Information and communication technology

Transcription

1 MARKET SNAPSHOT 2014 ICT Information and communication technology

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3 3 Content ICT Market OVERVIEW 6 IT-SERVICES & -CONSULTING 10 ENTERPRISE SOFTWARE 16 INFRASTRUCTURE & EQUIPMENT 24 MUMMERT & COMPANY 30 Excellence in Execution

4 4 Editorial In order to achieve our goal of maximizing value for our clients on M&A transactions, we need to assess and negotiate strategic and commercial value. Technology companies are unique in this respect and we have therefore developed proprietary Mummert & Company indices for our Information & Communications Technology ( ICT) clients in the following sectors: IT-Services & -Consulting ICT Infrastructure & Equipment Enterprise Software Application Software Infrastructure Software The first sector, IT-Services & -Consulting, has experienced strong consolidation in all three subsectors. IT System Houses are under fierce price pressure, but can benefit from economies of scale in purchasing and logistics. In IT-Services, we see declining prices in commodity services such as desktop services, but higher margins in specialty competencies such as legacy data migration. ITConsulting remains the most profitable subsegment, in particular for those companies that can leverage a lower cost consulting force based on well documented project workflows. For the second sector, Enterprise Software, we will distinguish between Application Software and Infrastructure Software companies. Both subsectors continue to be highly attractive, offering scale and relatively low capital expenditures. Enterprise Software has therefore become an increasingly interesting investment target for financial investors. Both license fee and SaaS based business models allow for strong growth rates with little downside risk once the installed base has reached critical size. In some of our software transactions, banks have financed close to six times EBITDA for leveraged buy-outs based on the targets strong cash flows. The third sector, Infrastructure & Equipment, also shows strong valuations. Many datacenter and web-hosting companies are highly profitable with EBITDA margins in excess of 40% for more than a decade. And those margins are often still increasing.

5 5 This snapshot is based on our global analysis of 157 stock listed companies that we cover on an ongoing basis and over 1,500 comparable transactions. The geographical split of the 157 stock listed companies covered is as follows: Asia Pacific 7% 68% 25% 157 Stock Listed Companies In recent years, Mummert & Company has completed many transactions in all three sectors. Our goal is to be the market leading M&A advisor in the German speaking region to clients in these sectors. We wish you continued success and hope that this snapshot serves as a basis for an ongoing dialogue. Best regards, Harald Maehrle Philip Stein Excellence in Execution

6 6 Key Trends 1. Cloud Computing 4 0% of German companies use cloud computing Virtualization will provide cost optimization and eff iciency enhancement in the IT-infrastructure M obile devices and the development of high speed internet access will spur further cloud innovations 2. Big Data D istributed data storage, next generation data centers and data virtualization will enable dynamic data handling L inguistic and semantic data analysis tools will increase eff iciency and allow for better business intelligence 3. IT-Security I n the aftermath of the NSA scandal, IT security is the high-priority topic S olutions include anti-virus software and f irewall protection, and more advanced applications such as cyber attack detection systems and anti-theft software A mong CIOs, implementing and monitoring security guidelines (e.g. BYOD) plays a key role 4. Mobile Computing M obile devices will become more capable of running business applications B usiness processes will be more eff icient, as employees can access company resources from anywhere M obile computing will enhance communication through advanced f ile sharing and video conferencing 5. Industry 4.0 I ndustry 4.0 is the next wave of digitalization in production and manufacturing, allowing for cross-company integration and cross-site networking I ndustry 4.0 enables the development, production and care of solutions via the internet leading to more flexible and eff icient processes

7 7 Mummert & Company Technology Indices In the last ten years, the Mummert & Company technology indices have significantly outperformed both the S&P 500 and the DAX 30. The bottom chart demonstrates that much of this valuation premium is based on above average sector growth. STOCK PRICE DEVELOPMENT OF Mummert & Company INDICES BENCHMARKED TO S&P 500 AND DAX % 130% 110% 90% 70% 50% 30% 10% (10%) (30%) (50%) Dec-2005 Dec-2006 Dec-2007 IT-Services & -Consulting S&P 500 Dec-2008 Dec-2009 Infrastructure Software Dec-2010 Dec-2011 Application Software Dec-2012 Dec- Infrastructure & Equipment DAX 30 Note: (1) Comparison of price indices, not performance indices SUB-SECTOR-ANALYSIS: REVENUE GROWTH 13-14E VS. EBITDA MULTIPLE 14E X-Axis: EV/ EBITDA 14E; Y-Axis: Revenue growth 13-14E 14.0% BI/ CRM/ SCM 12.0% Hosting 10.0% Datacenter ECM / HCM / Payroll NPM System Management 8.0% 6.0% 4.0% IT-Consulting Network & Hardware System Houses ERP BPM 2.0% IT-Services 0.0% 6.0x 8.0x x Source: Capital IQ, Mummert & Company Excellence in Execution

