Technology M&A Review

TECHNOLOGY M&A REVIEW January 2019 contents

4 Key statistics 5 Highlights 6 Macro Overview 8 US Technology M&A 10 — Largest US deals 12 — US Tech IPOs 14 UK Technology M&A 16 — Semi conductors 16 — FinTech 17 — Cyber Security 18 — AI and Machine Learning 19 — Public Sector 20 — HR 20 — Property 21 — Cloud Software 22 — E-Commerce 23 — Communications 24 — IT Managed Services 26 — Digital Media 27 — Health 28 — UK Risers and Fallers 30 — UK Tech IPOs 32 Outlook

ICON Corporate Finance, 2019 Creating wealth from technology 3 key statistics HIGHLIGHTS

18 20 1 3 c e d Global equity markets have had a great 8 2 7 , run, without really pausing for breath, 6 / and so a return to more ‘normal’ levels 8 ftse ftse techmark 8 UK percentage

6 8 of volatility in the past few months is , 1 31 20 7 0 of cross-border ec 18 d 2 no great surprise. The US economy 35 7

,6 1 1 0 deals 6 3

has powered ahead in 2018 with full

/ 2 6,728 3,309

3 c

0 e

3 employment, high corporate earnings 9

, d

6 8

e –12% –7% 1

7 % 0 growth fed by tax cuts. But the Fed have d

8 1 2 %

0 3 1

2 3

/ continued to increase interest rates and

nasdaq e

e %

1 –3% China growth is slowing, so the outlook

c 3

1 3

7 7 /

3 0 ,

5 e 5

0 is for US growth to slow. It is a similar

e story in EU where quantitative easing 6,635 d 8 1 has just finished, which will withdraw a 0 2 nyse fang+ –4% 1 much needed stimulus.

c e 1 2017 8/17 d 3 d

ec c 7 The number of global technology M&A

d 31 2 2,227

2 c 31 2017 5,

2 0 e 07 , 1 d 1 deals fell 13%, although comparison

8 / 2 4

/ ,4 is with a strong 2017. However, the 6 0% 8

2 7

2 d

, uK tech market remains healthy and some

2 e

c 7

1 global

0 3 valuations are spectacular, particularly 2

ipos 1

0 c 2 e 2 1 d tech M&A in Cloud Software. The number of 3 0 c e 1

d 8 6 deals (No.) deals in the UK fell by only 4%, which .2 17 1 / was impressive given all the Brexit 5 3 uncertainty. One of the main drivers . +113% 1 usD/GBP 4,487 7 remains the weaker currency which 1

0 exchange rate 8 2 attracts a number of overseas acquirers 1 unicorns –12%

1 0

2 3

31 2018 who still account for nearly 40% of all 1 c

c de

3 e

8 deals. In fact 9 out of our last 10 exits d 6 1.26 c 4 , e 1

d / were to an overseas acquirer. 261 2

1 3

–7% 6 6

2 , Eu

/ +25% 1

9 7 The Year of The Pig is surrounded

0 tech M&A 1

7 2 by uncertainty, both political and

0 deals (No.)

2 1

1 3

economic, particularly without the

c e d c

e safety blanket of quantitative easing. d 1,468 However, there still seems to be plenty of confidence about. Valuations remain –11% high with Microsoft, Google, Cisco, 8 01 2 OpenText, Workday, RELX, SAP, 1 017 2.8/ 3 Price to 1 2 2.7 c 3 d Adobe IBM Temenos Docusign c e ec , , , , e 8 d 3 UK d 1 EBIT (x) 1 0 Salesforce and PayPal all having paid 9 2 2 0 0 12mth average 1 tech M&A bitcoin (usd) 1 8 8 more than 10x revenues for their most

, 3 d

3 Price to e

c deals (No.)

/ c recent acquisitions. In Technology

Revenue (x)

6 1

2 M&A, although the number of deals is

. 8 2

, 23.2

3,809 0 3 12mth average

1 down, the total value was up 22% last

400

1 +5%

year and some of the valuations are

0 –73%

2 1

2 –4% snorters, pardon the pun. I doubt 2019

2.7 c

c 0

e e

d will be boaring. d

–3% 2 0 1 8

ICON Corporate Finance, 2019 Creating wealth from technology 5 macro oVERVIEW

global tech M&A deals (no.)

The bears will say, we have increased political risk with worries about US trade 5,208

5,071 wars, never ending Brexit negotiations, rising

global tech M&A deals (Value) interest rates, China trade, populist politics 4,708 4,579 ‘‘ and the end of quantitative easing. 4,427

4,328 Number of deals is down 4,248 ‘‘ but valuation is up The bulls will say interest rates still remain 3,916 3,900 444,000 pretty low, economic growth is OK and

3,617 is pretty good in USA, there is very low unemployment everywhere, inflation is low

336,875 and corporate profits are growing at a good 3,106 329,000 clip, particularly in the USA. Also, in the US 271,843 269,000 a significant corporate tax cut has boosted earnings and overseas cash repatriation.

