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since 1987

November 2015
I N DEPEN DENT I N VESTMENT BAN K I N G FO R GLOBA L
TECH NOLOGY, MEDIA, MARKETI NG & I N FORMATION

Tech M&A Update The Growing Influence of Cross-Border Deals and


Non-Tech Buyers
This months letter is written by Paul Cooper, Partner, Clarity (JEGIs UK Partner), paul.cooper@claritycp.com
The rapid and broad adoption of technology enabled applications and services is reflected in the growth of crossborder tech M&A.
an international f lavor

We expect global cross-border tech M&A activity to hit a new high in 2015 and forecast 2016 deal volume to be larger still.
The worldwide activity levels are reflective of whats happening in the EU, where the volume of M&A is being driven by
the three Cs:
1) Confidence in broader EU stability and US economic outlook
2) Currency favorable trend in US to EU exchange rate
3) Cash corporate and PE surplus
Confidence: US economic momentum, buoyed by anticipation of the forthcoming presidential election, provides a positive backdrop. European GDP growth rates, both in and out of the Eurozone, are anticipated to continue their positive
trajectory (forecast to be 1.9% and 2.1%, respectively, for FY2016). With the remaining pockets of deflation expected to
reverse in 2016, Europe is increasingly viewed as at least out of the woods.
Currency: The strengthening of the dollar renders international targets comparatively cheaper this is especially true
for US corporate buyers looking at Euro Zone targets, where the dollar has strengthened approximately 18% against the
Euro over the past three years.

JEGI Tech M&A Update - November 2015

Cash: US and EU corporates are benefitting from a prevalence of accessible capital and strengthening balance sheets.
Further, the increasing reserves of US corporate foreign-trapped cash serve to increase the appeal of non-domestic targets, at least for the moment.
growth in transatlantic tech activity

Since 2012, the number of cross border M&A transactions led by European acquirers has grown by approximately 27%,
as compared to 32% for North American acquirers buying assets in Europe. The volume of international M&A emanating from North American corporates is about double those of the Eurozone acquirers.
While growth in European-led activity is more balanced between North American targets and those from the rest of the
world (R.O.W.), growth in North American international tech activity has been focused primarily on European targets,
reflecting the value seen by North American acquirers in the European market.
We expect this trend of North American buyers focusing on Europe to continue, driving a further increase in transatlantic M&A. In addition to the three Cs, 2016 gets the added boost of being an election year in the US.
valuations
Emerging growth technology companies are gaining scale at earlier stages and growing more rapidly. Increasingly,
more of a companys value is occurring earlier, driving private valuations and activity, as investors seek to get in early
so as not to miss the growth boat. Lets not forget this is perceived value and the lack of financial maturity means
there is little floor, if you pick the wrong company in which to invest. We have been here before, where late in the cycle,
KPIs such as users, visitors and eyeballs (!) are being cited to justify higher valuations rather than relying on financial
indicators (financial metrics such as revenue, profit, cash). As in the past, it will end with winners and losers, not with
winners and winners!
The increasing appetite for tech assets is reflected both in terms of performance of tech indices and revenue multiple
evolution. The bubble of 2000 saw TEV/ Revenue multiples climb from approximately 1.0x to over 5.0x by mid-March
2000, according to S&P Capital IQ and the FTSE World Tech Index. Currently, the EV/revenue multiple of 2.2x is not really comparable to these previous cycles. Thats because, over time, the technology index constituents have changed
significantly i.e., the breadth in maturity has increased, ranging from start-ups to established tech firms, and the multiples of the latter are muting the larger multiples of high growth, earlier stage tech companies. In previous technology
booms, established companies formed a much smaller number of the sector constituents.
As such, earlier stage, higher growth tech companies, especially with an enterprise client base and strong recurring
revenue/SaaS model, are demanding valuations well in excess of 2.2x revenue in the current M&A environment. Some
recent examples include (date order):

JEGI Tech M&A Update - November 2015

Date

Buyer

Seller

Brief Description

Deal Size ($mil)

