IDCEE 2012: Exit Strategies for Internet companies in Western Europe and CEE - Marco Rodzynek (Founder @ NOAH Advisors)
 

IDCEE 2012: Exit Strategies for Internet companies in Western Europe and CEE - Marco Rodzynek (Founder @ NOAH Advisors)

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Marco Rodzynek is the founder of NOAH Advisors, a London-based corporate finance boutique focusing on M&A and raising capital for Internet and technology companies. He also initiated the NOAH Conference to bring together leaders, innovators and investors from the Internet industry to a one-day annual event.Prior to NOAH, Marco was an Executive Director at Lehman Brothers (acquired by Nomura in late 2008) in their Media Investment Banking Group. He has been an investment banking advisor to Internet and media companies for over 12 years in Europe. Since early 1998, he has been involved in 30 announced M&A deals with a total transaction value of over $95 billion.

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IDCEE 2012: Exit Strategies for Internet companies in Western Europe and CEE - Marco Rodzynek (Founder @ NOAH Advisors) IDCEE 2012: Exit Strategies for Internet companies in Western Europe and CEE - Marco Rodzynek (Founder @ NOAH Advisors) Presentation Transcript

  • Selling Complex Stories inSimple Words at High Prices October 2012 Strictly Private and Confidential
  • Intro
  • NOAH Advisors - Europe’s Leading Internet Corporate Finance Boutique Selected Completed NOAH Transactions May 2012 April 2012 Unique Industry Know-How Core Investment Banking Competence Sale of a 100%-stake in 100% focused on Internet companies, covering  The NOAH team has 25+ years of media 150 million growth equity investment from over 25 sub-verticals in this highly complex investment banking experience industry - Routine execution of M&A and financing for a 50% stake alongside Fotolia’s Founders and to - 15+ years active coverage of leading European transactions with sizes of several billion euros Additional $150 million senior debt financing Internet companies and investors  The team has been working together closely for 7 Total $300 million investment Deep understanding of industry dynamics and years (including 6 years at Lehman Brothers) Financial Advisor to Fotolia and its Shareholders Financial Advisor to Toprural and its Shareholders thinking of industry leaders  8 successfully completed NOAH Advisors Ability to add value beyond banking advice transactions underline successful transfer of - Facilitates overall process and minimizes competencies to the Internet sector November 2011 July 2011 management distraction Sale of a majority stake in Sale of a majority stake in Unmatched Network and Relationships Full Commitment - We Are Entrepreneurs! to NOAH Advisors is globally very well connected  The NOAH team are entrepreneurs and focused to and has direct access to virtually all key players in on growing the business and establishing a Quants Financial Services AG the industry reputation for excellence Exclusive Financial Advisor to - Knowledge of and strong relationships with  Full commitment to deliver top quality results in grupfoni and its Shareholders Advisor to EnGrande potential buyers’ key decision makers short time frames - Coverage of over 500 companies and 4,000  Highly success-based compensation structures individuals align interests of clients and NOAH Advisors, and April 2011 April 2011 - Proactively finds and unlocks attractive demonstrate conviction to deliver top results Sale of a majority stake in investment opportunities for leading have acquired a majority stake in investors (e.g. Bigpoint) Annual NOAH Conference for $350m from to The NOAH Advisors Core Team Exclusive Advisor to Advisor to Yatego Summit Partners and TA Associates Marco Yoram Jan Rodzynek Wijngaarde Brandes December 2009 April 2009 Managing Director Director Director Partial sale of $80m partial sale of and Founder to toContact Details Contact Details Contact Detailsmarco.rodzynek@noah-advisors.com yoram.wijngaarde@noah-advisors.com jan.brandes@noah-advisors.com Valuing Softonic at €175mUK Mobile: +44 77 85 330 330 UK Mobile: +44 79 17 084 784 German Mobile: +49 174 2010 984 Advisor to Softonic Advisor to FotoliaSwiss Mobile: + 41 79958 1512 3
