2015 Tech M&A Monthly - Sellers Panel
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We're in the midst of the best market to sell a software, Internet or related technology company in more than a decade. If you're considering taking advantage, you won't want to miss this in-depth conversation with a tech CEO who just sold the company he founded nearly 10 years ago. Kevin Linden just sold his firm Email Direct to j2 Global, one of the top buyers of software companies right now. Learn how he did it, what he learned, what surprised him and much more. Plus, a special report on the hot gaming M&A market.
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2015 Tech M&A Monthly - Sellers Panel
- 1. 1 Tech M&A Monthly Sellers Panel 12 March 2015
- 2. 2 Timothy joined Corum in 2011, and oversees the company’s marketing efforts globally from the headquarters near Seattle. Chief among these is Corum's extensive conference schedule, “Selling Up, Selling Out,” the Merge Briefing, the Tech M&A Monthly webcast and Corum's platinum sponsorship of the World Financial Symposiums' live events and Market Spotlight series. Through these events, Corum Group serves as the world’s leading educator in technology mergers and acquisitions. Prior to joining Corum, Timothy served as marketing and product manager for GIS software startup Depiction, Inc., and previously worked in marketing for VizX Labs, a pioneering SaaS startup delivering DNA analysis tools. In addition to marketing for software startups, Tim has worked for a US Senate campaign and taught science in Rio de Janeiro. Timothy graduated Magna Cum Laude from Bethel University in St. Paul, Minnesota, with degrees in History and Biology. Moderator Timothy Goddard VP, Marketing Corum Group Ltd.
- 3. 3 Agenda Welcome Field Report: EmailDirect Special Report: Gaming Ecosystem M&A Research Report Seller Conversation: Rob Linden, EmailDirect Q&A
- 4. 4 Rob has over 30 years of executive and entrepreneurial experience in multiple technologies: Integrated circuit testing, industrial process automation and control, communications software, security software, and energy software and services. Rob has founded and sold several companies and engaged in two IPOs. He was most recently CEO of Evergreen Fuel Technologies, Inc. in the energy sector. Rob is a broadly skilled strategic development professional with a proven reputation for targeting, negotiating and developing profitable ventures and a demonstrated ability to successfully analyze an organization's critical business requirements, identify deficiencies and opportunities, and develop innovative and cost-effective solutions for enhancing competitiveness, increasing revenues, and improving customer relationships. Rob Schram Senior Vice President Corum Group Ltd. Field Report: EmailDirect
- 5. 5 Gaming Ecosystem M&A Report Alina Soltys Associate Alina Soltys joined Corum Group in 2010, located out of their Seattle headquarters assisting on the transaction side. As a senior analyst, she focuses on strategic positioning, growth opportunity development and financial analysis as well as speaking regularly at conferences such as Casual Connect and WFS. Previously she worked on the buy side at a boutique real estate development firm focused on multi- family acquisitions as well as interning in the Mergers and Acquisitions Group at Colliers International. Alina graduated from the Foster School of Business at the University of Washington with honors, specializing in Finance and Entrepreneurship.
- 6. 6 Gaming Valuations: Public Peer Group 1.50 x 1.70 x 1.90 x 2.10 x 2.30 x 2.50 x 2.70 x 5.00 x 6.00 x 7.00 x 8.00 x 9.00 x 10.00 x 11.00 x 12.00 x 13.00 x EV/SEV/EBITDA Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 EV/EBITDA 8.04 x 7.51 x 7.08 x 6.84 x 7.94 x 7.94 x 9.16 x 9.33 x 9.92 x 9.63 x 9.75 x 11.31 x 12.00 x EV/S 2.14 x 2.42 x 2.18 x 2.18 x 2.47 x 2.30 x 2.58 x 2.29 x 2.14 x 2.26 x 2.30 x 2.20 x 2.08 x
- 7. 7 37 22 19 18 14 14 13 12 10 10 9 9 9 Top Strategic Acquirers: 2014
- 8. 8 Top Strategic Gaming Acquirers: 2014
- 9. 9 Oculus: Growth Through M&A Acquirer: Facebook Target: Oculus Rift Deal Value: $2 Billion Date: April 2014 Sold to Following the Acquisition Target: Carbon Design Group Acquirer: Oculus VR Transaction Value: Undisclosed Target: Jenkins Software (RakNet) Acquirer: Oculus VR Transaction Value: Undisclosed Target: Nimble VR Acquirer: Oculus VR Transaction Value: Undisclosed Target: 13th Lab AB Acquirer: Oculus VR Transaction Value: Undisclosed Sold to Sold to Sold to Sold to
- 10. 10 0 20 40 60 80 100 120 140 160 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 2009 H1 2009 H2 2010 H1 2010 H2 2011 H1 2011 H2 2012 H1 2012 H2 2013 H1 2013 H2 2014 H1 2014 H2 Deal Counts DollarValueinBillions Transaction Value ($B) Billion Dollar + Total Deals Transactions in the Gaming Ecosystem Sources include company filings and releases, industry databases and Corum Group. • Both majority and minority deals included. • Transactions relating to the gaming ecosystem were included, not limited to gaming studios. • Only announced or available deal values included.