Rev Mult

Sept 2015

comScore

Rentrak

Media measurement

$850

7.9x

Aug 2015

Advance Communications

1010data

Big data discovery

$500

10.0x

Aug 2015

IBM

Merge Healthcare

Healthcare technology

$1,000

4.4x

July 2015

HGGC

Selligent

Marketing technology

Confidential

Confidential

June 2015

Vista Equity Partners

Mediaocean

Cross-media platform

$720

Confidential

Apr 2015

MasterCard

Applied Predictive Tech

Predictive analytics

$600

6.0x

Apr 2015

Net Suite

Bronto

Cloud-based marketing

$200

5.3x

Apr 2015

Twitter

TellApart

Predictive marketing

$533

5.3x

Apr 2015

LinkedIn

Lynda.com

Online training

$1,500

10.0x

Mar 2015

PayPal (eBay)

Paydiant

Mobile payments

$280

Confidential

Mar 2015

Nielsen

eXelate

Data technology

$200

6.7x

Feb 2015

Samsung

LoopPay

Mobile payments

$250

Confidential

Jan 2015

Dun & Bradstreet

NetProspex

Data management

$125

6.3x

Note: Data marked confidential is either proprietary or related to transactions completed by JEGI
Source: JEGI Transaction Database

demand a pursuit of growth


While deal specific drivers are as unique as the diversity of tech development, tech M&A buyers are almost exclusively
focused on driving growth by reengineering their existing business or creating a new product or service line. Synergies
therefore tend to come under the categories of scale, efficiency savings, product innovation, and talent acquisition.
traditional tech buyers
Scale is a key driver for traditional tech buyers, as evidenced by the $67 billion acquisition of EMC by Dell, heralding a
new milestone. It is a matter of when, not if, a cross border tech deal of similar scale and profile occurs arguably the
Publicis acquisition of Sapient is a great example of this trend.
Product innovation and growth opportunities are two areas of focus for CIOs. The growth opportunities afforded within
the EU from select pockets of less mature high growth tech targets are proving attractive. The Ooyala (Telstra) acquisition of Nativ (UK headquartered cloud-based media logistics platform) provides an excellent example of such.
Tech companies are under pressure to maintain (profitable) growth either organically or through acquisition. There is
also pressure for transactions to be quickly accretive, as well as provide a strategic advantage. The HGGC backed Selligent acquisition (a Belgium headquartered omni-channel marketing technology company) of Strongview exemplifies
EU companies increasing preparedness to tap the US markets to gain market access and secure growth.
The ongoing clarification of corporate strategy is leading to the uncoupling of mergers and divestitures (e.g., HPs
planned separation into two companies and eBays spin-off its eBay Enterprises business). These separations will allow
the parent companies to focus on fewer businesses lines and create the ability to compete against nimbler competitors again fueling M&A.
non-traditional tech buyers
Over the past decade, we have observed an increase in buyers of technology assets from outside the traditional technology ecosystem, as a variety of businesses seek ways to accelerate growth and propel their own digital revolution.
Non tech acquirers are supplementing acquisition and investment activity formerly dominated by traditional tech buyers
and VCs, particularly in areas such as retail, media, finance and healthcare. It is in these markets where firms are increasingly looking to differentiate themselves from their competitors. Recent examples include the 2.0 billion acquisition of
the HERE digital mapping business by the German automotive consortium of AUDI, BMW and Daimler; and Conde Nast
parent Advance/Newhouses acquisition of big data analytics company 1010data for $500 million.