2008 2010 2012 2014 2016 2018 211,748 2018 was a bad year for almost all 165,000 152,500 asset classes as bonds, equities, 126,000 127,000 117,000 Technology M&A valuations property and commodities all fell. Brexit is a sideshow, the main fear 2008 2010 2012 2014 2016 2018 26 3.5 is a global slowdown in economic growth caused by China, the end uk tech M&A deals (no.) 24 of quantitative easing and rising 3.0 US interest rates. The UK economy 22 has slowed due to uncertainty over 565 Brexit but is actually muddling 20 along alright (so far) and the

479 2.5 eu tech M&A deals (no.) Price/EBIT weak currency has stimulated

428 (LHS) foreign investors who continue to 417 18 400 393 pour money into UK to acquire 373

353 2.0 everything from skyscrapers in 1,632 16 1,596 London to football teams and well- 281 1,468

1,414 run tech companies. 1,371 14 229 Price/revenue 1.5 1,221 187 (RHS)

1,161 Looking ahead, the return to more 12 “normal” monetary conditions 958 925 in 2019 will likely coincide with 828 10 1.0

715 slower economic growth globally. 2008 2010 2012 2014 2016 2018 2008 2010 2012 2014 2016 2018 The result is that equity market conditions are returning to more normal conditions – i.e. they may go down as well as up. Having risen for nearly 10 years, the outlook is likely to 2008 2010 2012 2014 2016 2018 be choppier for a while. However, few are forecasting a recession and interest rates remain pretty low everywhere. So, in a world where growth is slowing a notch then the higher growth Technology sector will continue to remain relatively attractive.

ICON Corporate Finance, 2019 Creating wealth from technology 7 Largest tech write-offs Us tecHNOLOGY M&A Autonomy Autonomy In 10 years’ time when we look back at recently, on hybrid cloud infrastructure which 5 of them, so knows them well. Valuation All Time Top 10 List of Odd Deals then would seem to be the key attraction for was 3.6x revenues. The products are arner acquired AOL AOL arner acquired probably the AOL/Time Warner deal will still IBM. In a statement, IBM CEO Gini Rometty Appscan (vulnerabilities in mission-critical

osoft acquired aQuantive aQuantive osoft acquired rank as Number 1. Hard on its heels will framed the deal as one that will make IBM applications); BigFix (endpoint security osoft acquisition of Nokia Time W gle acquisition of Motorola

HP acquisition of be the acquisition by Broadcom, the highly the leader in hybrid cloud solutions, and software); Unica (marketing automation); Micr erizon acquire AOL and Yahoo AOL erizon acquire Micr Goo V acquisitive semi-conductor manufacturer, remain firmly committed to open source. She IBM WebSphere Commerce (e-commerce of CA Technologies, the mainframe says Big Blue is set up to lead a market that’s platform); IBM WebSphere Portal (web portal

infrastructure software supplier. Broadcom worth more than $1tn. The deal strategically development); Domino (collaboration); and

2015 2014 2011 2011 2007 2000 paid $19bn or 4.5x revenues for the slow pits IBM against Amazon Web Services Connections (email and file and document growth main-frame business in a deal that and Microsoft Azure, which use proprietary sharing). Looks like some housekeeping, but

ss looks at face value to have a questionable platforms in their public cloud operations. it is a bold call buying companies at 11x o strategic fit. Broadcom, which is run by Hock revenues and selling at 3.6x. Tan out of Singapore, had a $160bn bid for A couple of months after the Red Hat Qualcomm rebuffed in 2018 by Mr Trump deal was announced HCL Technologies $4.3bn L and this looks like a rather odd replacement. paid $1.8bn to IBM to acquire 7 software products in the marketing automation,

ss Not all deals are successful and some lead commerce and security areas that IBM o to significant destruction of shareholder says tend to be sold on a standalone basis. value. In the list of the largest ever write offs HCL already has partnerships with IBM in from Technology M&A deals (see table to $6.2bn L left) it doesn’t take a team of analysts to see ss $m o that when a company makes an acquisition ss Largest tech M&A deals 67,000 o outside its core business the alarm bells Target should start ringing. Purchaser $7.6bn L EMC $8bn L ss Verizon AOL Yahoo Date

o ’s acquisitions of and at Dell a combined cost of $8.9bn a few years ago oct 15 37,000 looked somewhat ambitious and off-piste. $9bn L Rebranded Oath, it looked at the time like Broadcom Verizon had acquired yesterday’s brands. It MAY 15 Avago didn’t end well, as Verizon have just written off $4.6bn of the value of Oath and dumped 34,000 the name. It is however in good company, as Red Hat OCT 18 IBM the table above shows.