- 11. 11 Source: Corum Transactions in the Gaming Ecosystem Deal Volume Highest Since 2009 2 Record Setting Years Excluded Billion $ Transactions: • H1 2014 : $3.35B • H2 2014: $7.85B Average Deal Size: 5 Year Growth: 170% $43m to $115m YoY: 21% $95m to $115m $0 $20 $40 $60 $80 $100 $120 $140 2009 H1 2009 H2 2010 H1 2010 H2 2011 H1 2011 H2 2012 H1 2012 H2 2013 H1 2013 H2 2014 H1 2014 H2 inMillions Average Deal Size Trending 0 20 40 60 80 100 120 140 160 $0.0 $5.0 $10.0 $15.0 $20.0 $25.0 Deal Counts $ Value in Billions Reported Gaming Transactions Transaction Value ($B) Billion Dollar + Total Deals
- 12. 12 Top Gaming Transactions 2014 $885M $527M $941M $2.5BN $3.0BN $970M $960M $2.0BN $1.9BN $472M (MBO) (MBO)
- 13. 13 Asia Share of Top 10 Gaming Deals Source: Corum Top 9 of 10 Deals (2013) Top 4 of 10 Deals (2014) Top 7 of 10 Deals (2012)
- 14. 14 Battle of Chinese Giants : Tencent vs Alibaba Expanding beyond eCommerce Spending time partnering with studios to become a publisher Data Source: CapitalIQ $300M $500M $63M $120M $280M
- 15. 15 Activity Since 2013 for Tencent & Alibaba 88 $21B Acquisitions & Investments Total Value Data Compiled by The Corum Group
- 16. 16 Games as a Service Continuously delivering value to Gamers • Players pay as they go & what they use - “F2P”Service Concept • Starting with trailer thru game play, online presence, community, etc.All Encompassing • Strong analytical solutions and strategies • Keep the users coming back Monetization is Key • Focused solution providers helping every step of the way from product development to a/b testing to analytic compilationSpecialization Economy
- 17. 17 Corum Research Report Elon Gasper Vice President, Director of Research Amber Stoner Senior Analyst
- 18. 18 Public Markets 0% 5% 10% 15% 20% 25% 30% Weekly Percentage Change NASDAQ S&P TECH Dow Jones
- 19. 19 Start End Years Dotcom Bubble Oct. 11, 1990 Mar. 24, 2000 9.5 Postwar Boom Jun. 13, 1949 Aug. 2, 1956 7.1 That 70s Inflation Oct. 3, 1974 Nov. 28, 1980 6.2 Current Mar. 9, 2009 ? 6.0 + *Since the Great Depression. Source: S&P Capital IQ, The Associated Press Macro view: 4 Longest* Bull Market Runs
- 20. 20 Feb. 2014 Feb. 2015 # of Transactions 234 331 # of Mega Deals 1 4 Largest Deal $19B $4.8B Private Equity Deals 9 15 # VC backed Exits 48 62 % Cross Border Transactions 32% 34% % of Startup Acquisitions 12% 11% Average Life of Target 13 14 Corum Index Buyer Seller Price Harris Corp. Exelis Inc. $4.8B Canon Axis Communications $2.8B SS&C Technologies Advent Software $2.5B Expedia Orbitz Worldwide $1.4B
- 21. 21 February Mega-Deals Sold to Target: Exelis Acquirer: Harris Corporation Value: $4.75B - Designs software tools to visualize remotely sensed data
- 22. 22 February Mega-Deals Sold to Target: Axis Communications Acquirer: Canon Value: $2.8B - Video monitoring software and Internet-networked camera systems
- 23. 23 February Mega-Deals Sold to Target: Advent Software Acquirer: SS&C Technologies [Carlyle Group] Value: $2.7B - Investment analytics software
- 24. 24 Horizontal Application Software Market 3.6x 17.6x Public Valuation Multiples EV Sales Since Q4 Corum Analysis EV EBITDA Feb. 2015 Back to summer of ’14 levels after brief dip. Small decrease attending volatility in public markets.