  • Introduction to the NOAH Conference Draft NOAH Conference 2012 Program The NOAH Conference is an annual Internet event taking place once a year in Start - End Session Format London, focused on top management from Internet start-ups to global media Day 1 (6 th November) companies as well as senior investment professionals 8:50 - 8:55 Welcome Note & Introduction Welcome Speech 8:55 - 9:10 The State of European Internet Interview NOAH’s goal is to create a marketplace for the European Internet eco-system to 9:10 - 9:20 Overview of Conference Work Shops Presentation discuss key trends, generate business and facilitate investment transactions 9:20 - 9:50 Champion League Company Presentation Over the past 3 years numerous high-profile speakers presented at NOAH, including 9:50 - 10:20 Disruption: Music Keynote 10:20 - 10:30 How to Structure Sales Successfully Keynote over 100 CEOs 10:30 - 11:00 How to Win Customers Keynote & Panel The NOAH Conference was founded in 2009 by Marco Rodzynek and is organised by 11:00 - 11:15 Angel Investing Interview the NOAH Advisors team with sponsorship from some of the world’s leading 11:15 - 11:55 Rising Stars Company Presentation 11:55 - 12:30 Who Will Win the Mobile Industry War Keynote & Panel financial investors 12:30 - 13:45 Lunch 13:45 - 14:15 Early Game Changers Company Presentation 14:15 - 14:30 The eBay Turnaround Story Keynote & Interview NOAH 2012 on 6-7 November – Book Your Ticket Now! 14:30 - 15:00 Israel Panel - Part I: Innovation Keynote & Panel 15:00 - 15:30 Champion League Founder & CEO The conference will again take place at Old Billingsgate in London 15:30 - 16:05 Internet Investing Panel The NOAH Party on will take place at the iconic Battersea Power Station 16:05 - 16:40 Internet in Russia Panel 16:40 - 17:00 Champion League Company Presentation For updates, please check: www.noah-conference.com 17:00 - 17:10 Keynote: Unlocking the Long Tail of Knowledge Keynote 17:10 - 17:45 How to Hire and Scale an Organisation Keynote & Panel 17:45 - 18:15 Rising Stars Company Presentation 18:15 - 19:15 Bowl Food and Drinks 21:30 - 1:30 NOAH Party at the Battersea Power Station Day 2 (7 th November) 9:00 - 9:10 Markafoni Transformation Keynote & Interview 9:10 - 9:40 Champion League Company Presentation 9:40 - 10:00 Disruption: Gaming Keynote & Interview 10:00 - 10:30 Early Game Changers Company Presentation 10:30 10:40 Keynote: Innovation in TV - Media for Revenue/Equity Deals Keynote 10:40 10:50 Company Presentation: Viewster Company Presentation 10:50 - 11:15 Panel Discussion: The Future of Free TV Panel 11:15 - 11:55 Rising Stars Company Presentation 11:55 - 12:30 How to do Online Payment Keynote & Panel 12:30 - 14:00 Lunch 12:30 - 14:00 ProSiebenSat.1: SevenVentures Pitch Day Jury Member 14:00 - 14:15 How to Build a Big Business with M&A Keynote 14:15 - 14:30 Axel Springers Internet Strategy Presentation 14:30 - 15:05 Leading Women and Their Start-Ups Panel 15:05 - 15:20 Israel Panel - Part II: Finding EBITDA in the Holy Land Panel 15:20 - 15:40 Disruption: Navigation Presentation 15:40 - 16:20 Rising Stars Company Presentation 16:20 - 16:45 How to Analyse Traffic Keynote 16:45 - 17:25 Early Game Changers Company Presentation 17:25 - 18:55 Networking Drinks & Canapés 4
  • Reaching to New Limits … We Are Proud to Be Here Guys, It is Really Finally Let’s Go! Hot Here Here! 5
  • Where Does the Exit Market Stand European exit markets have been relatively quiet from an IPO and Trade Sale perspective Modest exit activity levels with relative unspectacular deals, with the exception of Skype Lack of large buyout and take privates. Internet debt market in its infancy Some recent expensive European Internet IPOs like Ocado led to more investor caution. Perform Group is a pleasant exception. They are like the European version of the Linkedin IPO (expensive but well performing) Permira and Axa Private Equity consolidated European online flight market with OdigeO, the combination of Opodo, Go Voyages and eDreams KKR acquired 50% of Fotolia in a leverage recap valuing the company above $500 million Significant interest by buyout groups to acquire sizeable Internet companies, among others: - Silver Lake, Providence, Apax, Advent, KKR, Permira, GA, TA, Summit, TPG, HF, Bridgepoint M&A process are run proprietary with a very targeted buyers group. Long processes are set to fail NOAH Advisors estimates that there are over 50 European Internet Companies worth over $500m US private company valuations for “hyped” stories are off the chart, but not always deliver in the public market, e.g. Demand Media, Facebook, Zynga, Pandora, etc. 6
  • How to Not Get Lost in an Exit Process 7
  • Europe Matters!A significant number of companies are valued at over €200 million 8Note: selected examples.
