M&A 2011 Looking to 2012 <ul><li>Tom Millitzer - President NCC International </li></ul>
Notes regarding these  slides These slides are from Tom Millitzers HostingCon presentation of August 10, 2011 in San Diego...
<ul><li>Tom Millitzer - President  </li></ul><ul><li>NCC International </li></ul><ul><li>Hosting M&A Since 1997 </li></ul>...
<ul><li>Tom Millitzer - President  </li></ul>A LEADING M&A PROFESSIONAL SERVING THE HOSTING INDUSTRY400+ SUCCESSFUL ASSIGN...
<ul><li>Tom Millitzer - President  </li></ul><ul><li>[email_address] </li></ul><ul><li>NCC International </li></ul>IF YOU ...
M&A 2011 Looking to 2012 EBITDA 2010 Revisited Advance of the telephone Private equity scales up SKIN GAME CHANGERS INTERN...
A thing about EBITDA In this slide Millitzer did a quick review of his EBITDA theory (this presentation was not M&A 101 or...
On the heels of 2010 In early 2010 I began making a series of predictions in the M&A blogs I write for the WHIR. This rela...
On the heels of 2010 At hostingCon 2010 I had outlined three transactions that I thought lead that charge... The total  va...
<ul><ul><ul><ul><ul><li>VISI </li></ul></ul></ul></ul></ul><ul><li>Central Host </li></ul><ul><ul><ul><ul><ul><li>CyrusOne...
TELEPHONY  I was proven right as the last 12 months have produced a plethora of activity in this sector. The following pag...
2011 the Theme Continues NOVEMBER 2010- CROSS CONNECT SOLUTIONS (PHILADELPHIA ) GOES TO SIDERA - SIDERA IS A NEW NAME FOR ...
2011 the Theme Continues December 2010 Windstream acquired Hosted Solutions (owned by ABRY Partners- see previous slide)  ...
2011 the Theme Continues -December TDS purchases TEAM Technologies, LLC for privately owned upper Midwest data center serv...
2011 the Theme Continues December Cavalier becomes a Paetec Company in a $450m deal worth 1.06X Revenues and 5X EBITDA – I...
2011 the Theme Continues April Time Warner closed NaviSite  $230 million deal represents 8.8X trailing EBITDA and 1.78X re...
2011 the Theme Continues -April  2011 Verizon closed  Terremark for $1.4 billion 3.7X Revenues  12X EBITDA accelerating th...
2011 the Theme Continues In June VoIP firm 8X8 STEPPED TO THE PLATE AGAIN and  ZERIGO 8 in a $2 MILLION acquisition  - 8X8...
2011 the Theme Continues Big year for CenturyLink ----on the heels of its merger with Qwest - creating a  $18.6 billion, E...
2011 the Theme Continues AUGUST – Just 4 days ago it was announced that Windstream is to acquire PAETEC for $2.4 BILLION N...
2011 the Theme Continues 2 of the 3 companies came back to the table --- TDS and 8x8  ---- and last week Cincinnati Bell h...
2011 the Theme Continues $7.4 BILLION This years aggregate equals $7.4 BILLION -----  A 1200% X sector awareness increase ...
so how does telephone fit Lets talk for a moment about telephone companies..... not innovators....never early adaptors.......
2011 Enters Private Equity Earlier this year in my WHIR blogs i indicated there were murmurings that private equity is bac...
2011 Enters Private Equity Phil Male April 20  , Lloyds Banking Group private equity division LDC partnered with the manag...
2011 Enters Private Equity Phil Koen   May 2011 PE firm Oak Hill Capital Partners buys Intermedia – 320,000 premium Micros...
2011 Enters Private Equity Eric Chouinard  Martin Leclair Going private from public in a  the transaction values iWeb  at ...
2011 Enters Private Equity Bob Parsons Let me be blunt: KKR has $61 billion under management, Silver Lake $14 billion and ...
lets talk about godaddy We can all guess about the structure of the deal but Ego always has something to do in deals ---- ...
PRIVATE EQUITY IS ABOUT Private Equity looks for  a great story, finances, the right time at the right place, in this econ...
