Trends in Technology: What’s Hot and What’s Not
M&A International Inc. Global Technology Briefing
LONDON · JUNE 9, 2011
M&A International Inc. – the world's leading M&A alliance
1. Introduction
2. Trends and Drivers in the Technology Sector
3. What’s Hot? Integration Software
4. What’s Hot? Internet/Digital Media
5. What’s Hot? Marketing Automation Software
6. What’s Hot? Social Networking
7. What’s Hot? IT Services
8. What’s Hot? Storage
9. Summary and Outlook
Presentation Outline
1
Introduction
M&A International Inc. – the world's leading M&A alliance
Speaker Bios
Bradford A. Adams, CFA– Managing Director, TM Capital - Boston
– Head of M&A International’s Technology Group
– Member of MAI International’s Executive Committee
– 19 years of investment banking experience
– Prior investment banking experience at Advest, Salomon SmithBarney and KPMG
Milledge Hart– Managing Director, Pagemill Partners
– Co-leads Pagemill’s Software, Services, and Digital Media practice
– CEO of multiple companies, most recently Tukaroo which was soldto Ask (now IAC) in 2004
– Prior investment banking experience at Dillon Read & Company(now UBS)
3
Trends and Drivers in the Technology Sector
M&A International Inc. – the world's leading M&A alliance
Technology and Healthcare Dominate Mid-Market M&A
2009 2010
Technology26%
Healthcare16%
Professional Services10%
RE & Property6%
Oil & Gas5%
Finance5%
Utility & Energy4%
Telecom3%
Mining3%
All Others22%
Technology27%
Healthcare17%
Professional Services8%
Oil & Gas6%
Finance5%
Telecom5%
RE & Property5%
Utility & Energy3%
Mining3%
All Others21%
Transactions with disclosed values between $25 million and $1 billionSource: Wall St. Research
5
M&A International Inc. – the world's leading M&A alliance
Ranking of IT priorities that CIOs selected as one of their Top 5 priorities in 2010
Evolving CIO IT Priorities – Moving to the Cloud….
* Not in Top 10 of rankingsSource: Gartner
Ranking 2010 2009 2008 2007
Virtualization 1 3 3 5
Cloud computing 2 16 * *
Web 2.0 3 15 15 *
Networking, voice and data communications 4 6 7 4
Business intelligence 5 1 1 1
Mobile technologies 6 12 12 11
Data and document management and storage 7 10 9 9
Security technologies 8 8 5 6
Service-oriented applications and architecture 9 9 10 7
IT management 10 * * *
Enterprise applications 11 2 2 2
6
M&A International Inc. – the world's leading M&A alliance
IT Spending Changes, by Industry, 2010 to 2011 (Average) 2011 Expected IT Spending as % of Total Operating Expenses
Looking Forward- Which Industries Show Promise?
Source: Gartner, January 2010
7
M&A International Inc. – the world's leading M&A alliance
Some New Faces in the IT Sector M&A Scene…
Strategic AcquirerNo. of Deals Top Targets
17
14
7
6
6
6
6
5
5
5
Source: Capital IQ and company press releases
8
M&A International Inc. – the world's leading M&A alliance
Select Private Equity Interest in the IT Sector
Source: Capital IQ and company press releases
Strategic Acquirer No. of Deals Top Targets
5
4
3
3
3
3
2
2
2
2
9
What’s Hot? Integration Software
M&A International Inc. – the world's leading M&A alliance
Converging Worlds in Integration Software
BPM
ApplicationServers
BI & CPM ECM
Integration
Servers
DataIntegration
EAI
Structured Data Unstructured Data
ETL &Warehousing
Data
Quality
Rules
BAM
Modelers
PredictiveAnalytics
ESBs
DataVisualization Text
MiningDRM
WCM
DAM
Workflow
Collaboration
GRC
11
M&A International Inc. – the world's leading M&A alliance
Gartner’s Magic Quadrant: Business Intelligence Platforms MAI Commentary
• Evolving market as classic BI tools adoption becomes mainstream
• The traditional BI market is relatively mature and is dominated by a few large players
• Predictive analytics and data visualization have become extremely popular
• Shift in business user interest from just measurement to analysis, forecasting and optimization
• BI is expected to remain one of the fastest growing segments of the enterprise software market
