WORLD TECH M&A REPORT - Corum Group€¦ · world tech m&a report 2016 corumgroup.com 5 primary...

WORLD TECH M&A REPORT2016

www.corumgroup.com

“For tech companies, the go-to-market model itself is just as important in creating a valuable asset as the underlying intellectual property. ”ROB PALUMBOACCEL-KKR

2 corumgroup.com WORLD TECH M&A REPORT 2016

2016 will continue the record pace established last year in all 30 market sectors around the world. This report profiles those sectors, including top buyers, jey deals and valuation metrics. For the third year, we are presenting the Corum Top Ten

Disruptive Technology Trends with individual reports by Corum’s top executives. These trends are driving tech M&A, fueled by over $4 trillion dollars available to both strategic and financial buyers.

Special thanks to our panel of industry luminaries for their insights and contribution to this report: Peter Coffee from Salesforce, Reese Jones from Singularity University, Mukund Mohan from Microsoft Ventures and Dr. Karl Popp from SAP. They were followed by our Private Equity panel, including Rob Palumbo from Accel-KKR, Joe Manning from Riverside, Peter Freeland from BuildGroup and Geoffery Baird from Tailwind.

All presentations are archived under “Forecast 2016 – World Tech M&A Report” at our website, www.corumgroup.com. We invite you to join us for monthly valuation updates the second Thursday of each month. Further, we look forward to seeing you at one of our 150 live tech M&A educational events this year in every major city (profiled in the back of this report). These conferences and workshops are for sellers – the better educated you are on the complexities that derail most mergers, the greater your chances to successfully sell your company.

Bruce MilneConference Chair

Data for this report was compiled by Corum Group, the world’s leading seller of privately held software, Internet, IT and related companies. For further information, please contact Elon Gasper, V.P. Research at +1 425 455 8281 or

[email protected].

© 2016 Corum Group Ltd. All Rights Reserved.

PRIVATE EQUITY PANEL

LUMINARY PANELThanks to our luminary panelists who took part in “Forecast 2016: Global Tech M&A.” For more of their thoughts on the technology landscape, view the original webcasts at www.corumgroup.com.

REESE JONES, SINGULARITY UNIVERSITY

“There is an arms race in data security between good guys and bad guys, and making it convenient for the good guys to use the best stuff is probably the bigger challenge now, rather than the technical challenge.”

DR. KARL POPP, SAP

“Artificial intelligence enablement is a very hot topic because we see opportunities to help and augment, but also hand over, some of the more complex work tasks in the industry to AI.”

PETER COFFEE, SALESFORCE

“The most interesting conversations we’re having result not from any one trend, because anyone can extrapolate, but from triangulating, looking for ways these trends will play off of each other.”

MUKUND MOHAN, MICROSOFT

“I’m very excited to see more companies getting formed in the areas of predictive analytics, in the area of being able to help industry-specific verticals, to be able to understand what to do with large amounts of data.”

“You don’t see many multi-billion dollar markets lacking a SaaS disruptor, so we’ll do investments to gain meaningful share of smaller markets.”PETER FREELANDBUILDGROUP

“Nearly every company with a software component is marketing themselves as SaaS, but the PE and strategic buyer markets are very familiar with what SaaS revenue and technology models really look like.”JOE MANNINGTHE RIVERSIDE COMPANY

2016 – ANOTHER RECORD YEAR?

“The combination of technology miniaturization, battery tech and pervasive connectivity is going to cause a huge change in the B2B space.”GEOFFREY BAIRDTAILWIND CAPITAL

Technology companies cannot ignore the disruptive technologies changing lives and transforming markets. Even the largest firms must adapt to these trends or fall behind. No technology leader has the foresight to always lead the innovation curve, so the most successful acquire the pioneering companies with the expertise to

help them continue that disruptive success.

Each year, Corum composes a list of the key trends driving deals, drawn from transactions in every sector, spanning hundreds of events, global reports and information from conversations with all of the buyers. 2016 has produced a particularly instructive set, described below.

3corumgroup.comWORLD TECH M&A REPORT 2016

TECH MARKETS DIVERGE AS M&A RISESPublic stock markets set record highs in mid-2015 before hitting the first correction of the post-financial crisis bull market in August. Despite a rebound, most major indexes finished 2015 still off those all-time peaks by about 4%. However, tech-oriented indexes gained for the year, with the NASDAQ up nearly 6%, diverging from broader indexes. The oil price collapse, volatile Asian markets and interest rate uncertainties continued to weigh on the broader markets, but tech M&A never slowed, powered by the near-perfect combination of factors continuing to make this one of the best times ever to sell a tech company.

TECH M&A HITS NEW RECORDSOverall M&A hit an all-time high of $4.7T, and tech M&A set records as well. The Corum Index shows total tech transactions up 11%, including a historic 59 “megadeals” of $1B or more. The continuing waves of consolidation represented by these major transactions are one more factor making this a great time for sellers to calibrate and realize strategic value.

Our Pipeline readings show Private Equity deals continued to take share from direct VC-backed exits, while our Attributes metrics show a slight drop in cross-border deals, as the proportion of startup acquisitions held steady, along with average age of acquired companies.

