Professional Documents
Culture Documents
November 2015
I N DEPEN DENT I N VESTMENT BAN K I N G FO R GLOBA L
TECH NOLOGY, MEDIA, MARKETI NG & I N FORMATION
We expect global cross-border tech M&A activity to hit a new high in 2015 and forecast 2016 deal volume to be larger still.
The worldwide activity levels are reflective of whats happening in the EU, where the volume of M&A is being driven by
the three Cs:
1) Confidence in broader EU stability and US economic outlook
2) Currency favorable trend in US to EU exchange rate
3) Cash corporate and PE surplus
Confidence: US economic momentum, buoyed by anticipation of the forthcoming presidential election, provides a positive backdrop. European GDP growth rates, both in and out of the Eurozone, are anticipated to continue their positive
trajectory (forecast to be 1.9% and 2.1%, respectively, for FY2016). With the remaining pockets of deflation expected to
reverse in 2016, Europe is increasingly viewed as at least out of the woods.
Currency: The strengthening of the dollar renders international targets comparatively cheaper this is especially true
for US corporate buyers looking at Euro Zone targets, where the dollar has strengthened approximately 18% against the
Euro over the past three years.
Cash: US and EU corporates are benefitting from a prevalence of accessible capital and strengthening balance sheets.
Further, the increasing reserves of US corporate foreign-trapped cash serve to increase the appeal of non-domestic targets, at least for the moment.
growth in transatlantic tech activity
Since 2012, the number of cross border M&A transactions led by European acquirers has grown by approximately 27%,
as compared to 32% for North American acquirers buying assets in Europe. The volume of international M&A emanating from North American corporates is about double those of the Eurozone acquirers.
While growth in European-led activity is more balanced between North American targets and those from the rest of the
world (R.O.W.), growth in North American international tech activity has been focused primarily on European targets,
reflecting the value seen by North American acquirers in the European market.
We expect this trend of North American buyers focusing on Europe to continue, driving a further increase in transatlantic M&A. In addition to the three Cs, 2016 gets the added boost of being an election year in the US.
valuations
Emerging growth technology companies are gaining scale at earlier stages and growing more rapidly. Increasingly,
more of a companys value is occurring earlier, driving private valuations and activity, as investors seek to get in early
so as not to miss the growth boat. Lets not forget this is perceived value and the lack of financial maturity means
there is little floor, if you pick the wrong company in which to invest. We have been here before, where late in the cycle,
KPIs such as users, visitors and eyeballs (!) are being cited to justify higher valuations rather than relying on financial
indicators (financial metrics such as revenue, profit, cash). As in the past, it will end with winners and losers, not with
winners and winners!
The increasing appetite for tech assets is reflected both in terms of performance of tech indices and revenue multiple
evolution. The bubble of 2000 saw TEV/ Revenue multiples climb from approximately 1.0x to over 5.0x by mid-March
2000, according to S&P Capital IQ and the FTSE World Tech Index. Currently, the EV/revenue multiple of 2.2x is not really comparable to these previous cycles. Thats because, over time, the technology index constituents have changed
significantly i.e., the breadth in maturity has increased, ranging from start-ups to established tech firms, and the multiples of the latter are muting the larger multiples of high growth, earlier stage tech companies. In previous technology
booms, established companies formed a much smaller number of the sector constituents.
