How to Win in Tech M&A

in 2014 A Brief US M&A Overview

November, 2013

GroupArgent / Results Argent Current M&A Our transactions span the globe. Below is a representation of current M&A engagements, many of which are cross-border

North America

South America

Eastern Europe

Asia

Australia & New

Zealand

Sub-Saharan Africa

Middle East & North Africa

Western Europe

Target Location

Acquirer Location

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Much has Changed in 10 years...

2003

2013

2004

2012

2011 2010

2009 2008

2007

2006 2005

VIDEO: Skype launches

WIFI: Intel adds Wifi to chips

SEARCH: Google IPOs

SOCIAL MEDIA: Facebook launches

M&A: eBay acquires Skype for $2.5bn

VIDEO: YouTube launches

MICRO-BLOGGING / NEWS: Twitter launches

M&A: Google acquires YouTube for $1.6bn

MOBILE: Apple introduces first iPhone

MOBILE: Amazon introduces Kindle

SEARCH: Google processes over 1tn URLs

TABLET: Apple introduces first iPad

IPO: Facebook is 3rd largest IPO ever ($16bn raised / $104bn valuation)

MOBILE: Apple releases its 6th gen iPhone; RIM faces market difficulties

MOBILE: Smartphone sales beat PC sales for the first time ever

M&A: Dell is taken private in a $5.5bn LBO

M&A: Facebook acquires Instagram for $1bn

SOCIAL: Instagram launches

M&A: Microsoft acquires Skype for $8.5bn

FINTECH: Square is launched

M&A: Google acquires Motorola for $12.9bn

LOCAL: Groupon launches

IPO: Groupon IPOs ($700m raised / $13bn valuation)

Within the past 10 years, we have seen the widespread adoption of wifi, invention of social media, revolution-ization of what it means to be “mobile” and landmark M&A and IPO events as technology giants work to gain and maintain market share

CLOUD: Dropbox’s launches

3 Source(s): Internet Research

…and Markets are Back on The Rise

S&P 500 NASDAQ

As the S&P and Nasdaq have reached 10-year highs, the IPO market has responded, with 2013 launching over 180 IPOs and raising $45bn, the highest deal values since 2007

1000

1500

2000

2500

3000

3500

4000

4500

5000

5500

500

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900

1100

1300

1500

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1900

$15

$43 $34

$42 $49

$25 $22

$39 $36 $42 $45

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 YTD

Twitter raised $1.82bn in its IPO, bringing 2013 total

deal volume to $45bn+ IPO deal volume ($bn)

16% The average first day pop in 2013, the highest level within the last 10 years 9 Companies that have raised

more than $1bn in their IPOs, the largest number in 5 years

4 Source(s): Renaissance Capital

Top Tech IPOs Raised $21bn+ Since 2012

1

5

4

3

2

6

10

9

8

7

5

11

12

13

14

15

May – 2012 $16bn raised @ $38/sh

Oct – 2012 $733m raised @ $28/sh

Jun – 2013 $395m raised @ $17/sh

Sep – 2013 $304m raised @ $20/sh

Apr – 2012 $264m raised @ $17/sh

Jul – 2012 $260m raised @ $42/sh

May – 2013 $254m raised @ $31/sh

Mar – 2012 $162m raised @ $19/sh

Sep – 2013 $162m raised @ $9/sh

Jan – 2012 $132m raised @ $13/sh

Sep – 2013 $131m raised @ $26.50/sh

Apr – 2012 $120m raised @ $16/sh

Source(s): Dealogic, Internet Research

Jul – 2013 $191m raised @ $21/sh

Jun – 2012 $240m raised @ $18/sh

Nov – 2013 $1.8bn raised @ $26/sh

Tech M&A Market is Back Open for Business

$29 $33

$21 $21

$10 $14

$28

1Q 12 2Q 12 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13

Software Internet Semiconductor IT Services Hardware / Networking

Tech M&A has seen a steady increase throughout 2013, with a significant boost in 3Q 13 due to the Software subsector

IPO deal volume ($bn)

As software becomes increasingly cloud-based and thus accessible to a wider enterprise audience, driving robust recurring revenues, acquirers seek software companies with technology that target specific solutions yet can be integrated into larger offerings

6 Source(s): PWC, 451 Research

Multiples Are Up Software companies continue to receive the highest multiples in 2013, while Hardware / Networking, Internet, and Semiconductor companies enjoyed significant boosts to their multiples

1.4x 1.6x 2.3x

3.3x

8.0x

1.3x

3.4x 4.0x

5.3x

8.2x

IT Services Semiconductor Internet Hardware /Networking

Software / SaaS

Enterprise Value / Revenue Multiples

2013 2012

6.0x Average 2013 Multiple Across Subsectors 4.7x Average 2012 Multiple

Across Subsectors

7 Source(s): 451 Research Note(s): Excludes acquisitions of non-US targets

Top 2013 US Target / US Acquirer Deals

Date Target Acquirer Target Description Deal Value ($m)

