Tech M&A Monthly - corumgroup.com 14- Draft12... · and Market Spotlight series. ... Tim has worked...

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Tech M&A MonthlyWhat Happens if You Don't Sell

June 14, 2018

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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

Event Report: E3

June 2018 Research Report

Special Report: What Happens When Deals Fail?

Q&A

4

The Highlights:

Microsoft acquires 4 studios to fuel

“The Initiative”

It’s time to be “all-in on esports”

VR Hardware goes wireless

Event Report: E3

Jim Perkins

Executive Vice President

5

Corum Research Report

Elon Gasper

EVP, Research

Patrick Cunningham

Analyst

Amber Stoner

Director of Research

6

Public Markets

USA May 2018

S&P Tech 5%

NASDAQ 5%

Dow Jones 1%

Asia May 2018

HANG SENG -1%

SSE Composite 0%

Nikkei -1%

Europe May 2018

CAC 40 7%

DAX 4%

FTSE 100 6%

Jan Mar May Jul Sep Nov Jan Mar May Jun2017 2018

7

2018: The Peaks Keep Coming

S&P Tech June 2018

NASDAQ June 2018

Hang Seng January

2018

Dow January

2018

Nikkei January

2018

SSE Composite June 2015

DAXJanuary

2018

FTSE May 2018

CAC 40 May 2018

8

Corum Index – Tech M&A

Market

Transactions

May 2018May 2017

311 285

Mega Deals4 9

Largest Deal $2.5B $16B

PipelinePrivate Equity

Platform Deals32 45

VC-Backed Exits5150

Attributes37%

Cross Border

Transactions 41%

Start-Up

Acquisitions 11%14%

17 yrs15 yrsAverage Life

of Target

May 2017 May 2018

May 2017 May 2018

0%

41%

125%

540%

8%

2%

9

2018 Mega Deals – YTD

INTERNET

$43B

IT SERVICES

$12B

$6.8B

$5.1B

HORIZONTAL

$19B

INFRASTRUCTURE

$30B

VERTICAL

$21B$9.5B

CONSUMER

Financial Markets

Business

Healthcare IT assets

$4.7B

$1.1B

$3.7B

$17B

$3.4B

$5.4B

$1.2B

$16B

$1.9B

$2.1B

$5.4B

$1.4B

$1.2B

$1.2B

$1.1B

$3.0B

$2.1B

Digital Farming

division

$1.9B

$3.5B

$2.4B

$1.1B

$2.6B

$2.8B

$2.2B

$1.1B

$1.7B

$1.0B

$6.6B

$2.0B

$3.4B

$1.4B

$8.3B

$7.5B

$1.6B

10


INTERNET

$43B

IT SERVICES

$12B

$6.8B

$5.1B

HORIZONTAL

$19B

INFRASTRUCTURE

$30B

VERTICAL

$21B$9.5B

CONSUMER

Financial Markets

Business


$4.7B

$1.1B

$3.7B

$17B

$3.4B

$5.4B

$1.2B

$16B

$1.9B

$2.1B

$5.4B

$1.4B

$1.2B

$1.2B

$1.1B

$3.0B

$2.1B

Digital Farming

division

$1.9B

$3.5B

$2.4B

$1.1B

$2.6B

$2.8B

$2.2B

$1.1B

$1.7B

$1.0B

$6.6B

$2.0B

$3.4B

$1.4B

$8.3B

$7.5B

$1.6B

Target: GitHub [USA]

Acquirer: Microsoft Corporation [USA]

Transaction Value: $7.5B

- World’s leading development platform for version control and source management

Sold to

11


INTERNET

$43B

IT SERVICES

$12B

$6.8B

$5.1B

HORIZONTAL

$19B

INFRASTRUCTURE

$30B

VERTICAL

$21B$9.5B

CONSUMER

Financial Markets

Business


$4.7B

$1.1B

$3.7B

$17B

$3.4B

$5.4B

$1.2B

$16B

$1.9B

$2.1B

$5.4B

$1.4B

$1.2B

$1.2B

$1.1B

$3.0B

$2.1B

Digital Farming

division

$1.9B

$3.5B

$2.4B

$1.1B

$2.6B

$2.8B

$2.2B

$1.1B

$1.7B

$1.0B

$6.6B

$2.0B

$3.4B

$1.4B

$8.3B

$7.5B

$1.6B

Sold to

Target: BMC Software [USA]

