Leading adviser on M&A and fundraisingto the global marketing, technologyand healthcare sectors
THE BULLETIN:ISSUE 71
IntelligentAutomation
ALSO IN THIS ISSUE:
The Healthcare Industry: Primed to profit from AI and Machine LearningThe Year of “Better” Cybersecurity
Women in Leadership Positions within the Healthcare Sector
ABOUT RESULTS INTERNATIONAL
MARKET SECTORS
MARKETING TECHNOLOGY HEALTHCARE
Results International has been providing independent M&A,
fundraising and corporate finance advice to entrepreneurs,
corporates and investors in our sectors for over 25 years.
With offices in Europe, the Americas and Asia, we are
specialists in cross-border transactions.
Our focus reflects the dynamic
transformation of the sector in recent
years, covering all areas of marketing
including digital transformation,
customer engagement, content,
search, social, data and media.
Results International Group LLP is Authorised and Regulated by the Financial Conduct Authority. This document is intended for use by professional clients only.
Our expertise spans all areas
of technology including enterprise
software, technology services,
cybersecurity, marketing and
commerce software and healthtech.
Our experience covers both
healthcare and life sciences, and
includes healthcare comms and
consulting, healthtech, CROs and
CMOs, as well as pharma, biotech
and medtech.
www.resultsig.com2
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www.resultsig.com
IN THIS ISSUE...
6-9
10-11
12-13
14-17
18-19
20
THE ROUTE TO INTELLIGENT AUTOMATION: OPTIMISING ENTERPRISE PERFORMANCEBY MARK WILLIAMS
WOMEN IN LEADERSHIP POSITIONS - HEALTHCAREBY PETRA MILKOVIC
MARKETING AUTOMATION ON THE RISE IN A VIBRANT Q1 FOR M&ABY PAUL GEORGES-PICOT
THE YEAR OF “BETTER” CYBERSECURITYBY CHRIS LEWIS
THE HEALTHCARE INDUSTRY: PRIMED TO PROFIT FROM AI AND MACHINE LEARNING BY KUNAL KADIWAR
ENTERPRISE SOFTWARE GROWTH DRIVING DEMAND IN TECHNOLOGY SERVICESBY MAURICE WATKINS
3
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NEXT15London, United Kingdom
www.resultsig.com4
has been acquired by
Hospira, a Pfizer company, has divested its UK
compounding business to
has been acquired by
has been acquired by
has been acquired by
ACCENTURENew York, United States
BOMGARGeorgia, United States
HEWLETT PACKARD ENTERPRISE
California, United States
BAXTERIllinois, United States
BRUKERMassachusetts, United States
LIVINGBRIDGELondon, United Kingdom
has made an investment intohas been acquired by
TOTALDEAL
VALUE*
US$1.5BN
OVER US$100M
MULTIPLEDEALS
* based on Results deals over the last 24 months
OUR ACCESS TO INTERNATIONAL BUYERS IS UNPARALLELED
GHO CAPITALLondon, United Kingdom
www.resultsig.com 5
has been acquired by has been acquired by a
Tier-1 CRO
has acquired
RECIPHARMStockholm, Sweden
CANCOMMunich, Germany
DENTSUTokyo, Japan
DIMENSION DATAJohannesburg, South Africa
has been acquired by
F-SECUREHelsinki, Finland
OVER US$100M
OF OUR DEALS ARE
CROSS BORDER
80%
has been acquired by
has divested its Holmes Chapel manufacturing site to
has been acquired by
OUR ACCESS TO INTERNATIONAL BUYERS IS UNPARALLELED
THE ROUTE TO INTELLIGENT AUTOMATION: OPTIMISING ENTERPRISE PERFORMANCE
“Intelligent Automation
is the goal – an enterprise
where processes are not
only automated, but
leverage and interact with
Artificial Intelligence
(AI) technologies to
drive smarter, real-time
decisioning that optimises
enterprise performance.”
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.......................................................
www.resultsig.com6
www.resultsig.com 7 www.resultsig.com
Over the past few years RPA has been
disrupting this model, enabling organisations
to instead deploy software that uses software
robots, or ‘bots’ to automate a repetitive process
in an organisation. It works by ingesting data
from multiple sources and systems that ‘learn’
how to replicate a process. This minimises the
requirement for human interaction, reduces
time-taken to perform tasks, increases speed
of processing and operates 24/7.
Humans are therefore able to be released from
laborious manual processing tasks and can be
upskilled to either monitor the robots, focus
on analysis rather than data-entry, or indeed
deploy their time more impactfully elsewhere
in an organisation. The reality though, is that a
near-term ‘benefit’ of RPA software is not only
speed and time-saved, but also a reduction
in employee numbers, enabling companies
to make substantial cost savings (with many
corporates measuring both productivity gain
and annual savings as measures of success),
driving both internal efficiency but also
profitability.
Organisations are currently in the throws
of mapping processes for RPA – and
implementing bots from the front to back end
of their businesses. The financial services
industries are as expected, the most advanced
– however this is truly a software with use
cases across all industries, from automotive
to manufacturing to healthcare and the public
sector. Across these large global enterprises,
the number of potential processes that could
be automated can run into the thousands and
with one ‘bot’ per process, that’s a vast market
opportunity.
All of this is partly why the core software
vendors – UiPath, BluePrism and Automation
Anywhere, the three largest players – have
been enjoying huge valuations in their recent
fundraises with all of them reaching ‘unicorn’
status.
However, these valuations are not just
reflective of the nearer term market
opportunity. With the pace of adoption, many
enterprises will have substantially progressed
their RPA implementation programmes in the
next few years with industry commentators
forecasting the value of the RPA market to be
worth c.$3bn by 2021. Therefore, in order to
justify sky-high valuations, the business case
for these software providers needs to be about
so much more. UiPath’s latest valuation alone,
was over 2x the estimated value of the entire
market in two years’ time.