• A number of sizeable players have yet to make an acquisition – and the “acquirable” pure play BI opportunities have become fewer and fewer
• Tremendous scarcity value for quality BI solution providers
The Business Intelligence Platform Market
Source: Gartner
12
M&A International Inc. – the world's leading M&A alliance
TEV / LTM Revenue Multiples over Time
TEV / LTM EBITDA Multiples Over Time
1.3x 1.6x
2.2x 2.4x 2.3x 2.3x
3.1x 3.3x 3.8x 3.8x
—
1.0x
2.0x
3.0x
4.0x
5.0xM
ar-0
9
Jun-
09
Sep-
09
Dec
-09
Mar
-10
Jun-
10
Sep-
10
Dec
-10
Mar
-11
7.1x 9.2x
10.4x 10.3x 11.2x 11.2x 12.6x 12.7x
14.3x 15.1x
—
4.0x
8.0x
12.0x
16.0x
20.0x
Mar
-09
Jun-
09
Sep-
09
Dec
-09
Mar
-10
Jun-
10
Sep-
10
Dec
-10
Mar
-11
TEV /
LTM
Rev
enue
TEV /
LTM
EBIT
DA
Public Valuations in Integration Software
13
M&A International Inc. – the world's leading M&A alliance
Company Acquiror(s) Transaction Metrics Commentary
Date: 5/9/11TEV / Rev: NATEV / EBITDA: NA
• Oco, provides SaaS based BI and analytics solutions• Deloitte Consulting is one of the leading global SIs• Services firm acquires a SaaS tool to add managed analytics
capabilities
Date: 2/2/11TEV / Rev: NATEV / EBITDA: NA
• Metastorm is one of the last remaining pure-play BPM vendors• Open Text is a leading ECM solution provider• Illustrates convergence between ECM and BPM• Completes the full consolidation of the BPM sector
Date: 5/24/10TEV / Rev: NATEV / EBITDA: NA
• IBM acquired Sterling Commerce from AT&T for $1.4 billion• Sterling Commerce provides integration solutions and supply
chain applications that optimize customers’ business collaboration networks
• Complements other IBM acquisitions such as Cognos, SPSS, CoreMetrics and Unica
Date: 6/8/10TEV / Rev: 3.0xTEV / EBITDA: 20.8x
• Exalead provides enterprise and Web search software• Dassault Systemes provides Product Lifecycle Mgmt. solutions• Combo yields a new class of search-based applications for
collaborative communities
Notable M&A Transactions
14
What’s Hot? Internet/Digital Media
M&A International Inc. – the world's leading M&A alliance16
Even as major stock market indexes have reached their highest levels in three years, recent Internet and Digital Media IPOs have come to market at significantly higher than expected prices
─ Responsys, an interactive marketing suite company, priced at ~30% above the midpoint of its initial range and now has a market cap of approximately $803M, trading at slightly more than 9x LTM revenue
Key Internet/Digital Media Trends
Companies like Netflix and OpenTable are experiencing strong share price gains and are priced at the high end of sector comparables
─ Netflix is up approximately 140% over the last twelve months to $266 per share (5.8x revenue)
─ OpenTable, which priced at $20 when the Company went public in May 2009, has increased by 339% to nearly $80 a share (18x revenue)
Source: Capital IQ as of 5/25/2011
Offer IPO Amount Return SinceCompany Date Price Raised ($M) IPOYandex 5/23/2011 $25.0 $1,305.0 37.8%Phoenix New Media 5/18/2011 11.0 140.8 3.4%Responsys 5/10/2011 12.0 79.2 44.4%Qihoo 360 5/10/2011 14.5 175.5 78.2%Demand Media 1/25/2011 17.0 151.3 -15%Amadeus 4/27/2010 14.6 1,746.4 37%
Selected Internet/Digital Media IPOs
M&A International Inc. – the world's leading M&A alliance17
Active Internet/Digital Media Acquirers
CompanyNumber of
Acquisitions(Last 3 Years)
Cash Balance ($M) Recent Transactions
14 $6,881
12 $382
17 $6,765
16 NA
53 $36,675
15 $1,318
14 $2,789
Source: Capital IQ and The 451 Group as of 5/25/2011
M&A International Inc. – the world's leading M&A alliance18
Selected LTM Internet/Digital Media M&A Transactions
Acquirer Target Enterprise Value ($M)
LTM Revenue Multiple
Transaction Rationale
$2,190 1.6x
“The acquisition of GSI, which offers the mostcomprehensive integrated suite of online commerce and interactive marketing services available, will significantly strengthen our ability to connect buyers and sellers worldwide.”
