EMEA 2019 - Barcelona M&A ACTIVITY: WHAT YOU NEED TO KNOW - An - - PowerPoint PPT Presentation

Presentation at Canalys EMEA 2019 - Barcelona

“M&A ACTIVITY: WHAT YOU NEED TO KNOW

• An Insight into the Mergers and Acquisitions

Activities of Technology Industries"

Pradip Somaia, Partner Regent Assay Limited October 2019

Regent Assay Profile

Regent Assay Profile

Fundraising

− Financing and Fundraising for growth − Acquisition funding − Recapitalisations and liquidity

Disposals

− Company sale and divestment lead advisory − Valuation − Negotiation − Deal Structuring

MBO/MBI

− Vendor assistance − Management team assistance − Raising funds required to support transaction

Acquisitions

− Buyer positioning − Financial Modelling − Due Diligence − Cultural fit and commercial review

30 Years of Service to the World’s TMT Industries

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Sample of our TMT Sector Clients

Acquisition Trends

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European Technology M&A Transactions

IT Services Software IT Distribution Computer Hardware Comms Services Comms Equipment Content & Media Applied Technology Internet Services

25% 26% 25% 24% 24% 26% 26% 27% 26% 29% 27% 13% 11% 14% 15% 14% 14% 15% 15% 16% 18% 20% 7% 7% 7% 7% 6% 6% 5% 5% 5% 4% 4% 5% 4% 5% 4% 4% 4% 4% 3% 3% 2% 3% 8% 8% 8% 6% 6% 6% 7% 5% 5% 5% 5% 1% 2% 2% 2% 1% 1% 1% 1% 1% 1% 1% 28% 30% 30% 30% 31% 30% 29% 29% 28% 25% 24% 8% 7% 6% 7% 7% 6% 6% 6% 7% 7% 7% 4% 5% 5% 5% 6% 7% 8% 9% 9% 9% 9%

500 1000 1500 2000 2500 3000 3500 4000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Number of transactions

Source: Regent Assay

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European Technology M&A and IPO Trends

2011 2012 2013 2014 2015 2016 2017 2018 2019 5 10 15 20 25 30 35 40 45 200 400 600 800 1000 1200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 IPOs Acquisitions

Number of Transactions in Europe - Quarterly Trend

Number of Acquisitions Number of IPOs

Source: Regent Assay

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Cross-Border Transactions

Source: Regent Assay

In 2018, 47% of European transactions were cross-border

Europe buying in the US: 253 The US buying in Europe: 434 Europe buying in the rest of the world: 113 The rest of the world buying in Europe: 148 Intra-European transactions: 799 Domestic Only transactions: 1933

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Buyer Activity by Country

• 50

100 150 200 250 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Number of Acquisitions

Trend Analysis by Country of Buying Company

UK & Ireland France North America Scandinavia Germany Benelux

• E. Europe

Rest of World Greece, Turkey, Israel Italy Spain & Portugal Austria & Switz

Source: Regent Assay

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Number of M&A Transactions in Europe - 2018

Source: Regent Assay

Valuation Trends

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European Technology M&A Valuations

0.5 1 1.5 2 2.5 3 3.5 4 2 4 6 8 10 12 Q1 14 Q2 Q3 Q4 Q1 15 Q2 Q3 Q4 Q1 16 Q2 Q3 Q4 Q1 17 Q2 Q3 Q4 Q1 18 Q2 Q3 Q4 Q1 19 Q2 P/S P/EBITDA

Quarterly P/EBITDA & P/S Ratios of European Technology Acquisitions

Price to EBITDA Ratio (P/EBITDA) Price to Sales Ratio (P/S)

Source: Regent Assay

Value Components

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Valuation

Any investor will be buying the future earning potential

• f its portfolio company. In this industry, five factors

combine to represent that potential.

• 1. The prospective financial performance of the

company

• 2. The strength and potential of the customer base
• 3. The capabilities of the management team
• 4. The quality and positioning of the company's

products and services

• 5. The prevailing sentiment about the sector and its

growth prospects Regent Assay is equipped with probably the most extensive research capability in the TMT industry in Europe to be able to determine company valuations. We have been tracking all of the acquisition transactions in the sector for over 20 years and can draw on a large database of deals to identify the leading valuation parameters and the underlying trends.

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Value Enhancers

Financial Enhancers

Profits Growth Repeat Revenues Cash Generation

People Enhancers

Employee Skills Management

Market Enhancers

Market Position Intellectual Property Customer Relations Brand

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Valuation Multiple and Key Valuation Drivers

Every industry has a multiple – an industry norm – a benchmark from which to compare one company against

• another. There will be some companies that achieve

higher multiples than others and some companies that are the best and worst performers. Therefore, if a business looks exactly the same as its competitors then both will get a similar multiple. The diagram opposite presents the key valuation drivers. If a business can demonstrate strength in a number of these areas than a greater multiple can be applied.