Acquirer: KKR [USA]

Transaction Value: $8.3B (reported)

- Business service management software and SaaS

12

Infrastructure Software Market

4.9x

17.1x

Public Valuation Multiples

EV

Sales

Corum Analysis

EV

EBITDA

Holding near peak Q1

levels…

…with EBITDA multiples

climbing back toward

January highs

Since Q1 May 2018

13

Deal Spotlights: Endpoint Security

Sold to

Sold to

Target: Secdo [Israel]

Acquirer: Palo Alto Networks [USA]

Transaction Value: $100M (reported)

- Incident investigation and response platform

Target: Bradford Networks [USA]

Acquirer: Fortinet [USA]

Transaction Value: $17M

- Network access control solutions

Sold to

Target: LogRhythm [USA]

Acquirer: Thoma Bravo [USA]

- Security intelligence and analytics platform


14

Deal Spotlights: Identity Verification

Sold to

Sold to

Target: iovation [USA]

Acquirer: TransUnion [USA]

- SaaS for fraud prevention and authentication of online businesses

Target: Confyrm [USA]

Acquirer: Capital One [USA]

- Online service for identity security alerts

Sold to

Target: Dealflo Limited [United Kingdom]

Acquirer: VASCO Data Security International [USA]

Transaction Value: $54.5M

- Agreement automation services to the financial sector


15

Deal Spotlights: Network Monitoring


Sold to

Sold to

Target: Sumerian Europe [United Kingdom]

Acquirer: ITRS Group [TA Associates] [United Kingdom]

- Capacity planning software, transforming data into business-focused IT intelligence

- Complements ITRS’ monitoring tools for the financial industry

Target: Lumeta Corporation [USA]

Acquirer: FireMon [Insight Venture Partners] [USA]

- Network situational awareness visualization solutions

- Improves FireMon’s network policy management capabilities

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3.3x

16.9x


EV

Sales

Corum Analysis

EV

EBITDA

Consumer Software Market

Dropped to year lows amid volatile sector conditions…

…with EBITDA metrics

continuing to track

closely

Since Q1 May 2018

17

Consumer Application Software MarketDeal Spotlight: Education

Sold to

Sold to

Target: ICS Learn [United Kingdom]

Acquirer: Primary Capital Partners [United Kingdom]

- Operates online learning courses

- Further optimizes ICS’ student-focused delivery model

Target: WriteLab [USA]

Acquirer: Chegg [USA]


- AI-driven grammar and style feedback platform

- Bolsters Chegg’s existing offerings in writing

18

Consumer Application Software MarketDeal Spotlights: Gaming

Sold to

Sold to

Target: Grinding Gear Games [New Zealand]

Acquirer: Tencent [China]

- Path of Exile, a competitive online action RPG

- Part of Tencent’s ongoing M&A strategy spanning hundreds of startups

Target: Gram Games [UK & Turkey]

Acquirer: Zynga [USA]

Transaction Value: $250M, 2-3x revenue (reported)

- iOS and Android mobile free-to-play games

- Adds to Zynga’s live services franchise expertise

19

Consumer Application Software MarketDeal Spotlight: Cloud Gaming

Sold to

Target: GameFly (cloud gaming technology and personnel of subsidiary)

Acquirer: Electronic Arts


- Tech assets behind GameFly's cloud streaming services

- Appeals to EA’s Origin Access and EA Access subscription services

- Increases EA's footprint in the streaming arena

Subsidiary Assets

20

Consumer Application Software MarketDeal Spotlight: Fantasy Sports

Sold to

Target: FanDuel [USA]