8 8 Global Valuation Overview INFRASTRUCTURE & EQUIPMENT EV/ EBITDA 14E 0.4x 6.7x 7.3x 0.6x 8.3x APPLICATION SOFTWARE System Houses INFRASTRUCTURE SOFTWARE ENTERPRISE SOFTWARE IT-SERVICES AND -CONSULTING EV/ SALES 14E IT-Services IT-Consulting 1 System Houses 2.9x 11.8x 12.8x ERP BI / CRM / SCM ECM / HCM / Payroll ERP 2.5x 1 BI / CRM / SCM Business Processes 14.7x 11.5x Network Performance 2 Network Performance 10.7x 9.6x 4.6x 9.9x 1.8x Hosting Systems Management 1 Business Processes Systems Management 2 8.5x 3.5x ECM / HCM / Payroll 2.4x 2 IT-Consulting 11.1x 2.5x IT-Services Datacenters Network & Hardware Hosting 1 Datacenters Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used 2 Network & Hardware Source: Capital IQ, Mummert & Company

9 9 Content ICT Market OVERVIEW 6 IT-SERVICES & -CONSULTING 10 ENTERPRISE SOFTWARE 16 INFRASTRUCTURE & EQUIPMENT 24 Mummert & Company 30 Excellence in Execution

10 10 Stock Listed Companies IT-Services & -Consulting EV/ SALES EV/ EBITDA 0.6x SYSTEM HOUSES Asia Pacific 0.2x 0.5x IT-SERVICES 1 EV/ EBITDA 3.4x Asia Pacific 2.6x 0.6x 0.6x 10.5x 8.5x 7.4x 7.6x 0.6x 13.8x Asia Pacific 0.6x 6.5x EV/ SALES 1 EV/ EBITDA 3.1x Asia Pacific IT-CONSULTING 10.6x 7.8x EV/ SALES 2.5x 0.7x 10.1x 9.1x 8.0x 0.6x 1 2.4x 1 Asia Pacific 7.5x 6.7x 0.5x 6.5x 0.2x 10.7x Asia Pacific 0.6x 6.8x Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used 1 Source: Capital IQ, Mummert & Company

11 11 StocK listed companies It-ServIceS & -consulting SyStem houses X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% 6.0x 8.0x x (10.0)% Note: (1) Cancom SE: Acquisition of HPM Inc. (Rev 13: 44m) and DIDAS Business Services GmbH (Rev 13: 56m) in February and April 2014, respectively It-ServIceS X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% 6.0x 8.0x x x (10.0)% Note: (1) CTG: Sale of several international activities in ; (2) CSC: Divestiture of more than 1bn in revenue in ; (3) SAIC: Split into two new companies in : SAIC and Leidos It-conSultIng X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% 6.0x 8.0x 1 (10.0)% Note: (1) GFT: Acquisition of 80% stake in Sempla Srl (Rev 12: 44m); (2) NTT Data: Acquisition of Everis Group (Rev 13: 591m) in Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used excellence In execution Source: Capital IQ, Mummert & Company

12 12 Global Comparable Transactions IT-Services & -Consulting Across all sub-sectors System Houses IT-Services IT-Consulting NUMBER OF TRANSACTIONS /14 SALES-MULTIPLES / x 9.4x 0.9x Sub-sample of multiples available for calculation EBITDA-MULTIPLES 11.2x 8.3x 7.3x / Sub-sample of multiples available for calculation While sales multiples of c. paid for IT-Services and -Consulting companies have been fairly stable over time, EBITDA multiples have decreased in /14 transactions. However, EBITDA margins have increased in the same period. Buyers seem to challenge the sustainability of such higher margins. Source: Mergermarket, Mummert & Company