IBM acquired Linux provider Red Hat for 32,300 $34bn in one of the largest ever deals. At JUL 16 Softbank ARM 11x revenues it is another very expensive acquisition. Red Hat is growing at 20% pa and has a leading market position but that JUN 16 Microsoft 26,200 seems to be more than reflected in the price. LinkedIn Red Hat was founded in 1993 and has built a multi-national firm based on providing FEB 14 enterprise services around open source Facebook software and is best known for its Linux Whatsapp ss 19,000

o server operating system. It has collaborated with IBM for the past 20 years, including JUL 18 Broadcom developing Linux for the enterprise and more

$45bn L CA 18,400

ICON Corporate Finance, 2019 Creating wealth from technology 9 LARGEST US TECH M&A TARGETS IN 2018

VALUATION (EV / T/o) Purchaser Target EV $m

11.6 34,000 intelligent business process services. At just 15.1 21,700 under 2x revenues the valuation is pretty full for a services business. 4.3 18,400 Microsoft has acquired open source development platform GitHub for $7.5bn 3.2 9,700 SAP, the German enterprise software giant, which was valued at a third of that just 3 acquired Qualtrics and at $8bn cash this is years ago. The interesting thing is that they 2.8 8,500 no tuck-in acquisition (just behind $8.3bn paid for it in Microsoft shares. The acquisition paid for Concur in 2014). At 20x current is Microsoft’s largest since the purchase 20.0 8,000 year revenues it is on the face of it a very two years ago of LinkedIn for $26.2bn. expensive looking deal. Part of the reason Microsoft has become the top contributor 25.0 7,500 is Qualtrics’ was nearing a planned IPO, to GitHub which hosts some 85 million code so a premium would be expected but the repositories and is used by over 28 million 2.8 6,600 $8bn compares with $2.5bn valuation developers. Its users include Apple, Amazon in 2017 (when it raised its last round of and Google. When you have $140bn in the funding) and the IPO valuation of $4bn. bank it is a little puzzling why you would 21.9 6,500 To get value from that sort of purchase pay for the deal in shares though. Part of price SAP is going to have to extract a the answer may be in the fact that Microsoft 2.4 5,400 lot of synergies. Earlier in 2018 SAP shares have risen by 40% in the past year.

also acquired CallidusCloud for $2.4bn The other part may be the valuation which

14.8 4,750 or nearly 7x revenues. Callidus provides was an astonishing 25x revenues. configure/price/quote (CPQ) and sales ‘‘ 4.0 3,700 performance management tools delivered as a cloud service. The products are aimed at managing company sales teams, from Microsoft paid 25x revenues! 1.8 3,400 initial lead, through to payment. SAP, which ‘‘ has traditionally handled the back-office of 8.4 2,600 some the biggest companies in the world Before embarking on an exit process it is is moving further into the front-office with often best to check you have support of 6.9 2,400 this deal. “The addition of CallidusCloud key shareholders. That’s trickier if you aligns perfectly to SAP’s innovation strategy are public. Ask Xerox shareholders whose 21.3 0.5 2,350 to transform the front office” said SAP CEO directors had agreed terms with Fuji on a Bill McDermott. The CallidusCloud products $6.1bn exit only for the deal to be ultimately will work in tandem with other front office rejected by Xerox shareholders at the 11th 0.8 2,300 tools SAP has acquired in recent years like hour. Cue a lot of unhappy shareholders/ Hybris, (eCommerce) and Gigya (identity directors from both buyer and seller. 2,000 management). Callidus has itself been quite Shareholder approval is a key part of any acquisitive, acquiring 14 companies dating deal and is best cleared beforehand. 1.1 2,000 back to 2010, including 4 in 2017. If you were wondering whether you are 6.3 1,900 Global aerospace/defence firm General likely to get a higher value from a trade Dynamics acquired CSRA for $9.6bn. buyer rather than a financial buyer or an CSRA iZettle 3.6 1,800 is a leading government IT business, IPO, then the case may help. It may providing digital and IT solutions to federal also help explain why there has been such customers. Its solutions include: cyber; a prolonged dearth of IPO’s of quality large 11.2 1,680 data and analytics; digital platforms; digital technology companies. iZettle is a Swedish services; enterprise business services and payments (portable credit card readers for 15.0 1,550

11 Number of new unicorns

50 retailers) start-up and was about to become Marketo for $4.75bn which is a staggering the equity markets in one of the biggest a big $1bn IPO but instead have sold to valuation of nearly 15x revenues. Vista 40 (and most complicated) tech listings ever. PayPal for $2.2bn, double that amount Equity were not complaining as they made a The big winner would seem to be Michael paying 13x revenues. It follows in a long list profit of nearly $3bn on their investment in 30 Dell, whose stake has apparently risen 8x to of Scandinavian companies that have sold just 2 years. Great marketing. be worth £30bn. out such as Skype, Mojang and Spotify and 20 surely answers part of the question as to Workday which focuses on HR apps has One of the main reasons that IPO volumes why there has been a dearth of IPOs. PayPal, acquired Adaptive Insights for $1.5bn in 10 remain so low is that alternatives are more having closed their iZettle deal in May, are another high valuation deal. It equates to attractive, be it trade sales or PE backed 0 certainly not resting on their laurels. In June 10x revenues for the business planning and 2012 2014 2016 2018 buyouts. There remains a wall of private alone they have acquired Jetlore (predictive financial modelling cloud software. Adaptive equity cash that the industry has raised start up AI for retail), Hyperwallet for $400m Insights filed for an IPO in 2017 and so is from investors that is still looking for a