As a result, software vendors will need to think
way beyond the current use case of their bots.
RPA is seen as only the initial step to creating
an intelligent enterprise. It’s a critical first-step
to intelligent automation and critical for digital
transformation but doesn’t digitally transform
process all on its own. The Intelligent
Automation roadmap for an organisation
is therefore key – only by combining RPA
with dynamic workflow, AI/machine learning,
natural language processing, chat-bots (to
name a few), organisations will then be able to
automate, end-to-end, critical decision making
and customer interaction. Bots that replicate
and automate low-level tasks are one thing,
but these vendors are going to need to create
sophisticated, intelligent, hyper-connected
bots that go beyond the mundane and drive
genuine intelligent decisioning.
Automation has become a core strategic priority for almost all enterprises, seeing the need to compete in a digital-first economy with streamlined, connected operations that drive greater value from internal resources. Intelligent Automation is the goal – an enterprise where processes are not only automated, but leverage and interact with Artificial Intelligence (AI) technologies to drive smarter, real-time decisioning that optimises enterprise performance.
A redefinition of the Future of Work – how
humans interact with technologies and
performance is enhanced by the use of
robotic software and AI technologies. It’s an
initiative that is high on the C-Suite agenda
and the ecosystem that surrounds Intelligent
Automation is growing incredibly fast, with
software and services players alike achieving
very high valuations in their fundraising and
M&A activity.
Robotic Process Automation (RPA) – the first step on the route to Intelligent Automation
Up until a few years ago, Business Process
Outsourcing, using third party providers with
large operations (people) in off-shore markets
to manage low-level processes, was a key
part of an enterprises’s efforts to relieve the
cost burden (e.g. data capture and processing
/ call centres) from undertaking substantial
amounts of manual tasks. ............................................................ ............................................................ ...........................................................
SELECTED RECENT VALUATIONS OF THE LARGEST RPA SOFTWARE VENDORS
US$7 BILLIONIMPLIED VALUATION
US$1.7 BILLION(1)
ENTERPRISE VALUE
US$2.6 BILLION IMPLIED VALUATION
PUBLIC (AIM: PRSM)
US$550 MILLIONTOTAL FUNDS RAISED
(1) As at 17/05/2019
US$1 BILLIONTOTAL FUNDS RAISED
www.resultsig.com8
Additionally, traditional BPO’s are building automation teams, for two key reasons – 1) their own business models are being increasingly disrupted by intelligent automation so they need to defend against revenue erosion by owning this capability and dealing with the significant internal backlog that would benefit from intelligent automation adoption and 2) most have established digital consultancies enabling them to cross-sell higher value services to their large enterprise client bases.
Of course, given the truly global nature of
the opportunity and the substantial growth
available in the market right now, M&A is seen
as an effective route to acquiring immediate
scale and capability in this multi-billion-dollar
market and buyers are willing to pay premium
prices.
Results International advised the shareholders
of Symphony Ventures on its sale to SYKES
Enterprises, which acquired the business
for a compelling 2.0x forecast calendar year
2019 revenues (the deal closed in October
2018, 15 months before this was realised).
The level of talent that organisations currently
have available is far below the demand for
automation services, so we certainly envisage
consolidation continuing in an effort to capture
available revenues and market share.
In the software ecosystem, below the three largest vendors, UiPath, Automation Anywhere and BluePrism we see a lot of consolidation potential. UIPath and Automation Anywhere may well join Blue Prism on the public markets with a high valuation IPO (a likely potential exit route for their backers who have invested at very high valuations), however we can see how other vendors, – Softomotive, Thoughtonomy and Workfusion to name a few, could be interesting targets for consolidation, potentially by the large diversified enterprise software vendors which could naturally see automation technology as a key connector across all of their vertical and horizontal offerings. These smaller rising stars, which have perhaps been a little more conservative with their funds raised, could be highly attractive and valuable targets.
There is also a growing set of vendors which have developed software for helping enterprises manage the human to bot interaction or providing bot ecosystem optimisation solutions for organisations that have a large estate of bots deployed across their enterprise that we envisage being key rising stars in the market as it starts to mature.
We are extremely excited about this very fast-growing market that is truly changing the face of the enterprise. If you are interested in discussing this further – please do get in touch.
M&A in the sector
As the major software vendors focus on
fundraising and organic growth, much of the
M&A in the sector has been focused on the
services ecosystem that surrounds RPA and
Intelligent Automation. Many automation
consultancies are experiencing comparably
high levels of growth when compared to
the software vendors, and are playing a
pivotal role in helping organisations identify
potential processes for automation, create
structured data-sets that can drive the bots
and implement the RPA software itself. As
is typical, the software vendors are focused
on recurring licence revenue and high gross
margin business models to support their lofty
valuations and are reliant upon consulting
partners to sell and successfully deliver their
bot implementations.
Horses for Sources, an industry analyst,
estimates that the services element of the
RPA market is c.3x greater than the annual
software market size.
As automation is such a key part of the
digital transformation story, there is a large
ecosystem of consultancies, including IT
consultancies and accounting firms, building
Intelligent Automation practices that will
enable them to ensure they are able to capture
the ‘automation’ slice of the substantial digital
transformation budgets. ........................................................................................................................ ............................................................
Mark WilliamsE [email protected]
www.resultsig.com 9
(1) Mergermarket estimate(2) Results International acted as exclusive financial advisor to Symphony VenturesSources: Press releases, Capital IQ, Mergermarket, 451 Research & Results analysis
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“M&A is seen as an
effective route to
acquiring immediate
scale and capability in
this multi-billion-dollar
market”
DATE TARGET BUYER ENTERPRISEVALUE
SOFTWARE/SERVICES
US$17m(1) SOFTWARENOV 18
US$8m SERVICESMAY 17
US$1,350m SOFTWAREMAY 17
US$74m SERVICESDEC 16
US$52m SERVICESAPR 16
- SERVICESAPR 17
US$70m SERVICESOCT 18(2)
10 www.resultsig.com
other key industries (Tech - 26%, Financial
Services - 46%). Despite their buying power
and workforce influence, the number of women
in top leadership positions is discouragingly low.