PE  Phil male Phil koen   Bob Parsons Eric Chouinard  Martin Leclair PE  OPLE
so how does PE Fit The private equity groups referenced here represent over $100 billion of managed assets...these are gro...
so how does PE Fit PRIVATE EQUITY CAN MOVE  FAST
GAMECHANGERS Game changers is were a transaction  has the capacity to dramatically change the complexion of the company or...
GAMECHANGERS
GAMECHANGERS Our first game changer is the CenturyLink / Savvis transaction... until CenturyLink has been (see previous sl...
GAMECHANGERS Although CenturyLink has piled up a lot of debt I could see them doing a fairly large international acquisiti...
GAMECHANGERS Our second game changer not only affects the company it affects the hosting industry --- for this reason alon...
GAMECHANGERS <ul><ul><ul><ul><ul><li>VISI </li></ul></ul></ul></ul></ul><ul><li>Central Host </li></ul><ul><li>- POSITIONI...
GAMECHANGERS Silverlake has international sector investments it can leverage -Llocaweb is the largest hosting company in B...
GAMECHANGERS Already Godaddy has added an international expert from the White House administration,  Silverlake has the wh...
World wide economy The world wide economy has been shaken this week - yesterday the Israel stock exchange closed early - t...
International Consider overseas acquisitions. US owners may want to consider exchange rates - as buying into a stable curr...
Strategy If you are larger you have the opportunity  to increase value if you are experts at a complex solution. If you ar...
[email_address] <ul><li>Tom Millitzer - President NCC International </li></ul><ul><li>239.282.5550 -5 GMT </li></ul>I’m he...
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HostingCon 2011 M&A 2011 Looking To 2012

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HostingCon 2011 M&A Presentation by Tom Millitzer - A Graduate look at the Web Hosting M&A Sector - Strategy, Positioning, International and Private Equity discussion The effect on Telephone companies and Private Equity.

Founded in 1994 Millitzer Capital is a business broker that represents the owners of Telecom, Internet and related web-hosting concerns int the sale of those companies.

The sectors we serve include web hosting, Data-centers, DaaS, Clecs, fixed wireless and related recurring revenue based companies.

All of are assignments are exclusive. 239-282-5550

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  • WHERE WE ARE COMING FROM DEALS AND PLAYERS GAME CHANGERS THE INTERNATIONAL POSITIONING PITFALLS AND PROMISES
  • Represent Sellers ------ 400 Assignments ------ Whir
  • Represent Sellers ------ 400 Assignments ------ Whir
  • Represent Sellers ------ 400 Assignments ------ Whir
  • WHERE WE ARE COMING FROM DEALS AND PLAYERS GAME CHANGERS THE INTERNATIONAL POSITIONING PITFALLS AND PROMISES
  • GLAD ATTITUDES CHANGING ----- WHILE YOU WILL HEAR MULTIPLE OF REVENUES IN THIS PRESENTATION ITS JUST BECAUSE - EBITDA TALK POWER OF 4X EBITDA --- THINK OF EBITDA IN YEARS ---- ASSUMING NOT A DECLINING MARKET 4X ----- BUT A BUYERS SYNERGY SHOULD MOVE IT TO 5 X 6X ------ WHERE MARKET SECTOR - GROWTH - TECHNOLOGY PROWNESS STARTS FACTORING IN
  • This is a story that began low margins ------ loss of lines desire for higher margins and new services SMB STICKY
  • LAST YEAR I MADE SOME PREDICTIONS ABOUT THE TELEPHONE INDUSTRY BASED ON THREE TRANSACTIONS This is a story that began low margins ------ loss of lines desire for higher margins and new services SMB STICKY LAST YEAR I SORT OF BET THE STORE AND FOCUSED ON 3 transactions
  • VISI $18 million 1.6X rev 5.8X EBITDA CENTRAL HOST $1.6 M 1.6 X 6.4X EBITDA CYRUSONE $525 M 9X REVENUES 12.5 X EBITDA LAST FRIDAY ANNOUNCED NEW ONE MILLION SQ FT DATA CENTER IN AZ IN AGGRAGATE THESE THREE ACQUISITIONS $18m $1.6 m and $525 m- an aggragate of less than $550 million - I felt very strongly about
  • I think I was PROVEN RIGHT AS THE LAST 12 MONTHS HAVE PRODUCED A PLETHORA OF ACTIVITY IN THIS SECTOR.