- 25. 25 17.6x Since Q4 Feb. 2015Sold to Target: Pentaho Acquirer: Hitachi Data Systems Value: $530M - BI analytics and data integration software Sold to Target: Revolution Analytics Acquirer: Microsoft Value: $200M - BI statistical computing and predictive analytics software Horizontal Application Software Market Deal spotlights
- 26. 26 17.6x Since Q4 Feb. 2015 Sold to Target: Decipher Acquirer: Focus Vision [Thompson Street] - Provides market research and reporting platform and tools Horizontal Application Software Market Sold to Target: Prelytix Acquirer: First Derivatives Value: $7.5M - B2B predictive analytics and marketing automation software Deal spotlights
- 27. 27 Since Q4 Feb. 2015 Sold to Target: Toro Acquirer: Google Horizontal Application Software Market Sold to Target: Converser Acquirer: Swrve Sold to Target: InferSystems Acquirer: Kochava Deal spotlights: Marketing Automation
- 28. 28 Sold to Target: Distribion Acquirer: AH Belo Value: $15+M - SaaS company specializing in marketing automation Horizontal Application Software Market Deal spotlights: Marketing Automation
- 29. 29 17.6x Since Q4 Feb. 2015Sold to Target: PeopleVine Acquirer: Alliance Creative Group - Platform that bridges CRM, marketing and customer engagement into a single product suite Sold to Target: Prosperity Systems Acquirer: WRAPmail - Offers development and commercialization of its own Virtual Desktop platform Horizontal Application Software Market Deal spotlights
- 30. 30 Internet Market 5.3x 24.4x Public Valuation Multiples EV Sales Corum Analysis EV EBITDA Since Q4 Feb. 2015 Sales valuations lifting; still far from 2014 highs, but more rationally pacing EBITDA trends. Small tick upward supported by hot subsectors like Travel & Leisure undergoing consolidation wave.
- 31. 31 Sold to Target: SwagsGalore.com Acquirer: Menrva Holdings - Online vendor of window treatments such as curtains and valences Internet Market Deal spotlights
- 32. 32 24.4x Since Q4 Feb. 2015Sold to Sold to Target: Travelocity Acquirer: Expedia Value: $280M - Added travel agency expertise to battle competitors Target: Orbitz Worldwide Acquirer: Expedia Value: $1.3B - Orbitz provides more search queries for Expedia to target Internet Market Deal spotlights
- 33. 33 Since Q4 Feb. 2015 Sold to Sold to Target: MyTable Acquirer: TripAdvisor Target: Restopolis Acquirer: TripAdvisor Sold to Target: ZeTrip Acquirer: TripAdvisor Internet Market Deal spotlights
- 34. 34 0 20 40 60 80 100 120 140 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 YTD Travel-related Internet Deals 2012-2015 (Projected)
- 35. 35 2015 - Travel & Leisure Acquisitions European & OtherNorth American
- 36. 36 Sold to Target: Trainline Acquirer: KKR - Rail ticket provider for UK consumers and businesses Internet Market Deal spotlights
- 37. 37 Infrastructure Software Market 4.0x 15.8x Public Valuation Multiples EV Sales Corum Analysis EV EBITDA Since Q4 Feb. 2015 Small dip cushioned by rising importance and value of security. Retreating to summer ’14 levels as focus shifts to market share value in changing environment.