If we look at women in pharma for instance,
the gap is even higher. Although we are very
pleased to see many of our big pharma clients
and friends at the forefront of the gender
equality line, the fact that women account for
only 25% of leadership teams and that there
is only one female CEO among the top 10
pharmaceuticals (by revenue), demonstrates
that we still have a long way to go.
The question arises - why is this? First of all,
let’s make one thing clear - this is not only an
issue in the healthcare industry. The gender gap
in business is well documented yet countless
studies show that women outnumber men in
college. They are well educated, talented, and
just as hard working as their male counterparts;
yet the percentage of chief executives of global
Fortune 500 companies is just under 5% and
nearly a quarter of FTSE 350 companies have
no women on their executive committees (Exec
Pipeline, Women Count 2018).
Given there are so many talented female
chemists, biochemists, biologists, physicians
and physicists already in the sector, one can
conclude that there is no tangible barrier for
women when it comes to workplace entry.
However, when it comes to advancement - the
obstacles seem to be immense; whether it is the
pay gap, unconscious bias, micro-aggressions,
or childbearing. Correlated with advancement,
it is evident that as women move up the ranks
- the resistance, discrimination, and isolation
increase as well.
Why should companies be worried
about a lack of women in pharma?
On paper, gender inequality is a long list of statistics showing the imbalance of power between men and women. In reality, gender inequality is a major issue that affects not only the lives of individual men and women but stunts economic growth and innovation,
The pharma industry has changed dramatically in recent decades, not only in terms of the vast strides that have been made in science, but also in terms of the leadership landscape. In the 1970s, it was highly unlikely that a woman would be running one of the world’s largest pharma companies, and today we have Emma Walmsley at the helm of GSK.
According to Oliver Wyman, ‘Women in
Healthcare Leadership 2019’, women in
healthcare represent 65% of the workforce - a
significantly higher ratio when compared to
........................................................................................................................ ...........................................................TOTAL NUMBER OF MALES VS. FEMALES IN LEADERSHIP ROLES
Total number of males vs. females in leadership roles, 2018. Graph from Assured Pharmacy, Who, What, Why, Where, When? The Pharmaceutical Top 10, Gender Diversity in Leadership (14 November 2018)
WOMEN IN LEADERSHIP POSITIONS WITHIN THE HEALTHCARE SECTOR
“Women in healthcare represent 65% of the workforce”............................................................
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www.resultsig.com
creative solutions to intractable problems, and ultimately better financial outcomes.
How can we expand diversity?
There’s reason to be hopeful. A focus on those unconscious beliefs and perceptions that drive instinctive behaviour can activate and change mindsets and actions. Many organisations have started to actively address the issue of unconscious bias but this is just the start.
To create transformation that lasts, organisations must make non-gender biased behaviours habitual. The UK Government in 2015 supported an initiative to target having 33% of female representation on FTSE 350 boards, which was outlined in response to the Davies Report publication on the approach to increase representation of women on FTSE 100 boards. As a response to that target, some UK companies are already actively promoting split childcare leave - allowing partners to split the 12 months maternity leave between them; others are even introducing “reconnecting programmes” of support to get women back into the workplace after an extended break. Nordic countries, led by Iceland, have been consistently standing out in the World Economic Forum’s annual Global Gender Gap Report which measures how well countries are doing at removing the obstacles that hold women back. Norway became the first country in the world to introduce a gender quota for publicly listed company boards. And while patterns across these Nordic countries vary, policies such as the mandatory paternity
leave in combination with maternity leave;
generous, state-mandated parental leave
benefits provided by a combination of social
insurance funds and employers; tax incentives
and post-maternity re-entry programmes make
the Nordic countries’ approach a useful role
model and valuable benchmark.
Companies like Lilly are also a great example
of active work on gender equality. Its Chief
Diversity Officer, Joy Fitzgerald, successfully
reported that their “extra mile” approach,
where they have commissioned a third party
to identify barriers and actively work on ways
to improve gender equality, led to a 3% global
increase of women leaders within the company
in just one year and then an 8% increase in
revenue - coincidence or not?
We already know what the future workplace
should look like, and it is now time to make
it a reality. There is no quick fix - cultural
change takes time. Great strides have been
made to remove the barriers for women when
it comes to workforce entry in the healthcare
sector, but the job is not done. The gradient of
change must remain steep, and a pro-active,
concerted and dedicated effort must be made
by the industry to shrink the leadership gap for
women. This has to be done not because of
the statistics, but because in the long run it will
be shown that shrinking the leadership gap is
profitable for companies, beneficial for society
and most importantly - it’s the right thing to do.
Petra MilkovicE [email protected]
along with hindering social development. As a testament to this fact, the United Nations even named gender equality as one of the Sustainable Development Goals as part of the “2030 Agenda”.
But why should corporates be worried about the issue?
Studies have shown that gender equality provides numerous economic benefits to corporates. A PIIE Report concludes that an increase of women in corporate leadership teams to 30% correlates to 1% increase in net margin, which translates to a 15% increase in profitability. Moreover, Credit Suisse revealed that companies with women in leadership positions report 19% higher return on equity and 9% higher dividend payments. Remarkably, no matter how the data is manipulated, in any event increasing female leadership is unquestionably positive for companies, leading us to one important conclusion: The diversity in corporate leadership is a key factor in improving profitability - it makes teams question their default assumptions in a way that produces better outcomes - more innovation, more ............................................................ ............................................................ ...........................................................