Acquirer: Paddy Power Betfair [Ireland]


- Online fantasy sports platform, former “unicorn”

- Builds on the acquisition of Draft, a US fantasy sports site, last year

- Just days after the U.S. Supreme court ruled in favor of sports betting

21

IT Services Software Market

1.3x

12.2x


EV

Sales

Corum Analysis

EV

EBITDA

…with EBITDA value metrics holding its highs for ten months

Remaining just below the multi-year highs set last autumn…

Since Q1 May 2018

22

IT Services – Developed MarketsDeal Spotlights: Microsoft SI

Target AcquirerTarget

Country

Acquirer

CountryDescription

Canada USAIT consulting in the Microsoft Datacenter and Azure

technologies

Switzerland Germany Microsoft Analytics and Cloud Solutions

United

Kingdom

United

KingdomMicrosoft network solutions and Office 365 SI

Canada CanadaMicrosoft Dynamics-based consulting and workflow

management support services

CanadaChannel

IslandsMicrosoft CRM services

23

IT Services – Developed MarketsDeal Spotlights: CRM SI

Sold to

Sold to

Target: RelationEdge [Tide Rock Ventures] [USA]

Acquirer: Rackspace US [Apollo Global] [USA]

- Salesforce-based business process engineering services

Target: PlanetPro [USA]

Acquirer: Kellton Tech Solutions [USA]

- Salesforce, analytics and custom program services

24

IT Services – Developed MarketsDeal Spotlights: Security Services

Sold to

Sold to

Sold to

Target: Ntsika ICT Security [South Africa]

Acquirer: 4Sight Holdings [Mauritius]

- Multifactor authentication and early warning threat detection solutions

Target: Red Sky Solution [USA]

Acquirer: Presidio [USA]

Transaction Value: $40.8M

- Cybersecurity managed services

Target: Sage Data Security [Knob Hill Partners] [USA]

Acquirer: Tyler Technologies [USA]

- Threat detection, incident response support and compliance reporting services

25


INTERNET

$43B

IT SERVICES

$12B

$6.8B

$5.1B

HORIZONTAL

$19B

INFRASTRUCTURE

$30B

VERTICAL

$21B$9.5B

CONSUMER

Financial Markets

Business


$4.7B

$1.1B

$3.7B

$17B

$3.4B

$5.4B

$1.2B

$16B

$1.9B

$2.1B

$5.4B

$1.4B

$1.2B

$1.2B

$1.1B

$3.0B

$2.1B

Digital Farming

division

$1.9B

$3.5B

$2.4B

$1.1B

$2.6B

$2.8B

$2.2B

$1.1B

$1.7B

$1.0B

$6.6B

$2.0B

$3.4B

$1.4B

$8.3B

$7.5B

$1.6B

Target: Adaptive Insights [USA]

Acquirer: Workday [USA]

Transaction Value: $1.6B

- Business planning cloud software

Sold to

26

Corum Research Report

Elon Gasper

EVP, Research

Patrick Cunningham

Analyst

Amber Stoner

Director of Research

27

What Happens

When Deals Fail?

28

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

What Happens When Deals Fail?

29

What percentage of self-managed M&A transactions fail?

Source: Corum Group Research

30

80%Source: Corum Group Research

31

What percentage of buyer outreach actually results in a transaction?

Source: Corum Group Research

32

11%Source: Corum Group Research

33

Entertainment software entrepreneur Jim Perkins is directly responsible for publishing some of the industry’s biggest

franchises, including Unreal, Duke Nukem, Wolfenstein, Doom, Hunting Unlimited, and Driver. A well-known senior

executive with a 22-year track record of publishing such bestselling hits, he founded and grew two highly successful

software publishing companies (FormGen and ARUSH) from start-ups to multi-million dollar enterprises.

His success and extensive experience in software production, marketing and public relations, packaging, online and

retail distribution and software M&A, uniquely qualify him as an expert in building value and realizing wealth. Jim 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 digital media companies.