13 13 case Study consinto It-ServIceS & -consulting THE DEAL REVENUES: 48M Sell Side EBITDA: ~10% EMPLOYEES: 310 sold CUSTOMERS: >120 to OUR CLIENT We advised Aurelius on the sale of Consinto. Aurelius is a publicly listed investment holding. It specializes in acquiring companies with development potential and in providing them with operational support. Aurelius acquired Consinto from Thales Group in THE TARGET At the time of its sale to Datagroup, Consinto was a very profitable provider of IT consulting, IT services and outsourcing solutions. With over 310 employees the company has established a loyal and high profile customer base. THE ACQUIRER Datagroup is one of the leading German IT-Services companies. It offers IT consulting, integration services and operations in its own data centers. Datagroup is listed on the German Entry Standard Exchange. In, Datagroup reported annual sales of EUR 156.9m (+7.4%) and EBITDA of EUR 12.6m. Datagroup identified many cross selling opportunities. After the acquisition of Cosinto, DEAL RATIONALE Datagroup could offer its customers full service solutions for their existing and new SAP installations. The acquisition also supported Datagroup s strategy to increasingly offer higher value add solutions such as SAP related services. OUTCOME Both Aurelius and Datagroup have benefited from this transaction. Aurelius has generated high returns on its initial investment in Consinto. Datagroup has significantly improved its positioning and breadth of services. The stock price development of both firms supports the transaction. aurelius ag, Share pricing ( ) datagroup ag, Share pricing ( ) Jan-2012 Apr-2014 Jan-2012 Source: Capital IQ excellence In execution Apr-2014 Source: Capital IQ

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15 15 Content ICT Market OVERVIEW 6 IT-SERVICES & -CONSULTING 10 ENTERPRISE SOFTWARE 16 Application Software Infrastructure Software INFRASTRUCTURE & EQUIPMENT 24 Mummert & Company 30 Excellence in Execution

16 16 Stock Listed Companies Application Software EV/ SALES EV/ EBITDA 2.6x ERP 3.3x BI/ CRM/ SCM 9.0x 8.2x EV/ SALES 30.0x EV/ EBITDA 3.1x 1.9x 12.1x 15.1x 1.9x 19.5x 2.8x 11.4x EV/ SALES ECM/ HCM/ PAYROLL 11.1x 3.3x 12.9x 2.9x 30.0x EV/ EBITDA 3.9x 3.5x 2.5x 19.3x 16.4x 2.3x 16.3x 12.8x Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used 30.0x Source: Capital IQ, Mummert & Company

17 17 StocK listed companies application Software erp X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% x x x x 30.0x x x x 50.0x x (10.0)% Note: (1) Sage: Divestiture of most of its North American Operations in BI/ crm/ Scm X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% 2 (10.0)% Note: (1) SHS Viveon: Expectation of strong revenue growth in 2014; (2) Vocus: To be acquired for US$ 18 per share by CTCR ecm/ hcm/ payroll X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% x x 4 (10.0)% Note: (1) Open Text: Acquisition of GXS (Rev 12: 369m) for 861m in November ; (2) Verint: Acquisition of KANA Software (Rev 14E: 110m) for 377m in January 2014; (3) Click Software: Acquisition of SaaS company Xova in March 2014 Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used excellence In execution Source: Capital IQ, Mummert & Company

18 18 Stock Listed Companies Infrastructure Software BUSINESS PROCESSES EV/ SALES EV/ EBITDA 2.7x 2.3x NETWORK PERFORMANCE 9.0x 8.2x EV/ SALES 30.0x EV/ EBITDA 2.6x 12.3x 20.5x 2.6x 13.4x 2.1x 14.7x EV/ SALES SYSTEMS MANAGEMENT 9.3x 2.3x 11.9x 2.5x 30.0x EV/ EBITDA 3.2x 4.8x 16.5x 2.8x 12.4x 12.2x 10.7x Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used 30.0x Source: Capital IQ, Mummert & Company

19 19 StocK listed companies InfraStructure Software BuSIneSS processes X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% x x x (10.0)% (15.0)% (20.0)% (25.0)% network performance X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% 1 (10.0)% (15.0)% (20.0)% (25.0)% SyStemS management X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0)% 1 (10.0)% (15.0)% (20.0)% (25.0)% Note: (1) Compuware: Sale of Changepoint, Professional Services and Uniface business in 2014 Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used excellence In execution Source: Capital IQ, Mummert & Company