(funds disbursement) and Simility $120m yet another example of higher price from a impressive list of mega cap companies such home; it is estimated to be over $1trn. With

(fraud prevention). trade sale. Adaptive had revenues of $100m as Airbnb, Uber, Lyft, Slack and Palantir. firepower like that the IPO will continue to

but was losing $40m, the key to valuation face stiff competition.

is the growth which at 30% is obviously a Spotify listed on the NYSE conducting a ‘‘ ‘‘ decent clip. direct listing, meaning no banks underwrote iZettle sold for 2x the offering and no price was set ahead of ‘‘ IPO valuation the debut. The NYSE set a reference price Unicorns are up 25% US IPO market of $132, it rose rapidly but has fallen below ‘‘ $110. It has a value now of $20bn, or 4x Salesforce has acquired Mulesoft for $6.5bn The recent mega listing of Dell in US is a revenue multiple, although that should The other side effect this wave of cash has and plans to use MuleSoft’s technology to re-financing and restructuring of a complex fall rapidly as expected revenue growth brought is the funding of Unicorns (private power a new Salesforce Integration Cloud, and highly leveraged businesses. The materialises. A solid, if not crazy, tech technology companies that are valued which will help customers connect multiple reality is that the number of Technology valuation, likely softened by the fact that their at more than $1bn). There are now 261 sources of data. MuleSoft’s existing software IPOs in the US continues to be on the floor. gross margin is only 20% as they pay a big Unicorns, that is a near 25% increase in allows businesses to bring information in Having said that, the quality of companies slice of their revenues to record companies. the number of these businesses in 2018. from other cloud services, as well as on- listing in 2018 has been pretty decent, New entrants in 2018 include just two UK premises infrastructure. MuleSoft only went it’s just the volume is very low. In 2017, companies – Atom Bank and Revolut – both public in 2017 so had a very short public life. Alteryx, Carvana, Cloudera, MuleSoft, ‘‘ FinTech. In 2017 there were 7 UK entrants At 22x revenues the price is stratospheric Netshoes, Okta, SailPoint, Snap and The No. of US tech IPOs including Improbable, HUT Group, Acorn and is the largest deal done by Salesforce. Switch listed but the performances were ‘‘ have collapsed Payments and Deliveroo. fairly mixed, particularly Snap which has Adobe acquired Magneto Commerce for lost its crackle and is below its IPO price. $1.7bn in another staggering valuation 2018 new listings include: Dell (hardware US technology ipos (No.) paying 11x revenues. The purchase gives and software), Spotify (music streaming), Dell was privatised in 2013 and as a result Adobe a missing e-commerce platform piece Docusign (document signature), DropBox acquired a huge debt pile of over $60bn 74 that works in B2B and B2C contexts and (file sharing), Pluralsight (web development setting it apart somewhat from its cash 64 should fit nicely in the company’s Experience training) and ZScaler (cyber security). laden peers. Then the $67bn acquisition 60 Cloud. This isn’t the first time the company Eventbrite (ticketing), SolarWinds (cyber), in 2015 by Dell of EMC, was the largest 54 has been acquired. Magento was founded Sonos (speakers), Anaplan (Fintech), IT M&A deal ever. To rebalance its books in 2008 and purchased by eBay in 2011 for SurveyMonkey (online surveys) all listed but in 2016 Dell sold its services division to

$180m. The company went private again in the performances have also been mixed, but NTT for $3bn. It also sold its software 38 2015 with help from Permira Funds, which perhaps that is no surprise given the slump division (Quest and SonicWALL) to private sources say paid around $200m. They in Technology shares in 2H2018. Public equity for $2bn. Now Dell has completed a 31 have just made a fantastic return on that appetite for large, high growth, highly valued complicated restructuring buying back the 25 21 investment. Adobe also acquired marketing tech companies will be tested in US in 2019, part of VMWare that was publicly listed (at automation specialist (and similar sounding) as those considering listing include an 15x revenues) and relisting itself back on 13 14 10

ICON Corporate Finance, 2019 Creating wealth from technology 2008 2010 2012 2014 2016 2018 13 LARGEST UK TECH M&A TARGETS IN 2018 UK tecHNOLOGY M&A

VALUATION (EV / T/o) Purchaser Target EV £m

8.0 2,535 suse

9.0 2,200

3.0 1,750

4.4 1,500

11.5 1,300 Overall, 2018 has been another strong 4.8 1,000 year for UK Technology M&A activity. As the table shows, the domestic fears 15.4 west street 538 infrastructure partners over Brexit have not deterred overseas acquirers who remain key, accounting 3.0 475 for nearly 40% of all deals last year. The cheaper currency and a very tech m&a deals with UK target 2.2 380 attractive pool of technology talent 160 are key drivers. 2.1 350 T&M 140

7.1 275 120

4.2 270 100

80 3.2 249 60 Cross border tech M&A UK deals 5.7 226 and oTHERs 40 45% 5.3 198 20

18.4 0.5 175 0 2013 2014 2015 2016 2017 2018 40%

11.4 160 supplier assess.

