webinar 011105 corum group 2004 m&a review & 2005 forecast
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8/8/2019 Webinar 011105 Corum Group 2004 M&a Review & 2005 Forecast
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
2004 M&A Review
&
2005 M&A Forecast
Bruce Milne
David Keith
Corum Group Ltd.
www.corumgroup.com
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Opening Remarks
Stock Market & IPO Review
Venture Capital Climate in 2004
M&A Review
What Drove Deals in 2004?
Sector Analysis
M&A Valuation Trends
What Will Drive Deals in 2005?
Agenda
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Corum Group
M&A specialists since 1985
Software and IT experts
Offices in USA, Canada, and Europe
25% of transactions international
Recognized industry leaders/experts
Sponsor of Selling Up Selling OutConferences
Sponsor of World Financial Symposiums Conferences
Publisher of Merge newsletter
Publisher of industry leading M&A research
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
2004 The Comeback Year for Tech
Innovative consumer products iPod
Google IPO
Firefox gains on Explorer
Open source (Linux) gains acceptance in the data center and
makes inroads into to the enterprise
Oracle/PeopleSoft
Worldwide adoption of 3G cell phones the next platform play
Internet/ecommerce/online advertising thrives
The Internet as a political fundraising tool
Blogs & instant messaging
Desktop searching
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
2004 A Year of Optimism and Opportunities
Global equities markets at 2 year highs
Best IPO market in 4 years
Venture Capitalists active again
Merger activity at 4 year highs
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Global Equity Markets Rebound
This has led to a renewed sense of optimismamong executives, investors and advisors
Country Index 52-wk Change
Brazil Bovespa 48%Hong Kong Hang Seng 31%U.S. NASDAQ 24%
Australia All Ordinaries 21%Germany DAX 18%Japan Nikkei 225 18%Canada TSX Composite 15%France CAC 40 13%
U.K. FTSE 100 13%U.S. DJIA 12%
Source: Corum Group Research
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
M&A Activity Mirrors the Direction of the
Stock Market
0
10
20
30
40
50
60
70
80
90
100
110
120
Jan-04 Feb-04 Mar-04A r-04 May-04 Jun-04 Jul-04 Aug-04 Sep-04 O -04 Nov-04 Dec-04
#ofSoftwareTransa
ctions
1,800
1,900
2,000
2,100
2,200
NASDAQ
NASDAQ # of M&AAnnouncements
Source: Corum Group Research
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
IPO Markets Improve
2003 2004 % Change
# of IPO Pricings 68 215 216%
IPO Volume $15B $43B 187%
New IPO Filings 105 315 200%
Source: IPOhome.com
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Top Performing Tech IPOs
Company Business YTD Gain
Shanda Interactive Online games in China 261%51 Jobs Human resources s/w in China 259%
Marchex Ecommerce 207%eCOST.com Online discount retailer 180%Cogent Fingerprinting technology 175%Volterra Semiconductors Semiconductors 167%Interchange Paid search services 136%Rightnow Technologies Customer service s/w 130%
Google Internet 127%
Source: Corum Group Research
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
M&A is the Primary Source of LiquidityIn Dollar Volume All Industries
$0
$100
$200
$300$400
$500
$600
$700
$800
$900
$1,000
$1,100$1,200
$1,300
$1,400
$1,500
$1,600
$1,700
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
In
Billins
M&A Dollar Volume IPO Amount Raised
Source: Corum Group Research
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Improving IPO and M&A Markets Leads to
More VC Investment
Source: PricewaterhouseCoopers/Venture Economics/NVCA/MoneyTree survey
Total Investment in Software Industry
$500
$700
$900
$1,100
$1,300
$1,500
$1,700
3Q02 4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
InMillio
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Where Are VCs Placing Their Bets?