CORUM TOP TEN DISRUPTIVE TECHNOLOGY TRENDS 2016

ONLINE EXCHANGESCONNECTING CREATORS & CONSUMERS

DIGITAL CURRENCY FLOW

DECREASING FRICTION IN PAYMENTS &

EXCHANGES

CONNECTED HEALTH

LINKING PEOPLE TO THEIR HEALTH DATA &

SERVICES

OMNICHANNEL SALES

PURCHASING DECISIONS ANYWHERE,

ANY PLATFORM

IOTSOFTWARE

EMERGING PLATFORMS, STANDARDS &

ANALYTICS

ENMESHED SYSTEMS

BLURRING THE LINES BETWEEN SOFTWARE &

HARDWARE

AI ENABLEMENT

PUTTING AI TO WORK BY MEANS OF BIG DATA &

FEEDBACK

POSITIONING INTELLIGENCEPIVOTAL LEVELS OF PRECISION &

UNDERSTANDING

SPORTS &GAMING

NEW HEIGHTS IN CULTURE AND NEW FRONTIERS IN TECH

DATASECURITY

BUILDING BARRIERS IN AN AGE OF

BLURRED LINES

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MARKET SET NEW HIGH

2015 PUBLIC MARKETS

CORUM INDEX 2014 - 2015

2014 2015

MarketTransactions 3879 4307

Megadeals 46 59

Largest Deal $22B $63B

PipelinePrivate Equity Deals 219 232

VC-Backed Exits 671 648

AttributesCross-border Deals 35% 34%

Startup Acquisitions 13% 13%

Average Life of Target 14 yrs 14 yrs

TECHNOLOGY ACQUIRERS SET NEW RECORDS

MICROSOFT SOARS, GOOGLE SLOWS

PRIVATE EQUITY BUILDS ON ITS RECORD DEAL FLOWTop Private Equity buyers continued the trend of beating out the top strategics. Vista Equity underscored that trend by taking over the leading spot, and doing it with more than twice the deals of the top strategic buyer.

Vista traded places with perennial top acquirer Insight Venture Partners, which saw its vigorous deal flow dip only slightly. ABRY Partners again rounded out the top three.

Stability was, perhaps appropriately, the overall story of the PE leaderboard, as the next three also contain the same buyers as

the prior year—Thoma Bravo, KKR andTA Associates. They were followed by Marlin Equity, returning to the chart after a year’s absence.

Notable sectors seeing increases in PE activity included security, supply chain management and media technology. Though platform-level deals continued, deal flow increasingly counted on bolt-ons to sustain these levels and deploy the immense amount of funds amassed and available to successful technology firms.

TOP PRIVATE EQUITY ACQUIRERS: 2015

TOP STRATEGIC ACQUIRERS: 2015


2014 2015 Change

Accenture 5 19 280%

IBM 5 15 200%

Cisco 6 11 83%

Microsoft 13 20 54%

Intel 6 9 50%

Amazon 6 9 50%

J2 Global 18 19 5%

Apple 9 9 0%

Google 37 16 57%

WPP 22 9 59%

Microsoft broke through as the top strategic acquirer, confirming our predicted sea change in the company’s M&A strategy brought by CEO Satya Nadella. The company’s broad, gap-filling strategy assembled assets in the mobile, security, analytics and enterprise spaces, though it reached for a few others, including stylus maker N-Trig and 3D physics platform Havok, divested by Intel.

Second place was shared by Accenture and j2 Global, both just under Microsoft’s total. Internet marketing conglomorate j2 continued the active M&A trend it began a year prior, rolling up small businesses globally in waves, including nine deals announced in October alone.

In contrast, Accenture only recently increased its tech acquisition pace, more than tripling 2014’s total, with many IT Services deals to strengthen its position against rival IBM. Big Blue also tripled its deal count, with many of its 15 purchases related to expansion of its Watson AI unit.

Even with individual buyers, M&A goes in waves; potential sellers must watch for these opportunities, not just their own company’s maturity, when considering exit timing.

Apple maintained its quicker post-Jobs M&A pace, while the most notable drop in leaderboard position was Google’s. The company that has topped the charts four of the last five years dropped by over half, which was still enough for fourth place. As the Alphabet reoganization finishes up, though, expect them to fight for the top spot again in 2016.


PRIMARY RESEARCH

ELON GASPERVP, RESEARCH

AMBER STONERSR. ANALYST

AARON KINGANALYST

YASMIN KHODAMORADI

ANALYST

ARTEM MAMAIEVANALYST

NINA SEGHATOLESLAMI

SR. ASSOCIATE

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EV/EBITDA

Corum tracks valuation multiples for publicly traded companies in 30 subsectors within six broad markets: Horizontal, Vertical, Consumer, Infrastructure, Internet and IT Services.

With the exception of the volatile Internet sector, tech company valuation to sales ratios remained surprisingly stable in order and range, while EBITDA metrics have been converging as Consumer and IT Services sector values rise. Broadly speaking, nearly all metrics tested or broke through their historic highs.

Subsequent sections of this report will unpack each market, along with the 30 subsectors, in detail.