0.4 154 35% 4.3 142 UK deals fell 4% ‘‘ ‘‘ but overseas buyers 30% 10.0 97 remain strong

3.8 105 0% 2013 2014 2015 2016 2017 2018

0.1 98

3.8 88 Business solutions

15 SEMI CONDUCTORS products it sells to customers who get credit under PE ownership with Paysafe acquiring funding (including £1m crowdfunding round checks, said it’s on track to make £39m US based iPayment in June 2018. on Crowdcube in 2015) the deal was hardly Last year Apple decided not to use in revenue in 2018. Experian are paying a a piece of cake. Imagination Technologies chips in their whopping 7x prospective sales in acquiring VISA acquired Fraedom, a SaaS technology iPhones anymore, a move which ended Clearscore, Experian will be hoping to company providing payments and In 2017 we saw Aviva invest heavily in Imagination’s independence quite quickly. expand its services while also diversifying its transaction management solutions for Wealthify. Now Invesco have bought wealth Now Apple is paying $300m to ‘acqui- customer base into South Africa. It is the first financial institutions and their corporate management platform Intelliflo. It offers hire’ 300 Dialog engineers plus another sizeable acquisition by Experian in a while. customers. It is not a Scottish company, a comprehensive front-to-back office

$300m in prepayments for Dialog’s power as it may sound, but was previously part technology platform for financial advisers management chips over the next 3 years. ‘‘ of travel group Hogg Robinson. Fraedom and their support teams. The business Apple accounted for a massive 75% of The power of has been a VISA partner for nearly ten currently supports 19,000 investment Dialog revenues, which is far too high, ‘‘ competitive tension years, and its technology underlies VISA professionals who manage in excess of leaving it exposed to Apple’s whims, this IntelliLink Spend Management, a core £300bn of assets so the software platform will reduce that reliance over time. $1m per platform for VISA’s commercial and small- is the backbone of the UK wealth sector, head is a very chunky recruitment fee for First Derivatives has paid $54m for business clients. “Increasingly, businesses supporting financial advisers across the “full the engineers. It is more than other acqui- remaining shares in Kx Systems having are replacing inefficient paper-based advice journey”. Growing at nearly 20% a hires i.e. Google acquisition of 2,000 HTC acquired a stake in 2014. Kx has developed payment systems with digital tools,” said year and with 90% recurrent revenues one engineers, which worked out at $500,000 a high performance, in-memory database, Vicky Bindra, global head of products and can see the attraction. each. Dialog will use the proceeds to develop paying a further US$53.8m on terms agreed solutions, VISA. its products in automotive and IoT and may back when the earlier deal was done. Kx’s Elsewhere Lombard Risk Management, have preserved its independence ability to analyse huge volumes of data is VISA also acquired listed Earthport in the listed insurance software provider a bit longer. to be deployed to monitor solar activity to December 2018 for £198m, or 5.3x was acquired by Vermeg for £52m or 2x predict space weather. The company will revenues. Earthport provides cross-border revenues. Vermeg is a Dutch HQ’d FinTech also apply artificial intelligence and machine payment services to banks and businesses. with European presence but revenues of FINTECH learning techniques to support the new Through Earthport APIs, clients can just €54m, so this is a big move for them. NASA Transiting Exoplanet Survey Satellite. seamlessly manage payments to almost any We also noted StatPro picked up the Temenos approached UK listed Fidessa bank account in the world, reducing costs performance analytics part of UBS, and and made a £1.4bn offer which was agreed Italian Gruppo Banca Sella bought mobile and complexity to meet their customers’ Verisk continues its cross Atlantic shopping and was just about to be tied up when up banking app Vipera for $34m. Vipera was evolving expectations of price, speed spree acquiring Business Insight (risk popped both SS&C and ION Trading. SS&C founded in 2015 and went public in 2010. and transparency. The deal comes after a modelling) amongst others. had a look and declined to bid, but ION They have now grown to 125 employees and difficult year for Earthport in which it lost a made an offer that was £100m greater and an impressive 3 million registered users. In major a customer, saw reduced transaction won the deal for the asset management 2017, Vipera acquired SoftTelecom for $1.5m. volumes and underwent a management CYBER SECURITY software provider. Another classic example shakeup. That partly explains why Visa of why you should not accept an offer when There has certainly been a major frenzy of offered 250% higher price than the quoted Helsinki listed F-Secure acquired MWR someone knocks on your door to buy your activity in the UK payments space in the share price as it is only 50% higher than at InfoSecurity, a cyber security company company – unless it is a knock out valuation past few years and 2018 was no different. similar time last year. operating globally but with its HQ in sunny of course. It’s the power of competitive Activity was kick-started in 2017 by Vantiv’s ‘‘ Basingstoke. “MWR InfoSecurity’s threat tension. At 4.2x revenues it was a pretty acquisition of UK’s Worldpay for £7.7bn, hunting platform (Countercept) is one of good price too. 1.7x revenues. WorldPay then acquired the most advanced in the market and is SIX Payments for €3bn in 2018 in another Payments frenzy an excellent complement to our existing Experian acquired Clearscore in £275m big deal. ‘‘ technologies,” said F-Secure CEO Samu deal. Experian, the world’s biggest credit Konttinen. With close to 400 employees, data company, has bought London-based Also in 2017 Blackstone acquired Paysafe Cake Technologies, the UK FinTech that MWR InfoSecurity is among the largest FinTech company Clearscore, which was only in a $3bn cash deal (2.9x revenues). Paysafe helps you pay your restaurant or bar bill, cyber security service providers serving launched in July 2015 and now offers over had previously acquired Skrill for $1.2bn in has been acquired by American Express enterprises globally. Countercept provides 6 million UK customers free credit checks. 2015 taking them into the Premier League for £10m. It’s tempting, but corny, to say extensive proactive attack detection and The company, which generates income from of digital payments. However, life goes on that will do nicely but having raised £7m in its suite of managed phishing protection

