the realities of the exit€¦ · technology m&a market overview source: 451 group and...

Dave Kalez – Managing Director, Energy & Industrial Technologies

[email protected]

KBCM Technology Group

The Realities of THE EXIT

I. Technology Market Dynamics

29% 25%

U.S. Tech IPOs All IPOs

26%

16%


16% 12%


2017 2018

2019 YTD2018*

8% 17%

60%66%

32% 17%


2017

29% 16%

57% 65%

14% 19%


Current Technology IPO Environment

LTM IPO Highlights

• U.S. Tech IPO Volume: 53 deals raising $25 billion; up 8% on

average post offer

‒ S-1 Filers: 21 deals raising $15 billion; up 37% on average

‒ F-1 Filers: 32 deals raising $9 billion; down 10% on average

• U.S. IPO Volume – All Sectors: 171 deals raising $50 billion; up 8%

on average

2

Pricing Performance Environment[1]

LTM Technology IPOs:

2019 YTD2018

Above Range

Within Range

Below Range

Aftermarket Performance Environment – Offer to 1 Day

2019 YTD

Aftermarket Performance Environment – Offer to Current

2017*

32%

18%


6% 13%

69%73%

25% 14%


Pricing Date Issuer Sector Deal Value ($M) Offer / Mkt Cap % Sec. Shrs.

Pricing to

Range[1]

Offer to

Current

05/16/19 Fastly Software $207 13% 0% In Range 25%

05/09/19 UBER IDM $8,100 10% 0% In Range (8%)

05/09/19 Sonim Technologies Hardware $39 18% 0% Below 33%

04/17/19 Zoom Software $864 8% 47% Above 111%

04/10/19 PagerDuty Software $250 12% 6% Above 93%

03/28/19 Lyft IDM $2,556 10% 0% In Range (17%)

10/18/18 SolarWinds Software $375 8% 0% In Range 13%

10/11/18 Anaplan Software $303 12% 0% In Range 146%

10/04/18 Elastic Software $290 9% 0% Above 121%

10/02/18 Upwork IDM $215 11% 52% Above (5%)

09/25/18 SVMK Software $207 13% 0% Above 35%

09/19/18 Eventbrite IDM $265 13% 0% In Range (31%)

08/02/18 Arlo Technologies IDM / Hardware $188 16% 0% Below (79%)

08/01/18 Sonos IDM / Hardware $240 16% 58% Below (34%)

07/25/18 Tenable Software $288 14% 0% Above 12%

07/24/18 Bloom Energy Energy & Ind. Tech $311 20% 0% In Range (29%)

06/28/18 Domo Software $222 42% 0% In Range 47%

06/27/18 EverQuote IDM $84 19% 33% Above (40%)

06/26/18 Lovesac IDM $64 32% 0% Above 128%

06/20/18 i3 Verticals Fin Tech $99 30% 0% In Range 90%

06/14/18 Avalara Software $207 13% 0% Above 173%

05/09/19 Jiayin Group Fin Tech $37 7% 0% In Range 5%

05/08/19 HeadHunter Group IDM $220 33% 100% In Range 27%

05/03/19 Yunji IDM $121 5% 0% In Range 0%

05/02/19 So-Young International Fin Tech $179 12% 0% Above 16%

04/11/19 Jumia Technologies IDM $225 20% 0% In Range 78%

04/10/19 Tufin Software Software $124 23% 0% In Range 58%

04/03/19 Ruhnn Holdings IDM $125 12% 0% In Range (71%)

03/19/19 Up Fintech Fin Tech $120 10% 0% Above (44%)

03/07/19 Futu Holdings Fin Tech $104 7% 0% In Range (15%)

12/13/18 360 Finance Fin Tech $51 2% 0% In Range (10%)

12/11/18 Tencent Music Entertainment IDM $1,066 5% 50% In Range (1%)

12/04/18 Mogu IDM $67 5% 0% In Range (66%)

11/20/18 TuanChe IDM $20 4% 0% In Range (49%)

11/14/18 Weidai Fin Tech $45 6% 0% In Range (4%)

10/24/18 Pintec Technology Fin Tech $50 10% 0% In Range (52%)