  • European Internet Pioneers & Global LeadersSome business models were invented or most successfully executed in Europe Company Segment Company Segment  Innovative payment platform  Remote access  Largest pure-play fashion Retailer  Open-source database  Enterprise software  FX  Social networking for people you  Vertical ad network (soccer) don’t know  Betting  VoIP  Free to play online gaming  Legal music service  Toolbars  Global hotel comparison leader  Freemium anti-virus  Private sales  Payment instalments  Personal loans 9
  • Europe Is Unique Countries & Poupulation Investors Russia and Eastern European market larger  Less VC money available and harder to get than Western Europe funding 10 Largest Western European countries: - 50m+: Germany (81.5m), France (65.3m),  Serial entrepreneurs and angel investors U.K. (62.7m), Italy (61.0m) dominate the scene as in the US - 20-50m: Spain (46.8m), Ukraine (45.1m),  Cultural differences, e.g. not anyone wants Poland (38.4m), Romania (21.9m), to get rich, different work ethics / intensity - 10-20m: Netherlands (16.8m), Portugal levels (10.8m) 10 Largest cities, many local markets: - 3m+: London (7.8m), Berlin (3.5m), Madrid (3.3m) - 1m+: Rome (2.8m), Paris (2.2m), Hamburg (1.8m), Warsaw (1.8m), Budapest (1.7m), Vienna (1.7m), Bucharest (1.6m) 10
  • Lets Compare the US and European Internet Success Stories
  • NOAH Study – Companies IncludedThe market cap of post-2000 Internet bubble IPOs is ~2.3x larger in the US than in Europe US Market Cap: $70bn European Market Cap: $30bn Nov-09 Nov-11 Oct-01 Feb-12 Oct-10 Feb-12 Mar-12 Jan-11 Dec-10 Aug-06 Nov-10 Jul-07 May-12 Nov-11 Jun-11 Jul-10 Apr-11 Mar-06 May-11 May-09 Nov-05 Mar-05 Dec-06 Jun-11 Feb-10 May-10 May-11 Dec-09 May-08 Feb-12 Jul-11 Dec-11 IPO Date = EBITDA NegativeNote: Market caps as of 12-Oct-12. 12
  • Company Size and Valuation Growth  US company universe valued 2.3x higher than European one  However, EU companies performed 4.5x better since IPO than the US group  European Internet IPOs are cheaper than US Internet IPOs Average Market Cap ($bn) Average Share Price Performance since IPO Average market cap of across sampled firms  Average share price increase since IPO of sampled firms 4.4 36% 1.9 8% US Europe US EuropeSources: Bloomberg, FactSet, 4-traders, NOAH Advisors. We excluded Asos (up 11,175% since IPO) 13
  • VC Funding is Less Developed in Europe  European public companies have relied less on VC money than US ones  VC investment per company and in % of current market cap significantly lower in Europe compared to the US  However, there are also fewer winners in Europe (less exits) Average VC Funding Raised ($m) VC Funding as % of Market Cap Average amount of venture capital raised across sampled  Average of venture capital raised as a percentage of current firms market capitalisation of sampled firms 367 17.1% 71 1.9% US Europe US EuropeSources: Bloomberg, FactSet, 4-traders, NOAH Advisors. Excluded Tradedoubler and Ocado for Europe. 14
  • A Look at the Largest VC Backed CompaniesOver-promised and under-delivered? They jumped several hurdles in our valuation chain VC Capital Raised ($bn) Share Price Performance since IPO 2,240 (48.6%) 1,140 (73.6%) 860 (75.7%) 510 (0.5%) 471 (63.1%)Source: Bloomberg, FactSet, 4-traders & NOAH Advisors. 15
  • High Profile Venture Backed CompaniesEuropean VC is waking up or rather has been awakened by many US investors Company Last Round Raised Selected Investors Company Last Round Raised Selected Investors Mar-11 $218m Feb-09 $65m June-11 $188m Jan-12 $63m Dec-11 $166m Apr-12 $62m Feb-12 $145m Mar-11 $59m Jul-07 $130m Feb-12 $58m Apr-12 $129m Jun-09 $53m Sep-07 $117m Jun-12 $47m May-11 $114m May-10 $23m Feb-12 ~$100mSources: Crunchbase, NOAH Advisors. 16
  • So What is a High Valuation or a Great Deal?
