Quarterly Technology M&A Review

Transcription

1 Quarterly Technology M&A Review Q4 01 Technology M&A deal value increased considerably in Q4 01, while deal count dipped to the lowest level since Q Normalized to remove the impact of Softbank s $0.1B acquisition of Sprint Nextel (NYSE: S), total deal value in Q4 was $39.B, representing an increase of % from the prior quarter. Announced transactions totaled 87, down 7% quarter on quarter. Exclusive of the pending Softbank Sprint deal, Q4 transactions accounted for % of total 01 deal value, the highest Q4 contribution rate since 009. Q4 011 and Q4 010 contributed just 1% and 0% of total annual deal value, respectively. Small and lower mid-market transactions continue to dominate the technology M&A landscape. Of the 181 deals in Q4 with disclosed transaction values, 14 or 78% were valued below $00M. Strong deal flow in this valuation tranche has been a recurring theme in every quarter in deals with valuations greater than $1B accounted for nearly 70% of Q4 deal value. This represents a sharp increase in the number of large-cap transactions compared to prior quarters; there were eight deals with $1B+ valuations in Q3, and 19 in Q1 and Q combined. Of the 13 $1B+ deals in Q4, only three were led by private equity investors. Four technology companies went public on U.S. exchanges in Q4, compared to seven in both the prior quarter and Q Gross proceeds among the four IPOs totaled $93M, of which HR management SaaS vendor, Workday (WDAY) took home $637M. The highly-anticipated Workday IPO exceeded market expectations, with the stock trading at a 74% premium one day after the IPO, and remaining up 71% 30 days later. Venture exits declined sharply in Q4 01, with total deal value declining 3% from the prior quarter. There was one exit over $1B: Cisco s $1.B acquisition of Meraki, the cloud based wireless networking provider. Technology M&A Overview¹ Deal Count &. While total deal volume fell to the lowest level since Q4 010, Q4 deal value rose sharply from the previous four quarters. The total deal value of $9.4B includes Softbank s $0.1B acquisition of Sprint. $ millions $ billions $38.8 $ $44.0 Median Multiple & Valuation. The median revenue multiple in Q4 01 was 1.x, a 7% decrease versus the prior quarter, and a 1% decrease from Q Median deal value was $3.0 million in Q4 01, 7% higher than the median over the past four quarters. Q4 Disclosed Deal Count and Median Multiple by Deal Size. In Q4 01 there were 181 deals with disclosed transaction values. Deals valued between $100 - $00 million exhibited the highest revenue multiples at.8x, compared to.4x in the previous quarter. 886 $37.3 $ x $3. Median.0x $7.0 1.x $40.0 Median EV/Rev².0x $ x $ x Median EV/Rev 1.6x 8.8x 19 0.x 39

2 Historical Technology M&A Activity¹ Quarterly M&A Activity. Trailing twelve month ( TTM ) deal volume has declined slightly in each of the last four quarters, but remains at a healthy level. Small and middle market transactions have dominated the tech M&A landscape in 01 as riskaverse acquirers have been reluctant to pursue large-cap transactions. 3,016 3,196 3,0 3,19 3,17 3, 3,39 3, 3,618 3,643 3,61 3,64 3,17 $ billions $176.9 $198.0 $1.4 $13.6 $186.6 $198.9 $190.0 $08.1 $08.1 $00.4 $179.1 $176.3 $13.7 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q Graph represents trailing twelve month total deal value and total deal volume. Historical Technology Valuation Trends¹ Quarterly M&A Activity. While slightly off the highs of 011, median deal value has increased steadily since 009 and 010. Similarly, the TTM valuation median was 1.76x revenue, slightly higher than the median revenue multiple of 1.68x over the past 13 quarters shown below, but a decline over the prior TTM median. The revenue multiples witnessed in 01 signal an increased confidence in the macroeconomic technology environment, and consistent with public market equity gains, forcing strategic and financial buyers to increase spending on acquisitions. $ millions 1.08x $ x $ x $ x 1.6x 1.63x $33.6 $34.8 $ x 1.7x $41. $ x 1.93x 1.91x 1.90x $36.8 $36.8 $36.8 $ x $3.8 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q4 Q1 Q Q3 Q Graph represents trailing twelve month quarterly median.