JEGI Tech M&A Update - November 2015

The proportion of non tech acquirers of tech businesses (approximately 40% of the market) increased about 2% in 20142015. However, when you pick through the data and exclude the small number of highly acquisitive US tech behemoths
(Google, Facebook, etc.), the number of occasional non-tech acquirers of tech assets is significant and increasing.
We are seeing the evidence in M&A processes, where our sellside clients are getting offers from outside the traditional buyer set, feeding demand and therefore pricing. All sellers would be well advised to invest the time and effort to seek out those
outside the box acquirers that might have a readily-apparent or aspirational need for their product or service offerings.
private equity and venture capital
Historically the preserve of the tech specific VC funds, technology is increasingly viewed as a key asset class for mainstream PE. The increase in number of maturing assets, as well as attractive growth opportunities presented both by pure
tech and tech-enabled businesses, means that tech assets, such as the recent $5.3 billion acquisition of Informatica led by
Permira Funds, are increasingly forming part of funds portfolios.
In contrast to identifying the next disruptive tech innovation, mainstream PE firms are looking for proven tech companies that have grown without traditional venture capital and have demonstrated ability to generate sustainable growth.
Through continuing to invest in innovation, while also improving growth rates, mainstream PE will crystalize value through
positioning assets as tech enablers.
Furthermore, savvy PE funds, through a well deployed application of tech solutions, will tech enable their existing portfolio companies to help them outperform their peers. For example, we are seeing these companies find value in the Eurozone through using IT to outsource services, incorporate platforms and build more valuable relationships with customers
that drive greater value through pricing or reducing churn.
In the EU, the European banking sector continues to suffer from a lack of self-confidence, presenting PE and innovative
debt firms with opportunities to fill gaps in investment required by small and mid-size enterprises. Europe, which still
lacks economic momentum, will remain a riskier investment proposition than the US, at least for the short term, and
therefore offers potentially lucrative investment opportunities over the medium term.
The increase of PE dry powder (both through accumulated commitments and an increasingly accessible fundraising environment) to more than $1.14 trillion will drive asset valuations. During 2014, over 225 European PE funds were able to raise
100 billion a five-year high. At current investment rates, these funds have 18 months of capital to deploy, in absence of
further capital raising.
the global pessimist should not unduly concern the technologist
An increase in global conflict and the resulting demographic pressure on the EU could reverse the pan-European return
to growth. The UK In-Out referendum (on whether to remain part of the EU) presents the inevitable anxieties resulting from worldwide uncertainty and change. Chinas challenges as it shifts towards a consumer, rather than an export,
economy will also present a number of opportunities.
IPO market activity fell in Q3. While mainland China saw more public listings in 2015 than in the whole of 2014, the closure
of mainland Chinese markets to new listings, as well as wider market volatility, has resulted in a reduction in global IPO
activity. Remaining issues are reverting to more established markets. Japan, for example, is on course for 100 IPOs by the
end of 2015 the highest level since 2007.
Tech specific threats exist, such as US technology companies perceiving an EU regulatory backlash in light of the Snowden
debacle. The most recent intervention scrapping the ability of US tech firms to ship personal information wholesale to
the US is identified by many as latent protectionism.
This unpredictability should not stop investor confidence, as the onward march of tech adoption, the digitalization of
business and associated M&A will continue into 2016 and beyond.

41

JEGI Tech M&A Update - November 2015

Hey, Did You See This?