  • Not Every Deal is Created EqualValuation is only one side of the medal Valuation Drivers  Process objectives: Loss of Control / New Investor Rights - Fast process with limited disruptions / leaks  Significant premium for (path to) control - Premium valuation  Governance and exit rights  Governance rights - Minority investment with limited rights (no - Board seats / Information rights liquidation preference, no path to control,  (Perceived) competition in process - Veto rights customary governance rights, exit rights TBD)  Operational out-performance during the  Management commitment to stay  Key success factors in creating: process  Path to control for new investor? - Growth profile and supportive KPIs  Due diligence findings - Call option - Equity story: simple terms with 3-5 key points  Macro-economic and M&A environment - First right of refusal  Performance-based earn-outs/ratchets - Access to, understanding of and relationship  Quality of motivation of management with relevant contacts at key potential  Availability of debt leverage  Exit rights investors. Trust matters the most! - Liquidation preference  Key success factors for getting investors “to  Funding currency and hedging cost - IPO right the finish line”:  Negotiation skills (shareholders, NOAH - Put option - Management focus and engagement and lawyers) - Tag and drag rights - Seamless process execution - Minimum valuation criteria - No negative due diligence findings - Strong performance during deal phase 18
  • Valuation Drivers in the Context of a Company’sDevelopment Stage: How NOAH sees the World MarketManagement Technology Users / KPIs Revenues EBITDA LeadershipIncreasing valuations – However Multiples Get More Reasonable (in Theory) Decreasing Execution Risk and Benefit of the Doubt (Less to Hope for) (GROWTH * MARGIN) Predictability = Valuation Multiple 19
  • Current Valuation Levels: Internet Sector BreakdownNew Economy is valued at Old Economy Prices adjusted for growthSource: UBS, FactSet (12-Sep-12) 20
  • Current Valuation Levels: All Over the PlaceAmazon enjoys a premium because of predictability(EURm except share price) Currency Share Price Market Enterprise EV/Revenues EV/EBITDA EV/EBIT P/ECompany Country (Share Price) 12-Oct-12 Cap Value 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013E 2011 2012E 2013EOnline large capsAmazon.com US USD 242.36 90,144 83,820 2.1x 1.6x 1.3x 52.4x 38.1x 24.3x NM NM 65.5x NM NM NMApple US USD 629.71 485,674 399,787 4.0x 2.9x 2.4x 11.8x 7.9x 6.6x 12.4x 8.4x 7.1x 19.7x 13.4x 11.3xeBay US USD 47.85 50,734 47,119 4.9x 4.1x 3.5x 14.9x 12.4x 10.8x 17.7x 15.4x 13.3x 19.1x 24.2x 21.2xFacebook US USD 19.52 34,404 27,923 9.1x 6.9x 