  • -November - Cross Connnect Solutions (Phili )goes to Sidera (Formally RCN - part of RCN going private) ABRY -December 2010 Windstream acquires Hosted Solutions ABRY Partners in an all-cash transaction valued at $310 million. ABRY bought it in April 2008 for $140 M - Up $170 m in 31 months
  • -December 2010 Windstream acquires Hosted Solutions ABRY Partners in an all-cash transaction valued at $310 million. ABRY bought it in April 2008 for $140 M - Up $170 m in 31 months WITH A CONSERVATIVE 4-1 LEVERAGE we are looking at a 50-60% Annual return -ALSO IN DECEMBER December TDS purchases TEAM Technologies, LLC for privately owned data center services providers, for a purchase price of $47 million or 4.5X Revenues
  • -December TDS purchases TEAM Technologies, LLC for privately owned upper midwest data center services providers, for a purchase price of $47 million or 4.5X Revenues -CLOSING OUT 2010 December Cavalier becomes a Paetec Company in a $450m deal worth 1.06X Revenues and 5X EBITDA
  • -December Cavalier becomes a Paetec Company in a $450m deal worth 1.06X Revenues and 5X EBITDA THIS IS IMPORTANT BECAUSE A COUPLE OF YEARS EARLY CAVALIER BOUGHT NET TELCOS -April Time W closed NaviSite $230 million deal represents 8.8X trailing EBITDA and 1.78X revenue
  • -April Time W closed NaviSite $230 million deal represents 8.8X trailing EBITDA and 1.78X revenue -April 2011 Verizon closed Terremark for $1.4 billion 3.7X Revenues 12X EBITDA accelerating the company’s strategy to provide “everything-as-a-service” to business and government customers globally.
  • -April 2011 Verizon closed Terremark for $1.4 billion 3.7X Revenues 12X EBITDA accelerating the company’s strategy to provide “everything-as-a-service” to business and government customers globally. -In June VOIP FIRM 8X8 STEPPED TO THE PLATE AGAIN AND ACQUIRED Zerigo acquired by VOIP firm 8x8 in a $2 million acquisition
  • -In June VOIP FIRM 8X8 STEPPED TO THE PLATE AGAIN AND ACQUIRED Zerigo acquired by VOIP firm 8x8 in a $2 million acquisition 2011 IS JUST HALF OVER AND IT JUST GOT BIGGER -July Savvis becomes part of CenturyLink $2.5 Billion 2.4X Revenues 8.3X EBITDA -August - Windstream to Acquier Paetec for $2.4 billion Who let these telephone guys in the room?
  • Its been a big year for Centurylink ----ton the heels of its merger with Qwest Communications - creating a $18.6 billion, EBITDA of $8.1 billion and adjusted free cash flow of approximately $3.1 billion for the twelve months ended Dec. 31, 2010. 2011 IS JUST HALF OVER AND IT JUST GOT BIGGER -July Savvis becomes part of CenturyLink $2.5 Billion 2.4X Revenues 8.3X EBITDA - Now we were 4 days into August - Windstream to Acquire Paetec for $2.4 billion
  • -August - Windstream to Acquier Paetec for $2.4 billion Who let these telephone guys in the room?
  • 2 OF THE 3 COMPANIES CAME BACK TO THE TABLE --- TDS AND 8X8 ---- AND CINCINNATI BELL HAS ANNOUNCED A MASSIVE NEW MILLION S/F DATA CENTER IN AZ THIS YEARS AGGREGATE EQUALS $7.4 BILLION ----- A 1200% X SECTOR AWARENESS INCREASE BY THE TELEPHONE SECTOR Who let these telephone guys in the room? But there is another big equation in the last 12 months ---- Who let these telephone guys in the room?
  • 2 OF THE 3 COMPANIES CAME BACK TO THE TABLE --- TDS AND 8X8 ---- AND CINCINNATI BELL HAS ANNOUNCED A MASSIVE NEW MILLION S/F DATA CENTER IN AZ THIS YEARS AGGREGATE EQUALS $7.4 BILLION ----- A 1200% X SECTOR AWARENESS INCREASE BY THE TELEPHONE SECTOR Who let these telephone guys in the room? But there is another big equation in the last 12 months ---- Who let these telephone guys in the room?