$720 7.0x
“The combined company will be able to power the next generation of digital entertainment offeringswith content discovery, delivery, and enhancedinteractivity capabilities that support advertisingand drive consumer engagement.”
$563 NA
“By acquiring Playdom, Disney will strengthen itsalready-robust digital gaming portfolio, acquire a first-rate management team and provide consumers new ways to interact with the company on popularsocial networks like Facebook and MySpace.”
$410 NA
“Our acquisition of drugstore.com todaysignificantly accelerates our online strategy to leverage the best community store network inAmerica by becoming the most convenient choice for health and daily living needs whether customers shop online or in our stores.”
$315 NA“The acquisition of The Huffington Post will create a next-generation American media company with global reach that combines content, community, and social experiences for consumers ...”
Source: Capital IQ and The 451 Group as of 5/25/2011
M&A International Inc. – the world's leading M&A alliance19
Internet & Digital Media – Capital Markets Update
LTM Performance
Historical Trading Multiples
NASDAQ Internet Index (QNET)
44.04%
NASDAQ Composite Index
25.75%
S&P 500 Index23.65%
80.00
90.00
100.00
110.00
120.00
130.00
140.00
150.00
160.00 S&P 500 Index (^SPX) - Index Value
NASDAQ Composite Index (^COMP) - Index Value
Dow Jones - Internet Composite Index - Index Value
Source: Capital IQ as of 5/25/2011
What’s Hot? Marketing Automation Software
M&A International Inc. – the world's leading M&A alliance21
Sector Landscape
Loyalty & Event Management
Marketing Resource Management (MRM)
Marketing Performance Management
Campaign Management & Interactive Marketing
Multi-Discipline Marketing Pureplays
CRM, Analytical Data Warehousing & Analytics ERP Platforms, ECM & BPM
Lead Management
Community Marketing
Email MarketingMulti-Channel
Content CreationAgencies
Design Tools
Content Optimization
Web Marketing & Analytics
Mobile Marketing
BI & Predictive Analytics
M&A International Inc. – the world's leading M&A alliance
Industry growth accelerated coming out of the recession, but customer adoption continues to outpace user adoption
Mainstream SaaS adoption in the pure-play arena, while platform vendors have been less successful with this model
“Verticalized” strategies have gained momentum
DAM, MRM, content creation, content optimization and social media CRM are gaining mindshare in the B2C segment
Lead management, event management and MPM are capturing the lion’s share of the B2B marketing wallets
Role-based application delivery is driving R&D strategies
MSPs, agencies & SIs count for 60-70% of implementation costs
Tactical investments with rapid deployment cycles and measurable ROI remain in vogue
22
Industry Observations
M&A International Inc. – the world's leading M&A alliance23
Consolidation Trends
Source: TM Capital and Capital IQ
Most Active Acquirors since 2006 in Marketing
AutomationAcquirer No. of
AcquisitionsYahoo! 10Acxiom 6Alterian 5Google 5Oracle 5Salesforce.com 5DoubleClick 4Omniture 4Responsys 4Unica 4Adobe 3IBM 3Microsoft 3Open Text 3Autonomy 2SAS 2EMC 1Teradata 1
Platform vendors are driving the evolution towards holistic marketing suites that encompass MRM, MCCM, Event Management, Loyalty Management, Community Management, etc.