Key Valuation Drivers Valuation Multiple

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Valuation Case Study: SimCorp Acquisition of AIM Software GmbH

Transaction Details Valuation Drivers

TECHNOLOGY

Transaction Highlights Consideration: $67.8m USD Industry: Vertical - FS P/S Multiple: 3.9x Industry Avg: 2.23x

1 2 3

Strengthen market share

• Market-leading AIM product suite

will help increase portfolio of products as data management becomes a growing area of importance to buy-side firms. Customer retention – Acquisition allows SimCorp to offer an even stronger value proposition to its existing clients by adding new capabilities. Synergies – Cross-selling synergies from complimentary products and shared target client base. Cost synergies expected from combining two office locations.

• Following the acquisition, AIM software will be

fully integrated into SimCorp.

• AIM Software’s product GAIN will be renamed

SimCorp Gain and become a core component

• f

SimCorp’s future data management

• ffering.
• Revenue

expected to increase by approximately 2% Provides data management solutions to the buy-side

• community. AIM’s GAIN suite of business applications

helps leading financial institutions aggregate, master and report on their market data. Provides integrated, investment management solutions to financial services industry. Their software products support the entire investment value chain.

The Valuation Ramp

Value Criteria Example Sectors

Price to historic EBITDA ratio

SaaS Software Products Hosting/Data Centres Managed Services Information Services Cloud Integration Vertical Solutions Outsourcing Systems Integration IT/Telco Services Business Services Distributors Resellers

11 10 9 8 7 6 5

Market Dominance High Growth Long Term Contracts Unique IPR Strong Recurring Revenue Scalability One-off Contracts Consolidating Market Few Barriers to Entry Product Sales

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Technology Valuations in 2018

0.2 0.4 0.6 0.8 1 1.2 1.4 1.6 1.8 2 2.2 2.4 Software & Services Distribution Channel Systems & Components Embedded Technology Communications Equipment Communications Services Media & Content Internet Services

Median Valuations

Price to Sales Ratio

Source: Regent Assay

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Technology Valuations in 2018

Price to EBITDA Ratio 2 4 6 8 10 12 14 16 18 Software & Services Distribution Channel Systems & Components Embedded Technology Communications Equipment Communications Services Media & Content Internet Services

Median Valuations

Source: Regent Assay

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Selected Recent Transaction History

HAS BEEN ACQUIRED BY HAS RECEIVED FUNDING FROM HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY HAS DIVESTED ITS SUBSIDIARY TO HAS BEEN ACQUIRED BY PA Group’s divisions: HAS BEEN ACQUIRED BY HAS DIVESTED ITS UK FORECAST OPERATIONS TO HAS ACQUIRED HAS DIVESTED ITS SUBSIDIARY TO HAS BEEN ACQUIRED BY HAS BEEN ACQUIRED BY TAX SYSTEMS PLC MANAGED BY HAS BEEN ACQUIRED BY HAS DIVESTED ITS SUBSIDIARY TO

Summary

IPOs remain volatile

• Institutions hold all the aces
• Very expensive to test the process

Refinancing remains a viable option

• Private equity firms remain cash rich
• Opportunities to select the appropriate partner

Numbers of Acquisitions are high and steady

• Buyers are looking at their development options
• Plenty of corporate cash available
• Valuations are at their long-term norm

THANK YOU

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Pradip is an experienced investment banker within the technology sector. He has been responsible for a wide range of advisory work since joining Regent Assay in 2000. Pradip has completed numerous assignments including the recent:

• divestment of AIControl Point (crisis and incident management software business)

from Access Intellience Plc. to the Norwegian company, OneVoice;

• sale of Widget (a European wearable technology distributer) to CMS Distribution;
• divestment of Due North (strategic sourcing software company), from Access

Intelligence Plc. to Proactis Plc;

• sale of Crimsonwing Plc (ERP and eCommerce solutions specialising in Microsoft

Dyanamics, Majento and Intershop) to KPMG;

• sale of Altimate (enterprise systems distributor) to Arrow Electronics Inc.;
• sale of PSCAL (financial management software company) to Civica;
• sale of Codework (security software distributor) to Altimate Group.

Prior to joining Regent Assay, Pradip served as chief financial officer within a number

• f large European and US multinational IT corporations, generally with financial

responsibility for operations throughout Europe. He has worked for EDS, International Data Corporation, Science Applications International Corporation and Equant Integration Services. Pradip is a Fellow of the Chartered Institute of Management Accountants and a Chartered Global Management Accountant.

Pradip Somaia Corporate Finance Partner

1 Royal Exchange Ave London EC3V 3LT psomaia@regentassay.com +44 (0) 7785 316 584

Presentation at Canalys EMEA 2019 - Barcelona

Regent Assay Limited, 1 Royal Exchange Avenue, London, EC3V 3LT Tel: +44 (0) 207 464 4110 www.regentassay.com

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