“Because essentially, gender equality is not just the right thing to do, it’s the smart thing to do.” ............................................................
............................................................
...................................................
“We already know what
the future workplace
should look like, and it
is now time to make it
a reality.”
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11
As 2019 gets underway, marketing sector M&A continues to surge off the back of high growth in 2018. The high deal activity of 2018 was driven by the continued emergence of new buyers and private equity interest in the sector, as well as the ongoing requirement for in-demand skills in areas such as technology, programmatic, content and analytics.
The Results International infographic is produced every quarter by our team of marketing and technology sector specialists who have been tracking the data since 2014. In recent years, marketing has become increasingly a tech-enabled sector. As the gap between marketing and sales continues to narrow, we have restructured our 2019 marketing sector M&A and trends report to reflect the evolution of the industry. In addition to analysing recorded marketing services transactions, our report now includes all global deals in martech(1) and adtech(2).
M&A activity in the marketing industry in Q1 19 grew 4% compared to Q4 18 which was a record quarter, and 35% compared to Q1 18. This growth is increasingly driven by technology enabled companies. Of the 391 transactions
12
153
133
105
JANUARY FEBRUARY MARCH
391
Q1
00
10
20
30
40
50
60
70
80
90
100
110
120
130
140
150
160
170
www.resultsig.com
completed in Q1 this year, 41% (162 deals)
were in the marketing and advertising
technology space (versus 34% in Q4 18).
Publicis Groupe’s announcement of its
potential acquisition of data driven marketing
agency Epsilon is a prime example of the
transformation the industry is - and has been
for some time - undergoing. If the deal comes
to fruition, it will be cited as one of the marketing
industry’s biggest ever takeovers.
The proposed cash consideration of £3.45 billion
makes it larger than the £2.5 billion Publicis paid
for Sapient in 2014 and comes close to Dentsu’s
£4 billion acquisition of Aegis Group in 2012 and
WPP’s £5 billion buyout of Young & Rubicam in
2000(3). Having a well-built tech stack is nothing
new in the marketing sector but it is continually
becoming more commonplace and “everyone
is starting to understand that creativity and
technology are fusing,” said Publicis Groupe
CEO Arthur Sadoun.
Marketing services deals totalled 229 in Q1;
representing a minor 8% decrease on the
previous quarter but a 22% increase on the
same period last year. By comparison, martech/adtech deals in Q1 were 28% higher than in Q4 2018 and 56% higher than a year ago.
Whilst, private equity firms have been active in acquiring marketing services businesses in previous quarters, the inclusion of marketing and advertising technology companies has led to an increase in the number of PE backed deals reported (88 deals in Q1, 23% of the total volume). Private equity activity has been driven by buy and build strategies as illustrated by the acquisition of US listed data analytics software company Attunity by Qlik Technologies (backed by Thoma Bravo) for US$560 million. This deal was one of the largest disclosed deals this quarter and follows Qlik’s acquisition of Crunch Data in January.
MARKETING AUTOMATION ON THE RISE IN A VIBRANT Q1 FOR M&A
Of the eight most active buyers in Q1, four were private equity and four were strategic. Alpine SG, a portfolio company of Alpine Investor was the most active buyer - by number of deals - in Q1 2019 merging no less than six martech businesses into a newly created dedicated entity “ASG MarTech”.
It was followed by Dentsu with five acquisitions, all within the advertising services space, and the only holding company to make the top buyers list this quarter – the first time Results’ quarterly M&A infographic has seen only one holding company make it onto its top buyers list.
Within marketing services, integrated/full-service agencies and UX/design continue to constitute the majority of targets, collectively representing 53 transactions or 55% of advertising services activity. Integrated offerings with a full-funnel proposition (both brand agencies and performance agencies) and the ability to build and activate experiences at scale continue to be attractive to acquirers.
A few examples of this include the acquisition of UK based JJ Marketing by Gravity Global and the acquisition of in-house agency Oliver by mid-market holding group You & Mr Jones in January. This deal further illustrates the need for agile and multi-disciplinary teams working on client premises.
Our analysis also shows that Accenture, which made three acquisitions in March and a further two in the first week of April, continues to lead the consultancy pack when it comes to M&A activity in the sector. Its recent acquisition of
www.resultsig.com
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05
03
03
0303
03
03
06DISCLOSED DEAL VALUE
Q1 2019
US$4.3 BILLION
“everyone is starting to
understand that creativity
and technology are fusing...” ............................................................
............................................................
TOTAL DEAL VOLUMES
TOP BUYERS Q1 2019
www.resultsig.com
Paul Georges-PicotE [email protected]
Droga5 follows three smaller acquisitions in March -?What If!, Hjatelin Stahl and Storm Digital - the last two based in the Nordics.
Because of its profile and client roster Droga5 was going to be a big prize whoever the buyer. Accenture has been openly pursuing a strategy of building a stronger creative capability in recent years and this deal makes perfect sense.
Accenture’s Nordic deals also highlight its continuing eagerness to acquire talent and expand its footprint regionally. The acquisition of Spanish creative agency Shackleton in April 2019 is yet more evidence of this.
North America was the most active region in Q1 2019 with 175 deals. It was followed by Western Europe, accounting for 24% of all deals this quarter. The UK is still seeing a significant amount of activity with 47 companies acquired. This is a slight decrease on the last quarter but an 81% increase on the same time last year, mainly driven by the rise in technology deals.
Marketing Technology activity is very much on the rise; the strong revenue visibility and high gross margins that characterise these
companies makes them particularly attractive to both financial investors and strategic buyers. The gap between the number of marketing services and technology deals is likely to continue to narrow in the future.