  • LETS TALK FOR A MOMENT ABOUT TELEPHONE COMPANIES..... NOT INNOVATORS.... NEVER EARLY ADAPTORS.... SIT IN THE BACKGROUND AND WAIT UNTIL THE A BASIC BUSINESS HAS MATURED....HAS COME OF AGE ------ WHICH SAYS ALOT ABOUT YOU TELEPHONE COMPANIES BUY QUALITY AND EXPERIENCE ..... THEY BUY A COMPANY TO TEACH THEM..... THEY ARE NOT AFRAID TO BE NEAR THE HIGHER END OF THE MARKET THEY OFTEN HAS A LOT OF CASH --------- BUT THE PAETEC AND SAVVIS DEAL WERE DONE WITH LEVERAGE (WHICH ACTUALLY IS A GOOD SIGN ------ THEY ARE WILLING TO RISK AND HAVE SOLD THE BANS
  • PRIVATE EQUITY IS BACK ------ BUT THEY ARE LOOKING AT A SOMEWHAT MATURE INDUSTRY NO ---- THE DOT COM PHASE IS GONE As we saw earlier with the ABRY Hosted Solutions producing 50% + returns ---- PE - Private Equity is all about the returns - TAKE NO PRIZONERS
  • April 20 In April, Lloyds Banking Group private equity division LDC partnered with the management team of UK2 Group ( www.uk2group.com ) to acquire a majori ty stake in the European web hosting provider for about $77 m illion. MANY OF YOU KNOW DITLIV BREDAHL LDC HAS OVER $3 BILLION OF INVESTMENTS --- COMFORT RANGE IS $3-$150 MILLION _____________________________________________________________________ As part of the acquisition, former Cable &amp; Wireless CSO Phil Male joined the company&apos;s management team as executive chairman. Chief Strategy Officer at Cable &amp; Wireless Operations Director at Cable &amp; Wireless Director Custome r Service at Cab le &amp; Wireless
  • May 2011 PE firm Oak Hill Capital Partners buys Intermedia -320,000 premium Microsoft hosted Exchange mailboxes and distributes services to 38,000 business customersOak Hill Capital Partners knows the sector, having acquired ViaWest and invested in TeleCity and Cincinnati Bell....drawn to the deal because it wanted to capitalize on the key trend driving the growth of the sector: the move from in-house servers to outsourced servers hosted in third-party datacenters.No financials were released. OAK HILL THROUGH ITS VARIOUS PARTNERSHIPS HAS $25 BILLION UNDER MANAGEMENT ___________________________________________________________________________________ 26 Oak Hill brought in Phil Koen as Chairman CEO who was of Savvis from 2006-10 and president and COO of Equinix from 2002-06 One could guess he prompted Oak Hill to look at Intermedia
  • The transaction values iWeb at approximately $47 million. Canadian NavaCap invests in companies focusing on growth and market leadership in the Information and Communication Technologies sector. It partners with first-rate management teams and actively works with them to build leading organizations in their markets. The firm seeks to invest a minimum of CAD $10 million ($9.4 million). ---- EXPLANE $10.2 MILLION ---- AN 8% SHIFT The information is not directly available but NCC believes they have about $2 billion under management prior to the deal iWeb was shopped to some 16 firms 5 seriously NOT RESTRICTED BY REPORTING ----- REPLACED DEBT WITH BETTER TERMS - AND EXPANDED CAPITAL MARKETS ___________________________________________________ iWeb founders Éric Chouinard and Martin Leclair collectively owned 55% percent of the outstanding shares. ______________________________________________
  • Let me be blunt: KKR has $61 billion under management, Silver Lake $14 billion and TVC $7.7 billion. SILVER LAKE JUST SOLD SKYPE FOR $7 BILLION IF BOB PARSONS IS GODDDY - KKR IS THE GRANDDADDY OF PRIVATE EQUITY THIS IS THE TRIFECTA OF PRIVATE EQUITY THE DEAL EST $2.25 TO $2.5 ---- MY EST IS $2.5 BECAUSE 2X REVENUE MY GUESS IS 11X EBITDA --- GUESS ---- PRIVATE ---- BUT RESEARCH __________________________________ BOB PARSONS -----
  • Phil Koen of Savvis from 2006-10 and president and COO of Equinix from 2002-06
  • Phil Koen of Savvis from 2006-10 and president and COO of Equinix from 2002-06
