Research & Market Analysis Sector Snapshot: Enterprise Content and Document Management July 2015 M&A, Corporate Finance and Strategic Advice for the Software, Digital Media and IT Services Sectors
Enterprise Content Management Overview Enterprise content and docment management has evolved dramatically over the past several years, now incorporating a variety of new capabilities including social software, collaboration and cloud based document creation. Key Points Key Service Offerings Evolution Driving M&A: The dramatic changes taking place in enterprise content management (ECM) have forced larger players to turn to M&A to bolster their platforms while smaller start-ups have had the opportunity to capture share with innovative new solutions. Mid-Size and New Public Players Driving Consolidation: Our landscape matrix on page 6 and 7 of this report shows more than a dozen mid-size players (page 7), many with new, strong public currencies (e.g. Box) that will be aggressive in leveraging their stock to build out more complete solutions. Shake-Out Likely Among Small Players: A number of newer segments such as cloud file sharing and online collaboration have become extremely crowded. Many smaller players have begun to drop out and we expect the shakeout to force players to become cash flow positive as further funding for smaller players in these segments vanishes. Mobility & Security Impacting Everything: Nearly every solution throughout the ECM landscape is having to manage a number of key dynamics, most notably mobility and security as enterprises are highly focused on both protecting data and making it widely available to users. 1
ECM Includes a Broad Suite of Solutions ECM & EDM encompass an increasingly broad array of software based solutions for managing content in a variety of media. Key Points Constantly Evolving: Content management covers a wide range of continuously evolving solutions, given the increasing breadth of content utilized within the enterprise. Integration with the IT Stack: Content management solutions increasingly integrate with related systems within the enterprise IT stack. This is critical as enterprises look to capture more data that flows through the organization and eliminate the need for redundant input or re-creation. Application vs Infrastructure: Given the need for greater integration, content management systems are no longer standalone solutions but have become core infrastructure upon which other applications can be built. Workflow: CMS solutions are designed around the workflow to better optimize business processes. As many workers primary jobs involve some aspect of creating, managing or accessing enterprise content, solutions carefully designed to follow the workflow provide substantial operational efficiencies. Multi-Lingual Content a Growing Challenge: As companies migrate more content to the web and make it available for global users, managing multilingual content and keeping it current in all languages has become an enormous task. Companies poised to provide automated solutions to solve these challenges are seeing rapid growth. 2
Enterprise Content Management Landscape Web Content Management Marketing Automation ECM & Cloud File Sharing Enterprise Mobile Content Enterprise Collaboration & Social Software Portals & Integration Sales Enablement & Webinar Document Management Diversified, Full Suite Providers Language Translation 3
Customer Engagement Topology ECM is built around 5 key pillars: capture, manage, store, deliver & preserve. Virtually any content can be thought about in this lifecycle. Source: Harold Heard 4
Acquirers Leading The Consolidation Document Management Multilingual Content Web Content Mgmt/ Analytics Expanding Point Players Konica Ricoh Financial Large Integrators Financial Players 5
Competitive Landscape Broad Content Management Players The sector s largest players, sown below, have broad content management suites facilitating integration to leverage data. However, in nearly all cases, they still have gaps in their offerings and will likely to continue to expand their product portfolios through M&A. Company Web Content & Experience Mgmt Enterprise Mobile Technology Marketing Automation & Social Tech Enterprise Collaboration & Social Software ECM & Cloud File Sharing Portals & Content Integration Digital & Media Asset Mgmt Adobe Adobe AEM Sites PhoneGap Adobe Marketing Cloud Scene7, Experience Mgr DAM EMC Documentum, Syncplicity Documentum Digital Asset Manager HP TeamSite HP WorkSite MediaBin IBM IBM Web Content Manager Worklight Foundation IBM EMM/SMA, SilverPop Engage IBM Connections FileNet P8 Platform WebSphere Portal Server Microsoft SharePoint 2013 WCM Yammer, SharePoint Server 2013 / Office 365 SharePoint 2013 SharePoint 2013 OpenText OpenText Web Experience Management Content Suite OpenText Portal OpenText Media Management Oracle WebCenter Sites Mobile Platform Salesforce site.com Salesforce1 Platform Eloqua Marketing Cloud, Social Relationship Mgmt ExactTarget, Radian6, Buddy Media, Social.com WebCenter/OSN WebCenter Content WebCenter Portal WebCenter Content Chatter SAP Mobile Platform SAP NetWeaver Acquia Drupal Drupal Commons 6