EV / Revenue

1 Feb-13 Silver Lake Partners / Michael Dell Computer & IT systems provider $24,811 0.4x

2 Sep-13 Electrical connector manufacturer $7,200 1.9x

3 May-13 PE Consortium Systems management software provider $6,900 3.2x

4 May-13 Mortgage loan origination software $2,900 2.0x

5 Jul-13 Intrusion detection & prevention & anti-malware $2,700 10.7x

6 Jun-13 Marketing automation SaaS provider $2,500 7.6x

7 Feb-13 Session border controllers provider $2,063 5.9x

8 Jun-13 Online automotive reference content $1,400 3.5x

9 Feb-13 Prepaid payment cards provider $1,400 4.1x

10 Aug-13 Commercial aviation communications & data $1,390 -

Average 4.4x

The average multiple for the top 10 deals in which a US target is acquired by a US company is 4.4x revenue, skewed by Dell’s LBO, the biggest deal of 2013 at $24.8bn

8 Source(s): 451 Research Note(s): Excludes asset acquisitions

Top 2013 US Target / European Acq. Deals

Date Target Acquirer Target Description Deal Value ($m)

EV / Revenue

1 Oct-13 Device identification & anti-fraud software

$310 14.1x

2 Jul-13 Power supply & LED driver semiconductors

$310 -

3 Oct-13 Optical transport systems provider $264 1.2x

4 May-13 Manufacturing operations management software

$205 4.1x

5 Jun-13 Video surveillance systems & recording software

$150 -

6 Apr-13 Genomic bioinformatics SaaS $105 5.3x

7 Aug-13 Professional services automation SaaS

$70 -

8 Jul-13 IT BSM & network monitoring SaaS $50 7.1x

9 Feb-13 Mobile video traffic software $50 10.2x

10 Aug-13 Operational intelligence visualization software

$40 4.0x

Average 6.6x

Meanwhile, US targets acquired by European companies have a higher revenue multiple at 6.6x, although deal sizes are smaller

9 Source(s): 451 Research Note(s): Excludes asset acquisitions

Top Active Acquirers Have Changed…

@WalmartLabs, Automattic, CSC, GoDaddy, IMS Health, Intel, Lexmark, Maxim Integrated Products, Shutterfly, TripAdvisor

2013 YTD 2012

While the software subsector may have the greatest deal volume, consumer-facing companies made the most acquisitions in 2013 YTD

10

= 1 acquisition

Source(s): 451 Research Note(s): Includes acquisitions involving US acquirer or US target; Excludes asset acquisitions

…Leading to New Kids On The Block…

After making only 9 acquisitions

between 2010 and 2012, Yahoo has

jumped to 21 acquisitions, mainly

“acqui-hires”

A newcomer to the tech M&A space,

@WalmartLabs has made 4 acquisitions

in the analytics / social network

space to enhance its online sales and

hire engineers

The fast-growing ERP company has

made 5 acquisitions,

predominantly building out its

services for retailers

The privately-held owner of

Wordpress raised $125m in 2013 and

made 3 software and 1 domain name

acquisition

The year after its IPO, Proofpoint made 4 spam /

malware acquisitions totaling

$55m

There are new names in the top M&A acquirers of 2013, ranging across subsectors

11 Source(s): 451 Research Note(s): Excludes asset acquisitions

…And Continuing the Acqui-Hire Trend The most powerful people in tech are hiring their next wave of innovators by acquiring smaller start-ups

19 acqui-hires

Midnox Mobile Technologies

Monoidics spaceport.io

Osmeta Hot Studio Storylane

Bread Labs IQ Engines

Ztelic AdMovate

Xobni Qwiki

Bignoggins Rondee

GhostBird Palaran

Tumblr Loki Studios

MileWise Go Poll Go Todoroo Summ.ly

Jybe Propeld Snip.it

7 acqui-hires

Marakana Lucky Sort

Ubalo We Are Hunted

Crashlytics

5 acqui-hires

Flexicorp Flutter

Wimmlabs Waze Wavii

DNNresearch

6 acqui-hires

12 Source(s): 451 Research Note(s): Acqui-hires defined based on press articles and releases

How to Win in M&A in 2014: Blunt Advice

Not everyone can sell to Yahoo, Google, or Microsoft so embrace non-traditional buyers

Execute on your strategic plan and often the right buyer will find you

You can’t be something to everyone. Too many tech companies get spread thin by concentrating on multiple things instead of doing one thing better than anyone else

Know when your exit is available and when the valuation is right. “Pigs get slaughtered!”

Embrace Timing 1

4

3

2 Be Open-Minded

Focus on Your Core Market

“Good Companies are Bought, Not Sold”

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About Our Firm We are the leading advisor to companies seeking to build and realize value in the global marketing, technology, communications, and healthcare industries. Our services include M&A, capital raising, and business consultancy

US Technology Bank Global Joint Venture

AdTech Marketing / Digital Agencies

Media / Content E-Commerce

SaaS

AdTech Software

Marketing / Digital Agencies Healthcare IT

Our sole mission is to help you maximize your company’s growth and enterprise value. Whether you need a capital partner, an exit, a door opened or just some good advice, our experienced team will guide you through your options and help you execute to the best possible outcome

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Our Global Team Our international presence consists of ten offices throughout Europe, North America, Latin America, Asia-Pacific, Middle East and North Africa, with headquarters in the heart of London and New York City

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Our M&A experience in every major territory across the globe is unrivalled; we have completed more than 200 transactions over the past 22 years

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