  • Phil Koen of Savvis from 2006-10 and president and COO of Equinix from 2002-06
  • LETS TALK SMART MONEY THIS BECKONS WELL FOR THE INDUSTRY ---- THESE DEALS HAVE BEEN PERCULATING FOR MONTHS AND JUST CLOSED BUT THE POWERE TO BE ARE SMART MONEY ---- GROWTH - INNOVATORS ----- THEY HAVE CASH ---- DEALING HIGH END OF THE MARKET DOES NOT BOTHER THEM IF THEY SEE THE ROCKET IS STILL MOVING THIS BODES WELL FOR THE ENTIRE INDUSTRY THEY HAVE CASH LOOKING FOR BIG RETURNS
  • YOU ARE LOOKING FOR A CHEMICAL MATCH ----- MEETS YOUR SIZE BRING SOMETHING SPECIAL ----- PEOPLE AND MANAGEMENT ARE A MUST --------------------------------- THEY CAN MOVE FAST....... IN OR OUT
  • When is a deal a gamechanger? One that changes the
  • Gardner research ranked the Savvis cloud infrastructure as a service and ability to execute cloud and webhosting the highest of ALL firms survayed - Ahead of ATT - Rackspace - Verizon business and Terramark worldwide. I SEE EXPANSION TO INTERNATIONAL FOR CENTURY LINK
  • When is a deal a gamechanger? One that changes the
  • THE DEAL EST $2.25 TO $2.5 ---- MY EST IS $2.5 BECAUSE 2X REVENUE MY GUESS IS 11X EBITDA --- GUESS ---- PRIVATE ---- BUT RESEARCH
  • BOLT ON DEALS ----- INTERNATIONAL CLOUD
  • BOLT ON DEALS ----- INTERNATIONAL CLOUD
  • WHO IS UNDER REGULATED? GOVERNMENT INTERNENTION YOU ARE THE DEVIL ----- ELECTRICY COMPLEXITY ----- COMMOMITY
  • SPREADING YOUR RISK BUYING ON THE CHEAP WATCHING YOUR EXCHANGE RATES GOING WHERE THE ENERGY IS CHEAP
  • COMPLEXITY ----- COMMOMITY POSITIONING YOUR COMPANY WE HAVE SEEN EXAMPLES OF STRATEGY ------ IMPLEMENTATION
  • Thank You Attending ---- Hostingcon RATE SEMINAR
  • HostingCon 2011 M&A 2011 Looking To 2012

    1. 1. M&A 2011 Looking to 2012 <ul><li>Tom Millitzer - President NCC International </li></ul>
    2. 2. Notes regarding these slides These slides are from Tom Millitzers HostingCon presentation of August 10, 2011 in San Diego, California The presentation was largely a dialog between Mr. Millitzer and the audience that related to the graphics. The information in this text color has been added in this production to add the dialog and information not on the original presentation slides. These are a combination of his personal screen notes and that dialog. Thank you for viewing this presentation Some comments here were not part of that presentation others were omitted – I can’t remember everything.
    3. 3. <ul><li>Tom Millitzer - President </li></ul><ul><li>NCC International </li></ul><ul><li>Hosting M&A Since 1997 </li></ul><ul><li>NCC International </li></ul>
    4. 4. <ul><li>Tom Millitzer - President </li></ul>A LEADING M&A PROFESSIONAL SERVING THE HOSTING INDUSTRY400+ SUCCESSFUL ASSIGNMENTS IN THIS SECTOR NCC REPRESENT SELLERS DEAL SIZE GENERALLY $500K TO $100 MILLION WE DO GREAT PRESENTATIONS AND SAVE THE BUYERS TIME WITH OUR PRE-DEAL DUE-DILIGENCE I WANT TO MAKE YOU RICH
    5. 5. <ul><li>Tom Millitzer - President </li></ul><ul><li>[email_address] </li></ul><ul><li>NCC International </li></ul>IF YOU REMEMBER ONE THING OTHER THAN A GREAT PRESENTATION - REMEMBER MY E-MAIL ADDRESS
    6. 6. M&A 2011 Looking to 2012 EBITDA 2010 Revisited Advance of the telephone Private equity scales up SKIN GAME CHANGERS INTERNATIONAL POSITIONING AND STRATEGY
    7. 7. A thing about EBITDA In this slide Millitzer did a quick review of his EBITDA theory (this presentation was not M&A 101 or lists of things to do during an acquisition - more of graduate level deal theory and positioning. Base deal should = 4x 25% EBITDA = 4 year return therefore a base deal should be 4x sellers EBITDA but buyers should be able to pay 6x (sellers) because in reality with synergy they should be able to move it to 4x EBITDA . Above 6x lies issues such as growth, opportunity, technology, great management team...etc. ---- theoretically there is no top end.