3 Q4 M&A Overview Active Technology Segments¹ M&A Activity by Segment. Communications Services, Internet & Digital Media, IT Services, Semiconductors, and Software accounted for 86% of all technology M&A deal value and 83% of total deal count in Q4 01. The Software and IT Services segments were the most active of the quarter, each accounting for 9% of total Q4 deal count. Communications Services accounted for 40% of total deal value, which includes the Softbank-Sprint deal, while Internet & Digital Media accounted for 17% of total deal value, with four $1B+ deals. Q4 01 Median EV/Rev² Sector Total Deal Count Disclosed Value ($B)¹ Median Value ($M)¹ Q4 011 Q3 01 Q4 01 Y/Y⁴ Delta Q/Q³ Delta Communications Services Internet & Digital Media IT Services Semiconductors Software Total: Active Sectors Total: Overall Technology x 3.0x 0.9x 13% (70%) x 1.4x 1.7x (19%) 1% x 1.4x 7% 17% x (0%) 0% x.x.9x (9%) 16% x 1.4x 1.4x (7%) x.0x 1.x (17%) (%) Q4 M&A Activity - Active Technology Segments¹ Communications Services. There were 31 Communications Services transactions in the fourth quarter, 1 of which had disclosed values. Communication Services median deal value in Q4 was $9.M, and median revenue multiple was 0.9x. Excluding the Softbank-Sprint deal, median deal value was $30M, while median revenue multiple was 1.4x. Median EV/Rev² 3.8x 4 0.6x 1 0.9x Internet & Digital Media. Of the 11 Internet & Digital Media deals announced in Q4 01, only 6 had disclosed values. Internet & Digital Media median deal value was $87.M, with deals in the $100M $00M range receiving the highest median revenue multiples. 7 Median EV/Rev² 9.6x 4 1.9x 1 3

4 Q4 M&A Activity - Active Technology Segments (continued)¹ IT Services. IT Services was the second-most-active sector in Q4 01 in terms of deal volume. There were 38 total transactions, 3 of which had disclosed values. The median deal value was only $9.1M, while the median revenue multiple was 1.4x. Median EV/Rev² 1 1.8x 1.1x 1 6 Semiconductors. The Semiconductor sector was the least active sector of the quarter. Of the transactions closed in Q4 01, 16 had disclosed valuations. The median revenue multiple in Q4 was, while the median deal value was $67.M Median EV/Rev² 6.1x 3 1.0x 3 Software. The Software segment was the most active sector of the quarter, accounting for 9% of total technology deal volume, and 13% of total technology deal value. The median revenue multiple for software deals was.9x, and was highest for transactions valued between $100M 00M. Median EV/Rev² 4.4x 3.6x 0.9x x 6 NA 8 4

5 M&A Overview Venture-Backed Companies¹ M&A Activity. Venture-backed M&A deal value in Q4 01 totaled $4.8B, a 3% decrease compared to the previous quarter. Deal volume totaled 199 transactions, a 1% increase from Q3 01, and a 10% increase compared to the TTM⁶ median quarterly volume. $ billions $.7 $.3 $ $ $4.8 Median & Multiples. Venture-backed M&A median deal value in Q4 01 increased slightly to $41.8M, but was still 8% lower than TTM quarterly median. At 1.7x revenue, valuations declined sharply from Q 01 highs of 4.3x revenue. Median Median EV/Rev² $ millions 3.0x 4.3x $ x.7x $60.0 $48.7 $41. $ x Q4 011 Q1 011 Q 01 Q3 01 Q4 01 Venture Exits Percentage of Total M&A Activity by Count and. Q4 01 venture-backed M&A activity represented 8% of total deal value, and 1% of total deal value excluding the Softbank-Sprint deal. 4% of total technology acquisitions during the quarter were venture-backed. 1% Deal Count 0% 3% 0% 0% 4% 1% 1% 17% 8%

6 Private Equity Participation¹ Private Equity-Backed Technology M&A Overview. Private equity-backed deal value in the fourth quarter was $.9B, representing 10% of total technology M&A deal value, and a 44% decrease from the total deal value of Q3 01. Only three of the 13 $1B+ technology deals in Q4 were led by private equity firms, totaling $4.7B. $ billions 97 $7. 8 $ $.7 $ $.9 36 Q4 M&A Geographic Distribution¹ Technology M&A Overview by Geography. North America and Western Europe accounted for approximately 88% of all technology M&A activity during Q4 01, in line with previous quarters. While Western Europe s total activity fell slightly, deal activity in North America increased by 3% over the two previous quarters. Western Europe, 0.6% Asia, 4.9% Australia,.9% North America, 67.3% Eastern Europe, 1.0% Other,.% South America, 1.1% NA 6