10/24/18 StoneCo Fin Tech $1,400 21% 14% Above 3%

10/18/18 Niu Technologies IDM $63 9% 0% Below (20%)

09/27/18 CooTek IDM $52 7% 0% In Range (25%)

09/26/18 LAIX IDM $72 11% 0% In Range (21%)

09/25/18 Arco Platform IDM $224 26% 0% In Range 125%

09/24/18 Viomi Technology IDM $103 17% 0% In Range (6%)

09/20/18 Farfetch IDM $1,018 16% 24% Above (3%)

09/19/18 X Financial Fin Tech $105 7% 0% In Range (55%)

09/13/18 Qutoutiao IDM $97 6% 0% In Range (39%)

09/12/18 NIO IDM $1,152 18% 0% In Range (53%)

09/12/18 111 IDM $100 9% 0% In Range (45%)

07/26/18 Endava IT & Other Svcs. $146 14% 50% Above 89%

07/26/18 Opera IDM $115 9% 0% In Range (13%)

07/25/18 Cango IDM $47 4% 0% In Range (53%)

07/25/18 Aurora Mobile Software $77 8% 0% In Range (17%)

07/25/18 Pinduoduo IDM $1,743 8% 0% In Range 0%

06/27/18 Uxin IDM $225 9% 0% Below (76%)

Mean: $465 13% 8% 8%

Median: $184 11% 0% (5%)F-1 issuers on US exchanges

26%

18%


20% 23%


Source: Dealogic. Excludes CLEFs, FICPs, FIAQs, SPACs, BDCs, and offerings <$20mm. Market Data as of 6/3/2019. Charts reflect means

*Offer to current as of respective year end for 2017 and 2018

[1] Offer price relative to filing or revised range

Technology M&A Market Overview

Source: 451 Group and Bloomberg New Energy Finance as of May 31, 2019.

Note: Excludes acquisition of customer base and reverse acquisitions.

YTD Deal Count by Sector

3

YTD Disclosed Deal Count and Median Deal Size

337

61

142 134 191

21 23

909

347

89 110 124

204

37 22

933

339

60 77 95 171

44 24

810

Software FinTech IDM Comms Tech Services HR Tech E&I Tech Total

2017YTD 2018YTD 2019YTD

111

19 43 48 36 5 9

271

100

28 28 39 47 12 7

261

69

15 15 26 10 7 5

147

$42$85 $60 $54

$20

$70 $75$52

$84$115

$18

$90$54

$16$37

$50$100

$500

$40$82

$38

$157$101

$67

$2

$20

$200

$2,000

$20,000

0

50

100

150

200

250

300

Software FinTech IDM Comms Tech Services HR Tech E&I Tech Total

Me

dia

n D

ea

l Size

($ in

millio

ns)

YT

D D

isclo

se

d D

ea

l Co

unt

2017YTD Disclosed 2018YTD Disclosed 2019YTD Disclosed Median Deal Size

Technology Private Placement Activity Overview

Source: PitchBook, National Venture Capital Association 4

Early Stage VC Deal Count

Median Pre-Money Valuation – Early Stage VC ($M) Median Pre-Money Valuation – Late Stage VC ($M)

$17

$22 $24

$21

$29 $28 $30

$44

$33

0

500

1,000

1,500

2,000

2,500

3,000

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q

2017 2018 2019

De

al

Co

un

t

De

al

Va

lue

($

B)

Deal value ($B) Deal count Angel & Seed Early VC Later VC

$7.0 $7.5

$20.0 $22.0

$55.0

$70.0

$0

$10

$20

$30

$40

$50

$60

$70

$80

Angel & Seed Series A Series B

$115.0 $102.5

$325.0 $345.0

$0

$50

$100

$150

$200

$250

$300

$350

$400

Series C Series D+

II. Industrial Technology Market Dynamics

Deal Stats Metrics at Pricing Aftermarket

Description

Deal

Type Exchange

Pricing

Date

Offering

Price ($)

Offering

Size ($M)

Initial Offering

Range

Price to

Range

Market

Cap ($M)

EV /

FCY

Rev.(1)