ICON Corporate Finance, 2019 Creating wealth from technology 17 services. MWR had revenues of £28m and Network Solutions based in London with a 35,000 websites. Nick Luff, the company’s the NHS. When added to the disposals only breaks even and so the price of £105m SoC in Camberley. Chief Financial Officer, said AI was a “key already undertaken it will raise more than including £25m earn out was a thumping theme of how we are building our profits £400m for Capita, well ahead of the target

3.8x revenues and looks a very full price. GB Group is another one to watch. They and developing our business”. ThreatMetrix, of £300m. Proceeds are likely to be used to

have not announced any UK deals in 2018, which launched in 2005, collects reduce Capita’s debt. Shearwater Group, the AIM listed cyber but the identity data intelligence software information like device type, location and ‘‘ security provider, is heading in the right provider was pretty busy in 2017 acquiring user behaviour to make sure the person direction and building a really interesting Worcester based SaaS software provider logging in to things like banking services Capita – clearing the decks group. Acquisitions have been key – 2017 PCA Predict (aka Postcode Anywhere) for is definitely who they say they are, which deals were SecurEnvoy (6x revenues) and £63m (4.5x revenues or 14x EBIT) and eliminates the need for complicated login. ‘‘

Newable Consulting (since rebranded as before that IDscan Biometrics for £37m Xcina Consulting). In 2018 it acquired cloud cash plus £8m earn out (4.9x revenues ‘‘ Advanced was a very acquisitive animal access security broker GeoLang (£1.7m), or 12x EBIT). They did however expand in RELX – largest acquisition under Vin Murria. After a pause for several cyber security solutions supplier Crystal Australia during 2018 acquiring Vix Verify, ‘‘ in a decade years it appears that in-fill acquisitions IT and Brookcourt (£30m, of which 76% an ID verification and location software are very much back on the agenda with is in cash and 24% in shares) funded by business for £38m, which is a reasonable acquisitions of Information Balance in March a placing. The Brookcourt deal was on a looking 1.8x revenues and looks a good fit. Netwrix Corporation, a US provider data 2018 and Hudman Solutions in 2017. At the reasonable 1.3x revenues and 7x EBIT. security and risk mitigation in hybrid end of June they also announced acquisition Shearwater are one to watch but the shares, environments, acquired Concept Searching of Docman a healthcare workflow/ which doubled in early 2018, have halved AI AND MACHINE LEARNING for circa £8m, a global leader in semantic document management. More than 5,400 since the summer. metadata generation, auto-classification and GP practices and 115 NHS Trusts currently