MARKET VALUATIONS

1. Record cash – strategic & financial buyers2. Strategic imperative – acquire or perish3. Solid economic growth4. More global buyers than ever5. Accessible, inexpensive debt – PE buyouts

5 REASONS TECH M&A REMAINS STRONG

VALERIYA CHUMACHENKO

ANALYSTALEXANDER BETSANALYST

DEBBI DAVISANALYST

LIUDMILA REVAKINA

ANALYST

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EV/SEV/EBITDA

Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15EV/EBITDA 17.85 x 17.20 x 18.85 x 20.12 x 19.86 x 18.88 x 17.28 x 16.94 x 16.07 x 15.70 x 17.60 x 17.79 x 16.42 xEV/S 3.74 x 3.33 x 3.55 x 3.57 x 3.40 x 3.51 x 3.39 x 3.42 x 3.30 x 3.32 x 3.55 x 3.63 x 3.54 x

HORIZONTAL


Business Intelligence

EV/S 3.65 x

EV/EBITDA 15.81 x

Tableau / Verint

Marketing & AdTech

EV/S 1.94 x

EV/EBITDA 16.74 x

Acxiom / Alliance Data

CRM

EV/S 1.59 x

EV/EBITDA 20.88 x

Salesforce / Convergys

SCM

EV/S 6.89 x

EV/EBITDA 25.88 x

Descartes / AspenTech

The Horizontal market saw fluctuations in sales multiples all year, eventually ending 2015 up from the numbers in January. EBITDA multiples, however, ended the year slightly down from where they began the year.

The BI, CRM and ERP subsectors all saw drops in sales and EBITDA multiples, while SCM and HR continue to set themselves apart from the rest. The newly introduced Payments subsector is the highest valued of those others, with over 4x sales and 16x EBITDA multiples.

Big data, intelligence and predictive analytics were key themes across the sector. Microsoft made five analytics acquisitions, including R programming language-based predictive analytics provider Revolution Analytics for an estimated $115M.

Other analytics deals included the purchase of predictive analytics company Prelytix by financial software vendor First Derivatives, and marketing analytics provider MarketShare’s acquisition by NeuStar for $450M, an 8x revenue multiple, to bolster the buyer’s growing marketing technology division.

In the back-office realm, Enterprise Mobility has been a hot topic as companies strive to minimize their costs on managed services. Corum client eMOBUS was picked up by Asentinel for its unique technological approach to the problem. Asentinel itself was acquired by Marlin Equity at the beginning of the

year, while competitor MOBI Wireless was snagged by Bregal Sagemount. With Private Equity making bold moves in the space, it is worth watching watching to see if traditional telecom expense management firms like Tangoe become targets.

The twin trends of Omni-Channel Sales and Digital Currency Flow are driving consolidation in the e-signing space. In Europe, Corum client SIGNificant Software was acquired by Namirial. In Canada, Silanis Technology was bought by VASCO Data Security for $85M, adding e-signature capabilities to its digital authentication products. Proof-of-delivery solution provider JumpTrack was snapped up by Carlyle-backed ECi to integrate its e-signature capture software into ECi’s offerings to SMBs.

And while omni-channel trends are driving disruption, the e-mail channel continues to be a top marketing priority, marked by significant consolidation. Corum client EmailDirect was acquired by top buyer j2 Global, while Bronto Software was gobbled up by NetSuite in a $200M transaction. The trend was

capped by the Constant Contact megadeal, with Endurance International adding one of the top email marketing names to its suite of products layered on top of its web-hosting core.

SOLD TO

SOLD TO

SOLD TO

Human Resources

EV/S 6.24 x

EV/EBITDA 35.12 x

ADP / Workday, Inc.

Horizontal Other

EV/S 2.74 x

EV/EBITDA 28.33 x

Nuance Comm. / OpenText

ERP

EV/S 2.90 x

EV/EBITDA 14.25 x

Oracle / SAP

Payment

EV/S 4.13x

EV/EBITDA 16.03 x

Paypal / ACI

Moving from email to snail mail, postal services companies made acquisitions in the SCM and logistics sectors. The Royal Mail bought three companies: parcel tracking and labelling platform NetDispatch, shipping & logistics SaaS provider StoreFeeder, as well as online same-day delivery company eCourier. Singapore Post followed suit, picking up two US-based SCM software providers: Tampa-based Jagged Peak, paying $11.5M for a 70% stake, and Cincinnati-based TradeGlobal, acquired from Bregal Sagemount for $168M.


SOLD TO

Young artificial intelligence systems from companies like Google, Apple, IBM and others are hungry for data

and for problems to solve with that data. Big Data analytics is the foundation for all AI, from Siri pulling a restaurant from a repository based on a GPS location and cuisine preferences, to a home’s climate control system learning the behavior of the residents and adjusting dynamically based on needs, time of day and temperature, to IBM’s Watson making a medical diagnosis using patient history, current data and the entire history of medical literature.

Watson is the furthest along of these new conversational AIs and is already driving M&A, with Merge Healthcare and the Weather Company now available to provide input and output for Watson. The others—Cortana, Siri, Alexa and many more—won’t be far behind. In particular, they’ll be seeking companies with unique stores of data and unique opportunities for AIs to prove their value.