8 Reasons Deals Fail: Geopolitical Changes

Jim Perkins

Executive Vice President

Corum Group

34

Jaber has over 25 years of experience in the technology sector. He recently was CEO of an IT services firm that he acquired, restructured and sold. Jaber has also an M&A advisory experience in the Software and IT Services sectors.

He has also invested time and funds into start-ups and young companies over the recent years in a diverse range of sectors. Earlier in his career, he worked as equity analyst covering Software stocks for ABN-AMRO, and held senior positions in global accounts management within SAP. Jaber started his career as management consultant with KPMG Peat Marwick.

Jaber holds an MSc in Computer Sciences from ENSEEIHT and an MBA from INSEAD. He has broad international experience and is fluent in English, French and Spanish.

Jaber Tannay

Vice President

Corum Group

8 Reasons Deals Fail: Major Announcement from an Industry Heavyweight

35

Steve joined Corum after 25 years of executive experience in various high-tech industries with both public and private venture-backed startups. He has extensive global experience, opening international markets and growing sales from zero to tens of million in revenue. He has been on the forefront of selling several companies and spinning off software divisions, highlighted by the sale of GetFon to Alestra (AT&T Mexico). He is fluent in Spanish.

Steve was the founding CEO of Solera Networks, a real-time intrusion detection security company. He also co-founded Auction Trust Network, an eCommerce company for online exchanges; which he sold to MediaForge (Rakuten Marketing).

Steve is a board member of several software companies and has industry expertise in several areas: enterprise apps and infrastructure, security, mobile and wireless, media & entertainment, supply chain, and embedded devices/systems (IoT).

Steve Jones

Senior Vice President

Corum Group

8 Reasons Deals Fail: Valuation Misalignment

36

Daniel Bernstein has worked in a number of roles over a twenty year career in high technology, most recently as the founder and CEO of Sandlot Games Corporation, a leading casual games publisher and developer. Having sold Sandlot Games to Digital Chocolate in 2011, Daniel started a small games studio and a consulting practice where he advises larger companies such as RealNetworks and smaller high growth businesses on product development, strategic initiatives, and M&A opportunities.

Prior to Sandlot Games, Daniel Bernstein held director level positions in companies such as Wild Tangent and Monolith. An accomplished composer, Daniel also writes music for most of the games he works on.

Daniel holds a BS in Computer Science and an MA in Music Composition from the University of Virginia.

Daniel Bernstein


Corum Group

8 Reasons Deals Fail: Buyer Wants Product or Customer Milestones

37

Jeff joined Corum in 2007 as Regional Director in Houston, Texas. He has over 30 years of entrepreneurial and consulting experience building software and business services companies. He specializes in information technology for engineering, scientific and business applications. He also understands the energy industry and multinational operations.

Jeff helped form and was President of Severn Trent Worksuite, a FTSE 100 subsidiary, which became the leading provider of enterprise and wireless workflow management software. Jeff was Vice President at IntelliGIS, a pioneer in geographic information systems and wireless computing. Additionally, he launched Western Hemisphere operations for Simon Petroleum Technology, a provider of petroleum reservoir management software, and was a member of the initial management team at GeoQuest Systems, which became the leader in petroleum decision support systems.

Jeff began his career on the research staff at Columbia University and is a published author. He holds a degree in Geology from the State University of NY.

Jeff Brown


Corum Group

8 Reasons Deals Fail: Partner Conflict

38

Julius joined Corum in 2016 and brings over 20 years of international entrepreneurial and business experience growing software and business services companies.

Recently, Julius was CEO for Seasam Group, a digital marketing and IoT company that was a leader for intelligent transportation systems and digital signage solutions. Prior to Seasam Group, Julius held director level positions in Cisco leading the Nordic sales.

Julius has been involved with startups and young companies over the recent years in a diverse range of sectors as an investor and a board member.

Julius holds a BBA in International Business and an MBA in Finance and Marketing from the Swedish School of Economics.

