. tech IPOs have priced above the range, and all but one have traded up afterwards % Performance Market Cap IPO One Since Pricing Date Company Sector / Subsector at IPO Size (MM) Filing Range price Week IPO Mar 28 CafePress Int. Svcs. / eCommerce $324 $86 $16.00 - $18.00 $19.00 (4.7%) (18.4%) Mar 28 Millennial Media Int. Svcs. / Mobile 989 133 $11.00 - $13.00 $13.00 53.5% 17.5% Mar 21 ExactTarget Int. Svcs. / Email 1,252 162 $15.00 - $17.00 $19.00 37.7% 34.2% Mar 21 Vantiv FinTech / Pmt. Processing 2,198 500 $16.00 - $18.00 $17.00 17.9% 28.0% Mar 14 Demandware SaaS & Outsrc. / eCommerce 465 88 $12.50 - $14.50 $16.00 61.2% 72.1% Mar 01 Yelp Int. Svcs. / Local 917 107 $12.00 - $14.00 $15.00 33.3% 35.1% Feb 23 Bazaarvoice Int. Svcs. / eCommerce 682 114 $8.00 - $10.00 $12.00 40.6% 40.4% Feb 17 Brightcove Int. Svcs. / Content Mgmt. 300 55 $10.00 - $12.00 $11.00 37.3% 38.6% Feb 09 Synacor Int. Svcs. / Content Mgmt. 134 34 $5.00 - $6.00 $5.00 0.4% 84.8% Mean $807 $142 30.8% 36.9% Median $682 $107 37.3% 35.1%Source: Capital IQ, Public Filings.Note: Highlighting denotes IPOs that priced above initial filing range. 15
  • 16. A Word About Gridley
  • 17. Gridley OverviewGridley & Company, a New York-based boutique investment bank, provides advisoryservices to companies in the Information Services industry Gridley & Company Leading Boutique • Sharp focus provides clients with valuable strategic insights and perspectives • Specialize in Internet Services, Digital Media & Marketing Services, Data Services, Financial Technology, and SaaS & Outsourcing Services • Founded in 2001 • Headquartered in New York, NY Strong Reputation • Strong industry reputation on assignments led by senior bankers • Experienced, bulge-bracket trained M&A bankers – The “A” Team Trusted Advisor • Thoughtful ideas – not just logical combinations • Deliver value to buyers, sellers, and investors alike • Broad industry network developed over 25+ years with industry leaders, emerging growth companies, and senior investors 17
  • 18. Interested in Other Gridley Resources?• Available at www.gridleyco.com/what-we-think/resources/ eCommerce Mobile POS Ad Tech Measurement Digital Content Digital NY Quarterly Newsletter 18
  • 19. QUESTIONS? Linda Gridley President & CEO 212.400.9710linda.gridley@gridleyco.com Gridley & Company LLC10 East 53rd Street, 24th Floor New York, NY 10022 212.400.9720 tel 212.400.9717 fax Twitter: @gridleyco www.gridleyco.com

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