5.4x N/A 12.8x 9.8x N/A 17.4x 13.0x N/A NM 38.0xGoogle US USD 744.75 200,390 170,734 7.1x 4.9x 3.9x 12.9x 10.7x 9.0x 14.6x 12.5x 10.6x 25.0x 20.5x 17.3xMicrosoft US USD 29.20 202,550 151,640 N/A 2.4x 2.2x N/A 5.7x 5.3x N/A 6.3x 5.8x N/A 11.8x 9.5xYahoo! US USD 15.88 15,478 10,215 2.8x 2.8x 2.7x 8.6x 8.5x 7.5x 15.5x 16.1x 14.0x 17.9x 16.2x 14.3xRakuten AsiaPac JPY - 10,424 11,901 3.0x 2.6x 2.3x 12.9x 11.0x 9.2x N/A 14.6x 11.5x NM 20.8x 17.4xTencent AsiaPac HKD 258.60 40,933 38,687 10.4x 6.9x 5.4x 21.9x 16.3x 12.9x 25.5x 18.7x 14.9x 30.7x 24.5x 19.2xYahoo! Japan AsiaPac JPY - 16,639 12,750 N/A 3.8x 3.6x N/A 6.4x 6.1x N/A 6.9x 6.4x N/A 14.9x 14.0xOverall Mean 5.4x 3.9x 3.3x 19.3x 13.0x 10.1x 17.2x 12.9x 16.2x 22.5x 18.3x 18.0xU.S. Mean 5.0x 3.7x 3.1x 20.1x 13.7x 10.5x 15.1x 12.7x 18.4x 20.4x 17.2x 18.6xAsia-Pacific Mean 6.7x 4.4x 3.8x 17.4x 11.2x 9.4x 25.5x 13.4x 10.9x 30.7x 20.0x 16.9xSources: NOAH Advisors, 4-Traders (12-Oct-12) 21
  • Current Valuation Levels: Regional DifferenceSource: UBS, FactSet (12-Sep-12) 22
  • Who are the Buyers?
  • Not only GoogleSeveral groups to think about Internet Coverage of over 10,000 industry leaders: 500 target companies and 300 investors Traditional Large Cap TMT & Retail Angels / Family VC and Hedge Funds Offices Private Growth Equity Funds Maryland Klaus Hommels Armira 24
  • Selected US Buyers – A Large Universe 25
  • Financial Investors Present at the NOAH Conference 2011 Venture Capital (€5-20m) Growth Capital (€20-250m) Private Equity (€250-1,000+m) Fund Attendees Key Contact Fund Attendees Key Contact Fund Attendees Key Contact Harry Nelis (hnelis@accel.com) John Meeks (jmeeks@ta.com) Stefan Götz (sgoetz@hf.com) 11 Sonali de Rycker (sderycker@accel.com) 7 Ajit Nedungadi (ajit@ta.com) 9 Zita Saurel (zita@hf.com) Adam Valkin (avalkin@accel.com) Morgan Seigler (mseigler@ta.com) Blake Kleinman (bkleinman@hf.com) Dominique Vidal (dom@indexventures.com) Scott Collins (scollins@summitpartners.com) Philipp Freise (freip@kkr.com) 9 Ben Holmes (benh@indexventures.com) 5 Christian Strain (cstrain@summitpartners.com) 4 Lucian Schoenefelder (lucian.schoenefelder@kkr.com) Jan Hammer (jan@indexventures.com) Vincent Lambert (vlambert@summitpartners.com) Vania Schlogel (vania.schlogel@kkr.com) Hans-Jürgen Schmitz (hans-juergen.schmitz@mangrove-vc.com) Konrad Stoebe (konrad.stoebe@warburgpincus.com) Dominik Stein (dominik.stein@eqt.de ) 3 Eugene Mizin (eugene.mizin@mangrove-vc.com) 5 Steven Klooster (steven.klooster@warburgpincus.com) 4 Christian Schuette (christian.schuette@eqt.de) Guillaume Durao (guillaume.durao@mangrove-vc.com) Johannes Korp (johannes.korp@warburgpincus.com) Anil Hansjee (anil@hansjee.net) Pawel