Competitive Landscape Broad Content Management Players There are many mid-size players with strong platforms in selected areas that have yet to expand into adjacent segments. Some of these players, including Box and Citrix, have strong public currencies to leverage and will likely be the leaders in driving further consolidation in the ECM space going forward. Company Web Content & Experience Management Enterprise Mobile Technology Marketing Automation & Social Technology Enterprise Collaboration & Social Software ECM & Cloud File Sharing Portals & Content Integration Digital & Media Asset Management Alfresco Enterprise Edition Atlassian Confluence Box Box Citrix GoToMeeting ShareFile Ektron Ektron CMS Google Google Apps Harris Broadcast Nexio SDL SDL Tridion SM2 TIBCO Software tibbr VMware Socialcast Telligent Zimbra Social 7
Sector Profile: ECM Suites Trends and Commentary Core Platform Market Largely Consolidated: ECM suites represent core platforms for players, and constantly require enhancements and new functionality as new forms of content (video, messaging) and features (security, social, mobile, multilingual) become more important to users. New Innovations Driving M&A: To keep their platforms current and competitive, established players have turned to M&A to acquire important new technologies (see deals at right and on pages 13 thru 15. Growth in SMB Market: Historically focused primarily on larger enterprises, the SMB market is seeing a number of players providing ECM solutions to meet the growing needs of small and mid-sized enterprises. Lexmark Very Acquisitive in EDM: Lexmark has been highly acquisitive, buying a number of players to build a strong ECM suite to leverage its computer and printer businesses. Key Transactions Target Acquirer Price Rev Mult OpenText Nstein Tech $33,485,500 1.5x Lexmark Perceptive Software $280,000,000 3.3x Lexmark Saperion $72,000,000 NA OpenText Resonate Knowledge $20,000,000 NA Emerging and Niche Players Leaders & Players of Scale Activity Benchmarks Number of Players Concentrated but Growing Future M&A Activity Importance to Major Players High Critical Core part of IT stack Interest by Financial Investors Moderate 8
Sector Profile: Web Content Management Trends and Commentary Analytics and Personalization Key Areas of Focus: We expect the leading WCM players to focus on personalization and analytics over the next few years as this will be a key area for M&A. Mobile Now A Must: Given that mobile is a must capability, we expect to see significant investment and acquisition by leading WCM players in mobile, such as SDL s acquisition of bemoko. Customer Experience : Because WCM is primarily about marketing, having the key analytics necessary to understand a site/s effectiveness based on traffic behavior is critical. We expect further M&A and investment in players incorporating analytics and personalization around web sites and web content. Multilingual Capabilities Are Critical: As enterprises put websites in more and more languages and perform greater levels of customer interaction online, keeping multiple language sites synced with the base language site will require automated tools and a more integrated translation process. Key Players Key Transactions Target Acquirer Price Rev Mult Day Software Adobe 217.0 5.1 Vignette Open Text 162.0 1.0 Fatwire Oracle 160.0 4.3 Activity Benchmarks Number of Players Numerous Future M&A Activity Moderate Importance to Major Players Critical Interest by Financial Investors High 9
Sector Profile: Language Translation and Multilingual Content Trends and Commentary Automated Tools Required to Keep Multilingual Content in Sync: Content is much more dynamic than in the past due to web and cloud environments. Websites are changing constantly, causing companies to struggle with keeping multi-language content in sync with the source document. Machine Translation Requires Human Assistance: While machine translation has improved, it still falls short for complex content (legal, marketing, websites, technical) where accuracy of translation is critical. Traditional Approaches to Translation Can t Keep Up: Software platforms are rapidly overtaking the slow, traditional approach for human assisted translation. Tech-Enabled Service Model: A human assisted approach to automating translation involves a tech-enabled services model which strong gross margins for translation where the supply of experienced translators with domain expertise (legal, technology) is fairly limited. Key Transactions Target Acquirer Price Rev Mult SDL Alterian $107,000,000 1.9x Lionbridge CLS Comm $77,000,000 0.9x SDL Language Weaver $42,000,000 NA Services Focus Software Focus Activity Benchmarks Number of Players Limited new players Future M&A Activity High Importance to Major Players Becoming Critical Interest by Financial Investors Moderate 10
Sector Profile: Document Management Trends and Commentary Storage is Not Management: While a number of leading players (Box, DropBox) have emerged from the crowded online storage space and currently carry lofty valuations, they will need to develop or acquire significant document management capabilities around creation, secure sharing, and collaboration. Incorporation of Collaboration is Critical: As document creation, storage and sharing have moved online, collaboration has become a critical element many players now need to incorporate into their solutions. Vertical Solutions: Many document management players have developed strong vertical market solutions, tailoring to the needs of the financial services, insurance, medical or government markets. Workflow: Solutions that are designed to manage a document online with the natural workflow within the organization will offer superior efficiencies to users. Key Transactions Target Acquirer Price Rev Mult Box Inc. Crocodoc $13.2m NA Nemetschek Bluebeam $96.5m NA OpenText Informative Graphics $39.1m 2.3x Lexmark ReadSof $264.4m 2.1x FormPipe Traen A/S $44.5m 1.4x Key Players Activity Benchmarks Number of Players Moderate Future M&A Activity High Importance to Major Players High Interest by Financial Investors Moderate 11