AI ENABLEMENT

ALLAN WILSONVICE PRESIDENT

DANIEL BERNSTEIN VICE PRESIDENT

In an age when consumer platforms and devices are continually fragmenting, Omni-Channel Marketing led

the way, seeking to reach the consumer with messaging no matter the medium. The next phase is Omni-Channel Sales, uniting buyers and sellers at the point when a consumer is ready to purchase. Whether it’s ecommerce integrated into a Twitter feed, TV set-top box or online, you can now order Domino’s Pizza anywhere you are. If you run a Bigcommerce site and live in San Francisco, you can integrate a same-day delivery platform courtesy of Uber, effectively competing against

Amazon’s same day delivery initiative. This trend is making its way into the enterprise, as companies like Cloze transform small workforces into more effective omnichannel sales organizations. To meet the challenge of Omni-Channel Sales, technology companies must leverage data science, mobilization, social network integration and many other technologies that bring both persuasion and transaction as close to the buyer as possible.

OMNI-CHANNEL SALES

NAT BURGESSPRESIDENT

The Internet creates a potential real-time connection between every person and every thing in the world. Online

exchanges turn potential connections into real connections to create transactions. Amazon and eBay started early and established global exchanges of buyers and sellers of goods. Innovative newcomers like OfferUp are challenging their positions. Illicit exchanges such as Silk Road have popped up in the darker corners of the Web, and we are now seeing exchanges for increasingly specialized products and services.Choosing a category and building an exchange is the easy part. Drawing enough participants to make an exchange viable is another matter. When your market has a dominant player, it

can be difficult to get a foothold, but they may be a potential acquirer. In the ticketing space, Ticketmaster has done four deals in just the last two years.Larger exchanges will continue to diversify and grow through acquisition, taking out emerging competitive threats, but online exchanges breaking new ground in the enterprise will be particularly attractive targets, as procurement departments find the same value that consumers have. In the longer term, the Internet of Things will enable B2B and B2C exchanges that create transactions without human intervention.

ONLINE EXCHANGES

I think curating a community of trusted advice around search is going to become the way people prefer to engage with providers.

Peter Coffee, Salesforce

“”

TOP DISRUPTIVE TECHNOLOGY TRENDS

On the B2B side, the two most important trends for analytics are machine learning and in the area of mixed, augmented, and

virtual reality.Mukund Mohan, Microsoft

“”

Vertical market multiples ended the year slightly higher than they began, after plenty of fluctuation during the year. The gains in Healthcare, Financial Services, and Architecture, Engineering and Construction sub-sectors helped to somewhat buoy stagnation in other verticals.

In the Healthcare sector, the consolidation of electronic health records has continued, albeit at a slower pace. Though there were no EHR-related megadeals, after a flurry in 2014, there are more middle-market deals to be done in this sector, as acquirers fill gaps in their specialties and geographies going forward.

Key EHR deals included the $165M acquisition of SaaS EHR provider HealthFusion by Quality Systems and the rollup of e-MDs, Corum’s Austin-based client, by Marlin Equity with its portfolio company MDeverywhere.

Europe saw a notable uptick in health IT M&A, with multiple deals towards the end of the year. US-based CompuGroup Medical made four deals through assorted European subsidiaries, acquiring BS Concept Realization and CareTrace out of the Netherlands, Germany’s LMZSOFT and Italian healthcare website Medicitalia.

Also in Italy, United Medical Software, a digital medical records solutions vendor and medical device integration provider, was

picked up by Swiss wireless health IT firm Ascom.

Healthcare analytics also drew significant interest, including Premier’s $65M acquisition of Healthcare Insights, and Centene’s purchase of LiveHealthier, which provides employee wellness analytics, a notable diversification from Centene’s core Medicaid business.

The insurance industry has always been on the forefront of innovation in analytics, and DriveFactor, an automotive telematic analytics provider to insurers, continued that trend, selling to CCC for $22M.

Chicago-based workers comp specialist Vikaran was sold to outsourcing provider Patriot National, with Vikaran’s Indian development center a key asset in the deal.

Insurance agency tech was also in demand, as Corum client QQ Solutions, a maker of software for smaller agencies, was acquired by Vertafore. Canadian company Brovada, which offers tools for agencies, brokers and carriers, was acquired by Towers Watson.

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VERTICAL


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Energy & Environment

EV/S 3.34 x

EV/EBITDA 15.78 x

Itron, Inc. / Schlumberger Ltd.

Real Estate

EV/S 7.17 x

EV/EBITDA 31.16 x

LoopNet / Zillow

Automotive

EV/S 3.98 x

EV/EBITDA 36.54 x

CDK Global / BitAuto

Vertical Other

EV/S 4.46 x

EV/EBITDA 14.83 x

Amadeus / Sabre

A/E/C

EV/S 5.13 x

EV/EBITDA 17.25 x

Autodesk / Synopsys

Government

EV/S 1.75 x

EV/EBITDA 12.25 x

Raytheon / Harris

Healthcare

EV/S 5.23 x

EV/EBITDA 18.31 x

Cerner / Allscripts

Financial Services

EV/S 4.80 x

EV/EBITDA 15.24 x

Broadridge / Fiserv

In Fintech, analytics was again a key theme. CoreOne was one of three acquisitions made by Markit Group last year, which spent $200M to get the New York-based regulatory reporting provider. Broadridge did five deals, most recently QED Financial, an investment accounting solutions vendor, and in England, financial modeling tool Tyche was acquired by RPC Consulting.