FCY

Rev.(1)

Growth

EV /

FCY EBITDA

LTM

EBITDA % T + 1

Offer to

Current

Designs, develops and produces photovoltaic products in the

People’s Republic of China and internationally.FO NYSE 5/14/19 $ 16.00 $ 75 $17.69 - $17.69 Above $ 762 0.6x 0% 8.1x 6% 9% 24%

Provides technology based solutions in the defense and critical

infrastructure markets.IPO NYSE 5/7/19 27.00 575 $26.00 - $28.00 Within 2,610 NA NA NA 7% 11% 16%

Designs, manufactures, and sells electric vehicles, and energy

generation and storage systems.FO Nasdaq 5/2/19 243.00 862 $234.01 - $234.01 Above 43,159 2.2x 18% 22.6x 8% 5% (23%)

Develops computer vision related technologies in Australia, North

America, the Asia Pacific, Europe, and internationally.FO AIM 4/23/19 0.03 35 $0.03 - $0.03 Within 266 6.7x 0% -15.2x (154%) 33% 38%

Designs, manufactures, and markets professional, medical,

industrial, and commercial products and services worldwide.FO NYSE 2/26/19 123.00 1,488 $123.15 - $123.15 Below 87,787 4.5x 0% 18.0x 24% 3% 7%

Develops scanning technology that provides high-resolution

miniature projection, and three-dimensional sensing.FO Nasdaq 12/7/18 0.60 4 $0.79 - $0.79 Below 79 1.4x 142% NM (105%) (5%) 37%

Provides distributed solar energy primarily to residential customers

in the United States.FO NYSE 11/29/18 5.50 44 $7.00 - $7.00 Below 835 5.7x 13% NM (11%) (1%) 16%

Provides three-dimensional (3D) printers and on-demand parts

services to industrial and commercial customers worldwide.FO NYSE 10/17/18 2.57 14 $3.75 - $3.75 Below 76 1.8x 29% NM (29%) (4%) (32%)

Develops next-generation electric cars designed to shape the

future of mobility in the hopes of establishing a sustainable future.IPO NYSE 9/12/18 6.26 1,002 $6.25 - $8.25 Within 6,886 2.1x 334% NM NM 5% (51%)

Designs, develops, and manufactures semiconductor and fiber

lasers.FO Nasdaq 9/6/18 26.50 137 $30.81 - $30.81 Below 977 3.7x 21% 20.9x 15% 2% (29%)

Develops, manufactures, and markets energy storage and power

delivery products worldwide.FO Nasdaq 8/8/18 3.25 25 $3.60 - $3.60 Below 152 1.1x 24% 71.8x (56%) (100%) (100%)

Provides smart connected devices to monitor environments in real-

time with a Wi-Fi or a cellular network.IPO NYSE 8/2/18 16.00 163 $18.00 - $20.00 Below 1,163 1.5x 32% NM 2% 38% (78%)

Designs, manufactures, and sells solid-oxide fuel cell systems. IPO NYSE 7/25/18 15.00 311 $13.00 - $15.00 High End 1,747 4.9x 17% 34.8x (4%) 40% (28%)

Provides additive manufacturing software and 3D printing services

in Europe, the Americas, Africa, and the Asia-Pacific.FO Nasdaq 7/23/18 13.00 39 $12.59 - 412.59 Above 669 3.0x 14% 22.8x 11% (2%) 17%

Provides application-specific semiconductors for the Internet of

Things (IoT) era.FO Nasdaq 7/10/18 6.00 46 $8.80 - $8.80 Below 191 1.4x 51% 13.5x (3%) 0% 25%

Industrial Tech Public Offerings Overview

6

Initial Public Offerings

Market data as of 5/31/19

Sources: Dealogic, Capital IQ

• Public equity offerings of industrial technology companies have been few and far between in last 12 months

• Due to the nascency of many technologies in the space, few players have reached sufficient scale to be viable public offering candidates

• Additionally, the mission critical applications of many industrial technology solutions makes them highly desirable M&A targets for established industrial companies

