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UBS Technology M&A: Discussion of Current Industry Trends
UBS Technology M&A: Discussion of Current Industry Trends
March 2005
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Table of Contents
SECTION 1 SECTION 2 SECTION 3
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SECTION 1
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1,045 1,000
($ in billion)
750 608 530 500 407 296 250 97 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 110 116 154 529 433
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$485 > $10bn 95 $1bn - $10bn < $1bn No. of Deals $311
3,000
2,500
2,000
300 65 250 200 150 100 50 58 0 1997 1998 1999 2000 2001 2002 2003 2004 58 $85 26 98 65 $143 25 60 157 148 $124 24 36 $65 19 46 $64 17 47 65 0 $103 22 15 500 1,000 233 1,500
No. of Deals
1998 1,409
1999 1,862
2000 2,648
2001 1,705
2002 1,318
2003 1,329
2004 1,508
Source: Securities Data Corporation Note: Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q3 2003
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Technology M&A deal volume increased 60% in 2004 M&A pipeline is expected to be strong for 2005
Number of Announced Transactions 1
500 400 300 200 100 Q1 Q2 Q3 2003 Q4 Q1 Q2 2004 Q3 Q4 281 325 352 371 399 370 394
102.6
345
$64.2
2003
2004
179 additional transactions were announced in 2004 compared with 2003 Volume of discussions has intensified drastically
Source: Security Data Corporation Note: 1 Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q2 2003
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RECENT TRANSACTIONS
IBM / Ascential ($1,100mm) Symantec / Veritas ($13,521mm) Lenovo Group / IBM PC Business ($1,300mm) CA / Netegrity ($451mm) Juniper / Netscreen ($3,816mm) Oracle / Peoplesoft ($10,300mm) ARM / Artisan ($933mm) 3Com / TippingPoint ($408mm) Credence / NPTest ($663mm) Serena / Merant ($380mm) Cisco / NetSolve ($137mm)
Sector Consolidation
Stock Consideration
Mm) Symantec / Veritas ($13,521mm) Safenet / Rainbow ($463mm) Credence / NPTest ($663mm) Issued convertible Serena / Merant ($380mm) Issued convertible Carlyle / Insight ($2,100mm) Golden Gate Capital / Blue Martini ($54mm) Veritas Capital / DynCorp from CSC ($850mm) Bain Capital, Silver Lake Partners, Warbug Pincus / UGS PLM from EDS ($2,050mm)
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250
200 1,508 1,500 1,133 1,000 1,409 1,318 124 100 100 60 500 23 0 1997 1998 1999 2000 M&A 2001 IPO 2002 2003 2004 19 21 0 50 1,329 150
Source: Securities Data Corporation and UBS Equity Capital Markets Group Note: Oracle/PeopleSoft included as 2004 M&A transaction, original hostile offer was first launched in Q3 2003
SECTION 2
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Achieve Scale
Customer leverage Increased distribution and sales support Market position consolidation Leapfrog competition New market entry product or geography
Capture new customer bases Buy vs. make time to market Engineering talent and/or management acquisition Off-income statement R&D Fill product gaps
Capitalize on installed base Accelerate time to market Strengthen channel partnerships Offer one-stop shop
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M&A Considerations
A number of factors to consider in pursuing any M&A transaction
Business Rationale
Compelling strategic rationale Create or consolidate market leadership position Essential new technologies, markets or products Transaction multiples compared to public comparables and precedent transactions
Financial Considerations
Impact on combined company revenue and earnings growth trajectories Effect on margins Revenue and cost synergies EPS accretion / dilution Market perception of target company / merger partner
M arket Reaction
Consistent, simple to understand story Financial parameter clarity Price paid / consideration mix Time to closure
Execution Risk
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Process Considerations
Public Offering Versus Sale
Initial Public Offering PROS: Primary shareholders retain voting control and existing management continues to execute the strategic vision of the business Proceeds from an IPO can be used to increase scale through acquisitions or fuel organic growth Shareholders can participate in potential upside should the business continue to execute and market conditions remain favorable CONS The organization must take on the costs associated with public filing and compliance requirements while managing greater scrutiny by investors An IPO lock-up prevents current shareholders from achieving immediate liquidity There is a high degree of uncertainty in future capital market conditions PROS:
Sale of Business
Reduces or eliminates execution risks of the current business plan as well as future capital market uncertainties M&A valuation includes control premium Can offer a more immediate path to liquidity for current shareholders Avoids the costs associated with being a public company Partnering increases opportunity to cross-sell and up-sell through larger distribution platform and gain rapid critical mass to better compete CONS: Primary shareholders relinquish voting control and new management executes the strategic vision of the company Cash transactions eliminate the upside participation in the pro forma company Integration and execution risk of combined business
There is the potential for a downside in valuation should the business lose traction
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($ millions)
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Due diligence meetings Information Memorandum Preparation of management presentation Finalize buyer list Initiate contact with buyers
Marketing
Deliver Information Memorandum Finalize management presentation and data room Buyer due diligence
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SECTION 3
UBS Overview
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Worlds Best Investment Bank EUROMONEY 2004 Worlds Best Bank EUROMONEY 2003
UBS is a banking giant but, a Wall Street powerhouse? Oh Yes. This is a house thats grown out of its regional shell to assume premier proportions in world finance. But its the push into the rarified realm of Investment Banking that sets UBS apart.