There were also a number of analytics deals in the Real Estate subsector. FNC, a property appraisal automation software firm, was snapped up by CoreLogic for $475M. 4tell Solutions, a provider of real estate and infrastructure performance

management software, was bought by Rubicon Technology Partners.

Finally, Shanghai-based real estate Internet platform Anjuke was bought out by online classifieds platform 58.com for $267M, as it takes on established Chinese real estate sites like Soufun and Leju.


SOLD TO

As an amateur race car driver, I never underestimate the importance of location precision and intelligence.

Knowing the car’s speed, attitude and position relative to other objects is critical. Use cases for proximity technology are also racing ahead, enabled by evolution of tools and data for a new level of precision and awareness. With proximity marketing, consumers receive targeted messages based on proximity to retailers, allowing delivery of discounts, coupons, recommendations and awards to potential customers.

Drones are becoming ubiquitous, finding commercial applications beyond consumer markets, with retail delivery no longer just a dream.The imminent reality of autonomous vehicles relies on these new levels of precision, situation awareness and contextual insight. Google, Ford, Uber, GM, Lyft, Toyota and others making major investments here demonstrate the scale of the opportunity.

POSITIONING INTELLIGENCE

WARD CARTER CHAIRMAN

As consumers of health care services use mobile apps, smart-phones and wearable tech, the type and amount

of available medical information has grown exponentially. Harnessing this data to extract actionable and predictive intelligence will be a key driver for connecting the entire healthcare ecosystem in ways that will improve the delivery of health services. This Connected Health trend drove deals well beyond traditional health IT and life science acquirers—Under Armour’s acquisition of MyFitnessPal and Fossil’s acquisition of Misfit wearables highlight the convergence of health and ‘non-traditional’ health sectors. In 2015, Adidas

and Weight Watchers also acquired fitness apps, while IBM acquired a digital imaging business and a couple of healthcare data companies to bolster its Watson health business. Meanwhile, GlaxoSmithKlein and Qualcomm are rumored to be setting up a $1B joint medical device venture.This activity will accelerate as companies with patient-centric technology successfully driving healthcare disintermediation and pushing inefficiencies out of healthcare systems will demand the attention of both traditional and non-traditional health-tech acquirers.

CONNECTED HEALTH

DAVE LEVINEVICE PRESIDENT


Payments M&A dominated Fintech transactions in 2015, and we believe this trend will continue in 2016.

Mobile payments have finally become a reality. Apple Pay is now accepted by national retailers across the US and in Europe with collaborations with the largest card issuers. The other leading handset manufacturers and OS vendors are following suit, deploying products such as Google Pay, Samsung Pay and LG Pay. There is massive opportunity for banks, card issuers, and payments processors to deliver mobile payments to more global markets and a wider distribution of customers

through acquiring payments technology vendors.Banks are under threat by new entrants transforming the customer experience and therefore commanding a higher market share of the total profits. Additionally, cross-border payment inefficiencies remain, creating opportunities for new technology solutions. And finally, digital payments continues to grow, driven by low costs, ease of use and improved banking infrastructure.

DIGITAL CURRENCY FLOW

DOUGAN MILNE VP OF INT’L DEV

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CONSUMER

10corumgroup.com WORLD TECH M&A REPORT 2016

Entertainment

EV/S 3.51 x

EV/EBITDA 62.51 x

Netflix / Pandora

Video Games

EV/S 2.74 x

EV/EBITDA 14.15 x

Electronic Arts / Activision

Education

EV/S 1.54 x

EV/EBITDA 14.35 x

Rosetta Stone / Chegg

Valuations in the Consumer sector went on a bit of a roller coaster ride this year, as fitness, entertainment, wearables and media continue to intermingle and fuse. Sales and EBITDA multiples both ended the year very slightly above where they began and began to climb again after the August market correction.

Fitness tracking became a fight club for consumer players such as Under Armour, which knocked out Nike and Adidas this year to claim the champion title of largest fitness community. In February, the Baltimore-based giant grabbed Danish fitness app Endomondo and food tracker app maker MyFitnessPal, for $85M and $475M respectively, finishing up with workout finder app Gritness.

Not just fitness but fashion moved into wearables, with global fashion brand Fossil acquiring health tracking startup Misfit for $250M.

The Internet of Things is pushing other traditional companies toward technology acquisitions, including retail giant Sears absorbing moisture sensing tech WallyHome.

In the UK, AlertMe, a connected home tech pioneer, was sold to British Gas for over $67M. Apart from solidifying the energy giant’s footprint on the home automation front, the transaction should expand AlertMe’s services offshore since British Gas is a part of a larger Centrica Group.

In the gaming space, Ubisoft took a shot at buying up studios with a trusted partnership background. It started with Ivory Tower, French developer of The Crew, and closed out with

Canadian Longtail Studios, now Ubisoft Halifax, with an unorthodox focus on triple-A mobile games.

And Sega is trying to get back into the fight by going after studios in the US and UK, including Demiurge Studios from Boston, San Francisco-based Ignited Artists and England’s Space Ape Games.