Chudzinski (pawel@pointninecap.com) Frank Seehaus (fs@actoncapital.de) Kai Romberg (kai.romberg@hgcapital.com) 3 Lukasz Gadowski (lukasz@teameurope.net) 3 Jan-Gisbert Schultze (jgs@actoncapital.de) 3 Dan Groen (dan.groen@hgcapital.com) Kolja Hebenstreit (kolja@teameurope.net) Benedikt Sudbrock (bs@actoncapital.de) Sascha Kaumann (sascha.kaumann@hgcapital.com) Roberto Bonanzinga (rbonanzinga@balderton.com) Fabio Giuseppetti (giuseppetti@palamon.com) 2 Karim Tabet (karim.tabet@provequity.co.uk) Dharmash Mistry (dmistry@balderton.com ) 3 Daniel Mytnik (mytnik@palamon.com) Ricardo Caupers (caupers@palamon.com) 3 Bruno Mourgue dA. (bruno.mourguedAlgue@provequity.co.uk) Marcel Rafart (marcel.rafart@nautacapital.com) Andrew Tisdale (andrew.tisdale@provequity.co.uk) 2 Javier Rubio (javier.rubio@nautacapital.com) Marco Brockhaus (brockhaus@brockhaus-pe.com) Karl Peterson (kpeterson@tpg.com) Pär-Jörgen Pärson (pjp@northzone.com) 2 Jan Daniel Neumann (neumann@brockhaus-pe.com) 2 3 Anand Tejani (atejani@tpg.com) Hans Otterling (hans@northzone.com) Jean Baptiste Brian (jbbrian@tpg.com) Andrin Bachmann (andrin.bachmann@pitoncap.com) Chris Caulkin (ccaulkin@generalatlantic.com) 2 Greg Lockwood (greg.lockwood@pitoncap.com) 2 David Lisewski (dlisewski@generalatlantic.com) Tripp Lane (tripp.lane@apax.com) 2 Frank Ehmer (frank.ehmer@apax.de) Alexander Ribbink (alexander@primeventures.com) 2 Rogier Taphoorn (rogier@primeventures.com) Sarah Pinto (spinto@greathillpartners.com) 2 Peter Garran (pgarran@greathillpartners.com) Hubert Deitmers (hubert.deitmers@endeit.com) Andrea Valeri (valeri@blackstone.com) 2 Martijn Hamann (martijn.hamann@endeit.com) 2 Lance Toler (lance.toler@blackstone.com) Alex Gonthier (gonthier@@wellington-partners.com) Jim Quagliaroli (jim@spectrumequity.com) 2 2 Jeff Haywood (jeff@spectrumequity.com) Christian Thaler-Wolski (thaler@wellington-partners.com) Stefan Franssen (stefan.franssen@gmtpartners.com) 2 Natalie Tydeman (natalie.tydeman@gmtpartners.com) 1 Emanuele Levi (emanuele.levi@360capitalpartners.com) Daniel O’Keefe (dokeefe@tcv.com ) 1 Mike Chalfen (mike.chalfen@adventventures.com) 2 Woody Marshall (wmarshall@tcv.com) Hinrich Stahl (hs@maryland-gmbh.de) 1 Mattias Ljungman (mattias@atomicoinvestments.com) 2 Helge Luetzen (hl@maryland-gmbh.de) Stephen Byrne (stephen.byrne@vitruvianpartners.com) 1 Michael Eisenberg (michael@benchmark.com) 2 Jussi Wuoristo (jussi.wuoristo@vitruvianpartners.com) Michael Korzinstone (michael.korzinstone@silverlake.com) 1 Alon Lifshitz (alon@blumbergcapital.com) 2 John Flynn (john.flynn@silverlake.com) 1 Ian Noel (iannoel@bonsaigrupo.com) 1 Fabian Wasmus (fabian.wasmus@eqt.de) Expansion Capital 1 Nic Brisbourne (nic@dfjesprit.com) 1 Jan-Olivier Fillols (jan-olivier.fillols@3i.com) 1 Sebastien Briens (sebastien.briens@hgcapital.com) 1 Ben Tompkins (bt@edenventures.co.uk) Mercury 1 Bernard Vogel (bv@endeavourvision.com) 1 Jens Hagen (jhagen@uk.adventinternational.com) 1 Harley Miller (HMiller@insightpartners.com) 1 Davor Hebel (davor@fgpe.com) 1 Stephen Lowery (stephen.lowery@frogcapital.com) 1 Jörg Mohaupt (jmohaupt@accind.com) 1 Christoph Haschka (christoph.haschka@macquarie.com) 1 Torsten Kreindl (t.kreindl@grazia.com ) 1 Laurel Bowden (lbowden@greylock.com) 1 Michael Black (michael.black@bridgepoint.eu) 1 Mark Joseph (mark.joseph@oakleycapital.com) 1 Martin Weber (martin.weber@holtzbrinck.net) 1 Johan Englund (johan.englund@industrifonden.se) 1 Pueo Keffer (pkeffer@redpoint.com) 1 Jason Khaksar (jason.khaksar@carlyle.com) 1 Baris Aksoy (baris.aksoy@intel.com) 1 Tomasz Czechowicz (czechowicz@mci.eu) 1 Richard Yen (ryen@saban.com) 1 Andrew Young (andrew.young@permira.com) 1 Thomas Preuss (preuss@neuhauspartners.com) 1 Phillippe Collombel (pcollombel@partechventure.com) 1 Morgan Callagy (callagym@vss.com) 1 Tony Askew (tony.askew@reedelsevier.com ) 1 Olivier Sichel (osichel@sofinnova.fr) 1 Mauro Pretolani (mauro.pretolani@tlcom.co.uk) 26
  • The Universe of Financial European Internet InvestorsEquity investment/check size, geography, minority/majority, growth profile are key ways to differentiate them Venture Capital Growth Funds Buyout Funds Francisco Partners Silverlake Growth Warburg Pincus General Atlantic Carlyle Growth Intel Capital Holtzbrinck Providence Wellington Blackstone Investcorp HG Capital Balderton Spectrum Silverlake Exponent Bessemer Great Hill Vitruvian R Capital Palamon Peacock Sequoia Permira Summit Veronis Advent Fidelity Battery Kennet Carlyle Cinven Insight Endeit Acton Accel Index Cyrte Apax GMT H&F Bain TPG KKR Oak CVC TCV TA(€ million) 3iEU Office ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔US Office ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔Internet Deals 1 1 1 1 1 1 1 1 2 1 1 1 1 2 2 1 2 2 2 2 2 2 1 2 2 2 1 1 1 1 2 2 2 2 1 1 2 2 1 3 2 1 3 3 3 2 3 3 1 800 800 750 700 700 Equity Investment Size 600 600 600 Control Investments Only 500 500 500 500 Sweet Spot 500 500 400 400 400 400 300 300 300 300 300 300 300 250 200 200 200 200 200 200 200 200 200 150 150 150 120 100 100 100 150 80 75 100 100 70 70 70 70 70 70 120 60 60 50 50 100 100 100 100 100 100 100 100 35 30 25 25 25 25 25 75 75 75 20 15 60 50 50 50 40 40 40 30 30 30 0 0 25 25 25 20 20 20 20 20 15 15 10 10 10 10 10 10 5 5 5 5 5 5 5 5 2 2Note: Number of previous European Internet deals: 1 - many, 2 - a few, 3 - new to the segment. 27
  • How to Sell?