As such, earlier stage, higher growth tech companies, especially with an enterprise client base and strong recurring
revenue/SaaS model, are demanding valuations well in excess of 2.2x revenue in the current M&A environment. Some
recent examples include (date order):
Date
Buyer
Seller
Brief Description
Rev Mult
Sept 2015
comScore
Rentrak
Media measurement
$850
7.9x
Aug 2015
Advance Communications
1010data
$500
10.0x
Aug 2015
IBM
Merge Healthcare
Healthcare technology
$1,000
4.4x
July 2015
HGGC
Selligent
Marketing technology
Confidential
Confidential
June 2015
Mediaocean
Cross-media platform
$720
Confidential
Apr 2015
MasterCard
Predictive analytics
$600
6.0x
Apr 2015
Net Suite
Bronto
Cloud-based marketing
$200
5.3x
Apr 2015
TellApart
Predictive marketing
$533
5.3x
Apr 2015
Lynda.com
Online training
$1,500
10.0x
Mar 2015
PayPal (eBay)
Paydiant
Mobile payments
$280
Confidential
Mar 2015
Nielsen
eXelate
Data technology
$200
6.7x
Feb 2015
Samsung
LoopPay
Mobile payments
$250
Confidential
Jan 2015
NetProspex
Data management
$125
6.3x
Note: Data marked confidential is either proprietary or related to transactions completed by JEGI
Source: JEGI Transaction Database
The proportion of non tech acquirers of tech businesses (approximately 40% of the market) increased about 2% in 20142015. However, when you pick through the data and exclude the small number of highly acquisitive US tech behemoths
(Google, Facebook, etc.), the number of occasional non-tech acquirers of tech assets is significant and increasing.
We are seeing the evidence in M&A processes, where our sellside clients are getting offers from outside the traditional buyer set, feeding demand and therefore pricing. All sellers would be well advised to invest the time and effort to seek out those
outside the box acquirers that might have a readily-apparent or aspirational need for their product or service offerings.
private equity and venture capital
Historically the preserve of the tech specific VC funds, technology is increasingly viewed as a key asset class for mainstream PE. The increase in number of maturing assets, as well as attractive growth opportunities presented both by pure
tech and tech-enabled businesses, means that tech assets, such as the recent $5.3 billion acquisition of Informatica led by
Permira Funds, are increasingly forming part of funds portfolios.
In contrast to identifying the next disruptive tech innovation, mainstream PE firms are looking for proven tech companies that have grown without traditional venture capital and have demonstrated ability to generate sustainable growth.
Through continuing to invest in innovation, while also improving growth rates, mainstream PE will crystalize value through
positioning assets as tech enablers.
Furthermore, savvy PE funds, through a well deployed application of tech solutions, will tech enable their existing portfolio companies to help them outperform their peers. For example, we are seeing these companies find value in the Eurozone through using IT to outsource services, incorporate platforms and build more valuable relationships with customers
that drive greater value through pricing or reducing churn.
In the EU, the European banking sector continues to suffer from a lack of self-confidence, presenting PE and innovative
debt firms with opportunities to fill gaps in investment required by small and mid-size enterprises. Europe, which still
lacks economic momentum, will remain a riskier investment proposition than the US, at least for the short term, and
therefore offers potentially lucrative investment opportunities over the medium term.
The increase of PE dry powder (both through accumulated commitments and an increasingly accessible fundraising environment) to more than $1.14 trillion will drive asset valuations. During 2014, over 225 European PE funds were able to raise
100 billion a five-year high. At current investment rates, these funds have 18 months of capital to deploy, in absence of
further capital raising.
the global pessimist should not unduly concern the technologist
An increase in global conflict and the resulting demographic pressure on the EU could reverse the pan-European return
to growth. The UK In-Out referendum (on whether to remain part of the EU) presents the inevitable anxieties resulting from worldwide uncertainty and change. Chinas challenges as it shifts towards a consumer, rather than an export,
economy will also present a number of opportunities.
IPO market activity fell in Q3. While mainland China saw more public listings in 2015 than in the whole of 2014, the closure
of mainland Chinese markets to new listings, as well as wider market volatility, has resulted in a reduction in global IPO
activity. Remaining issues are reverting to more established markets. Japan, for example, is on course for 100 IPOs by the
end of 2015 the highest level since 2007.
Tech specific threats exist, such as US technology companies perceiving an EU regulatory backlash in light of the Snowden
debacle. The most recent intervention scrapping the ability of US tech firms to ship personal information wholesale to
the US is identified by many as latent protectionism.
This unpredictability should not stop investor confidence, as the onward march of tech adoption, the digitalization of
business and associated M&A will continue into 2016 and beyond.