    8. 8. On the heels of 2010 In early 2010 I began making a series of predictions in the M&A blogs I write for the WHIR. This related to telephone companies and the fact that they needed to add services to make up for land lines they were losing. TELEPHONE companies needed new services for SMB’s to increase average revenue and to what i term “the sticky” .... I noted we now ride the rails of the IP rails of cable companies network (so do the telephone companies)... get on board .
    9. 9. On the heels of 2010 At hostingCon 2010 I had outlined three transactions that I thought lead that charge... The total valuation of these transactions was a paltry $530 million. As a quick review…
    10. 10. <ul><ul><ul><ul><ul><li>VISI </li></ul></ul></ul></ul></ul><ul><li>Central Host </li></ul><ul><ul><ul><ul><ul><li>CyrusOne </li></ul></ul></ul></ul></ul>...the year of discovery VISI $18 MILLION 1.6X REV 5.8X EBITDA CENTRAL HOST $1.6 M 1.6 X 6.4X EBITDA CYRUSONE $525 M 9X REVENUES 12.5 X EBITDA Note: NCC International represented Central Host in that transaction.
    11. 11. TELEPHONY I was proven right as the last 12 months have produced a plethora of activity in this sector. The following pages outline the specific transactions I felt noteworthy.
    12. 12. 2011 the Theme Continues NOVEMBER 2010- CROSS CONNECT SOLUTIONS (PHILADELPHIA ) GOES TO SIDERA - SIDERA IS A NEW NAME FOR RCN - RCN WENT PRIVATE IN A MANAGEMENT BUYOUT WHICH INVOLVED ABRY GROUP PRIVATE EQUITY - THIS WILL RELATE TO THE NEXT SLIDE AND PART OF THE PE PRESENTATION LATER
    13. 13. 2011 the Theme Continues December 2010 Windstream acquired Hosted Solutions (owned by ABRY Partners- see previous slide) in an all-cash transaction valued at $310 million. ABRY bought it in April 2008 for $140 M - Up $170 m in 31 months WITH A CONSERVATIVE 4-1 LEVERAGE we are looking at a 50-60% Annual return
    14. 14. 2011 the Theme Continues -December TDS purchases TEAM Technologies, LLC for privately owned upper Midwest data center services providers, for a purchase price of $47 million or 4.5X Revenues note: TDS purchased VISI last year
    15. 15. 2011 the Theme Continues December Cavalier becomes a Paetec Company in a $450m deal worth 1.06X Revenues and 5X EBITDA – Important as Cavalier picked up colo dc assets with its 2010 NET Telcos acquisition.
    16. 16. 2011 the Theme Continues April Time Warner closed NaviSite $230 million deal represents 8.8X trailing EBITDA and 1.78X revenues In my blogs I noted they may have got this deal cheap and I was worried about a cultural clash.
    17. 17. 2011 the Theme Continues -April 2011 Verizon closed Terremark for $1.4 billion 3.7X Revenues 12X EBITDA accelerating the company’s strategy to provide “everything-as-a-service” to business and government customers globally. Later in the presentation Verizon is referred to as an ISP
    18. 18. 2011 the Theme Continues In June VoIP firm 8X8 STEPPED TO THE PLATE AGAIN and ZERIGO 8 in a $2 MILLION acquisition - 8X8 WAS ON OUR LIST OF 2010 BUYERS
    19. 19. 2011 the Theme Continues Big year for CenturyLink ----on the heels of its merger with Qwest - creating a $18.6 billion, EBITDA of $8.1 billion acquired Savvis $2.5 billion 2.4x revenues 8.3x EBITDA
    20. 20. 2011 the Theme Continues AUGUST – Just 4 days ago it was announced that Windstream is to acquire PAETEC for $2.4 BILLION Now Windstream will own Cavalier on of our other buyers.