  • 101 of Internet M&A The Basics The Valuation Drivers The Tough Lessons Learnt If you want to sell, don’t be for  Valuation is the sum of all future  M&A is hard work sale cash flows after tax discounted  You have to be 100% prepared Don’t be greedy by the expected rate of return before you start (usually higher than risk free A good day today is better than interest rates, around 10%)  Dictate a timetable and bring all a great deal tomorrow parties on the same schedule (time value of money and  Market Size  NEVER deliver below your opportunity costs)  Market share projections during a process Do a deal when you can, not  Predictability of success  Don’t change your mind. No one when you have to  Synergies for the buyer likes it Work with a professional banker  Comparable company and  There are many buyers who all Always work with several buyers transaction analyses want to hear a story tailored to not one. Not the loudest is  A nature of a deal: them. Know your value to usually the best buyer must have, nice to have, could parties Know about 3 prices: have, shouldn’t have  Always give parties an - the price at which you sell  Perceived management quality understanding that they are not - the price of the best buyer alone but not too many - the price of the cover bidder  Luck. One dumb deal does not mean it gets repeated. Focus on  If they sense you HAVE to do a Use this dynamic wisely deal, they won’t give you a deal your story not of others’ luck Be honest, simple and analytical  Motivate, it is a love story  Forget the public market  Be patient and don’t rush 29
  • Sale Process OverviewNOAH Advisors will take the lead in 3-phase process focused on strategic buyers, expected to last 4-5 months 1 Approach Potential Buyers 2 Management Presentations 3 Due Diligence  Kick-off in May  Select parties to round 1  Select 3-5 parties to round 2  Target and NOAH to agree on potential  1 week management presentations  8 weeks open data room buyers list (max 3 per day, 3-4 hours each)  Send KPI business plan out ‒ Focus on strategic buyers ‒ Tight and fast process with c. 10 Key Steps  Expert sessions ‒ Manage financial parties management presentations with  2-4 weeks final negotiations simultaneously only highly qualified investors / buyers  Term sheet: bring all parties on one  NOAH will approach potential buyers term sheet post round 1 in a low profile manner  3 weeks for indicative bids  Prepare for next phase  Creation of “equity story” and  Day-to-day process management  Co-ordination of lawyers, accountants materials:  Rehearse presentation and Q&A and Target shareholders ‒ 1-3 page teaser  Assist Target with preparation of  Negotiations NOAH’s Role ‒ 50 page management dataroom  Regular updates to the board presentation  Logistics ‒ KPI business plan/model  Regular updates to the board  Introduction to investors  Regular updates to the board 30
  • Indicative Timetable Month 1 Month 2 Month 3 Month 4 Month 5 Lead:PreparationEL signing and Project kick-off C, NShare project data & information C, NPrepare management presentation NPrepare budget & mid-term financial model NDrafting session C, NSend 1 page teaser to selected parties NSolicit response, select candidates for phase I NApproach potential buyers with NDA and process letter NPhase I: Management Presentation (c. 8 - 12 parties)Management presentations rehearsals C, NSend final management presentation incl. projections C, NManagement presentations C, NDataroom index NPrepare master KPI file (commercial data) C, NPrepare dataroom (financial, legal, tax, etc.) C, N, L, AccIndicative bids due (incl. term sheets) and select parties N, CNegotiate term sheets and select parties for Phase II N, CPhase II: Due Diligence Phase (select 3 - 5 parties)Dataroom open NDue diligence and Q&A C, N, L, AccDraft SPA and provide to party for final Exclusivity Phase C, L, NFinal binding offers due, & negotiation C, N, LExclusivity PhaseLegal documentation drafting LConfirmatory due diligence and remaining Q&A C, N, LSigning, closing, funding C, N, LResponsibilities: Client (C), NOAH Advisors (N), Legal (L), Accountant (Acc) = Process = NOAH Deliverable = Key milestone 31
  • Investor Materials1-2 page company overview (teaser) – can be based on public info if you want your advisor to put you on the radar of buyers without giving the perception that your company is for sale30 page crisp document Team overview and history Market opportunity and competition Product overview and business model Growth strategy and zoom in on key areas, e.g. marketing or sales force Technology and organizational overview KPIs and financials (in line with the financial model) 32
  • Considerations for Public Profile CreationGet on the radar of key buyers without being for sale Dont shoot all your powder in round one. It is a marathon not a sprint Time release of news and events well in harmony with corporate objectives: fund raisings etc. Use Coca Cola / Pepsi play off strategy: the one is in, so the other will be on board too. Works for journalists, hiring, M&A etc. Formulate early KPIs which you can consistently communicate to the press Indentify early the dealers and wheelers in your industry and segment and build targeted relationship with them: journalists, corporate dev people, angels, funds, headhunters competitors, bloggers, bankers, etc Hire above your class and talk about it Pick the right investors and partners for momentum Don’t focus on details but on big steps. Never wait for the right big move. Do it now! No news is good news and don’t overpromise Track your profile consistently Dont forget the substance. Public profile is great but long term corporate cash flows matter 33