Nearly half (48%, 76 deals) of the technology transactions in Q1 were acquisitions of marketing software companies. These were driven by, on the one hand, the growth in marketing automation, identity, and
visualisation tools (collectively 33 transactions), which suggests that single customer view and marketing orchestration are the main obstacles to marketing success; and, on the other hand, by 27 transactions in content and social marketing, highlighting the continued blurred lines between content (including user generated) and marketing.
The first quarter of this year even saw left-field buyers acquiring personalisation and omnichannel marketing capabilities, such as McDonald’s acquisition of Dynamic Yield for
US$300 million in an effort to build an ‘Amazon-style personalised online experience’.
Every quarter, the ability to fuse creativity and technology is becoming more and more relevant as marketing continues to deliver on the promise of getting more products off the shelf with the ‘zeitgeist capabilities’ being identity resolution and the ability to build upon it to activate omnichannel experiences as a service.
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UNITED KINGDOM47
EASTERN EUROPE06
WESTERN EUROPE94
SOUTH AMERICA12
NORTH AMERICA175
MIDDLE EAST09
APAC43AFRICA05
132 CROSS BORDER
38
34
21
Advertising & Creative Agencies
Marketing & Sales Technology
Events & PR
Content Production & Management
eCommerce Technology
96AdTech
76
34
“the ‘zeitgeist capabilities’
being identity resolution
and the ability to build upon
it to activate omnichannel
experiences as a service.”............................................................
............................................................
............................................................TOP MARKETING SECTORS Q1 2019
ADVERTISNG & CREATIVE
Performance marketing
Full service and integrated
agencies
Brand marketing
Creative agencies
Tech expert teams
6
8
9
15
53
Social media marketing agencies
5
MARKETING & SALES
TECHNOLOGY
MMMMMMMMAMAMAMAMAMAMAARARARARKETING & SALES
TTTTTTTETETECHNOLOGY
7696
Other
16
27
Content and social marketing
platforms
Marketing automation
& CDPs
33
ADVERTISNG & CREATIVE
Performance marketing
Full service and integrated
agencies
Brand marketing
Creative agencies
Tech expert teams
6
8
9
15
53
Social media marketing agencies
5
MARKETING & SALES
TECHNOLOGY
MMMMMMMMAMAMAMAMAMAMAARARARARKETING & SALES
TTTTTTTETETECHNOLOGY
7696
Other
16
27
Content and social marketing
platforms
Marketing automation
& CDPs
33
ADVERTISING & CREATIVE AGENCIES Q1 2019
MARKETING & SALES TECHNOLOGY Q1 2019
GEOGRAPHICAL SPLIT OF TARGETS Q1 2019
13
“Marketing Technology
activity is very much on
the rise; the strong revenue
visibility and high gross
margins that characterise
these companies makes
them particularly attractive
to both financial investors
and strategic buyers.”
Footnotes:(1) Martech defined as sales & marketing technologies, ecommerce technologies, websites creation & optimisation (2) Adtech (defined as search and advertising technologies). (3) Accounts for inflation. Total Enterprise Value as of 31/3/19. Source: Capital IQ
14 www.resultsig.com
2018 was an interesting year for the cybersecurity sector with valuations at their highest since 2016, as a wave of inorganic growth surged. The sector shares many traits with other B2B software markets - it’s growing well, innovating rapidly, and is experiencing strong valuations and record M&A activity.
The fundamental difference with other sub-sectors though, is that there is an additional external adversary to deal with; not just a competitor but a malicious actor, trying to subvert or break the security infrastructure to steal data, move money, deny service or otherwise cause mayhem. Consequently, the industry sells on a heady mix of fear (well-grounded) and hope (some better grounded than others).
As we forge ahead, into the fourth industrial revolution and the profound opportunities that come with it, cybersecurity has quickly become one of the most important issues on business leaders’ minds. This sentiment was palpable at the RSA conference this year where the theme was simply to be “better” - better solutions, sharper algorithms, more sophisticated machine learning but also generally just being better at making cybersecurity a top priority across industries. There was clear recognition that (i) the industry needs to up its game against
increasingly strong, well organised, and well-funded criminal gangs and nation state actors, and (ii) that organisations, large and small, need to improve their overall security stance.
Further high-profile breaches in 2018 including T-Mobile, Quora, Google, and Orbitz, have driven demand for innovative technologies that prevent or mitigate against highly complex business-critical cyber risk. The increase has also been driving M&A activity, and 2019 started out strong with 47 deals completed in Q1, closely aligning with our global security share price index growing 22% over the quarter. We expect the market to continue to reward cybersecurity firms, especially those able to mitigate the biggest organisational risks such as Identity and Access Management, with vendors CyberArk, SailPoint and Okta trading at a median valuation of 9.9x revenue. Another leading player in the space, Ping Identity, will be taking notice as it plans its own IPO later this year.
How many significant cyber breaches will there be in 2019? And how will the M&A landscape look as a result? This remains to be seen but there are some key trends to note:
1) Threat intelligence: cybersecurity professionals are calling out for “better” threat intelligence platforms that give them rich and granular data to interrogate, reducing uncertainty for their businesses. Venture capitalists globally, are backing and will continue to back the need for greater threat intelligence as they invest heavily into start-ups innovating in the
THE YEAR OF “BETTER” CYBERSECURITY
space. In order to prioritise scarce resource to detect and remedy issues, threat intelligence is being used to identify and focus on the biggest potential business-risks.
2) Artificial intelligence: a marketing buzzword two years ago, is now commonly being deployed into specific value-add use cases. However, all the vendors are short of talent and use-case specific capability however, and many are seeking to add these through acquisition. Of particular note is the use of AI and machine learning techniques to better triage the firehose of alert data coming out of threat intelligence and Security Information and Events Management (SIEM) systems, to enable Security Operations Centre (SOC) analysts to be a lot more focused on high-threat items.