- 38. 38 4.0x 15.8x Since Q4 Feb. 2015 Sold to Target: Voltage Security Acquirer: Hewlett-Packard Value: $175M - Encryption software provider offering protection across enterprise, cloud, mobile and big data environments Infrastructure Software Market Sold to Target: Porticor [Israel] Acquirer: Intuit - SaaS data encryption company Deal spotlight
- 39. 39 4.0x 15.8x Since Q4 Feb. 2015 Sold to Target: Intellinx [Israel] Acquirer: Bottomline Technologies Value: $85M - Enterprise fraud detection software Infrastructure Software Market Sold to Target: Identity Finder Acquirer: Inverness Graham - Provides anti-data breach and leakage software Deal spotlight
- 40. 40 Sold to Target: Younited [F-Secure] [Finland] Acquirer: Synchronoss Technologies Value: $60M - Cloud storage solutions provider Infrastructure Software Market Deal spotlight
- 41. 41 Sold to Target: Coversant Acquirer: Ubiquity Value: $6M - “Internet of Things Service Bus” Infrastructure Software Market Deal spotlight
- 42. 42 IT Services Market 0.89x 9.8x Public Valuation Multiples EV Sales Corum Analysis EV EBITDA Since Q4 Feb. 2015 Uptick matches Sales valuation growth. Steady growth in valuations since Q3 2014.
- 43. 43 Since Q4 Feb. 2015Sold to Target: Cosmic Blue Team [Italy] Acquirer: Hitachi Sold to Target: oXya [France] Acquirer: Hitachi - Hitachi has retained the 800 employees between CBT and oXya, strengthening its European position IT Services Market Deal spotlights
- 44. 44 Sold to Target: TS Sports Acquirer: Panasonic - Specializes in LED technology for video board systems, as well as designs, installs, systems integration and services the boards, sounds systems and control rooms IT Services Market Deal spotlights
- 45. 45 Corum Research Report Elon Gasper Vice President, Director of Research Amber Stoner Senior Analyst
- 46. 46 Nat Burgess President Corum Group Ltd. Seller Conversation Kevin Linden CEO/CO-founder EmailDirect – sold to j2 Global
- 47. 47 Q&A We welcome your questions! Use Q&A window on left side Submit to queue at any time Ask “all panelists” – see “ask” option above text-entry box
- 48. 48 Upcoming Conference Schedule Selling Up Selling Out (SUSO) - Ready to go to market? During this half-day workshop, learn to prepare, position, research, value, negotiate, and execute due diligence for maximum price and structure. This is the most attended Tech M&A event ever – participants have done over $1 trillion in transaction value. Merge Briefing (MB) - The Merge Briefing is a 90-minute executive briefing providing a current M&A market update (trends, valuations, etc.), as well as a brief overview of the Tech M&A process: “8 Steps To An Optimal Outcome.” www.CorumGroup.com/Events Mar. 17: Copenhagen – MB Mar. 17: Detroit – SUSO Mar. 18: Stockholm – MB Mar. 20: Houston – MB Mar. 24: Orlando – MB Mar. 26: Miami – MB Mar. 31: Dallas – MB Apr. 2: Austin – MB Apr. 14: Atlanta – SUSO Apr. 15: Paris – MB Apr. 22: Munich – MB Apr. 28: Kansas City – MB Apr. 29: St. Louis – MB Apr. 30: Manchester – MB May 5: Riga – MB May 7: Istanbul – MB
- 49. 49 After the Deal – Celebration
Editor's Notes
- The common thread here is gaming transactions are being done by all of the top tier firms.
- Yahoo 30 mobile transaction flurry $300m More to come on the consolidation in Ad tech’s most recent. Microsoft : MineCraft -- #1 game for christmas.; 2nd highest grossing game worldwide Amazon ++ Twitch tremendous growth even now under Amazon with 100 Unique Monthly Viewers . All pointing to a significant eGaming segment emerging & sufficiently so for Amazon to continue funding expantion now throught Twitch. Acquired video game broadcasting and esports advertising company GoodGame. GoodGame’s team knows how to pitch companies with big budgets for brand advertising. Let’s talk about Oculus
- Oculus with the backing of Facebook started off hot and heavy with the pick up of Carbon Design Group & Raknet right out of the gate. In Mid December, continuing to prime the Rift for public consumption – Hand Tracking with Nimble VR 3D model creation with 13th Lab During GDC last week, significant news was driven around VR with both HTC and Valve planning product releases this year.
- My team and I took a look at the entire gaming ecosystem like studios, payment providers, portals and infrastructures who are all key components in providing high quality games around the world. This is a half yearly look spanning from 2009 through to December 2014. This is the 2nd year in a row to set records. Activity has been very strong on the M&A front – with a nice upward sweep
- and most recently Multi Billion Dollar transactions have been pushing the small and medium sized deals higher more than doubling total consideration for those types. The excellent news for most of us here, is that you don’t have to be a billion dollar unicorn to attract attention in today’s M&A market The average deal size is increasing, now at $115m for those disclosed.