Oracle acquired Cambridge UK-based taxonomy management software. Another use Docman’s document management and ‘‘ Grapeshot, whose Contextual Intelligence cross Atlantic deal. workflow solutions. Advanced also made the Consolidation in platform keeps brands safe by ensuring ads £16m acquisition of Science Warehouse, a ‘‘ cyber services are not placed against damaging content. SaaS-based e-procurement platform, which Grapeshot examines keywords to gauge PUBLIC SECTOR accelerates Advanced’s cloud strategy. context and avoid inappropriate placement. As CEO Gordon Wilson said: “the Cloud There has been quite a consolidation in cyber Grapeshot has previously received funding Capita sold Supplier Assessment Services, is increasingly seen as the fuel for digital services as there is a severe shortage of of c.$23m from IQ Capital Partners, Draper including Constructionline, to funds transformation projects, which is why skilled staff. Having acquired Sec-1 in 2017, Esprit and Albion. Growth is reported as over affiliated with Warburg Pincus for £160m accelerating our Cloud capabilities is at the Claranet acquired NotSoSecure, a company 100% annually. in cash which will be used to reduce heart of our business vision.” Established providing global pen-testing services indebtedness. Given its underlying revenue in 2000, and a spinout from the University and “ethical hacking” training courses to RELX, the British publishing group turned and operating profit were £14m and £6m of Leeds, Science Warehouse is a provider customers in the US, UK and Europe. It analytics company, has paid £580m for respectively in the year to 31 December of spend management and eMarketplace is headquartered in Cambridgeshire, and ThreatMetrix, a fraud detection tool. RELX 2017 it seems to have got a really good systems to commercial, government, higher has teams in San Francisco and India. is investing heavily to move away from its price at 11x revenues. New CEO, Joe education, NHS and housing customers. Similarly, Intertek acquired pen-tester NTA print publishing of magazines like New Lewis, is making headway in clearing out Its cloud-based SaaS technology drives Monitor (who have offices in Kent and off- Scientist along with academic journals “non-core” businesses having sold Affinity efficiencies through the procurement process shore operations in Malaysia). Six Degrees and data for medics, lawyers and other Workplace to Endless and Asset Services for both buyers and suppliers. added CNS Convergent a 50 strong team professionals. Print now accounts for just Group to Australian financial services firm of pen testers. Managed service provider 10% of its revenues – down from 50% a Link for some £888m in 2017. Capita also Civica changed PE owners in a huge £1bn Six Degrees Group has purchased CNS decade ago. This is its largest acquisition sold ParkingEye, their car parking solutions deal in 2017 valuing it at nearly 4x revenues. Group, a specialist in managed security in that time. ThreatMetrix’s Digital Identity division to a consortium for £226m. The It hasn’t halted acquisitions, far from it, Civica services, penetration testing, consultancy Network is one of the largest repositories valuation represents a healthy profit on the has acquired 7 companies in 2018!!! The and compliance assessments adding 50 staff of online digital identities, encompassing £58m that Capita paid for the business five latest is e-recruitment software specialist Trac and revenue of over £7m. It also brings a 1.4 billion unique online identities from 4.5 years ago and equates to over 5x revenues Systems, which provides cloud software and dedicated Security Operations Centre (SoC). billion devices in 185 countries. It analyses and 15x EBIT. ParkingEye manages car related services to the NHS and the wider CNS Started back in 1999 as Convergent over 100 million transactions per day across parks for retail, hospitality, education and public sector for the complete recruitment

ICON Corporate Finance, 2019 Creating wealth from technology 19 process, from advertising vacancies and HR marketplaces, has snapped up UK based hosting and managed services. Approximately managing applications to on-boarding and commercial property portal Realla, which 200 people strong, Symphony has one of induction. Others include cashless catering Allocate Software has acquired Leicester has 90,000 listings. Realla was only founded the largest independent global teams of and EPOS provider Nationwide Retail based provider 247 Time for an undisclosed in 2016 and has become the Rightmove of Intelligent Automation experts. Symphony Systems (NRS) to expand its payment fee. Formed in 2011, 247 Time supplies Commercial property in UK. CoStar Group holds partnerships with leading RPA software systems business. Barnsley-based NRS is an SaaS-based contingent workforce solutions. founder and chief executive, Andrew Florance, vendors, including Automation Anywhere, established provider of integrated payment Vista owns Allocate and is another example said: “It’s not The Shard we’re talking about Blue Prism, NICE, Thoughtonomy and UiPath, solutions, particularly in the education of PE supporting acquisition programs and selling – its typically a high street retail and has grown roughly four-fold since fiscal sector where it provides cashless catering is perhaps not a big surprise as they grew property in Ipswich”. Glamorous. year 2016. The cost was £52m which equates systems to more than 2,000 local authority, revenues 20% last year. to 2x revenues, pretty good for a services school and college customers. NRS looks Marlowe who provide regulated inspection, business and a good exit for Livingbridge. a nice tuck in for Civica having made profit Tech recruiter Harvey Nash Group has been testing and compliance services for margins of over 35% on its £7m revenues, acquired for just under £100m by DBAY commercial properties, acquired William ICG have joined Hg Capital in taking a stake and brings new technologies such as identity who already controlled 26% of Harvey Nash Martin Compliance for £30m right at the in IRIS Software Group, the acquisitive management. Civica also acquired ERS Group shares. DBAY took a significant stake in end of the year. Formed in 2004, William Berkshire-based accountancy and payroll (Electoral Reform Service) who had revenues Harvey Nash in 2017. Valuation of the deal Martin is a leading technology-enabled UK solutions provider, valuing it at £1.3bn, approaching £40m last year. ERS was formed was just 10% of revenues but 9x EBIT. The provider of property-related compliance in and became one of UK’s largest ever in 1988 when it spun out of The Electoral 130p valuation looks good relative to its areas such as health and safety, fire safety, private equity led software buyouts. IRIS Reform Society, providing end-to-end ballot, share price but not so pretty compared with water safety, asbestos management. It is has 80% recurrent revenues and grew 15% election and voting services and has managed its £8 peak in the dotcom boom. DBAY are paying 4.5x revenues or 15x EBITDA. It is in 2017. The valuation was a whopping more than 50 million registrations. UK value investors who “invest in companies predominantly a cash deal with a small 11x revenues. At the same time IRIS has overlooked or deeply misunderstood by the amount of shares and an earn out. bought Taxfiler, the cloud tax and accounts NEC Corporation acquired Northgate Public market and in many instances out of favour provider for small accountancy practices. Services division for £475m from Cinven. with investors, often taking a contrarian Bentley Systems is a regular shopper Founded in 2012, Taxfiler offers a monthly The strategic tie up is not that obvious at view.” They quote Benjamin Graham “The in UK market. Having acquired Dutch subscription service for agents and first glance. Established in 1969, Northgate intelligent investor is a realist who sells to Geo-technical modelling company Plaxis accountants to submit statutory accounts sells mainly to local police forces, tax optimists and buys from pessimists”. earlier in the year, they acquired Legion, a and tax returns and follows two other collection offices, social security offices and pedestrian simulation software provider. It recent deals – payroll systems provider Star housing authorities. The link is that NEC has Morneau Shepell, the US HR consulting simulates and analyzes the foot traffic on Computers Ltd, and education software an international safety business capitalizing business, acquired London based LifeWorks infrastructure assets that include rail and specialists Contact Group. on biometrics technologies, including face which is an employee well-being business metro stations, stadiums, shopping malls recognition and fingerprint recognition which combines employee assistance, and airports. So operators can accurately ‘‘ technologies that have been evaluated as wellness, recognition and incentive test designs and operational or commercial FreeAgent – “the the world’s most accurate, and provides programs. LifeWorks’ solution features an plans to enhance footfall, wayfinding, crowd ‘‘ whole enchilada” identification systems to more than 30% of evolved employee assistance program, HR management and safety. Clients include state police forces in the United States. It communications and community, perks Gatwick airport, although it’s a pity it is a tenuous reason to make an acquisition, and savings, rewards and recognition, doesn’t simulate drone traffic. One of the strangest deals in a while was but you can see some logic. Following that and a wellness program. “Its best-in-class the acquisition of FreeAgent by RBS. Yes, deal Northgate acquired i2N, which supplies user experience and support services help the bank. The UK-based provider of SaaS specialist software to the UK’s Ministry of improve employee health and productivity”. CLOUD SOFTWARE accounting software solutions for micro- Justice’s HM Prison and Probation Service businesses IPO’d in late 2016. It has been and the Youth Justice Board. Following the Nasdaq listed Sykes Enterprises, acquired purchased at 5x revenue, or £53m, by RBS. deal, over 50% of police officers in England PROPERTY SOFTWARE Symphony Ventures Limited, the leading FreeAgent has many value-added features, will be using Northgate technology. In best-of-breed provider of Robotic Process including good dashboarding, templated early 2019 Northgate have made a further US-headquartered CoStar Group (which Automation (RPA) services. Founded in 2014 forms and systems to support tax reporting. acquisition of APD Communications which owns LoopNet.com and Apartments. and headquartered in London, Symphony After a 4Q 2017 rollout, over 10,000 has mission critical control room software com) a global provider of commercial real is a premier provider to blue chip clients, RBS customers are “signed up to use the for police forces, airports etc. estate information, analytics and online offering RPA consulting, implementation, FreeAgent solution”. RBS plans to operate