3) Managing identity and privilege remains key: identity theft is a key threat vector and none is more dangerous than those in privileged positions (system administrators, payments processing teams etc.) 2018’s roll-up of BeyondTrust, Bomgar, Avecto and Lieberman into a scaled, broad-line player (in which Results International advised Avecto) to challenge CyberArk for leadership in this space is meaningful and we expect further consolidation ahead in this area.
4) Zero Trust: cloud security solutions which eliminate the idea that internal
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“Cybersecurity has
quickly become one of the
most important issues on
business leaders’ minds.”
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Chris LewisE [email protected]
players are trustworthy, are at the top of enterprise C-suite boardroom conversations. 90% of organisations feel vulnerable to inside attacks due to excess access privilege, an increasing number of devices with access to sensitive data and the increasing complexity of IT, (according to the CA Technologies Insider Threat Report 2018). The largest vendors have begun addressing the issue; Symantec, for example, acquired Luminate earlier this year.
5) Back to the future - rebuilding on- premise capability: a number of vendors talk to us about building or re-building capability to deploy products on-premise or in a single-tenant private cloud in response to some larger customers - especially in financial services and government - expressing growing concern about the security of public cloud security infrastructure and containerisation.
6) Cybersecurity managed services: managed services are growing in importance within the space and not just for mid-market customers. Many product- focused vendors are talking about adding managed services to their endpoint detection and response (EDR) platforms, and Symantec notably announced its new managed endpoint detection and response offering at the RSA Conference this year. F-Secure was an early mover with this strategy and the intent to build a world-class services and managed services organisation played a key part in its acquisition of MWR last year (a transaction in which Results International advised MWR). The growing shortage of skilled cybersecurity professionals will continue to drive this trend in our view.
7) Skills shortage: the cybersecurity skills shortage is nothing new, however according to a survey by ESG at the end of last year, the problem is getting progressively worse. In its Global Survey of IT Professionals 2018-2019, cybersecurity skills topped the list - 53% of survey respondents reported a problematic shortage of cybersecurity skills at their organisation compared to 51% the year before and 45% the year before that.
As this trend continues, organisations will look to acquire businesses to fill the gap. A report delivered by Capgemini last year in 2018, Cybersecurity Talent: The Big Gap in Cyber Protection, found that the UK is home to 13% of the world’s cybersecurity talent, putting it in third place behind India and the US, and making it a key acquisition hub for buyers.
8) Consolidation: With the average large corporate deploying security products from over 70 different vendors there is tangible need for the industry and a real push from customers for more joined-up solutions from fewer vendors. This trend, coupled with the ever-changing threat landscape, will see larger security vendors acquiring for talent, innovation, and to enter new solution categories.
As the cyber risks of a connected world keep expanding and getting more threatening, the future of cybersecurity M&A is bright.
For more information on deal activity and valuation metrics, download the CyberScope from our website - our regular market update for the global cybersecurity space. If you’re looking for advice on future growth plans or the next phase of your company’s development, please do get in touch.
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RSA key themes 2015 - 2019
The resurgence of protection (as opposed to detect and respond) from the next-gen endpoint protection vendors
UEBA (user and entity behavioural analytics) to add a new dimension to identifying anomalies and adding a layer of protection to identity beyond credentials
Machine learning as the panacea [AI techniques used by Black Hats now make it as much a part of the problem as the solution]
Identity and privilege as the key attack vector
Better solutions, sharper algorithms, more sophisticated machine learning
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2016
2017
2018
2019
2015
Each year the show brings a new marketing theme; in the five years we have been attending the key themes from the vendor community have, in our view, been:
Source: Cybersecurity Talent: The Big Gap in Cyber Protection [Capgemini Digital Transformation Institute survey, Digital Talent Gap; June-July 2017, N=230 cybersecurity talent employees.]
Cybersecurity talent by geography
Ind
ia
Fra
nce
Ge
rma
ny
Spa
in
Swe
de
n
Net
herla
nds
Italy
Uni
ted
Ki
ngd
om
Uni
ted
Sta
tes
16% 16%
13% 12% 11% 10% 9% 8%6%
CYBERSECURITY TALENT BY GEOGRAPHY
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THE HEALTHCARE INDUSTRY: PRIMED TO PROFIT FROM AI AND MACHINE LEARNING
Drug discovery: identifying promising drug molecules
With fully loaded costs per successfully commercialised molecule reaching US$2 billion, pharmaceutical companies are excited about the potential of AI to improve the identification of promising molecules at the earlier stages of the drug discovery and development process. Hence, reducing the necessity to make and screen a relevant subset of Active Pharmaceutical Ingredients, subsequently reducing the high attrition rates which are a key contributor to the escalating development prices and diminishing returns on R&D across the industry. Laboratory researchers are using AI and machine learning technology for heavy labour-intensive tasks such as target identification, drug design and compound screening, to reduce timelines and increase the likelihood of accurate identification. There are many examples where large pharma have used AI to successfully identify and accelerate new drug candidates: in May 2018, GlaxoSmithKline signed to collaborate with Cloud Pharmaceuticals on an AI-driven drug design program, whilst earlier that year Pfizer announced a collaboration
with IBM Watson’s to utilise their machine-learning platform to aid the discovery of new immunology targets.
Clinical trials: improving patient recruitment times
There are numerous areas within the clinical trial process where insights driven from AI and machine learning tools have the ability to implement revolutionary changes. From improving study design and decision-making, to real-time monitoring and patient recruitment, AI has the potential to process large pools of data at varying risk-points and highlight them early. Additionally, companies could have the ability to predict performance of certain trial sites, anticipate drop outs and even predict outcomes when AI is applied to real-world evidence data. Patient recruitment and clinical trial optimisation are two primary applications of AI use-cases.