Sector Profile: Enterprise Collaboration & Social Software Trends and Commentary Wide Range of Functionality: Collaboration and social activity in the enterprise includes a wide variety of interactions including messaging feeds, collaboration, conferencing, file sharing & syncing, and task management. Players are incorporating different functionality to target different vertical needs. People vs. Document Centric: A primary distinction is whether companies take a people centric approach to their platform (focusing on interaction among individuals) or a document centric approach (where interaction is around collaborating on a specific piece of content). Verticalization: Many smaller players have built vertical solutions similar to project management platforms that offer automation and process optimization around specific workflows. Key Transactions Target Acquirer Price Rev Mult Yammer Microsoft $1.2b NA Podio Citrix $45m NA Assitly Salesforce $55m NA EventRobot VMware NA NA CubeTree SuccessFactors $49m NA Emerging and Niche Players Leaders & Players of Scale Number of Players Activity Benchmarks High Future M&A Activity High Importance to Major Players Interest by Financial Investors Increasing but early Moderate waiting maturation 12
M&A Activity The M&A market for content management has been extremely strong, as enterprises need new solutions to manage increased content in a new, cloud based environment. Acquirer Target Deal Amt (Millions). Target Abstract EV/Rev EV/EBITDA Polycom Accordent Technologies 50.0 Enterprise video management software 5.6 OpenText Corp Actuate Corporation 330.0 Business intelligence analytics software 2.5 SDL International Alterian 106.0 Web content management software 1.9 Hewlett-Packard Autonomy Corporation 11,700.0 Information retrieval software provider 11.8 25.3 Nemetschek Bluebeam Software 96.5 Editable PDF document software Lexmark Brainware 148.0 Data capture software provider Recall Holdings Business Records Mgmt 77.0 Document management BPO services Autonomy Corporation CA, Inc. (information governance business) 19.0 Information governance software assets Lionbridge Technologies CLS Communication 77.0 Swiss language translation services 0.9 Oracle Compendium 15.0 Content marketing SaaS vendor 7.5 OpenText Corp Cordys Software 33.0 BPM software, SaaS & PaaS Box Inc. Crocodoc 13.2 Document conversion software provider Adobe \ Day Software AG 242.7 Content management software provider 5.3 31.8 OpenText Corp EasyLink Services 246.1 EDI & messaging SaaS provider 1.7 7.4 13
M&A Activity Acquirer Target Deal Amt. Target Abstract EV/Rev EV/EBITDA Adobe Systems Efficient Frontier 400.0 Advertising campaign management SaaS 5.3 Top Image Systems egistics 18.0 EDI & document management SaaS 11.8 Accel-KKR Ektron 75.0 Web content management SaaS 2.0 Oracle FatWire Software 160.0 Web content management software 4.0 OpenText Corp Global 360 260.0 BPM software provider 2.9 Logica Grupo Gesfor 33.9 Spanish systems integrator 0.5 OpenText Corp Informative Graphics 39.1 Document management software provider 2.3 Autonomy Iron Mountain (digital archiving, ediscovery and online backup assets) 380.0 E-discovery & backup software assets Qumu Kulu Valley 15.0 Video presentation creation SaaS 2.7 SDL International Language Weaver 42.5 Translation software provider Xerox Lateral Data 30.0 E-discovery software provider Permira Funds Metalogix Software 250.0 Content management & migration software 3.8 OpenText Corp Metastorm, 182.0 Business process management software 2.4 EchoStar Move Network 45.0 Streaming video software assets OpenText Corp Nstein Technologies 33.5 Content management software provider 1.5 14
M&A Activity Acquirer Target Deal Amt. Target Abstract EV/Rev EV/EBITDA Miranda Technologies OmniBus Systems $4676 Video content management software 1.7 10.4 Kenexa Corp OutStart 38.9 Content management SaaS provider Lexmark Perceptive Software 280.0 Content management software provider 3.3 IBM Corporation PSS Systems 65.0 E-discovery software provider 4.1 Document compliance management Accelrys QUMAS 50.0 software Yahoo! RayV 70.0 Streaming video network SaaS 10.0 Lexmark ReadSof 264.4 Document management software provider 2.1 57.9 Content management customization OpenText Corp Resonate Knowledge Tech 20.0 software Citrix Systems RightSignatur 37.5 Electronic signature SaaS 5.4 Lexmark Saperion 72.0 ECM & BPM software & SaaS Kofax Softpro 31.2 Electronic signature software & SaaS AOL Studionow 36.5 Content management SaaS provider FormPipe Software Traen A/S 44.4 Document management software provider 1.4 OpenText Corp wecomm 20.56 Mobile application development software Standard Register WorkflowOne 218.0 BPO printing & document management 15
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