Encroachment from larger industry bellwethers will take years to materialize, but is likely to start delaying sales cycles for the pure-plays
Next step in the consolidation cycle will be to converge creative brand management with traditional analytics
Eventual goal is a platform that consists of a marketing database, a single DAM repository, one set of workflow tools, one set of analytical dashboards, a common UI and one code base built on J2EE or .NET
M&A International Inc. – the world's leading M&A alliance
TEV / Revenue Multiples over Time
Comparable Company Analysis
24
2.7x 3.1x
1.4x 1.6x
4.9x
—
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
Dec
-08
Mar
-09
Jun-
09
Sep
-09
Dec
-09
Mar
-10
Jun-
10
Sep
-10
Dec
-10
Mar
-11
TEV
/ LT
M R
even
ue
Marketing Sof tware BI, Analytics and ECM MSPs Agencies SaaS
M&A International Inc. – the world's leading M&A alliance
Company Acquiror(s) Transaction Metrics Commentary
Date: 12/21/10TEV / Rev: 7.1xTEV / EBITDA: NA
• Aprimo provides cloud-based integrated marketing software• Teradata provides enterprise DW solutions• Combines leading DW player with leading marketing analytics
solution – critical given increasing volume of marketing data
Date: 11/2/10TEV / Rev: 4.5xTEV / EBITDA: 32.1x
• Art Technology Group develops and markets e-commerce software solutions
• Enables Oracle to integrate CRM, retail and e-commerce• Unified marketing, merchandising, services, order
management and supply chain – personalized customer experience
Date: 9/1/10TEV / Rev: NATEV / EBITDA: NA
• Intrepid is a social media analytics and market research consultancy
• Alterian provides marketing analysis software• Exemplifies the consultancy sale element of MAS
Date: 8/12/10TEV / Rev: 4.1xTEV / EBITDA: 44.3x
• Unica provides on-demand enterprise marketing management solutions
• Leverages IBM’s previous acquisitions – SPSS, CoreMetricsand Netezza
• Dominant solution – marketing management and analytics
Notable M&A Transactions
25
What’s Hot? Social Networking
M&A International Inc. – the world's leading M&A alliance27
Social Media offers brands a powerful medium to engage & measure online activity
─ Social networks are a completely new media from a marketing perspective – the amount and extent of detailed user information enable very effective new forms of marketing
─ Social Media is an enabler for more engaging, relevant, real-time and better targeted marketing
─ Social Media provides powerful platforms for brands to advertise, measure trends, and manage brand equity
As Social Media continues to attract audiences worldwide, companies have shifted their online advertising strategy towards Social Media
─ Average usage time on social media in 2009 was 5:35 hours per month, almost 3 times the 2007 figure. Facebook (FB) users show even higher usage
─ Facebook has become the #1 online destination with 540 million unique users and 570 billion page views (April 2010)
─ Twitter is currently the fastest growing online service with over 80m users (+300% year on year)
Key Social Networking Trends
Demand for solutions that enhance Social Media advertising and measure brand engagement is expected to increase significantly over the next few years as Social Media market further develops
─ Social Media advertising reached $2.2B in 2009 and is expected to grow by 12x to $25.7B by 2014
Social Media Advertising Forecast
$ bi
llion
sSource: Capital IQ and 451 Group as of 5/25/2011
M&A International Inc. – the world's leading M&A alliance28
Several Social Networking companies have recently gone public with strong results
─ Shares of LinkedIn, which rose as much as 171% in their first day of trading and closed at $94.25, more than 109% above the $45 IPO price
─ Renren Inc, one of the biggest social networking companies in China, surged 28.6% in its sizable IPO
Key Social Networking Trends (cont.)