20 20 Global Comparable Transactions Enterprise Software Application Software Infrastructure Software ERP Business Processes BI/ CRM/ SCM Network Performance ECM/ HCM/ Payroll Systems Management NUMBER OF TRANSACTIONS x 1.9x /14 SALES-MULTIPLES 1.9x 1.5x 1.2x / Sub-sample of multiples available for calculation EBITDA-MULTIPLES 9.9x 11.3x x / Sub-sample of multiples available for calculation Enterprise Software is the segment with the highest M&A activity. Each year, we count almost 1,000 transactions globally. Companies in this segment are highly profitable. This leads to sales multiples of close to. Based on strong sales growth and sticky customer bases, EBITDA multiples are typically above 10x. Source: Mergermarket, Mummert & Company

21 21 case Study proalpha enterprise Software THE DEAL Sell Side REVENUES: 55M EBITDA: 12M EMPLOYEES: 530 was sold to CUSTOMERS: 1,600 OUR CLIENT We advised the shareholders of proalpha on the sale of the company. After successfully building the business for the last 22 years, the founders of proalpha have decided to sell the company. Two of the three founders wanted to retire from daily operations as part of the transaction. Financial investor Beaufort Capital, who was also a significant shareholder, decided to exit alongside the founders. THE TARGET proalpha is the largest privatly held ERP software company in Germany. In 2012, the company generated annual sales of c. EUR 55m with an EBITDA margin in excess of 20%. THE ACQUIRER Bregal Capital is an investment firm of the Brenninkmeijer family with fund commitments of more than 3bn that has invested in more than 20 companies since its inception. Bregal Capital is currently investing from its third fund with a volume of 1bn, targeting investments in buy out and development capital for medium-sized companies, such as proalpha. proalpha is a market leader in ERP solutions for discrete manufacturing companies. DEAL RATIONALE The firm offers a very robust customer base and strong sales growth. Its innovative ERP solutions are tailored to the requirements of medium-sized companies. Bregal Capital wants to support management in further developing the position of proalpha as preferred provider of ERP solutions for medium-sized companies. OUTCOME In the meantime, Leo and Werner Ernst, two of the three founders, have retired from daily operations. Bregal has recruited Dr. Friedrich Neumeyer as new CEO. Martin Wolf, the third founder, has reinvested in the business alongside Bregal Capital and has assumed the role of CTO. excellence In execution

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23 23 Content ICT Market OVERVIEW 6 IT-SERVICES & -CONSULTING 10 ENTERPRISE SOFTWARE 16 INFRASTRUCTURE & EQUIPMENT 24 Mummert & Company 30 Excellence in Execution

24 24 Stock Listed Companies Infrastructure & Equipment EV/ SALES EV/ EBITDA 4.4x HOSTING 2.4x 6.0x 8.0x DATACENTERS 12.5x 10.5x EV/ SALES 1 EV/ EBITDA 7.6x 4.7x 12.5x 7.8x 2.7x 6.0x 8.0x 7.2x EV/ SALES NETWORK & HARDWARE 10.9x 2.2x 13.8x 3.7x 1 EV/ EBITDA 1.8x 2.5x 8.9x 12.4x 2.5x 12.3x 1.8x 6.0x 8.0x 13.1x Note: (i) Share prices as of ; (ii) Financials as of December; (iii) Median of financial estimates used 1 Source: Capital IQ, Mummert & Company

25 25 StocK listed companies InfraStructure & equipment hosting X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 40.0% 30.0% 20.0% 10.0% 0.0% 8.0x x 18.0x x 18.0x x 18.0x 2 (10.0)% datacenters X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 40.0% 30.0% 20.0% 10.0% 0.0% 6.0x 8.0x 1 (10.0)% network & hardware X-aXIS: ev/ ebitda 14e; y-axis: revenue growth 13-14e 40.0% 30.0% 20.0% 10.0% 0.0% 6.0x 8.0x 1 (10.0)% Note: (1) Arris: Acquisition of Motorola Home from Google in for 1.8bn (Rev: 2.5bn) Source: Capital IQ, Mummert & Company excellence In execution