    21. 21. 2011 the Theme Continues 2 of the 3 companies came back to the table --- TDS and 8x8 ---- and last week Cincinnati Bell has announced a massive new million sq/ft data center in Arizona. ALL 3 BACK MAKING INVESTMENTS!
    22. 22. 2011 the Theme Continues $7.4 BILLION This years aggregate equals $7.4 BILLION ----- A 1200% X sector awareness increase by the telephone sector. Who let these telephone guys in the room?
    23. 23. so how does telephone fit Lets talk for a moment about telephone companies..... not innovators....never early adaptors....sit in the background and wait until a basic business has matured....has come of age ------ which says a lot about THE HOSTING INDUSTRY. Telephone companies buy quality and experience ..... they buy a company to teach them.....they are not afraid to be near the higher end of the market-----they often have a lot of cash--------- but the PAETEC and Savvis deal were done with leverage a good sign ------ AS they are willing to risk and have sold INTERNET HOSTING IDEA TO the banks! --- Which is great in this tight credit market.
    24. 24. 2011 Enters Private Equity Earlier this year in my WHIR blogs i indicated there were murmurings that private equity is back ------ it is... but they are looking at a somewhat mature industry now ---- the dot com phase is gone. As we saw earlier with the Abry deal with Hosted Solutions producing 50% + returns ---- PE - Private Equity is all about the returns – As I say “take no prisoners”
    25. 25. 2011 Enters Private Equity Phil Male April 20 , Lloyds Banking Group private equity division LDC partnered with the management team of UK2 group and acquired a majority stake in the European web hosting provider for about $77 million. As part of the acquisition, former Cable & Wireless CSO Phil Male joined the company's management team as Executive Chairman .
    26. 26. 2011 Enters Private Equity Phil Koen May 2011 PE firm Oak Hill Capital Partners buys Intermedia – 320,000 premium Microsoft hosted Exchange mailboxes Oak Hill Capital Partners knows the sector, having acquired ViaWest and invested in TeleCity and Cincinnati Bell.... No financials were released. Oak Hill through its various partnerships has $25 billion under managemen Brought in Phil Koen as Chairman CEO who was of Savvis from 2006-10 and president and COO of equinix from 2002-06 one could guess he prompted Oak Hill to look at Intermedia
    27. 27. 2011 Enters Private Equity Eric Chouinard Martin Leclair Going private from public in a the transaction values iWeb at approximately $47 million. Canadian Novacap invests in companies the firm seeks to invest a minimum of cad $10 million ($9.4 million). (dovetails to currency shift discussion later- see international) Prior to the deal iWeb was shopped to some 16 firms 5 seriously required for investor scrutiny. iWeb founders Eric Chouinard and Martin Leclair collectively owned 55% percent of the outstanding shares.
    28. 28. 2011 Enters Private Equity Bob Parsons Let me be blunt: KKR has $61 billion under management, Silver Lake $14 billion and TVC $7.7 billion. SILVER LAKE JUST SOLD SKYPE FOR $7 BILLION IF BOB PARSONS IS GODDDY - KKR IS THE GRANDDADDY OF PRIVATE EQUITY THIS IS THE TRIFECTA OF PRIVATE EQUITYTHE DEAL EST $2.25 TO $2.5 ---- MY EST IS $2.6 BECAUSE 2X REVENUES MY GUESS IS 11X EBITDA ---
    29. 29. lets talk about godaddy We can all guess about the structure of the deal but Ego always has something to do in deals ---- I suggest that Parsons wanted something like this BTW THIS CHECK IS A JOKE - THE PHOTO RIGHT IS PARSONS GIVING A BIG CHECK TO A NON-PROFIT GROUP THIS CHECK REPLACING THE REAL ONE.