41
51
Seller
Target Description
Enterprise
Value
($mm)
SolarWinds
Roper Technologies
Aderant Holdings
Tyler Technologies
Cisco Systems
Lancope
Quality Systems
HealthFusion Holdings
Deluxe Corporation
$4,500
$675
$670
NBAD software
$453
$165
Datamyx
$160
LogMeIn
Marvasol
$110
WEX
Benaissance
$80
Rapid7
RevelOps
$68
PTC
Qualcomm Incorporated
(Vuforia business)
$65
OpenText Corporation
Daegis
E-discovery SaaS
$14
Diligent
$10
Ruckus Wireless
Cloudpath Networks
$9
Premier
InflowHealth
$6
61
Sq1
Apple
Perceptio
CoreTrac
eMOBUS
Autodesk
Configure One
Cisco Systems
1 Mainstream
Ellie Mae
Mortgage Returns
71
Buyer
Seller
Target Description
Enrollment Advisors
HighRoads (employer
technology division)
TKS Solutions
Divshot
IBM Corporation
Cleversafe
Embarcadero Technologies
(Thoma Bravo)
Intel Corporation
Saffron Technology
j2 Global
OnlineBackupVault.com
Morningstar
FNA
Nitro Software
Daggerboard
PatientSafe Solutions
PhishMe
Raycom Media
Pure Auto
International Document
Services
Roper Technologies
Simply Measured
DataRank
SintecMedia
Broadway Systems
SMARTLogix
Unbound Commerce
Apptive
VersionOne
ClearCode Labs
VMware (EMC)
Boxer
Wombat Security
Technologies
Salesify
Enterprise
Value
($mm)
About JEGI
JEGI is the leading independent investment bank for the global software, tech-enabled services, media, marketing
and information sectors. Over the past 28 years, the firm has completed nearly 600 M&A transactions, serving global
corporations, private companies, entrepreneurs and founders, and private equity and venture capital firms.
JEGIs senior bankers average nearly 20 years of M&A experience and personally lead each client engagement. Through
the firms broad network of industry contacts and a deep understanding of the markets that its clients serve, JEGI helps
technology companies find their optimal strategic paths via exit or growth capital. The firm provides clients with a wide
and global breadth of buyers, leveraging its unique and extensive market knowledge and deep relationships across
diverse markets to maximize value. For more information, visit www.jegi.com.
a portfolio company of
from
August 2015
July 2015
July 2015
July 2015
July 2015
has merged
with
a significant investment
to
to
to
October 2014
November 2014
March 2015
to
a subsidiary of
a portfolio company of
July 2014
a portfolio company of
has sold
has received
a significant investment
from
to
to
to
&
for $52,000,000
May 2013
March 2014
May 2014
May 2012
October 2012
*Some of the transactions highlighted above were completed by JEGI Managing Directors Joseph Sanborn and Jeff Becker, prior to joining the firm.
Wilma Jordan
Founder & CEO
wilmaj@jegi.com
Scott Peters
Co-President
scottp@jegi.com
Jeff Becker
Managing Director
jeffb@jegi.com
Tolman Geffs
Co-President
tolmang@jegi.com
Tom Pecht
Managing Director
tomp@jegi.com
Boston
CIC Boston
50 Milk Street
Boston, MA 02109
Phone: +1 (617) 294-6555
Richard Mead
Managing Director
richardm@jegi.com
Sam Barthelme
Director
samb@jegi.com
David Clark
Managing Director
davidc@jegi.com
Adam Gross
Chief Marketing Officer
adamg@jegi.com
Atlanta
40 Wallace Road
Buford, GA 30519
Phone: +1 (770) 932-8700
Amir Akhavan
Managing Director
amira@jegi.com
Bill Hitzig
Chief Operating Officer
billh@jegi.com
Joseph Sanborn
Managing Director
josephs@jegi.com
Tom Creaser
Executive Vice President
tomc@jegi.com