india technology product m&a industry monitor report

Strictly Private & Confidential

India Technology Product M&A

Industry Monitor Report

June 2014


Strictly Private & Confidential 2

VC/PE funding is a strong & growing source of Growth Capital for Indian Technology Product Companies

26 28 31 29

26

8195

7416

20

21

20

0

40

80

120

160

2010 2011 2012 2013

# D

eal

s

B2B Software Internet & Consumer / E-Commerce Mobility

77 99 143171

112

555603

808

60

31655

42

0

250

500

750

1000

1250

2010 2011 2012 2013

USD

Mn

B2B Software Internet & Consumer / E-Commerce Mobility

India VC / PE Investments: Deal Value

India VC / PE Investments: Deal Volume Investment in has grown by ~ between 2010-2013 and continues to grab a lions share of the VC/PE investment dollars

Overall deal valuations are going up, but Series A for e-Commerce & Internet

start-ups has seen a drop as VCs increasingly have been providing

Global VC/PE firms ploughing in $$ into helping them

expand their footprint in Emerging & Developed markets

$$ invested in companies showing an upward trend

Company SectorTotal Amount

RaisedInvestors

Sequoia Capital Nexus Venture Partners Tenaya Capital

Nexus Venture Partners SilverLake

Info Edge Sequoia Capital

Kalaari Capital Intel Capital Nexus Ventures

eBay and Premji Bessemer Temasek

Accel Partners Tiger Global Morgan Stanley

Vulcan Capital MIH Naspers Others

$550m+

$340m+

~$53m

$50m

~$39m

Source: Signal Hill & iSPIRT analysis and research, Venture Intelligence

E-Commerce

E-Commerce

Internet & Consumer

Software

Software

Kalaari Capital Tiger Global IDG Ventures

Accel Partners PremjiInvest Others

$100m+E-Commerce


The Early-Stage Ecosystem has developed significantly, improving the overall health of VC/PE & Indian Technology Product Company Ecosystem..

Incubators / Accelerators

Seed Funding & Angel Investors

Venture Capital(Series A)

Salient Features Illustrative Examples

Upto $100k

Invest in ideas / business plans

Access to shared office space and support services

Mentorship and guidance from experienced entrepreneurs

and technologists

Provide access and support for seed funding from angels /

investor groups

100k - $750k as a syndicate

Company should have a beta version of product / working

prototype and well defined market potential

Mentorship and guidance from experienced entrepreneurs

and technologists

Initial funding of $2 - $7m with ability to

participate in follow on rounds

Market accepted service offering / product being used by 2-3

clients

Enables greater depth in product development, rapid market

expansion and ability to hire talent

Development of strong sales & marketing organization to

access developed markets


However, overall M&A exit value of Indian Technology Product Companies is significantly below key Peers, and VC/PEs have large Exit Backlogs

Source: Signal Hill & iSPIRT analysis and research, Venture Intelligence, PwC, NVCA US

Technology Product VC/PE and M&A

2010-2013

VC / PE Investments - Volume

VC / PE Investments - Value

M&A - Volume

M&A - Value

M&A Value: VC / PE Value

Average M&A Deal Size

Product M&A - Challenges and Bottlenecks continue to exist

Limited sales traction in back yard (US, Europe) of Software / Internet

majors; Most start-ups dont show up on the radar of acquirers

1

Lack of listed Software / Internet Peers in India to benchmark against

and sluggish & nascent Software / Internet IPO market in India

2

Low maturity levels in product management & marketing

Companies and entrepreneurs need to focus on building a globally

differentiated proposition and ensure global accounting & governance

standards to ignite M&A deal flow

3

4

Nascent local acquirer universe; US / Global Acquirer is required to

create a block buster outcome*only includes disclosed deal values.

^Slightly understated for US as the M&A value only includes disclosed deal values


Clear growth in Product M&A; Domestic M&A contributes majority of deal volume, whereas Inbound M&A contributes majority of deal value..

Source: Signal Hill & iSPIRT analysis and research, Venture Intelligence, YTD as on May 2014, * - Excluding Flipkart-Myntra transaction it is $2.3m

Product M&A Deals

EstimatedTotal Product

M&A Deal Value

Average M&A Deal Value


Cumulative Product M&A : 2010 - YTD 2014

Source: Signal Hill & iSPIRT analysis and research, Venture Intelligence, YTD as on May 2014

Product M&A Deal Volume (Cumulative) : 2010 - YTD 2014 Product M&A Deal Value (Cumulative) : 2010 - YTD 2014

31%

36%

14%

9%

9%

38%

25%

26%

6%5%


Cumulative Product M&A : Inbound vs. Domestic

Inbound and Domestic Deal Volume Split by Sectors (Cumulative 2010 - YTD 2014)

54%

21%

4%

8%

13%

Inbound (Total 48 Deals)

22%

43%

18%

9%

8%

Domestic (Total 111 Deals)

Inbound and Domestic Deal Value Split by Sectors (Cumulative 2010 -YTD 2014)

56%32%

1%9%

2%

Inbound (Total ~$1.1b)

7%

14%

69%

2%8%

Domestic (Total ~$660m)