26 26 Global Comparable Transactions Infrastructure & Equipment Across all sub-sectors Hosting Datacenters Network & Hardware NUMBER OF TRANSACTIONS /14 SALES-MULTIPLES 1.9x 1.5x 1.1x 0.9x 1.2x / Sub-sample of multiples available for calculation EBITDA-MULTIPLES 9.1x 12.4x 9.4x 11.8x 8.7x / Sub-sample of multiples available for calculation Infrastructure & Equipment offers a rather small transaction sample compared to IT-Services & -Consulting and Enterprise Software. In addition, transaction data is only disclosed for c. 15% of all counted transactions. Both sales and EBITDA multiples are attractive, but slightly below valuations of publicly listed companies. Source: Mergermarket, Mummert & Company

27 27 case Study domainfactory InfraStructure & equipment THE DEAL Sell Side REVENUES: 24M EBITDA: 12M was sold to EMPLOYEES: 70 CUSTOMERS: >170,000 a portfolio company of OUR CLIENT We advised the two founders of Domainfactory on the sale of the company. As part of the transaction they both wanted to retire from daily operations. THE TARGET Domainfactory was the fourth largest provider of.de domains in Germany (after 1&1, Deutsche Telekom and Host Europe) and the leading independent hosting company. Domainfactory has focused on selling its solutions to micro-smes, i.e. companies with less than 20 employees. THE ACQUIRER Founded in 1997 and headquartered in the UK, Host Europe provides hosting and domain services to small and medium-sized enterprises. At the time of the transaction, Host Europe had c. 600 employees. In July, Cinven acquired Host Europe from Montagu Private Equity. The acquisition of Domainfactory was consistent with Host Europe s strategy of DEAL RATIONALE consolidating a highly fragmented hosting market in Europe. Domainfactory s strong reputation for high quality solutions and best-in-class customer service made it a perfect fit with Host Europe. OUTCOME This acquisition has significantly enhanced Host Europe s presence and capabilities in the German mass hosting market now with almost 400,000 customers and managing in excess of 2 million domains. The transition of daily operations from the Domainfactory founders to former second level management and the integration into Host Europe have been successfully accomplished. excellence In execution

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29 29 Content ICT Market OVERVIEW 6 IT-SERVICES & -CONSULTING 10 ENTERPRISE SOFTWARE 16 INFRASTRUCTURE & EQUIPMENT 24 Mummert & Company 30 Excellence in Execution

30 30 mummert & company InduStry coverage TMT HEALTH CARE INDUSTRIAL TECHNOLOGIES BUSINESS SERVICES ENERGY UTE MARTIN LASSNIG RIDLER mummertcompany.com DIRK PASCAL LIEDTKE SCHMIDT mummertcompany.com JAN COTTA MELVILLE D. MUMMERT mummertcompany.com mummertcompany.com Temporary Employment Municipal Utilities Responsible Partners Segments ICT Biotech/ Biopharma Automotive Media Medical Devices Telecommunication Health Services Machinery and Engineering Healthcare IT Renewable Energy Logistics Plastics Engineering Chemicals Hotels/ Tourism Electronics Exemplary Reference Customers TMT Partners HARALD MAEHRLE PHILIP STEIN mummertcompany.com mummertcompany.com MONIKA NICKL JAPHET WUENSCH SEBASTIAN WINTGENS SEBASTIAN KNACKFUSS mummertcompany.com mummertcompany.com mummertcompany.com TMT Team #1 ICT >40 ICT TRANSACTIONS >70% INTERNATIONAL > 90% leading M&A advisor successfully closed transactions of ICT companies sold to strategic buyers

31 31 Sample Ict transactions IT-SERVICES & -CONSULTING Buy Side acquired German, Dutch, Indian and Polish IT services operations from Sell Side Sell Side sold its IT-Services business unit to Sell Side sold was sold to to ENTERPRISE SOFTWARE Sell Side sold its healthcare software and IT services business to Sell Side was sold to Sell Side was sold to Sell Side was sold to INFRASTRUCTURE & EQUIPMENT Sell Side was sold to a portfolio company of Buy Side Sell Side Sell Side sold a minority stake to acquired the German hosting business from and excellence In execution was sold to

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