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Tech M&A Monthly: When You are Approached

Corum Group
Corum Group
Corum GroupCorum Group

In today’s competitive Tech M&A environment, more and more firms were being approached by potential acquirers. Here at Corum, we are seeing more and more companies coming to us after they have been approached, but only those who manage discussions properly will get a deal done. In this webinar, Corum’s global team of senior dealmakers will address the question, “What do I do when I've been approached?”, sharing 13 tips to turn that approach into an optimal outcome—and avoid the mistakes that can turn an approach into a disaster for your company. Getting approached is a double edged sword - it means a buyer is interested, but it means they may also be interested in your competitors. We looked at the missteps sellers often make when they're first approached, best practices for dealing with that first inquiry, and the methods for leveraging a single buyer’s approach into an auction environment that will ultimately give you the maximum value and best structure.

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Tech M&A Monthly
When You Are Approached
September 13, 2018
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.
Welcome
Timothy Goddard
EVP, Marketing
Corum Group Ltd.
3
Agenda
 Welcome
 Field Reports:
 NTP Software
 ExakTime
 AnalytiX DS
 Client Fishing Celebration Report
 September 2018 Research Report
 Special Report: When You Are Approached
 Q&A
4
Dave joined Corum in 2015 and has a diverse background in technology and life sciences. As an executive and
entrepreneur, Dave has been operating and investing in companies sitting at the convergence of commerce and
eCommerce as well as innovative life science businesses for over 25 years. Recently, Dave was CEO North America
for Gaxsys, an eCommerce and logistics company that is a leader in last mile logistics and fulfillment for eCommerce
marketplaces.
Dave has been on both sides of the mergers and acquisitions table, having sold a life science technology company,
facilitated sell side and buy side technology transactions and has also scaled multiple technology companies globally in
the eCommerce, life sciences and innovation intelligence markets.
Dave sits on boards of numerous public and private companies, including one that recently filed for an IPO.
Field Report: NTP Software
David Levine
Senior Vice President
Corum Group
5
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
Field Report: ExakTime
6
Ivan Ruzic has had a successful 30+ year career in the software business that has included virtually every senior
executive role. His resume spans marquee companies such as BEA systems, Novell and Borland as well as multiple
startups including his own. His international experience is extensive and in addition to the United States has been
involved in mergers and acquisitions in Europe, Africa and Asia.
His success and extensive experience qualify him as an expert in building value and realizing wealth. Ivan joined
Corum Group, the world’s leading software M&A firm, with a specific focus on educating and helping prospective
sellers maximize the value of their technology companies.
Ivan Ruzic
Vice President
Corum Group
Field Report: AnalytiX DS
Ad

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Tech M&A Monthly: When You are Approached

  • 1. 1 Tech M&A Monthly When You Are Approached September 13, 2018
  • 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. Welcome Timothy Goddard EVP, Marketing Corum Group Ltd.
  • 3. 3 Agenda  Welcome  Field Reports:  NTP Software  ExakTime  AnalytiX DS  Client Fishing Celebration Report  September 2018 Research Report  Special Report: When You Are Approached  Q&A
  • 4. 4 Dave joined Corum in 2015 and has a diverse background in technology and life sciences. As an executive and entrepreneur, Dave has been operating and investing in companies sitting at the convergence of commerce and eCommerce as well as innovative life science businesses for over 25 years. Recently, Dave was CEO North America for Gaxsys, an eCommerce and logistics company that is a leader in last mile logistics and fulfillment for eCommerce marketplaces. Dave has been on both sides of the mergers and acquisitions table, having sold a life science technology company, facilitated sell side and buy side technology transactions and has also scaled multiple technology companies globally in the eCommerce, life sciences and innovation intelligence markets. Dave sits on boards of numerous public and private companies, including one that recently filed for an IPO. Field Report: NTP Software David Levine Senior Vice President Corum Group