In the music arena, Pandora bought music analytics firm Next Big Sound and spent $75M for Rdio and its on-demand streaming service, while US-based Soundtracker was nabbed by Italy’s Sounday, enhancing the latter’s music ecosystem with geolocation tech.

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SPORTS AND GAMING

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Sports & gaming continue their ascent to cultural dominance. In the gaming space, that’s reflected in

disclosed deal value that’s higher than ever, driven by the sector’s record deals – first Microsoft’s $2.5B acquisition of Mojang and the runaway hit Minecraft, soon dwarfed by Activision Blizzard grabbing King Digital and Candy Crush for $5.9B. This indicates more to come from major players – and from China – but at the moment fewer small studios are being picked up as the giants focus on consolidating.Deals are happening, though, where sports & gaming blur, in emerging sectors like esports and daily fantasy, plus

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INTERNET

Diversified Internet

EV/S 5.63 x

EV/EBITDA 20.00 x

Alphabet / Tencent

E-commerce

EV/S 1.53 x

EV/EBITDA 26.55 x

eBay / JD.com

Social Network

EV/S 7.75 x

EV/EBITDA 42.11 x

Facebook / LinkedIn

Travel & Leisure

EV/S 5.25 x

EV/EBITDA 25.92 x

Expedia / JustEat

The Internet sector did not recover as much momentum as others after the midyear market drop, but remains a pressure cooker of tech change. Its social network subsector retained the top value position, while eCommerce fell amid a perception of depleted opportunities. Diversified models defied commoditization to rise in value.

2015 marked milestones in the online travel industry, with Seattle-based Expedia taking in competitors Travelocity and Orbitz, paying about $1.5B for the pair. Expedia’s latest and largest purchase, vacation rental site HomeAway for nearly $4B, addressed the threat of newcomer AirBnB as well as longtime rivals Priceline and TripAdvisor.

And before being grabbed by Expedia, HomeAway struck a couple of deals itself, acquiring Singapore-based startup Travelmob to pump up its Asia-Pacific business arm, and Seattle-based vacation rental app Dwellable.

In the EU, Swedish online agency eTRAVELi was acquired by ProSiebenSat.1 out of Germany for nearly $265M, the media

conglomerate’s largest travel investment yet.

Elsewhere in the Travel & Leisure subsector, in the online take-out buffet, Just Eat put away the largest single portion, dishing out $682M for Australia’s food marketplace Menulog, plus a couple of Italian ordering platforms – Clicca e Mangia and DeliveRex, with Canada’s Orderit for dessert.

Rocket Internet and Foodpanda again made the most deals in the space, a varied diet of six food ordering acquisitions – all in the first four months of the year. The top food ordering acquirers were rounded out by GrubHub’s three deals and Delivery Hero making Middle East inroads, acquiring Yemeksepeti – Turkish for Market Basket – for $589M, and Kuwait’s Talabat.

The online dating space was nearly as active as travel and leisure, set against the romantic backdrop of Match Group’s successful IPO in November. Ahead of that, Match Group acquired the Canadian Plentyoffish dating service for $575M.

Other dating matches happened globally. In China, Jiayuan hooked up with competitor Baihe’s LoveWorld for $250M; Britain’s Oakley Capital paired up two German dating services, Parship and ElitePartner; and JSwipe found another nice Jewish-focused dating platform, as it was acquired by JDate’s parent company Spark Networks for an estimated $7M.

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JIM PERKINS SR. VICE PRESIDENT

SOLD TO

continually in gambling technology. The importance of gaming also means that even when the market for studios is slow, high quality companies who have built superior games using their own IP are in demand, particularly from Asian buyers, with deals getting done even in the face of volatile public markets.A good example was Hong Kong-based Leyou and Beijing’s Perfect World acquiring Corum client Digital Extremes. It will be instructive to see where Leyou and other Asian-based gaming companies expand in 2016.

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INFRASTRUCTURE


Network Management

EV/S 2.29 x

EV/EBITDA 19.22 x

Cisco / Juniper Networks

Storage & Hosting

EV/S 2.34 x

EV/EBITDA 6.68 x

NetApp / Brocade

Security

EV/S 4.84 x

EV/EBITDA 15.42 x

Gemalto / Check Point

Endpoint

EV/S 3.23 x

EV/EBITDA 14.93 x

VMware / Citrix

Sales multiples in the overall Infrastructure sector fluctuated in the latter half of 2015, but ended the year roughly in line with where it began. EBITDA multiples didn’t fare as well, ending down from the beginning of the year.

Valuations among the six infrastructure subsectors mirrored the sector as a whole with only IT Services Management rising in both sales and EBITDA multiples, as Storage and Network Management saw gains in sales and EBITDA multiples, respectively. And while the Security subsector did have dips in both metrics, the critical nature of security kept deals happening at a rapid pace.

This includes the acquisition of Websense by US defense contractor Raytheon for $1.3B, making it clear that data security is an unavoidable component of national security.

Enterprise data encryption was a key component of the security trend, provoking a number of industry juggernauts into M&A activity.