Julius Telaranta

Vice President

Corum Group

8 Reasons Deals Fail: Buyer Problems and Delays

39

Prior to rejoining Corum, Bruce was the Founding President and CEO of Invest Ottawa for 5 years. During that time he worked with over 1000 technology start-ups, raising over $300m in venture capital and debt, and created over 4,700 jobs. Prior to joining Invest Ottawa, he was Chairman of the Ottawa Software Cluster for six years and Vice President in Canada for Corum Group.

Before that he held senior technology executive positions including six years as CEO with FreeBalance Inc. an enterprise software company where he raised millions of dollars in venture capital and debt financing, and helped grow the company by 300 per cent while moving into new international markets.

In 2005, he was voted Canada’s Private Sector Technology Leader by the Canadian Advanced Technology Alliance and in 2016 he received Canadian Community Innovation Leadership Award by the same organization.

8 Reasons Deals Fail:Lack of Preparation

Bruce Lazenby

Vice President

Corum Group

40

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.

8 Reasons Deals Fail: Lack of Resources and Focus

David Levine


Corum Group

41

Benefits of an M&A Process:The Use of a Hiatus Period

42

M&A Process Benefits

Rob Schram

Senior VP

Rob Griggs

Vice President

Joel Espelien

Vice President

Jon Scott

Managing Director

43

5 Major Benefits of a Professional Process

Model

The

preparation

process will

help forge a

better

business

model for

your firm

1

43

44


Model

The

preparation

process will

help forge a

better

business

model for

your firm

1

Research

Your

strategic

position will

improve from

the research/

positioning

process

2

44

45


Model

The

preparation

process will

help forge a

better

business

model for

your firm

1

Research

Your

strategic

position will

improve from

the research/

positioning

process

2

Market

Feedback

Buyer

contact will

provide

invaluable

data/insights

to help

improve your

value

3

45

46


Model

The

preparation

process will

help forge a

better

business

model for

your firm

1

Research

Your

strategic

position will

improve from

the research/

positioning

process

2

Market

Feedback

Buyer

contact will

provide

invaluable

data/insights

to help

improve your

value

3

Relation-

ships

Not everyone

is a buyer,

but you open

many doors

which will

yield

business

4

46

47


Model

The

preparation

process will

help forge a

better

business

model for

your firm

1

Research

Your

strategic

position will

improve from

the research/

positioning

process

2

Market

Feedback

Buyer

contact will

provide

invaluable

data/insights

to help

improve your

value

3

Relation-

ships

Not everyone

is a buyer,

but you open

many doors

which will

yield

business

4

Exit

The merger,

asset sale, or

financial

recap of your

company

5

47

48


Model

The

preparation

process will

help forge a

better

business

model for

your firm

1

Research

Your

strategic

position will

improve from

the research/

positioning

process

2

Market

Feedback

Buyer

contact will

provide

invaluable

data/insights

to help

improve your

value

3

Relation-

ships

Not everyone

is a buyer,

but you open

many doors

which will

yield

business

4

Exit

The merger,

asset sale, or

financial

recap of your

company

5

48

Any of these benefits will

justify the time and expense

of a global partner search.

49

Case Study

50

Sold again 2 years later for over $100 million

51

Upcoming Conference ScheduleSelling 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

Jun. 14: Cleveland – MB

Jun. 14: Edmonton – MB

Jun. 14: Lille – MB

Jun. 14: Ottawa – SUSO

Jun. 14: San Diego – SUSO

Jun. 19: Mexico City – MB

Jun. 19: Vienna – MB

Jun. 20: Monterrey – MB

Jun. 20: Zurich – MB

Jun. 21: Guadalajara – MB

Jun. 21: Lausanne – MB

Jun. 26: Antwerp – MB

Jun. 26: Seattle – MB

Jun. 28: Paris – MB

Jul. 10: Baltimore – MB

Jul. 17: San Jose – MB

52

www.corumgroup.com

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