  • 5. 5 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 Field Report: ExakTime
  • 6. 6 Ivan Ruzic has had a successful 30+ year career in the software business that has included virtually every senior executive role. His resume spans marquee companies such as BEA systems, Novell and Borland as well as multiple startups including his own. His international experience is extensive and in addition to the United States has been involved in mergers and acquisitions in Europe, Africa and Asia. His success and extensive experience qualify him as an expert in building value and realizing wealth. Ivan joined Corum Group, the world’s leading software M&A firm, with a specific focus on educating and helping prospective sellers maximize the value of their technology companies. Ivan Ruzic Vice President Corum Group Field Report: AnalytiX DS
  • 7. 7 Prior to Corum, he founded or owned four software/IT/internet related firms, including the largest vertical market software company in its time, AMI. This Inc. 500 firm, at its peak, was rated by IDC as the fastest growing computer- related company in the world. He has also been at the vanguard of creative financing and, at one point, raised more venture capital in a single closing than anyone in history without a lead investor. Through Corum, he has helped execute over $1 billion in financings/recapitalizations with VC and PE firms in the U.S. and Europe. As a recognized expert in software, he has served on numerous advisory boards including Bill Gates at Microsoft, IBM, and Apple. He was founding investor in a number of firms, including Blue Coat, Bright Star and Sabaki, as well as advisor to two governors, a senator, and the Canadian Government. He was a board member of the Washington Technology Center, and founded the WTIA, the nation’s most active regional technology trade association. Bruce Milne CEO Corum Group Client Fishing Celebration Report
  • 19. 19 Scheming Up New Companies
  • 22. 22 Nathan Isterling & Luc Pettet – Punters.com.au
  • 25. 25 Corum Research Report Elon Gasper EVP, Research Amber Stoner Director of Research Amanda Tallman Senior Analyst Becky Hill Research Analyst
  • 26. 26 Public Markets 2017-2018 2017 2018 Jan Mar May Jul Sep Nov Jan Mar May Jul Aug USA Aug 2018 S&P Tech 8% NASDAQ 6% Dow Jones 2% Asia Aug 2018 HANG SENG -2% SSE Composite -5% Nikkei 1% Europe Aug 2018 CAC 40 -2% DAX -3% FTSE 100 -4% All-time high
  • 27. 27 Corum Index – Tech M&A Market Transactions Aug. 2018Aug. 2017 307 287 Mega Deals 5 3 Largest Deal $10.4B $5.4B Pipeline Private Equity Platform Deals 35 31 VC-Backed Exits 4257 Attributes 38% Cross Border Transactions 34% Start-Up Acquisitions 10%11% 18 yrs16 yrs Average Life of Target Aug. 2017 Aug. 2018 Aug. 2017 Aug. 2018 0% 7% 2% 11% 26% 48% 40%
  • 28. 28 Corum Index: Analysis  2018 August volumes low; but July high, offsetting  Total deal count Q3 so far is 5% higher YoY  Many Sept megadeals already; brings Q3 to 2017 level  From Corum’s vantage point:  August closings delayed or not disclosed  Approaches continuing at high pace  Buyer needs still urgent amid tech market changes  Sellers hesitant, risk exit timing by chasing growth  Conclusion: supply-limited seller’s market still
  • 29. 29 Q3 2018: Megadeals to Date $4.9B $24B $3.4B $2.5B $19B IT SERVICES INFRASTRUCTUREVERTICAL $7.1B $2.6B $1.5B $12B HORIZONTAL $2.3B $1.3B $2.0B $2.4B$1.5B $1.5B $5.4B $1.2B $1.5B
  • 30. 30 Q3 2018: Megadeals to Date $4.9B $24B $3.4B $2.5B $19B IT SERVICES INFRASTRUCTUREVERTICAL $7.1B $2.6B $1.5B $12B HORIZONTAL $2.3B $1.3B $2.0B $2.4B$1.5B $1.5B $5.4B $1.2B $1.5B Target: TrevelClick [Thoma Bravo] [USA] Acquirer: Amadeus IT Group [Spain] Transaction Value: $1.5B (4.1x EV/Sales and 17.7x EBITDA) - Cloud-based software solutions for hoteliers - Accelerates Amadeus’ expansion in hospitality sector Sold to
  • 31. 31 Q3 2018: Megadeals to Date $4.9B $24B $3.4B $2.5B $19B IT SERVICES INFRASTRUCTUREVERTICAL $7.1B $2.6B $1.5B $12B HORIZONTAL $2.3B $1.3B $2.0B $2.4B$1.5B $1.5B $5.4B $1.2B $1.5B
  • 32. 32 Internet Market Public Valuation Multiples 4.6x 18.8x EV Sales Corum Analysis EV EBITDA Climbing back towards early year numbers… …while EBITDA metrics dropped down, again reflecting business model uncertainties, as in Q1. Aug. 2018Since Q2