Microsoft did its third Israeli deal in a year, buying enterprise data encryption provider Secure Islands for an estimated $85M. With Aorato and Adallom already onboard, Microsoft is reinforcing its enterprise security capabilities via outbound

acquisitions, alongside a number of other major players—Intuit, which snapped up Porticor, another Israeli data encryption SaaS vendor; Hewlett-Packard, which acquired Voltage Security, a data-centric encryption technology provider for an estimated $175M at 5x revenue; and France’s Thales Group, which paid $400M for data protection firm Vormetric.

Elsewhere in the enterprise threat prevention space, CirroSecure, a cloud application control vendor, was snatched up by Palo Alto Networks to protect collaborative tools such as Box and Salesforce.

Boston-based machine data search vendor RevelOps was sold to newly-public Rapid7 for $68M following Rapid7’s earlier acquisition of NT OBJECTives, a penetration testing firm, for $6.5M. Akamai dipped into the email security space as well, acquiring Bloxx, a Scottish Web gateway and email filtering solution provider, for a reported $18.7M.

In the storage space, Sanbolic, a virtual storage optimization company, was bought by Citrix for almost $90M to optimize Citrix’ virtualization technologies, while SolidFire, an all-flash storage maker, was acquired for $870M by NetApp, as the industry veteran races to keep up with new technologies amid shrinking revenues.

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IT Services Management

EV/S 6.20 x

EV/EBITDA 27.40 x

CA Technologies / redhat

Infrastructure Other

EV/S 4.32 x

EV/EBITDA 13.78 x

Atlassian/ Progress


Finally, in a deal driven by the Enmeshed Systems trend, Ottawa provider of M2M intelligence solutions B+B SmartWorx was purchased by Advantech for nearly $100M, as the Taiwanese PC maker angles for a piece of the North American and European industrial connectivity market.

The Internet of Things drove over $21B in 2015 deal value. As billions more “things” come online, the IoT’s

virtualization of the physical world could create as much value for consumers and enterprises as the Internet itself.IoT M&A was active across the board, with diverse buyers like Google, Qualcomm, Adidas, Cisco, even farm machinery maker Deere & Company. Automotive was a dominant sector with strong trends in vehicle-to-vehicle communications, intelligent transportation systems, remote diagnostics, usage-based insurance solutions and traffic data services. These trends will only pick up speed as the car continues to cement its place as the true center of the IoT.

As IoT hardware moves towards commoditization, the true opportunity lies with the innovative software and platform providers creating value in areas such as edge analytics, IoT operating systems, gateways, aggregation, modules, wearables, big data, cloud, middleware and applications that also provide data privacy and cybersecurity.Both established IoT players and traditional companies that find themselves needing to add IoT capabilities will be in acquisition mode in the coming year. Companies poised to address this spectrum of IoT requirements will be highly attractive acquisition candidates in 2016 and beyond.

IOT SOFTWARE

ROB SCHRAM SR. VICE PRESIDENT

Enmeshed Systems fuse millions of lines of software code into ever smaller and faster hardware platforms

that power new generations of consumer and commercial applications. Such fusion is driven primarily by the need for exponential performance improvements in applications as widespread as connected cars, Internet security, advanced avionics, factory robotics, global data search, facial recognition accuracy and self-diagnostics for malfunctioning jet engines. Such fundamental market opportunities drove significant

M&A activity in 2015 such as the $11.8B acquisition of Freescale Semiconductor by Dutch firm NXP and Intel’s acquisition of Altera Corporation, whose $16.7B purchase in December was Intel’s largest ever acquisition. These huge amounts of money are also finding their way to the middle market, for technology companies that are building out successfully and creating real value in key niches of this complex ecosystem.

ENMESHED SYSTEMS

JOHN SIMPSON VICE PRESIDENT

All these trends result in new vulnerabilities, and major data breaches have affected nearly all consumers, many

governments and large enterprises. This is complicated by new types of attacks such as the advanced persistent threat, or APT, and the many new vulnerabilities opened up by the Internet of Things. In response, the major security suppliers Symantec, McAfee and Palo Alto Networks founded an organization called the Cyber Threat Alliance to coordinate defense efforts. With such a wide range of threats, an outsized amount of cybersecurity innovation is carried out by small startups who become significant subject matter experts in their specialties.

Often by the time a new threat is identified, it does not make economic sense for a large vendor to spec, hire and develop new functions when they can go out and buy a solution immediately, and these smaller companies can capture significant value. Examples of this trend are Cisco acquiring Lancope, focused on monitoring suspicious traffic patterns, for $453M, and Splunk’s $190M acquisition of Caspida, a behavior analytics provider. Innovative companies like these will make 2016 another record year for data security acquisitions.

DATA SECURITY

JON SCOTTSR. VICE PRESIDENT


The theme for security is an immune system developing for the Internet, which monitors

what is normal and makes interventions if something is

aberrant.

Reese Jones, Singularity University

“”SOLD TO

IT SERVICES


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Valuations are up across the board in IT Services, with sales and EBITDA multiples rising over the year in both developed and emerging markets. Sales multiples are rising slightly faster than EBITDA, especially in emerging markets, indicating that IT services companies are improving their margins.

