Cloud Valuation - M&A - HostingCon 2010
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Cloud Valuation - M&A - HostingCon 2010

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Cloud Valuations in the Web Hosting SaaS industry - A macro look on how concerns will change the face of the Web Hosting Industry and spur valuations. ...

Cloud Valuations in the Web Hosting SaaS industry - A macro look on how concerns will change the face of the Web Hosting Industry and spur valuations.

These slides are from HostingCon 2010 - Austin, Texas - Presented by Tom Millitzer President of NCC INTERNATIONAL tm@com-broker.com

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  • Develop models based on synergies based on “normal” acquisition standards – based on effeciencies gained by the acquirer (The sophisticated varient) and SAAP Bolts <br />
  • Develop models based on synergies based on “normal” acquisition standards – based on effeciencies gained by the acquirer (The sophisticated varient) and SAAP Bolts <br />
  • Develop models based on synergies based on “normal” acquisition standards – based on efficiencies gained by the acquirer (The sophisticated variant) and SAAP Bolts <br />
  • Savvis 1Q 2010 http://www.corporate-ir.net/media_files/priv/CCBN/event_help/icons/md_pdf.gif <br /> Cable and Wireless acquisition 2004 <br />
  • 10.4 X EBITDA - The Savvis / Fusepoint Deal http://www.thewhir.com/blog/Tom_Millitzer/060110_104_X_EBITDA <br /> Liam Interview <br />
  • http://investor.cincinnatibell.com/phoenix.zhtml?c=111332&p=irol-newsArticle&ID=1092966&highlight= Cincinnati Bell acquires GramTel <br />
  • Microsoft&apos;s Cloud Plan: What&apos;s In It For You? <br /> http://www.informationweek.com/news/windows/showArticle.jhtml?articleID=224700247 <br /> oud Growth Ahead <br />

Cloud Valuation - M&A - HostingCon 2010 Cloud Valuation - M&A - HostingCon 2010 Presentation Transcript