BIG KID ON THE BLOCK FORBES
UBS has achieved what once seemed impossible for any European investment bank: it has broken into the front rank in the US market, source of roughly half the global investment banking fee pool. In the 12 months ending in April 2004, it doubled its share in announced US M&A deals.
WORLDS BEST INVESTMENT BANK
EUROMONEY 2004
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Goldman Sachs JP Morgan Citigroup Morgan Stanley CSFB 333 322 Deutsche Bank Merrill Lynch Lehman Bros Lazard 265 8.6% 262 8.5% 252 197 6.4% 8.1% 377
+23% Lehman Bros Deutsche Bank Lazard Goldman Sachs Citigroup JP Morgan Morgan Stanley Merrill Lynch CSFB (38% ) (23% ) (1% ) (2% ) (5% ) (11% ) +9% +6% +3%
10.8% 10.4%
Notes: Data represents all M&A deals worldwide greater than $100 million in transaction value. Full credit given to acquiror and target advisor(s). Excludes withdrawn deals, equity carveouts, exchange offers, and open market repurchases 1 Market share based on number of transactions. Market shares do not sum to 100% due to multiple advisors on each transaction (e.g., target advisor and acquiror advisor)
UBS has positioned itself as one of the leading M&A advisors worldwide and has unprecedented momentum, capturing more market share than any other bank since 2002
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Rank
Value ($mm)
No. of Deals
1 2 3 4 5 6 7 8 9 10
7,168.2 6,025.4 5,187.3 4,476.8 4,375.4 2,148.2 2,114.1 2,093.0 1,560.4 1,492.6
17 22 15 11 14 5 12 21 9 3
February 2005 US$850 million Sale of Selected DynCorp Units to Veritas Capital
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Contact Information
UBS Securities LLC 555 California Street Suite 4650 San Francisco CA 94104 Tel. +1-415-352 5650
www.ubs.com
This presentation has been prepared by UBS Securities LLC (UBS) for the exclusive use of recipient (together with its subsidiaries and affiliates, the company) using information provided by the company and other publicly available information. UBS has not independently verified the information contained herein, nor does UBS make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this presentation. Any estimates or projections as to events that may occur in the future (including projections of revenue, expense, net income and stock performance) are based upon the best judgment of UBS from the information provided by the company and other publicly available information as of the date of this presentation. There is no guarantee that any of these estimates or projections will be achieved. Actual results will vary from the projections and such variations may be material. Nothing contained herein is, or shall be relied upon as, a promise or representation as to the past or future. UBS expressly disclaims any and all liability relating or resulting from the use of this presentation. This presentation has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The company should not construe the contents of this presentation as legal, tax, accounting or investment advice or a recommendation. The company should consult its own counsel, tax and financial advisors as to legal and related matters concerning any transaction described herein. This presentation does not purport to be all-inclusive or to contain all of the information which the company may require. No investment, divestment or other financial decisions or actions should be based solely on the information in this presentation. This presentation has been prepared on a confidential basis solely for the use and benefit of the company; provided that the company and any of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to the company relating to such tax treatment and tax structure. Distribution of this presentation to any person other than the company and those persons retained to advise the company is unauthorized. This material must not be copied, reproduced, distributed or passed to others at any time without the prior written consent of UBS.
UBS Investment Bank is a business group of UBS AG UBS Securities LLC is a subsidiary of UBS AG
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