ABM & Jobaline November 11, 2015
ABM, a provider of integrated facility solutions, signed a multi-year national agreement with Jobaline, a mobile and
bilingual hourly jobs matching marketplace and training network. Jobaline will assist ABMs rapid growth by facilitating faster access to skilled workers and reducing pre-screening and recruitment costs. Jobaline is enabling ABM to put
people back to work faster and more efficiently.
Centric Software September 22, 2015
Centric Software, a provider of product lifecycle management (PLM) solutions for retail, apparel, footwear, luxury and
consumer goods, announced a new solution specifically designed for small businesses called Centric Cloud. As a cloudbased PLM solution, Centric Cloud helps speed product development, improve costs and increase market responsiveness. Centric Cloud is designed to grow with companies and can be rapidly deployed to bring expert know-how to small
businesses, leveling the competitive playing field.
edo Interactive September 21, 2015
edo Interactive, an advertising technology innovator, announced a multi-year partnership with Rewards Network, a
leading operator of dining rewards programs. Global financial institutions use edos patented card-linking technology
to deliver instantly redeemable discounts to cardholders, tailored to their spending habits and backed by data-driven
insights. Cardholders are automatically enrolled in edos Prewards program through their banks credit or debit cards
and can access offers via desktop, tablet or mobile. The partnership will market Rewards Networks 11,000 participating
restaurants to over 40 million cardholders in edos Prewards network.
Intercom October 20, 2015
Intercom, a provider of integrated products for targeted communication with customers, has launched a new website
messaging and live chat platform Acquire. Acquire is intended to change the way businesses communicate with visitors, and to help capture email addresses (among other things) in a more useful and interactive way. The messaging
platform sits quietly in the corner of a company website until invoked; it is easily accessible but a stark difference from
the typical pop-up method. Intercoms mission is to make the internet business more personal by providing two-way
communication solutions.
Spredfast November 12, 2015
Spredfast, a social media management platform, has announced the first implementation of Shoutlet technology after
acquiring the competitor in August. Promotions is a custom form builder that allows brands to create contests, sweepstakes, polls, quizzes, surveys and other interactive features, and capture the user data. The technology collects user data
to use in conjunction with a customer relationship management (CRM) platform. This is the first platform of its kind to
offer a complete suite of functions.
Volusion November 3, 2015
Volusion, an ecommerce platform for small- to medium-sized businesses, has announced a new built-in support for Pay
with Amazon. This feature will provide hundreds of millions of active Amazon customers with the ability to seamlessly
shop on Volusion merchant stores by securely logging into their Amazon accounts and completing their purchases
with stored payment and shipping information. This means a hassle-free checkout experience for customers, and fewer
abandoned carts for retailers.
Weebly October 27, 2015
Weebly, a website-builder and web-hosting service based in San Francisco, has announced a major localization program
for Europe that will cater to businesses in the UK, France and Germany. While the company already allowed merchants
to accept payments from their customers in multiple currencies, Weebly itself has only accepted payments in US dollars
from its own customers now, it will accept euros and British pounds as well. Given that web hosting is a core part of
Weeblys offering, the company is also now offering localized domain names, including .co.uk (U.K.), .de (Germany), .nl
(Netherlands), .fr (France), .es (Spain), .eu (Europe), .us (U.S.), .ca (Canada), and .info.

51

JEGI Tech M&A Update - November 2015

Selected October M&A Transactions in JEGI Tech Coverage


Buyer

Seller

Target Description

Enterprise
Value
($mm)

Deals with Values (by size)


Silver Lake Partners/
Thoma Bravo

SolarWinds

Roper Technologies

Aderant Holdings

Tyler Technologies

New World Systems


Corporation

Cisco Systems

Lancope

Quality Systems

HealthFusion Holdings

Deluxe Corporation

Network management software

$4,500

Legal practice management software

$675

Public sector ERP systems

$670

NBAD software

$453

EHR & practice management SaaS

$165

Datamyx

Consumer data analytics marketing

$160

LogMeIn

Marvasol

Password management software & application

$110

WEX

Benaissance

Healthcare billing & payments SaaS

$80

Rapid7

RevelOps

Log management & analytics SaaS

$68

PTC

Qualcomm Incorporated
(Vuforia business)

Augmented reality software development

$65

OpenText Corporation

Daegis

E-discovery SaaS

$14

Diligent

Thomson Reuters (BoardLink


assets)

Board meeting document collaboration SaaS

$10

Ruckus Wireless

Cloudpath Networks

BYOD mobile device security SaaS

$9

Premier

InflowHealth

Healthcare operational analytics SaaS

$6

Deals without Announced Values (alphabetical by buyer)

61

Ansira (KRG Capital Partners)

Sq1

Digital marketing & design services

Apple

Perceptio

Mobile AI-based image-recognition software

Aptean (Vista Equity


Partners)

CoreTrac

Banking CRM & Salesforce SaaS

Asentinel (Marlin Equity


Partners)

eMOBUS

Enterprise mobility management SaaS

Autodesk

Configure One

Configure, price & quote software

Cisco Systems

1 Mainstream

Streaming video distribution SaaS

Ellie Mae

Mortgage Returns

Mortgage marketing automation SaaS

JEGI Tech M&A Update - November 2015

71

Buyer

Seller

Target Description

Enrollment Advisors

HighRoads (employer
technology division)

Benefits plan management SaaS

Eze Software Group


(TPG Capital)