7 Q4 01 Notable Transactions¹ Acquirer Target Date Segment Enterprise Value EV/Rev² EV/EBITDA⁵ Cisco Meraki 11/18/1 Networking Software $1.B NM NA On November 18th, Cisco announced the acquisition of cloud Wi-Fi vendor Meraki Networks for $1.B in cash. The transaction is only the third time since 009 that Cisco has spent more than $1B on an acquisition. The deal is highly strategic (believed to be valued at 1.0x forward bookings), as Meraki may help to accelerate Cisco s software-centric networking initiative, and thwart increasing competition from Oracle (Xsigo) and VMWare (Nicira). Cisco has been extremely active in the M&A arena of late Meraki marks Cisco s fifth buy in the second half of 01. According to the Cisco conference call regarding the acquisition, Meraki had a run rate of $100M in annual bookings, and employed 330 people, representing a purchase price of $3.6M per Meraki employee. Meraki had raised approximately $60M in capital from Google, Sequoia, Northgate and Duff Ackerman & Goodrich. Acquirer Target Date Segment Enterprise Value EV/Rev EV/EBITDA Citrix Zenprise 1/06/1 MDM Software $37M 14.x NA On December 6th, Citrix announced the acquisition of Zenprise, a leading provider of mobile device management (MDM) software and Software as a Service. The acquisition helps Citrix with securing and monitoring mobile data, which is evolving from simple filtering to dealing with hundreds of apps accessing corporate data on mobile devices. Citrix s Receiver helps manage mobile applications by storing data from the apps in the cloud, as opposed to on the device. The addition of Zenprise gives Citrix a more holistic MDM solution, offering file synchronization, application management, and data-loss prevention services. According to Citrix filings, the company paid $37M for Zenprise. The 41 Group reports TTM revenue at approximately $3M, implying a 14.x revenue multiple. Zenprise had raised $40M since 004 from Bay Partners, Greylock, Rembrandt, Mayfield, Ignition, and Shasta. Acquirer Target Date Segment Enterprise Value EV/Rev EV/EBITDA Oracle Eloqua 1/0/1 Marketing SaaS $870M 9.7x NM On December 0th, Oracle announced the acquisition of Eloqua for $870M. Eloqua provides marketing automation SaaS, with features for marketing, sales lead management and marketing campaign analytics. The deal comes shortly after several acquisitions in the marketing automation sector, including ExactTarget s acquisition of Pardot and Microsoft s acquisition of MarketingPilot. Eloqua completed its IPO on the Nasdaq four months prior to the deal, offering shares at $11.0. At $3.0 per share, Oracle is paying a 31% premium for Eloqua, which closed at $17.9 in the previous trading session. This compares to a 0% premium for RightNow and an 18% premium for Taleo, Oracle s previous two SaaS application acquisitions. The acquisition may help Oracle provide customers with a unified experience across all marketing and sales channels, and help to create brand loyalty through online interaction. Acquirer Target Date Segment Enterprise Value EV/Rev EV/EBITDA Atmel Ozmo ⁷ 1/19/1 Semiconductors Not Disclosed NA NA On December 19th, Atmel announced the strategic acquisition of Ozmo Devices for an undisclosed amount. Ozmo provides ultra low-power Wi-Fi solutions based upon the Wi-Fi Direct standard, targeted at enabling wireless personal area network (WPAN) connectivity for battery-operated devices. Ozmo focused on a variety of end market applications including remote controls, gaming consoles, audio headsets, wireless mice and the Internet of Things ("IoT"). The transaction expands Atmel s wireless offering, providing key technology for integration with Atmel s existing microcontroller platform, and accelerates Atmel s strategy to provide complete solutions for a number of large markets, including IoT. The transaction resulted in a positive return for Ozmo's investors including Atlantic Bridge Ventures, Granite Ventures and Intel Capital. 1. Limited to transactions with disclosed values as of 1/31/1; variances due to rounding; sources used throughout the report include The 41 Group and Capital IQ. EV/Rev = Enterprise Value Revenue 3. Q/Q = Quarter on Quarter 4. Y/Y = Year on Year. EBITDA earnings before interest, taxes, depreciation, and amortization 6. TTM = Trailing Twelve Month. 7. Pagemill Partners acted as the sole financial advisor to Ozmo on its sale to Atmel Disclaimer: The information provided is for general informational purposes only and should not be considered legal or investment advice. Pagemill Partners LLC, recommends you seek advice from qualified legal counsel for specific questions you may have regarding M&A transactions. In addition, nothing contained herein is to be construed as an offer or recommendation, or the solicitation of an offer, to sell or buy a specific security, nor is any of the information contained here intended to constitute an analysis of any company or security reasonably sufficient to form the basis for any investment decision. The information herein is based in part on third party sources. While we believe the information to be reliable, it has not been verified by us to be accurate. As such, we do not guarantee that the information is accurate or complete. All expressions of opinion are subject to change without notice in reaction to shifting market conditions.