  • Tom Millitzer, President - NCC Tom Millitzer – President NCC International Cloud Telecom Valuations MatriXIn A New
  • Tom Millitzer, President - NCC Tom Millitzer – President NCC International  Internet M&A Firm Founded 1994  Over 300 Completed Assignments  Sold our first Hosting Firm in 1997  Represent Selers
  • Tom Millitzer, President - NCC Tom Millitzer – President NCC International I want to do business with you.... tm@com-broker.com
  • Tom Millitzer, President - NCC What we will do today…  Valuation Theory in the 4th and 6th Dimension  Deals  Cloud Valuation and the New Matrix  Where does this Cloud between Internet and Telecom…  Deal Strategy Timing
  • Tom Millitzer, President - NCC The provider…End user. . .
  • Tom Millitzer, President - NCC Rule of 4 – Valuation Theory  Multiple of EBITDA  Multiple of Revenues
  • Tom Millitzer, President - NCC …. Operating in the 4th Dimension Classic “Shared Hosting” 1X Annual Revenues .25 X 4 = 1 The base acquisition should pay back in 4 years. 25% EBITDA
  • Operating in SYNERGY Dimension • SYNERGY………
  • Tom Millitzer, President - NCC … WE Reduce Costs … WE Build On Our Efficiencies … WE Leverage Assets
  • Tom Millitzer, President - NCC …. WE Operate in the 6th Dimension 6 x EBITDA = 4 x Post Synergy • Synergy should move most deals to a 40% Accretive EBITDA
  • Tom Millitzer, President - NCC …. Operating in the 6th Dimension Tex t 4 X 6 X
  • Tom Millitzer, President - NCC …base 4 to 6 X EBITDA Valuation Range 4-6 EBITDA is often the “comfort” or “negotiating start range ” The greater the synergy the greater outcome and possibly the new decent “Inverted Synergy” outcome.
  • Tom Millitzer, President - NCC …base 4 to 6 X EBITDA Valuation Range is the floor for Cloud services
  • Tom Millitzer, President - NCC …ENOUGH … We want to look at some real deals…
  • Tom Millitzer, President - NCC … March 2010 TDS acquires
  • Tom Millitzer, President - NCC – (NYSE:TDS, TDS.S) • 8th Largest Telephone Company • 750 thousand customers • $5 billion in annual revenues • $670 million cash on hand. • Visi – Managed Hosting – Cloud entrant • $10-12 million Annual Revenues –
  • Tom Millitzer, President - NCC …TDS / Visi --- the deal • $17.5 Million Cash • 1.45 to 1.75 X annual revenues • 5.8 X EBITDA (assuming $12m rev X 25%) • $17.5 Million Cash • 1.45 to 1.75 X annual revenues • 5.8 X EBITDA (assuming $12m rev X 25%) Signal Hill - Represented Visi
  • Tom Millitzer, President - NCC …TDS / Visi deal - revealed • - Visi has been transitioning - ISP to Hosting Company.• - Visi has been transitioning - ISP to Hosting Company. - Revenues 50% broadband - 50% Hosting Related. Hosting portion possibly: 2X Annual Revenues 8X EBITDA May have been higher. - Visi launched Cloud in December 2009
  • Tom Millitzer, President - NCC …TDS / Visi –…. • - They speak the same language.• - They speak the same language. - TDS acquired product line to sell into 200,000 (est.) SMB’s - A product to increase customer stickiness and loyalty. - TDS understands DSL and Broadband - Will achieve synergies. - TDS obtained a product line outside of PUC rate regulation.
  • Tom Millitzer, President - NCC …Visi deal – great timing…. - Total tax savings up to $1,940,000 – 11.1% of the deal. - $20 million to obtain the same result as of January 1, 2011
  • Tom Millitzer, President - NCC …8x8, Inc. Acquires Central Host – May 2010
  • Tom Millitzer, President - NCC • (Nasdaq:EGHT) • VOIP Company • 20,000 SMBs (avg rev - $250/mo.) • $63 million annual rev (ttm) • $17 million cash on hand. Central Host – Managed Hosting $1 million Annual Revenues – Avg account $2,300/mo.
  • Tom Millitzer, President - NCC …8x8 / Central Host --- the deal • $1.6 Million • 1.6 X annual revenues • 6.4 X EBITDA • $1.6 Million • 1.6 X annual revenues • 6.4 X EBITDA NCC International - Represented Central Host
  • Tom Millitzer, President - NCC ……what 8x8 acquired… - 8x8 acquired product line to sell into 20,000 SMB’s - A product to increase customer stickiness and loyalty. - Leverage a great sales organization. - Increase margins and increase Avg. Rev.
  • Tom Millitzer, President - NCC …Savvis Acquires Fusepoint – May/June 2010
  • Tom Millitzer, President - NCC (Nasdaq:SVVS) • IT – Cloud – Managed – Colo - Bandwidth • 4,200 IT customers – Likes vertical markets • $870 million in annual revenues • $146 million cash on hand. (3-31-10) • 25% EBITDA Fusepoint – - Managed Hosting – Cloud entrant - Toronto - $47.5 million Annual Revenues – - 50% managed servers, 30% Colo, 20% App Services - 25% EBITDA
  • Tom Millitzer, President - NCC …Savvis / Fusepoint --- the deal Signal Hill - Represented Fusepoint • $124.5 M Cash transaction • $47.5 M Annual Revenues • 2.62 X Annual Revenues • 10.4 X EBITDA
  • Tom Millitzer, President - NCC ……what Savvis acquired… - Savvis has a large vertical Financial market sector, lucrative… - Fusepoint – right place – great reputation – right time. - Wanted immediate Canada expansion…Toronto financial hub. - Savvis not sure what to do w/ SaaS - Savvis stated: “near” immediate $8 million reduction in costs – REALLY 6-7 EBITDA? (vs 10.4)
  • Tom Millitzer, President - NCC • (NYSE:CBB • $525 million cash transaction • Data Center deal – • 12.5X EBITDA • 9X rev • 163,000 sq ft of datacenter @ $3220 per sq ft. • (NYSE:CBB • $525 million cash transaction • Data Center deal – • 12.5X EBITDA • 9X rev • 163,000 sq ft of datacenter @ $3220 per sq ft. Jan 2008--Cincinnati Bell acquired GramTel USA, a disaster recovery,, data backup and co-location services. in a transaction valued at approximately $20 million. Est – 3.5X annual revenues. Acquires CyrusOne
  • Tom Millitzer, President - NCC And just to note…the market shift…
  • Tom Millitzer, President - NCC ....the Cloud today – The Cloud will create what I term…..
  • Tom Millitzer, President - NCC …Inverted Synergy Paradigm
  • Tom Millitzer, President - NCC …. Inverted Synergy Paradigm WHERE... • Synergy improves my Base EBITDA • The acquisition dramatically improves my base business. • My business experiences a true paradigm shift.
  • Tom Millitzer, President - NCC … U Reduce OUR Costs … WE Build On YOUR Efficiencies … WE Reconfigure OUR Assets …WHERE
  • Tom Millitzer, President - NCC Where is that 4 year Payback now?
  • Tom Millitzer, President - NCC - Growth like this equals = Great Valuations......
  • Tom Millitzer, President - NCC Visit go to the press release section of www.com-broker.com Want more detail?
  • Tom Millitzer, President - NCC Thank You Please Fill out the Comment Form @ HostingCon Call or Text 239-938-6566 tomm@com-broker.com www.com-broker.com 239-282-5550