Contract Research Organisations (CROs) typically provide development and support services to pharmaceutical and biotech companies during the clinical trial process. The patient recruitment process for clinical trials can be difficult and time-consuming for both
Artificial Intelligence (AI) and machine learning hold the promise of reforming the healthcare and life science industries. Generating and harnessing mass pools of data, the healthcare and life science industries are particularly primed to profit from the potential of AI, offering the unearthing of hidden insights in a world of unstructured data. Frost and Sullivan predicts that the health AI market, valued at US$600 million in 2014 will reach a high of US$6.2 billion by 2022.
The innovative analytics strategies behind AI and machine learning are increasingly having more impact on all stages of the life science industry and to a number of the basic processes in this sector. To name a few, the key laboratory, operational and clinical areas of which AI and machine learning are predicted to have a large impact, includes medical imaging analytics, drug discovery, clinical trials and clinical decision support.
“Laboratory researchers
are using AI and machine
learning technology for
heavy labour-intensive
tasks such as target
identification, drug
design and compound
screening...”
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quality of healthcare for people with mental
health conditions. Through the use of an
online, secure virtual therapy room which
patients can access through their computer
or smartphone, therapists are able to deliver
cognitive behavioral therapy to patients in
real-time through written conversations.
Ieso’s algorithms support an outcomes-driven
therapist allocation and scheduling system,
whereby they assign patients to therapists
most likely to delivery a meaningful clinical
outcome at the lowest cost. A key feature
of the app enabled by machine learning
technology includes the review of verbatim
transcripts, aiding mandatory therapist quality
control faster than face-to-face therapy.
Natural language processing analytics
enable real-time monitoring of therapist
protocol adherence and risk detection, whilst
providing guidance to the therapist in relation
to clinical decision support. Standard practice
is systemised and variation in treatment is
reduced, ultimately delivering better than
average recovery rates for patients.
In another development, the non-profit
company Sage Bionetworks has launched
the AI-empowered mPower app, a free,
2-year mobile research study with the goal of
understanding the progression of Parkinson’s
Disease. Unlike many other conditions,
Parkinson’s Disease varies significantly
between patients and disease progression
has an unknown mechanism of action. The
app tracks physical and cognitive activities,
symptom, medication, and trigger tracking,
allowing patients to learn their symptoms,
factors, and how these relate to specific
medications. This not only allows the Sage
Bionetwork team to monitor and understand
unique patterns of the disease over time,
but also results in patients gaining a deeper
understanding of their own condition. Ultimately
enabling more productive conversations with
doctors and caregivers. The aim of the study
is to create a powerful dataset which has the
potential to progress into powerful insights
through its AI technology.
The ability of AI to decode medical images has
already proven a valuable ally for radiologists
and pathologists to accelerate their
productivity and accuracy in medical imaging.
Multiple studies have indicated that AI tools
can perform equally to human clinicians at
identifying features in images quickly and
precisely. For example, in cardiovascular
abnormalities, automating the detection of
deviations in commonly-ordered imaging tests,
such as chest x-rays, could lead to quicker
decision-making and fewer diagnostic errors.
the CRO and the patient. A Cognizant report on recruitment forecasts estimated that 80% of clinical trials fail to meet enrollment timelines and one third of phase III study terminations are due to recruitment issues. Traditionally, patients may get trial recommendations from their doctor, providing their doctor is aware of an ongoing trial, or patients undertake their own independent research through ClinicalTrials.gov or patient forums. Several companies are developing AI software which can extract relevant information from a patient’s medical records and web search history and compare it with live trials which are recruiting and then suggest an appropriate match. Deep 6 AI is an example of a company which uses natural language processing to better match patients to clinical trials. Their algorithms are trained to recognise patient medical data and clinical data points which are extracted from health records and aggregated to develop a clinical profile. This clinical profile is then utilised to discover and compare populations and individual patients meeting a defined search criteria.
AI algorithms coupled with machine learning can also be used to mine various data sources like electronic health records, prescribing data and insurance claims. The resulting federated database can then be compared with patients who are currently enrolled in clinical trials to identify subgroups of patients which may be more susceptible to adverse events. The same method can be used for patient enrichment strategies whereby certain population subgroups are selected as most likely to progress to a particular disease state or to respond well to treatment. This can ultimately drive down costs and shorten development timeline while increasing the chance of a successful trial outcome.
Beyond the development process: clinical decision support and medical imaging
Although drug discovery and clinical studies are key areas which can be widely advanced by AI and machine learning, the application of AI is not just limited to these areas. Looking at the broader healthcare arena, AI is already being used to check data to detect patterns to improve analyses to provide better diagnosis and care for patients which also reduces costs. Companies such as Ieso Digital Health, based in the UK, are using AI and machine learning to improve the accessibility, affordability and
“The ability of AI to
decode medical images
has already proven
a valuable ally for
radiologists...”
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The impact of AI and machine learning on the industry
AI and machine learning is having and
will continue to have a huge impact on all
aspects of the life science and healthcare
industry. Although the industry as a whole
has been slower to implement these types
of technologies into their processes in
comparison to adjacent sectors, in 2018
we saw a shift in the attitude of key industry
leaders with numerous collaborations and
M&A activities focused around AI technology.
From the drug development process to clinical
decision support, AI and machine learning
has the potential to transform every key
inflexion point spanning the entire healthcare
and life science sector. Still in its infancy,
AI and machine learning will undoubtedly
revolutionise this industry as it stands today,
and in many ways which are yet to be
discovered.
Kunal KadiwarE [email protected]
M&A in life sciences AI and machine learning
Linguamatics acquired by a Tier-1 CRO [Results International acted as financialadvisor to Linguamatics]In January 2019, Linguamatics was acquired by a Tier-1 CRO. Linguamatics is a leading provider of natural language processing (NLP) SaaS solutions to the life sciences and healthcare industries. In completing the acquisition, the tier-1 CRO will improve their current capabilities of uncovering insights to patient outcomes and enhancing their value-based care offerings. It’s intelligent solution generates insights from a wide range of unstructured and semi-structured data, empowering customers to efficiently integrate AI into their operations. In 2018, Linguamatics was recognised by Frost and Sullivan as an Artificial Intelligence Life Sciences Leader.