- These are the Top Gaming transactions of 2014, minus the super billion dollar casino deals. Corum deals with a significant amount of Financial buyers, PEs and its interesting to note a massive BET that CVC Capital Partners out of London put down almost a $1BN for SkyBET – major table stakes Same goes for Churchill Downs that picked up Seattle’s Big Fish Games. As you’ll see, there are more red, white and blue flags
- Asian firms have learned how to share the top deals from the previous page, Now doing 4 of the top 10 .
- The world’s largest gaming company, Tencent has Accelerated Pace of Private Company Investments Is most active VC in China, averaging 3 investments per month Comes as Tencent and Alibaba compete against each other across multiple domains, and aim to continue to expand their mobile internet presences.
- Significant traffic 88 Acquisitions & Investments Totalling $21b According to our research
- Delivering compelling game play has never been a bigger priority for publishers; creating content that will please the players , keep them coming back and ultimately drive them to pay. The “as a service” concept is key and taking care of your players leads to the successful companies out there The infrastructure layer has grown into its own with specialized companies who are able to help on individual aspects. Helfpshift helps companies like supercell with their faqs and cstuomer feedback, mixpanel delivers tremendious data feedback on every component of your game and photon’s engine allows for multiplayer , cross platform development.
- Apr 11, 2014 – Mar 6, 2015
- Now, let’s turn to the Corum Index on deals – valuations, volume, structures, …etc.. This report is done monthly for six major sectors and quarterly for all 26 markets. It’s presented at our online M&A Monthlies which are broadcast to 36 countries the second Thursday at 10 a.m. Pacific Mountain Time. How many of you have attended one of these monthly or quarterly events? (See a show of hands – usually not more than 20%.) Well, if you’re serious about selling in the next year or two, I would urge you to tune in to these broadcasts. They have all the latest information on valuations, deal structures, who’s selling, plus special market reports, and insider presentations on trends that you need to know to best position for optimal value. Further, we have guest speakers – recent headliners, buyers, or CEOs who have just sold and give you the lowdown on what it’s like in the M&A trenches right now. Here’s the latest Corum Index. [NEW COPY NEEDED] By the way, an example of the full 26 market report is in the annual report. (Have them pull that back up) Everyone open up to the market sections to see more detail. There are also special reports by Corum Staff – considered world experts in the major trends.
- While multiples in the Internet market experienced a slight dip since last month, activity in its pure play subsector remained steady and saw some interesting transaction sets in advertising and online recruitment space….
- Now, let’s turn to the Corum Index on deals – valuations, volume, structures, …etc.. This report is done monthly for six major sectors and quarterly for all 26 markets. It’s presented at our online M&A Monthlies which are broadcast to 36 countries the second Thursday at 10 a.m. Pacific Mountain Time. How many of you have attended one of these monthly or quarterly events? (See a show of hands – usually not more than 20%.) Well, if you’re serious about selling in the next year or two, I would urge you to tune in to these broadcasts. They have all the latest information on valuations, deal structures, who’s selling, plus special market reports, and insider presentations on trends that you need to know to best position for optimal value. Further, we have guest speakers – recent headliners, buyers, or CEOs who have just sold and give you the lowdown on what it’s like in the M&A trenches right now. Here’s the latest Corum Index. [NEW COPY NEEDED] By the way, an example of the full 26 market report is in the annual report. (Have them pull that back up) Everyone open up to the market sections to see more detail. There are also special reports by Corum Staff – considered world experts in the major trends.
- IT services remain to be high in the end of 2014 as companies have some areas in need of growth preferring to do acquisitions to fill up those gaps…
- We’ve reached the end. The celebration part. Selling software, IT and related technology companies is very satisfying. You become close to your clients after such an intense process. Unfortunately, the closings are often very anti-climactic. Ending with a whimper with some government filing, a wire transfer, the parties scattered across the globe. That why once a year we take our clients who successfully sold to Langara in the gulf of Alaska – we’ve been doing this for 23 years. You can more about these trips, and comments from those company owners like you who have attended. So, I’ll close by simply inviting you to go fishing with us. Thank you for your time today.