TKS Solutions

Hedge fund accounting software

Google

Divshot

IBM Corporation

Cleversafe

Idera (TA Associates)

Embarcadero Technologies
(Thoma Bravo)

Intel Corporation

Saffron Technology

j2 Global

OnlineBackupVault.com

Online managed storage services

Milestone Internet Marketing

Oracle (MICROS eCommerce


business unit)

Web marketing & design services

Morningstar

FNA

Nitro Software

Daggerboard

PatientSafe Solutions

Vree Health (Merck)

PhishMe

Malcovery Security (assets)

Raycom Media

Pure Auto

Reynolds and Reynolds (Vista


Equity/ Goldman Sachs)

International Document
Services

Mortgage document e-signature SaaS

Roper Technologies

Atlas Medical Software

Healthcare management software & services

Simply Measured

DataRank

SintecMedia

Broadway Systems

SkyBitz (Telular Corporation)

SMARTLogix

Unbound Commerce

Apptive

Versata Enterprises (Trilogy


Enterprises)

Quantum Retail Technology

VersionOne

ClearCode Labs

Software workflow management SaaS

VMware (EMC)

Boxer

Mobile email management application

Wombat Security
Technologies

ThreatSim (Stratum Security)

Ziff Davis Media ( j2 Global)

Salesify

Enterprise
Value
($mm)

Web application interface PaaS


Object storage SaaS
Database development software
Cognitive computing software

Investment portfolio rebalancing SaaS


Marketing document management SaaS
Patient care app & BPO
Malware threat intelligence software
Automotive digital marketing

Social media analytics SaaS


Television advertising management software
Petroleum distribution & tracking SaaS
Mobile e-commerce application development SaaS
Retail SCM software

Anti-phishing simulation & training SaaS


B2B customer analytics SaaS

JEGI Tech M&A Update - November 2015

About JEGI
JEGI is the leading independent investment bank for the global software, tech-enabled services, media, marketing
and information sectors. Over the past 28 years, the firm has completed nearly 600 M&A transactions, serving global
corporations, private companies, entrepreneurs and founders, and private equity and venture capital firms.
JEGIs senior bankers average nearly 20 years of M&A experience and personally lead each client engagement. Through
the firms broad network of industry contacts and a deep understanding of the markets that its clients serve, JEGI helps
technology companies find their optimal strategic paths via exit or growth capital. The firm provides clients with a wide
and global breadth of buyers, leveraging its unique and extensive market knowledge and deep relationships across
diverse markets to maximize value. For more information, visit www.jegi.com.

Select Recent JEGI Technology Transactions*


the leader in omnichannel
content creation and delivery

a leading provider of enterprise


secure file sharing and collaboration
services for IT business managers

and a portfolio company of

has been sold


to

a leading mobile video and branded


content advertising platform
has received

a digital strategy and


experience design firm

an international SaaS platform


delivering omnichannel
audience engagement

has been sold

a portfolio company of

from

has been sold


to

August 2015

July 2015

July 2015

July 2015

July 2015

a cloud-based provider of global


sourcing and collaborative
supply chain software solutions

a leading software and data


provider to the agriculture market

a leading tech-enabled search


and digital marketing agency

a leading provider of mobile


workforce management solutions
for field service

has been sold

has been sold


to

has merged
with

a significant investment

to

a leader in digital experience design

a leading event housing software


and services provider
has been sold
to

has been sold

has been sold

to

to

October 2014

November 2014

March 2015

to

a subsidiary of

a portfolio company of

July 2014

a portfolio company of

a leading mobile app market


intelligence and analytics provider

a pioneer and leading SaaS


provider of talent analytics to
HR and C-level professionals

has been sold

has been sold

has sold

has received
a significant investment
from

the leading provider


of sales enablement and business
intelligence SaaS solutions

to

to

has been sold


to

to
&

for $52,000,000
May 2013

March 2014

May 2014

a pioneer and leader in mobile


entertainment services

a leading provider of shopping


and shopper marketing
software and services

May 2012

October 2012

*Some of the transactions highlighted above were completed by JEGI Managing Directors Joseph Sanborn and Jeff Becker, prior to joining the firm.

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