  • 33. 33 Deal Spotlights: Travel Internet Market Sold to Sold to Sold to Target: Gagfare [Hong Kong] Acquirer: Sharing Economy International [Hong Kong] Transaction Value: $3.6M - Online platform for searching and booking flights Target: Tropo [ProSiebenSat.1 Media] [Germany] Acquirer: dnata [Emirates Group] [UAE] - Online booking for flights, hotels, car hire Target: PrivateFly [USA] Acquirer: OneSky [Directional Aviation] [USA] - Online private flight booking service
  • 34. 34 Deal Spotlights: Food Delivery Internet Market Target: PedidosYa [Delivery Hero] [Uruguay] Acquirer: iFood [Brazil] - Online and mobile food-ordering platform Sold to Target: 10bis.co.il [Israel] Acquirer: Takeaway.com [Netherlands] Transaction Value: $157.3M (10.2x EV/Sales and 23.7 EV/EBITDA) - Online and mobile food ordering services Sold to Sold to Target: looloo [Philippines] Acquirer: BigDish Ventures [Philippines] - Platform to discover restaurants, hotels, and travel destinations Brazilian assets
  • 35. 35 Deal Spotlights: Ticketing Internet Market Sold to Sold to Target: Rukkus [USA] Acquirer: TickPick [USA] - Live entertainment search engine that explores ticket sites Target: Picatic [Canada] Acquirer: Eventbrite [USA] - Crowd-funding platform for event ticket sales
  • 36. 36 Deal Spotlight: E-commerce Internet Market Sold to Target: Serviz [USA] Acquirer: Porch.com [USA] - Online platform for booking home repair and maintenance services - Enables Porch to deliver services via mobile app - Follows recent buys of Porch in home services, including Done.com
  • 37. 37 3.1x 17.4x Public Valuation Multiples EV Sales Corum Analysis EV EBITDA Consumer Application Software Market Leveled out after sliding since Q1, before reaching 2017 lows… …with EBITDA-based performance continuing to track tightly Since Q2 Aug. 2018
  • 38. 38 Deal Spotlights: Gaming Target: Fuel Powered [USA] Acquirer: Animoca Brands Corporation [Hong Kong] - Multiplayer and live events for mobile games Target: The Chinese Room [United Kingdom] Acquirer: Sumo Digital [United Kingdom] Transaction Value: $2.8M - Exploration games development studio Sold to Sold to Sold to Target: PixOwl [USA] Acquirer: Animoca Brands Corporation [Hong Kong] Transaction Value: $4.8M - Mobile games developer Consumer Application Software Market
  • 39. 39 Deal Spotlight: Gaming Consumer Application Software Market Sold to Target: CCP Games [Iceland] Acquirer: Pearl Abyss [South Korea] Transaction Value: $425M - MMO videogames and development services - Fuels growth of the Black Desert Online franchise - Aligns with CCP’s decision to switch from VR to mobile games
  • 40. 40 Deal Spotlights: Personal Banking Sold to Target: Walnut [India] Acquirer: Capital Float [India] Transaction Value: $30M - Software for managing finances Target: Balance Technology [India] Acquirer: Paytm [Alibaba] [China] - Savings management app Sold to Target: Tapzo [India] Acquirer: Amazon [USA] Transaction Value: $40M (reported) - Platform to discover and transact on different apps Sold to Consumer Application Software Market
  • 41. 41 IT Services Market 1.3x 12.9x Public Valuation Multiples EV Sales Corum Analysis EV EBITDA …with EBITDA ratios following suit. Back to stability after blip in June… Since Q2 Aug. 2018
  • 42. 42 IT Services Market Deal Spotlights: Salesforce SI Sold to Target: SaaSfocus [India] Acquirer: Cognizant [USA] - Salesforce consulting, integration and customization Sold to Target: Amicus Digital Ventures [Australia] Acquirer: Dentsu Aegis Network [United Kingdom] - Salesforce Cloud consulting and technical services Sold to Sold to Target: Figur8 Technology Ventures [USA] Acquirer: AllCloud [Israel] - Strategic consulting and Salesforce development Target: Canpango [USA] Acquirer: ScanSource [USA] - Salesforce implementation and consulting
  • 43. 43 IT Services Market Deal Spotlights: Security Services Sold to Target: InfoNet [Turkey] Acquirer: CYBER1 [USA] Transaction Value: $14M - Cyber Security Services and products Target: MacAulay-Brown [USA] Acquirer: Alion Science and Technology Corporation [Veritas Capital] [USA] - Engineering and cybersecurity services Sold to
  • 44. 44 IT Services Market Deal Spotlights: Accenture Sold to Target: Mindtribe [USA] Acquirer: Accenture [USA] - Mechanical and electrical hardware engineering Target: Pillar Technology Group [NewSpring Holdings] [USA] Acquirer: Accenture [USA] - Information technology consulting services Sold to
  • 45. 45 Q3 2018: Megadeals to Date $4.9B $24B $3.4B $2.5B $19B IT SERVICES INFRASTRUCTUREVERTICAL $7.1B $2.6B $1.5B $12B HORIZONTAL $2.3B $1.3B $2.0B $2.4B$1.5B $1.5B $5.4B $1.2B $1.5B Target: Engility Holdings [USA] Acquirer: Science Applications International [aka SAIC] [USA] Transaction Value: $1.5B (1.3x EV/Sales and 13.7x EBITDA) - Engineering and logistics services for government - Continues the flurry of deal-making in government sector Sold to