Precision Therapeutics + HelomicsIn June 2018, Precision Therapeutics and Helomics agreed to merge. In doing so Precision gained access to Helomics’ artificial intelligence platform which, when combined with Helomics’ vast tumour database of over 149,000 patient cancer tumours, can produce actionable insights to help Precision’s TumorGenesis subsidiary develop patient-derived tumour models much more efficiently.
Genae + Hilbert ParadoxMedical device CRO Genae bought Hilbert Paradox (HPX), a digital health data management platform in March 2018. HPX’s platform enables (1) isolated digital health data silos to be captured and integrated using data analytics and AI, and (2) the processing of large volumes of data generated from genomics, diagnostic devices, biosensors and wearables to accelerate research.
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CRO SECTOR: M&A DRIVERS AND MARKET TRENDS WHITE PAPER
...................................................................
In our latest 2019 white paper on CRO sector M&A, we discuss some of the important trends observed in recent years and look to the future of deal making within the industry. The robust corporate activity that the CRO sector has enjoyed over recent years looks likely to continue going forward.
The CRO industry has been growing steadily in recent years. In 2018, the value of the global CRO services market was estimated to be valued at US$37 billion. Between the forecast period of 2018 to 2024, the market is estimated to grow at a 8.2% CAGR as the demand for robust clinical services grows and sponsors continue to invest in R&D.
Download your copy at resultshealthcare.com/insights
“The last few years have been a very interesting period for deal watchers in the CRO space. Multiple mega-mergers took place between key players leaving the CRO landscape looking very different to when the period began.”Kevin Bottomley, Partner
19 www.resultsig.com
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all purchased niche providers to selectively
expand capabilities and eliminate white
space in their technology stacks. In 2018,
the top 10 enterprise software transactions
counted for $87 billion in value alone including
SAP’s acquisition of Qualtrics, a pioneer
of experience management software that
enables organisations to deliver superior
customer, employee and brand experiences;
Salesforce’s acquisition of Datorama, a
provider of AI-powered marketing intelligence
and analytics; and Workday’s acquisition of
Adaptive Insights, which will help customers
accelerate their finance transformation in
the cloud.
To keep up with the demand, the global
technology service providers (consultancies,
systems integrators and business process
outsourcing companies) are in the midst of
addressing the need to continually evolve
and develop new skills as the large software
vendors continue to consolidate - the general
consensus being that those that are successful
will have a depth and breadth of capabilities
across its portfolio. They can either do
this through training in-house, developing
customised automation tools or the acquisition
of niche service providers possessing scarce
knowledge and skills. Business consulting
firms like Accenture and Deloitte as well as
IT services firms like Capgemini and DXC
Technology are all looking at both large and
small acquisition targets that specialise in
implementation and cloud migration services.
Examples include Accenture’s acquisition of
DAZ Systems, a provider of Oracle ERP Cloud
services; Capgemini’s acquisition of Lyons
Consulting Group, an award-winning digital
and global commerce service provider with
deep expertise in Salesforce Commerce Cloud;
and Sykes’ acquisition of Symphony Ventures,
an RPA consultancy working with the likes of
BluePrism and UiPath (Results International
advised on this transaction). As the demand for
enterprise software outpaces the availability
of implementation skills, we expect a
continued emphasis by the large technology
service acquirers to purchase smaller,
platform-specific integrators in a ravenous
grab for technology talent.
Maurice WatkinsE [email protected]
The continued global growth of the enterprise software market will drive ongoing demand for expert technology services companies.
Enterprise software applications automate and support a range of administrative and operational business processes of the enterprise, including its sales & marketing, financial reporting, human resources, and supply chain.
With the economic and efficiency benefits of software automation being fully realised, there is an ever-increasing demand for software and the corresponding implementation and maintenance services that come with a more complex technology environment. Overall, the enterprise software market is expected to reach $575 billion by 2024.
This expanding market opportunity has led to an aggressive acquisition strategy by traditional software publishers trying to preserve their thought leadership and market share in this age of nimbler and cheaper cloud-only applications. Large software players such as Oracle, SAP, IBM, and Microsoft have ............................................................ ............................................................ ............................................................
20
ENTERPRISE SOFTWARE: GLOBAL M&A ACTIVITY Q1 2013 – Q1 2019
Sources: Press releases, Capital IQ, Mergermarket, 451 Research and Results International analysis
ENTERPRISE SOFTWARE GROWTH DRIVING DEMAND IN TECHNOLOGY SERVICES
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TECHNOLOGY
MARKETING
HEALTHCARE
22
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MEET THE TEAMEUROPE
NORTH AMERICA
ASIA-PACIFIC & MENA
Keith HuntManaging Partner
Maurice WatkinsPartner
27 Soho Square, London, W1D 3AY Tel: +44 20 7629 7575
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Andrew KeffordPartner
Julie LangleyPartner
Pierre-Georges RoyPartner
Part of a global team of 50+ employees across offices in London, New York and Singapore.
Chris BeaumontPartner
Imad KublawiPartner
Mark WilliamsManaging Director
Kevin BottomleyPartner
Jason FossManaging Director
Sunil GuptaPartner
Eduardo SteinerPartner
Chris LewisPartner
Paul Georges-PicotDirector
Annabelle GuillermoDirector
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TECHNOLOGY
Results International Group LLP is Authorised and Regulated by the Financial Conduct Authority. This document is intended for use by professional clients only.
23
James KesnerDirector
Kunal KadiwarDirector
Richard LatnerDirector
James WestDirector
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