Product M&A Deal Volume: 2010 - YTD 2014

713 11 10

7

2217

3229

11

0

10

20

30

40

50

2010 2011 2012 2013 YTD 2014

# D

eal

s

Inbound Domestic

Product M&A Deal Volume Trend : 2010 - YTD 2014

4

75 5 5

1

2

3 2 2

2

1

2

1

2

1

1

2

0

4

8

12

16

2010 2011 2012 2013 YTD 2014

# D

eal

s

5 39

4 3

12

6

7 16

7

4

3

9 3

1

1

3

42

2

3

4

0

10

20

30

40

2010 2011 2012 2013 YTD 2014

# D

eal

s

Product M&A Inbound Deal Volume Trend : 2010 - YTD 2014

Product M&A Deal Volume Trend by Segment: 2010 - YTD 2014

Product M&A Domestic Deal Volume Trend : 2010 - YTD 2014


9 1014

9 8

138

10 18

9

45

9 3

1

14

6

32 3

4

6

0

10

20

30

40

50

2010 2011 2012 2013 YTD 2014

# D

eal

s

B2B Software Internet & Consumer E-Commerce Ad.Tech & Marketing Automation Mobile


Product M&A Deal Value: 2010 - YTD 2014

82

605

69

233

127

38

22

136

74

391

0

100

200

300

400

500

600

700

2010 2011 2012 2013 YTD 2014

USD

Mn

Inbound Domestic

Estimated Product M&A Deal Value Trend : 2010 - YTD 2014 Estimated Product M&A Deal Value Trend by Segment: 2010 - YTD 2014

74%

49%64%

49%

84%

21%

38% 4%43%

16%5% 13%

32%

7%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 YTD 2014

B2B Software Interenet & Consumer / E-Commerce Others

41%

25%

7% 7% 3%

58%

41%

51%

87% 97%

1%

34%42%

6%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 YTD 2014

B2B Software Internet & Consumer / E-Commerce Others

Estimated Product M&A Inbound Deal Value Trend : 2010 - YTD 2014 Estimated Product M&A Domestic Deal Value Trend : 2010 - YTD 2014


64%

48%

26%

39%

23%

27%

35%

4%

50%

6%

5%

2%

31%

3%

71%

14%

11%

1%3% 1%

28%

6%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 YTD 2014

B2B Software Internet & Consumer E-Commerce Ad.Tech & Marketing Automation Mobile


Select Inbound Deals

Date Acquirer Target Target Description Deal Value ($m)

May14 Online medical advisory service with a network of approximately 15,000 general physicians and surgeons.

18.5

Feb14 Unified Threat Management Solutions ~70-80

Jan14 Performance analytics software platform for mobile app developers ~11

Aug13 Software solutions for logistics, transportation, supply chain service providers 45.1

Jun13 Online bus ticketing platform ~100-105

Feb13 Provides differentiated Analog, Mixed-Signal silicon IP cores and ASICs 62.0

Dec12Provider of analytics and business intelligence solutions to the financial services, insurance, retail and telecommunications industries

NA (51% stake)

Oct12Acquisition of Qontext, an enterprise social collaboration software, from Pramati Technologies portfolio of products

NA

Oct11Provider of open source storage solutions for standardizing the management of unstructured data

136.0

Oct11 Developer and publisher of mobile and online games 80-90

Mar11 Manufacturing, marketing and sale of structured cabling products 112.0

Jan11Provides online tutoring worldwide and K12 school solutions and education services

213.0

Jan11Provides cloud-based, enterprise applications for live online meetings, webinars, desktop sharing and eLearning.

31.0



Signal Hill is a leading independent advisory boutique serving the M&A and private capital raising needs of growth companies. Signal Hills experienced bankers provide deep domain expertise and anunyielding commitment to clients in our sectors: Internet & Digital Media, Internet Infrastructure, Services and Software. With over 600 completed transactions and offices in Baltimore, Bangalore,Boston, Nashville, New York, Reston and San Francisco, Signal Hill leverages deep strategic industry and financial sponsor relationships to help our clients achieve Greater Outcomes.

11

iSPIRT Foundation is an industry think-tank founded by key participants and proponents of the Indian software product industry. iSPIRT enables a strong ecosystem, connects and guidessoftware product entrepreneurs and helps catalyse business growth. It encourages buyers to improve performance by leveraging software products effectively. iSPIRT advises policymakers on interventions that can set the industry on a higher growth trajectory

For questions, please contact:

Sanat Rao,

Partner (M&A), iSPIRT

[email protected]

Klaas Oskam

Managing Director, Signal Hill India

[email protected]

This document has been prepared by Signal Hill Capital Advisory India Private Limited (SHI) & iSPIRT for discussion purposes only. The information and opinions contained in thisdocument are derived from public and private sources which we believe to be reliable and accurate but which, without further investigation cannot be warranted as to their accuracy,completeness or correctness. This information is supplied on the condition that SHI and any partner, employee or affiliate of SHI are not liable for any error or inaccuracy containedherein, whether negligently caused or otherwise, or for loss or damage suffered by any person due to such error, omission or inaccuracy as a result of such a supply. SHI and its affiliatesare also not liable for any loss or damage howsoever caused by relying on the information provided in this document. In particular any numbers, initial valuations and schedules containedin this document are preliminary and are for discussion purposes only and does not constitute an opinion.

india technology product m&a industry monitor report

Documents