CSC spent over $1B across three major transactions around the globe, plus two more with values undisclosed. It bought Australian firm UXC for almost $308M, at 0.6x sales and 9.6x EBITDA. UK’s Xchanging was snapped up for $720M and 0.9x sales despite a negative EBITDA, while Chicago-based Fruition Partners, a ServiceNow consulting firm, was grabbed for $130M at a notable 2.4x revenue. As with many services buyers, CSC appears to be filling gaps in geography and expertise.

Other cloud-oriented services firms also did well for themselves. KPMG picked up experts in Dynamics from Crimsonwing and the Workday-focused HR service practice from Towers Watson. IBM also picked up Workday consultants, paying $120M and a remarkable 3x sales for Boston-based Meteorix. India’s Wipro grabbed SAP expertise for $77M via Germany’s Cellent, and Salesforce picked up services for its own SaaS offerings, spending $24M on Paris-based Kerensen Consulting.

Meanwhile, ecommerce integrator CrossView, with dual skills in IBM WebSphere Commerce and SAP hybrid integration, was snatched for $38M by digital agency and ecommerce solution provider PFSweb.

In the emerging markets, Ukrainian near-shore developer Ciklum, a Corum Client for an earlier investment by Horizon Capital, was handed over to the Soros Fund for $180M.

Polish web hosting service Home.pl was picked up by 1&1 Internet for nearly $150M, consolidating the Polish market as 1&1 considers an IPO.

In India, BPO operations provider Intelenet Global Services was purchased by US-based Blackstone Group from UK’s Serco Group for almost $400M and 7x EBITDA, the largest-ever acquisition by Blackstone in India.

Finally, in China, Hangzhou Maimiao Network Tech, a software developer focused on online marketing for Alibaba, was sold to Shenzhen Comix Group for over $55M at 13x revenue.

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EMERGING MARKETS

The customer expects their identity and experience to

move across all channels of interaction with a provider of goods or services. That

expectation is only going to become further cemented.

Peter Coffee, Salesforce

“”

AmsterdamAtlantaAucklandAustinBangaloreBarcelonaBeijingBerlinBostonBrisbaneCalgaryChicagoCincinnatiClevelandCologneColumbusCosta MesaDallasDenver

DetroitDublinDurhamEdmontonHalifaxHamburgHelsinkiHong KongHoustonIndianapolisKansas CityLas VegasLisbonLondonLos AngelesMadisonMadridMelbourneMemphis

Mexico CityMiamiMilwaukeeMinneapolisMonterreyMontreal MunichNashvilleNashuaNew YorkOrlandoOsloOttawaParisPhiladelphiaPittsburghPortlandPragueRaleigh

RestonSacramentoSalt Lake CitySan DiegoSan FranciscoSan JoseSanta ClaraSeattleShanghaiSingaporeSt. LouisStockholmSydneyTel AvivTorontoVancouverViennaWellingtonZurich


SELLING YOUR SOFTWARE, IT OR RELATED TECH COMPANY?

2016 CONFERENCE LOCATIONS

Executed professionally, done right, it leads to fortune. Unfortunately, most owners’ efforts to sell end in failure due to lack of experience and knowledge. For the most important transaction of your life, it’s imperative to get the necessary education. Corum is the leading tech M&A educator in the world—we share the experience gained in selling more firms than anyone else over the past 30 years. Our experts offer a number of live events designed to give you the knowledge you need to achieve what we call an “Optimal Outcome”—maximum price and best structure.

Thinking about selling in the next 1-3 years? The Merge Briefing is a 90-minute executive briefing that provides a

current M&A market update (trends, valuations, etc.), as well as a brief overview of the Tech M&A process:

“8 Stages to an Optimal Outcome.”

Ready to go to market? During the half-day workshop Selling Up, Selling Out (SUSO), learn to prepare, position,

research, value, negotiate and execute due diligence for maximum price and optimal structure. This is the most

attended tech M&A event ever, participants having done over $2T in transaction value.

World Financial Symposiums (WFS) brings together experts, luminaries, newsmakers and global leaders in tech

and finance for events across the globe. Corum is a Platinum Sponsor, one of many organizations that support the WFS. Its primary conference, Growth and Exit Strategies for

Software & IT Companies, is a full-day symposium held in New York, London, Silicon Valley and Seattle, with half-day events in cities including Austin, Vancouver BC and others.

The event educates owners and CEOs of software, IT and related technology companies on the key developments in today’s technological and financial landscapes and helps

them prepare their strategies for growth and eventual exits. To register for a conference, visit www.wfs.com.

MARKET SPOTLIGHTMarket Spotlights are monthly webcasts sponsored by the WFS, focusing on the opportunities for technology

companies in specific sectors, topics and regions. Recent topics have included healthtech, security, patents, the

connected car and more.

To learn more, visit www.wfs.com.

TECH M&A MONTHLY WEBCAST

Want to stay on top of M&A and build more value into your technology company? Every month, this 30-minute global webcast brings you the news you need to know on markets,

trends, deals and valuations. Plus, invaluable special reports by buyers, technologists, dealmakers and industry leaders. And be sure not to miss the quarterly and mid-year reports with

valuation data on all 30 technology subsectors.

Join us on the second Thursday of every month at www.corumgroup.com.

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