Wireless
Device management/security, synchronization,data services, multimedia entertainment,WAN security, messaging/content delivery
Next generation communications
Voice/telephony applications, VoIP services
RFID
Readers, chips, tags, antennas
Solutions that simplify IT management
Solutions that increase networking capacity
Semiconductor technology
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Tech M&A: Fewer Deals, But Higher Value
2003 2004 % Change
# of Deals 1,300 1,000 -23%
Deal Value $24B $29B 20%
Valuation Offers 1.5x 2.0x 2.0x 3.0x
Time to Close 12+ months 10 -12 months
LOI to Close 120+ days 90 120 days*
Source: Corum Group Research
*Due to more comfort with SOX, both buyers & sellers better prepared
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Top Buyers in 2004
Source: Corum Group Research
Cisco Systems - 12
IBM - 10
Kintera 8
HP - 7Bentley Systems - 5
Broadcom Corporation - 5
Allen Systems Group - 4
aQuantive - 4
InfoSpace - 4
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
2004 Deal Consideration
Cash was King in 2004
Source: Corum Group Research
1%
9%
40%
All Cash All Stoc Mi
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
More Buyer Competition in 2004
Abundant liquidity in markets Low interest rates
High cash balances
The S&P 500 - $2 trillion in cash & short term assets
Strong stock market
Pent up demand, buyers must do something to stimulate growth
113 buyers acquired 2 companies
28 buyers acquired 3 companies
13 buyers acquired 4 companies
4 buyers acquired 5 companies
More competition for deals
Return of strategic buyers
Private equity putting money to work
Recapitalizations
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Recapitalizations A Driving Force in 2004
Over $100B of committed capital
$32.5B raised in the 1st nine months of 04
Recent deals involving Private Equity:
Apex Partners/Cartesis
Made2Manage (Battery Ventures)/DTR Software
Consortium of PE Firms/ Payroll processing BPOCompany
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
The Mega Deals of 2004
Juniper Networks/NetScreen Technologies ($4B)
Networking & security converging -moving and inspecting packets a natural fit
JNPR needed to move beyond Telcos andISPs and into the Enterprise
Oracle/PeopleSoft ($10.3B)
Every company is for sale at the right price
Acquiring revenue growth & customers
Symantec/Veritas Software ($13.5B)
Security & storage converging - need forintegrated solutions
SYMC seeking EPS Growth and to lessenreliance on consumer market
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Most Firms are a Collection of Acquisitions
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Case Study: Symantec
Symantec has acquired 36 companies since its IPO in June1989
Significant M&A Deals:
DMA PC anywhere (1991)
Fifth Generation Systems Backup and security utilities (1993)
Binary Research Disk cloning technology (Ghost) (1998)
AXENT Technologies Enterprise security software (2000)
Veritas Software Storage software (2004)
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Case Study: Symantec
Recent Acquisitions:
Veritas Software Storage Management
Brightmail, Inc. E-mail services and anti-spam software
Turn Tide Anti-spam routers
Nexland, Inc. Internet security appliancesSafeWeb, Inc. SSL VPN appliances
PowerQuest Inc. Automated deployment and recovery
ON Technology Corp. Software distribution/configuration
Recourse Technologies Advanced intrusion detection solutions
SecurityFocus Enterprise security threat management
RIPTech Managed security services provider Mountain Wave Software used to detect security incidents
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Case Study: Symantec
Has Symantec Created Value through Acquisitions?
Over a 10-Year Period:
Market Capitalization has grown to $15.0B
Revenue has increased to $2.0B
Cash flow has increased to $1.0B
Over 4,000 new jobs have been created
The company has tactically used M&A to enter new
markets, supplement its own R&D, and acquire cuttingedge technology
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
M&A Sector Coverage
Business Intelligence IT Services
Connectivity Software Development Tools
Digital Media Security
Engineering Storage
Enterprise Applications Supply Chain Management
Enterprise Content Management Vertical Market Financial Services
Enterprise Infrastructure Vertical Market Healthcare
Gaming Vertical Market Telecom
Internet Infrastructure Vertical Market Other
Internet Pure Plays Wireless
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Consolidation - Enterprise Applications
Changing market dynamics driving consolidation
IT customers want to buy from fewer vendors
Customers want integrated solutions
IT purchases smaller & taking longer
The result:
Vendors are trying to bulk up
Fill in product gaps
Harder for small vendors to survive forcing many tosell
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Consolidation ERP Market
Top Tier Vendors
Baan
Oracle
PeopleSoft
SAP
JD Edwards
Mid Tier Vendors
ACCPAC
Best Software
Daamgard
ExactEpicor
Great Plains
Lawson
Macola
Navision
SageSBT Accounting Systems
Scala
Soloman
3rd Tier Vendors
AccountMate Software
Harper and Shuman
Maxwell Business Systems
Myob LimitedPWA Group
PeachTree Software
Real World Corp.