These IPOs have set the stage for other private social networking companies to go public, who have already received high valuations from private investors and on the secondary markets (e.g., Sharespost)
─ Facebook raised $500M in a transaction that valued the company at $50B
─ Latest auction of Twitter shares on Sharespost valued the company at $7.7B
─ Groupon has hired underwriters and could file to go public as early as the second half of 2011 – some investors believe that its initial public offering could reach $15B to $20B
─ Zynga is raising a new round of funding that values the company at between $7B and $9B
Offer IPO Amount Return SinceCompany Date Price Raised ($M) IPOThe Active Network 5/24/2011 $15.0 $165.0 8.5%LinkedIn 5/18/2011 45.0 351.0 91.9%FriendFinder 5/10/2011 10.0 50.0 -44.2%Jiayuan.com 5/10/2011 11.0 78.1 27.3%Renren 5/3/2011 14.0 743.4 -9.4%Youku.com 12/8/2010 12.8 202.9 233%Mail.ru Group 11/8/2010 27.7 911.3 25%
Selected Social Networking IPOs
Source: Capital IQ and 451 Group as of 5/25/2011
M&A International Inc. – the world's leading M&A alliance
Key Social Networking Trends (cont.)
Company Select Investors Amount Raised ($M)
Last Raise Amount ($M)
Last Raise Date
Insight Venture Partners $17.5 $17.5 6/20/2010
Google, Pinnacle, Canaan Partners, Intel Capital, Betfair, SK Telecom $124.5 $85.0 5/26/2011
Austin Ventures $22.0 $22.0 3/3/2010
Bessemer, GSR Ventures, Lightspeed, NEA, New World Ventures, Disney (parent company) $76 Acquired July 2010 Acquired July
2010
MeriTech Capital Partners $22.5 $22.5 10/7/2009
Partners, Bezos Expeditions, Columbia Capital, Felicis Ventures, Greylock Partners, Novak Biddle Venture Partners, The Founders Fund, TomorrowVentures
$17.0 Acquired April 2011 Acquired April 2011
Andreessen Horowitz, Avalon, Foundry, Globespan, Google, IVP, KPCB, Mail.ru Group, SOFTBANK, Tiger Global Management, Union Square Ventures
416.0 $153.7 6/14/2010
Within Social Media, social gaming has also attracted high valuations and a significant amount of investment
─ According to comScore, social network users make up more than two-thirds of total Internet users and the current penetration of games on social networks remains less than 10%
─ The global social gaming market has the potential to grow from $1B in 2009 to $3B+ in 2012, representing a CAGR of 45%
29
What’s Hot? IT Services
M&A International Inc. – the world's leading M&A alliance
The IT Services Barbell Market MAI Commentary
Polarized marketplace
Regional players trying to scale and differentiate offerings
Global SI’s continue to look into the left hand side of the barbell for “tip of the spear” type acquisitions
Tremendous scarcity value in mid-tier sector of the market
Market Forces Continue to Polarize the Industry
Small Regional Consultancies Mid-Tier System Integrators Global System Integrators
• Domain or vertical experts• Geographically focused• Challenged by global delivery• Revenues sub - $100 million
• Evolving to a global SI model• “Scarcity Value”• Revenues: $100 - $500 million
• Multiple practices – Industry, Functional and Application
• M&A is core to growth strategy• Revenues $500 million +
COMPLEXITY
PR
OJE
CT
VALU
E
31
M&A International Inc. – the world's leading M&A alliance
Trends and Drivers in the IT Services Sector
2010 - recovery year for most players in the IT services sector– Average revenue performance increased approximately 6% over 2009– 2009 performance was down 10-15% versus 2008 levels
The 2009 dilemma - adjust headcount to the lower revenue levels orsacrifice profitability by maintaining a bench
In 2011, industry fundamentals have strengthened, and we are seeing a noticeable up-tick in demand
The 2011 challenge – where can we find the resources?
Offshore services continue to gather momentum due to the efficiency of their economic model and ability to price engagements aggressively
Noticeable increase in interest in managed services, outsourcing and IT services businesses by PE investors – Infrastructure outsourcing is hot!
Tier 1 vendors will continue to look at M&A to bolster growth and defend business models – Business Intelligence Services is hot!