LTM Industrial Technologies Public Equity Offerings

Industrial Tech M&A Overview

7Sources: 451 Research

• M&A activity in industrial tech remains strong, propelled by the continued digitalization of “industry”

• Operational technology vendors are investing billions to strengthen their software capabilities

• Industrial software acquisitions also continue to command the highest transaction multiples amongst industrial tech

24

42

2517

10

21

7

15

28

10

5

3

7

4

GE Siemens SchneiderElectric

ABB RockwellAutomation

Honeywell Bosch

Non-Software Tech Software

Software vs. Non-Software Tech Acquisitions: 2010 - Present Industrial Tech M&A: Avg. Multiples Paid 2010 - Present

2.1x

3.2x

5.1x

Industrial Tech Hardware /Services

Industrial Tech Platform

Industrial Software

Digital Transformation Reshaping the Global Economy


LTM additions

(Continued on next page)

BLUE IRON

SYSTEMS

9

1

3

10

2

3



LTM additions


0

1

0

0

1

1



LTM additions


BLOWDOWN(SULSIM 7 ASSET)

PSVPLUS

0

1

1

1

0

3

Industrial Tech & Industrial Investments by Financial Sponsors


Industrial Technology and Industrial Software LTM additions

4

8

5

8

3

3

0

III. Top 7 Myths & Realities of Tech M&A

Myth: Sellers should begin a process as soon as

possible to take advantage of favorable market

conditions

Reality: Company-specific factors should be

weighed as heavily as market conditions

▪ Factors such as Company size, growth, recent customer wins and potential to meet

projections are all critically important

▪ Important to consider management’s availability, timing of new customers, financial

performance or any other changes that can disrupt a process

▪ A failed M&A process is much worse than no process at all

14

Myth: Pick the advisor that gives me the highest valuation

range in the pitch

Reality: Purchase price is only part of the transaction

▪ Execution strategy should be of utmost importance

▪ Form of currency, reps & warranties, indemnification provisions, escrow and other key

provisions are often substantially more important

▪ Long-term strategic fit can significantly enhance valuation overtime

16

Myth: Buyers are going to throw advisors and accountants

into diligence during the final stages so it’s not necessary to

do a lot of that work up front

Reality: Time is the enemy of all deals when you’re

negotiating with a buyer(s)

▪ An organized process signals commitment, credibility and control

▪ Doing the work up front will mitigate execution risk

▪ Have a defined strategy and agreed upon timeline in place

▪ Hold all parties accountable through the entire process

18

Myth: A high number of IOIs (initial bids) will lead to a high

number of LOIs (final bids)

Reality: Potential buyers can (and do) exit a process at any

time without prior notice

▪ Critically important to keep buyers engaged following first round bids – important role of

IB advisor

▪ Need to have the next steps of the process (management presentations, data room,

etc.) “ready-to-go” to sustain process momentum

▪ Having multiple options to consider enhances likelihood of a successful close at an

attractive valuation

20

Reality: While being accretive is important, the strategic

value of perceived synergies they can gain from the specific

technology they are acquiring is the primary driver

▪ Target-specific factors as well as process dynamics play a very significant role in

influencing valuation

▪ Two companies with similar products and financial profiles may garner significantly

different valuations

▪ The more comfortable an acquirer is with technology, customer opportunities and

financial dynamics, the higher the valuation

22

Myth: Strategic acquirers’ purchase multiples are always a

product of their own valuation or what they have paid

historically

Myth: A Company’s Board and executive team offer the best

valuation perspective heading into a sale

Reality: Valuation expectations of management are often

significantly overinflated

▪ Strategic acquirers will value the Company based on the expected synergies that can be

realized

▪ Don’t rely on comments made during a “courting process”

▪ Financial sponsors will only look at deals from an ROI perspective

24

26

Myth: A broad process will always provide the highest

valuation

Reality: A targeted or pre-emptive process can result in a

very high premium as investors will price-in exclusivity and

synergies

▪ Don’t underestimate the power of knowledge and familiarity

▪ Perceived synergies leads to enhanced shareholder value

▪ Fear Of Missing Out

Disclosure

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28

the realities of the exit€¦ · technology m&a market overview source: 451 group and...

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