  • 46. 46 Corum Research Report Elon Gasper EVP, Research Amber Stoner Director of Research Amanda Tallman Senior Analyst Becky Hill Research Analyst
  • 47. 47 When You Are Approached: 13 Tips to Ensure Deal Success
  • 48. 48 Joel Espelien has worked in a number of roles over a twenty year career in the technology industry. Most recently Joel served as Senior Advisor to Karmel Capital, where he advised on corporate spin-offs and M&A transactions, including the private-equity backed purchase of DivX LLC from Rovi Corporation and subsequent sale to Neulion, Inc, as well as the successful spin-off of Snaptracs, Inc. and its Tagg wireless pet tracking product from Qualcomm and the eventual two-stage sale to Whistle Labs and Mars Petcare. Joel has also served on the boards of multiple venture-backed companies resulting in successful exits, including AI startup IQ Engines (acquired by Yahoo) and IoT-for-AgTech pioneer 640 Labs (acquired by Monsanto/Climate Corporation). Joel has also written extensively on the future of video in his capacity as Senior Analyst for the Diffusion Group where he published 14 industry research reports as well as a widely recognized weekly blog. Previously, Joel was the Chief Business Officer, SVP of Strategy and General Counsel of PacketVideo, a pioneer in the mobile video market. While at PacketVideo, Joel led corporate development activities, including multiple buy-side acquisitions in the US and Europe, a groundbreaking technology partnership with Google that helped launch Android, a private-equity backed MBO and ultimately the sale of the company to NTT DoCoMo (Japan). Joel Espelien Vice President Corum Group Moderator
  • 49. 49 13 Tips for When You Are Approached Bruce Milne CEO Corum Group Ltd. Understand the numbers Know your odds
  • 50. 50 Tech M&A Guideline Percentages  Buyer solicitations that result in transaction  Average improvement from first offer with an auction process  How often another firm is willing to pay more than the initial bidder  Deals involving only one bidder that are suboptimal  Failure rate in “self-managed” tech M&A
  • 51. 51 13 Tips for When You Are Approached Julius Telaranta Vice President Corum Group Ltd. Protect Yourself Get an NDA & nonsolicitation agreement
  • 52. 52 13 Tips for When You Are Approached Jon Scott Managing Director Corum Group International Qualify the Buyer Are they a bottom feeder?
  • 53. 53 13 Tips for When You Are Approached Rob Schram Senior Vice President Corum Group Ltd. Qualify the Buyer Can they do the deal?
  • 54. 54 13 Tips for When You Are Approached Peter Prince Vice President Corum Group International Qualify the Buyer What deals have they done?
  • 55. 55 13 Tips for When You Are Approached Steve Jones Senior Vice President Corum Group Ltd. Examine the landscape Are there other buyers willing to pay more?
  • 56. 56 13 Tips for When You Are Approached Rob Griggs Vice President Corum Group Ltd. Are they serious? Get a due-diligence checklist
  • 57. 57 13 Tips for When You Are Approached Martin Lowrie Vice President Corum Group Ltd. Prepare your numbers Build three year financials & projections
  • 58. 58 13 Tips for When You Are Approached David Levine Senior Vice President Corum Group Ltd. Build out your assumptions Are they credible?
  • 59. 59 13 Tips for When You Are Approached Dan Bernstein Senior Vice President Corum Group Ltd. Buy time with a valuation Cover your fiduciary responsibility
  • 60. 60 13 Tips for When You Are Approached Jim Perkins Executive Vice President Corum Group Ltd. Make discreet inquiries to other suitors Must be at the highest level
  • 61. 61 13 Tips for When You Are Approached Ivan Ruzic Vice President Corum Group Ltd. Under no circumstances have only one bidder One buyer is no buyer
  • 62. 62 13 Tips for When You Are Approached Joel Espelien Vice President Corum Group Ltd. Get Some Help Don’t take this journey alone
  • 63. 63 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 Sep. 13: Phoenix– MB Sep. 13: Omaha – MB Sep. 13: Lincoln – MB Sep. 20: Chicago – SUSO Sep. 25: Hamburg – MB Sep. 25: Sao Paulo – MB Sep. 17: San Francisco – MB Oct. 02: Stockholm– SUSO Oct. 02: Toulouse – MB Oct. 03: Helsinki – SUSO Oct. 04: Tallinn – MB Oct. 04: Lyon – MB Oct. 04: Santa Barbara – SUSO Oct. 11: Grenoble – MB Oct. 16: Geneva – MB Oct. 17: Amsterdam – SUSO