    30. 30. PRIVATE EQUITY IS ABOUT Private Equity looks for a great story, finances, the right time at the right place, in this economy a bit of safety, growth..... but that is nothing without a great management team... they are looking for top management to stay - or as demonstrated can change out the leader with someone that has demonstrated great leadership skills in the past... They want motivation ----- and there is nothing like ‘skin in the game to achieve this’ ---- not mentioned in the presentation ---- but skin in the game is akin to letting management be part of the bank - after all Bob Parsons is probably in for some 25% +
    31. 31. PE Phil male Phil koen Bob Parsons Eric Chouinard Martin Leclair PE OPLE
    32. 32. so how does PE Fit The private equity groups referenced here represent over $100 billion of managed assets...these are groups (and there are hundreds more) they want great returns.... 20-40% the higher the better They have targeted the hosting industry as a sector they believe can achieve these goals.... PE started looking at this sector a year ago ---- knowing where the economy was going (600 DOW drop day of this presentation) PE is SMART MONEY This bodes well for the HOSTING industry and your values you will see more
    33. 33. so how does PE Fit PRIVATE EQUITY CAN MOVE FAST
    34. 34. GAMECHANGERS Game changers is were a transaction has the capacity to dramatically change the complexion of the company or in some cases an industry (or both) ---- i think two transactions fall into that category this year - two fairly recent transactions...
    35. 35. GAMECHANGERS
    36. 36. GAMECHANGERS Our first game changer is the CenturyLink / Savvis transaction... until CenturyLink has been (see previous slide for website shot)) “serving customers across the nation” Actually serving second and third tier markets On the heels of the Quest acquisition they went big again with the $2.5 billion Savvis play - They picked up a prestige company - with serves SMB’s to the top fortune 500 firms (by the way we now sell telephone also) ---- Overnight they have a cadre of hosting services, cloud services, Overnight they are in some respects the best in the business.... add to this they are no longer national ----- they are international ..... this is a game changer for CenturyLink.
    37. 37. GAMECHANGERS Although CenturyLink has piled up a lot of debt I could see them doing a fairly large international acquisition in the next 18 months
    38. 38. GAMECHANGERS Our second game changer not only affects the company it affects the hosting industry --- for this reason alone it is a game changer--- is more about how it will effect you ----
    39. 39. GAMECHANGERS <ul><ul><ul><ul><ul><li>VISI </li></ul></ul></ul></ul></ul><ul><li>Central Host </li></ul><ul><li>- POSITIONING </li></ul>The investors are savvy, the smartest money, the most connected. Together they have over $80 billion under management - this is a signal to the entire industry .
    40. 40. GAMECHANGERS Silverlake has international sector investments it can leverage -Llocaweb is the largest hosting company in Brazil - Allyes is in china - This deal is also about partnerships and leverage
    41. 41. GAMECHANGERS Already Godaddy has added an international expert from the White House administration, Silverlake has the who’s who list of connections, other international hosting investments they can leverage what will happen - 1 -international acquisitions or partnerships will occur 2 - Godaddy will acquire cloud technology to move it from a blue collar to higher end technology company 3 - Parsons plays well in Asia and South America where U.S. macho is respected ---- see him there 4 - Good chance Godaddy will sponsor the World Cup. 5. This signals that the hosting industry is well positioned.
    42. 42. World wide economy The world wide economy has been shaken this week - yesterday the Israel stock exchange closed early - the DOW this hour is down 600 points ---- all of this comes to play as business contract more often then expand. We need to consider international as a safety valve. .
    43. 43. International Consider overseas acquisitions. US owners may want to consider exchange rates - as buying into a stable currency - today your Canadian customers are purchasing your services for 7% +/- that they did a year ago Conversely - if you see the u.s. rebounding - (for example) a Canadian firm can buy a similar us hosting firm at a discount today. This is a world wide phenomenon - i am bullish on the Netherlands as it has evolved into one of the world wide centers for the internet Look towards expanding economies with an eye on geo-political issues.
    44. 44. Strategy If you are larger you have the opportunity to increase value if you are experts at a complex solution. If you are smaller - do not have the capacity to develop a wide range of staff - stay in the commodity sector (shared, dedicated etc..... work on margins) ISP’s are back (in the end that is what CenturyLink, Verizon are) --- you have value if you can work on a wide range of solutions and have a great staff --- i would think you would need revenues in excess of $12 million to occur A deal i wish i had? ---- I would love to sell a pure play cloud company, with complex solutions, great staff that knew there stuff - with revenues of $20+ million --- I think it would be a 3x revenue 12x EBITDA transaction ---- maybe more
    45. 45. [email_address] <ul><li>Tom Millitzer - President NCC International </li></ul><ul><li>239.282.5550 -5 GMT </li></ul>I’m here to help you. I do M&A – give me a call

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