32
M&A International Inc. – the world's leading M&A alliance
Onshore TEV / EBITDA Multiples Over Time
Offshore TEV / EBITDA Multiples Over Time
TEV
/ LTM
EBI
TDA
TEV
/ LTM
EBI
TDA
Public Valuations
Source: Capital IQ
8.3x 7.8x 7.2x
8.9x
—
2.0x
4.0x
6.0x
8.0x
10.0x
Mar
-09
Jun-
09
Sep-
09
Dec
-09
Mar
-10
Jun-
10
Sep-
10
Dec
-10
Mar
-11
NA ITS Euro ITS Gov't ITS Specialty/Strategy
14.8x
8.0x
21.4x
10.7x 9.4x
—
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
Mar
-09
Jun-
09
Sep-
09
Dec
-09
Mar
-10
Jun -
10
Sep-
10
Dec
-10
Mar
-11
>$1B Indian Of fshore <$1B Indian Of fshore China Of fshore BPO OPD
33
M&A International Inc. – the world's leading M&A alliance
Company Acquiror(s) Transaction Metrics Commentary
Date: 4/6/11TEV / Rev: 2.1xTEV / EBITDA: NA
• Headstrong provides consulting and technology services for financial services, public sector, and service industries
• Genpact is a provider of business process consulting services• Scarcity value, offshore and FS vertical focus drove valuation
Date: 12/14/10TEV / Rev: NATEV / EBITDA: NA
• Atos Origin acquired the Siemens IT Solutions and Services division from Siemens AG for approximately 860 million euros
• Siemens IT Solutions and Services offers BI, CRM, ESM, ERP, and other application software solutions
• Aggressive landscape-changing acquisition in Europe
Date: 11/2/10TEV / Rev: 0.5xTEV / EBITDA: 17.5x
• TechTeam Global provides IT outsourcing and BPO services• Stefanini IT Solutions provides infrastructure and applications
outsourcing, as well as BPO services• Aggressive US play by a Latin American services provider
Date: 10/29/10TEV / Rev: NATEV / EBITDA: NA
• Keane provides IT consulting and outsourcing services• NTT Data provides IT services and solutions in Japan and
internationally• Aggressive US/India acquisition by a Japanese market leader• Not a huge win for Keane investors despite relatively low price
paid when taken public in 2007
Notable M&A Transactions
34
What’s Hot? Storage
M&A International Inc. – the world's leading M&A alliance36
Key Storage Market Trends
The broader storage market is in transition as several factors combine to drive significant change in the coming years
─ Proliferation of video is increasing capacity requirements exponentially
─ Paradigm shifts in infrastructure technology (i.e. Cloud computing, Virtualization, etc.) require corresponding changes in enterprise storage
─ Government regulation and litigation preparedness create opportunities in archiving and eDiscovery
Efficiency is paramount as increases in storage costs outstrip IT budgets
Consolidation will continue as diversified vendors seek to:
─ Accelerate time to market
─ Foster near-term growth
─ Supplement core solutions with specific functionality
M&A International Inc. – the world's leading M&A alliance37
Active Storage Acquirers
CompanyNumber of
Acquisitions(Last 3 Years)
Cash Balance ($M) Notable Storage Transactions
4 $1,070
12 $14,479
10 $5,594
14 $12,738
27 $13,279
3 $5,175
11 $2,958
Source: Capital IQ and The 451 Group as of 5/25/2011
(Information Governance Software)(Digital Archiving Business)
(Engenio Storage Systems)
M&A International Inc. – the world's leading M&A alliance38
Selected LTM Storage M&A Transactions
Acquirer Target Enterprise Value ($M)
LTM Revenue Multiple
Transaction Rationale
$390 7.0x“…further increases Symantec's ability to get the right information, to the right people, at the right time, while reducing overall legal review costs and limiting Risk…”
$899 6.1x“The Compellent storage platform enables Dell to provide customers additional mid- and high-end network storage solutions that simplify and reducethe cost of data management”
$2,401 13.7x“…The unmistakable waves of cloud computing and ‘Big Data’ are upon us…EMC & Isilon…help customers get the absolute most out of what cloud computing has to offer."
$1,593 7.1x“Netezza strongly complements IBM’s business analytics capabilities and client base. Together, we have the opportunity to quickly leverage the technology and accelerate the offering.”