Sesam
State of the Art Inc.
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Consolidation ERP Market 2005
Top Tier Vendors
BaanOraclePeopleSoft
SAPJD Edwards
Mid Tier Vendors
ACCPAC
Best Software
Daamgard
ExactEpicor
Great Plains
Lawson
Macola
Navision
SageSBT Accounting Systems
Scala
Soloman
3rd Tier Vendors
AccountMate Software
Harper and Shuman
Maxwell Business Systems
Myob LimitedPWA Group
PeachTree Software
Real World Corp.
Sesam
State of the Art Inc.
I p c : L b y r wh y r y h v wh y
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Enterprise Infrastructure
Technology Trend: Utility Computing
M&A Deals: HP/Novadigm & Consera
Veritas/Ejasent
Sun Microsystems/Center Run
Technology Trend: Service Oriented Architecture
M&A Deals: CA/Adjion Solutions
HP/Talking Blocks
Oblix/Confluent Software
Actional Corp/Westbridge Technologies
Digital Evolution/Flamenco Networks
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Technology Trend: Who gets access and to what?
Automatic provisioning
M&A Deals: HP/TruLogicaNetegrity/Business Layers
Computer Associates/Netegrity
Sun/Waveset
IBM/Access360
BMC Software/Calendra
Security Access/Identity Management
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Storage
Document management & storage converging
EMC/Documentum
Storage & security converging
Symantec/Veritas
Storage technology for the mid-market
EMC/Danz
Converging of SAN, NAS & Direct Attached storagetechnologies
Adaptec/Snap Appliance
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Factors Affecting M&A Valuations in 2004
Historical Financials
Revenue growth
Historical margins
What does business look like going forward Projected revenue growth
Value of sales pipeline
Value of customer base
Strategic importance to buyer
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
M&A Valuation
2.3
2.7 2.72.9
6.7
3.0
2.0 1.5 1.5 1.61.8 2.1 2.3
2.2
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
P
/S
Multiple
1H:98 2H:98 1H:99 2H:99 1H:00 2H:00 1H:01 2H:01 1H:02 2H:02 1H:03 2H:03 1H:04 2H:04
M&A T an a tion Multi l So t a In u t
Sou : Co um G ou R a h
Valuationsconstrainedbybuyersownvaluationmultiplesandpriordeals
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Valuation Study: 2003 - 2004
Private software firms with revenue under $10 million
21% of transactions were less than 1.25x
60% of transactions were greater than 2.00x 33% were greater than 3.00x
High growth companies
High margin companies
Next generation technologies
Security software
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
2004 Valuations Security Software
2.0x 3.0x 3.0x 7.0x 10.0x +
Price to Sale Multiples
Software
IndustryM&A
Multiples
Security
SoftwarePublic
Multiples
Security
SoftwareM&A Multiples
Multiples driven by VC
investment
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
1.25x 2.00x 2.0x 3.0x
Price to Sale Multiples
Software
IndustryM&A
Multiples
2004 Valuations Niche Applications
NicheSoftware
FirmsM&A
Multiples
Multiples held back by
size of market opportunity
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
1.20x 1.50x
Price to Sale Multiples
High
ValueBPOM&A
Multiples
2004 Valuations IT Service
1.50x 2.00x0.60x
Govt ITService
M&AMultiples
Application/
SystemsIntegration
M&AMultiples
Rellers/Distributors
Low ValueBPO
0.80x 1.10x
Valuations depend on
where you are in the value
chain
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
How To Improve Your M&A Success
Prepare early and do it thoroughly
Align shareholder interests
Agree to valuation range/expectations
Understand your companys value proposition Create an environment of trust
Personal trust between buyer and seller is the keyto getting deals done today
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THE PREMIER PROVIDER OF M&A SERVICES TO TECHNOLOGY COMPANIES WORLDWIDE
Contact Information
Corum Group Ltd.
10500 NE 8th Street, Suite 1500Bellevue, WA 98004USA(425) 455-8281
Corum Group International
Hottingerstrasse 21CH-8032 ZurichSwitzerland
+41 1 251 82 65
www.corumgroup.com
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