$2,216 10.9x
“The addition of 3PAR’s next-generation storage architecture will accelerate HP’s winning Converged Infrastructure strategy, which provides customers with an unmatched portfolio of intellectual property across storage, server and networking Solutions.”
$60 12.0x“Akorri further strengthens NetApp's data management capabilities to achieve greater quality of service and performance in their virtual and cloud environments...”
Source: Capital IQ and The 451 Group as of 5/25/2011
M&A International Inc. – the world's leading M&A alliance39
Storage – Capital Markets Update
LTM Performance
Historical Trading Multiples
1.2x 1.2x 1.0x 0.7x 0.6x 0.9x 0.9x 1.2x 1.3x 1.0x 1.1x 1.1x 0.9x
5.9x
6.7x
5.6x
3.7x 3.7x
5.8x
8.0x8.6x 8.8x
8.0x 8.2x 8.3x7.4x
Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011
Avg TEV/Total Revenue Avg TEV/EBITDA
S&P Composite 1500 Computer Storage & Peripherals:
+40.51%
NASDAQ Composite Index:
+25.75%
S&P 500 Index: +24.13%
-10.00
0.00
10.00
20.00
30.00
40.00
50.00 NASDAQ Composite Index
S&P Composite 1500 Computer Storage & Peripherals
S&P 500 Index
Summary and Outlook
M&A International Inc. – the world's leading M&A alliance41
Observations from the Trenches
Increasing M&A activity – formal processes, mini-processes/market checks and one-on-one conversations
─ Some concern about potential distraction of a full process
─ Sellers are interested in listening to viable ideas from qualified acquirers
After a slow start to the year, deal flow has increased substantially for both ibanks and PE buyers
─ Most ibanks are extremely busy and pipelines are as strong as they’ve been for some time
─ PE firms are starting to see a dramatic increase in acquisition opportunities –becoming a crowded marketplace once again
Strength in the financing market is enabling attractive dividend recaps for many companies as alternatives to sale transactions
─ Opportunity to take capital off the table today and maintain a “second bite of the apple” with an ownership stake going forward
M&A International Inc. – the world's leading M&A alliance42
Observations from the Trenches (cont.)
Large strategic acquirers remain aggressive on the acquisition front but are also interested in streamlining operations and divesting non-core assets
─ Potentially complex transactions, but interesting opportunities for both strategic and financial acquirers
Technology M&A has become a global market – especially in the middle market
─ International acquirers are extremely active and are beginning to play major roles in the sell side processes of most U.S. targets
The IPO process – really an M&A process in disguise?
─ Ibanks are pitching flexibility throughout the IPO process – potential for a sale or recap in the event an IPO isn’t the best option
M&A International Inc. – the world's leading M&A alliance43
Outlook for 2011
Extremely bullish about the remainder of the year
─ Seeing strong buyer interest with existing deals in the market
─ Many ongoing conversations with prospects, formally and informally, about evaluating strategic alternatives sometime this year
─ Time to harvest returns for many private equity firms
Improving financial performance by corporations
─ Positive earning reports
─ Anecdotal evidence of improving sales and hiring at most clients and prospects –finding talent is tough again
Uncertainty in the capital markets – debt and equity
─ Favorable conditions now – can it continue?
─ Potential for overheating – high yield and leveraged loans
─ International concerns – Japan? Sovereign debt?
M&A International Inc. – the world's leading M&A alliance44
Outlook for 2011 (cont.)
Continued tension between buyers and sellers – “nothing is easy”
─ Buyers – extensive due diligence, past, present and future – substance over presentation?
─ Sellers – valuation (multiples and base), structure and terms – will there be a retrade?
Transactions will continue to be complex and will require creativity to get done
─ Need to bridge valuation gaps and navigate legal, accounting and tax obstacles
─ Requires experienced advisors – financial, legal, accounting, etc.
M&A will continue to be a global business at all transaction levels –large cap and middle market
─ Need advisors with a global reach and international expertise
M&A International Inc. – the world's leading M&A alliance
Global Technology Briefing· June 9, 2011
Thank You!