ICON Corporate Finance, 2019 Creating wealth from technology 21 FreeAgent as an “independent member of (EDP) which, as the name suggests provides million packages sent annually by leading likes of Moneysavingexpert. Choosing the RBS Group”, offering the solution across ERP solutions to the merchanting and e-commerce retailers. Its client list is home communications, broadband and its customer base. FreeAgent’s strapline is wholesale distribution industry. The £11.8m impressive including ASOS, M&S, John mobile phone deals is “complex and “For managing your business it’s the whole offer is a 33% bump on the share price ahead Lewis, Argos and Halfords. confusing” according to Mark Lewis, enchilada”. That’s a wrap. of the offer and brings to a close its listed CEO of Moneysupermarket. status which goes back over 30 years and has Silver Lake agreed to buy property platform Hg Capital have sold Allocate Software been somewhat less than exciting, struggling ZPG (Zoopla/USwitch) for almost £2.2bn. The online travel sector has had a really to Vista Equity in another private equity to break £5m revenues. Since Accel-KKR’s Its shares jumped 30% on the news and good shake out in the past few years. pass the parcel. Interestingly, since its investment in 2015, Kerridge has made 8 delighted shareholder DMGT who had Skyscanner was acquired by Ctrip and investment at the end of 2014 Hg has been acquisitions, late in 2018 they also added 14x return on their investment. ZPG Priceline acquired Momondo in the past pretty busy. It would seem they supported Insphire (heavy plant software) and Current owns and operates a number of online few years. This year Travel Counsellors and the management through hiring new key RMS (AV and events software). Clearly property portals, and acquired financial Love Holidays have been acquired by private personnel, completed a refinancing in 2016 showing how private equity owned businesses services website Money.co.uk for £80m equity. Valuations are high but not reaching returning 30% of the original investment, embrace in-fill acquisition programmes. (3.3x revenues) and property data provider the high watermark of 11x revenues set by completed two acquisitions, entered four Hometrack for £120m (7.5x revenues). the Chinese acquisition of Skyscanner. The new markets and launched two major new ‘‘ It also made an offer for GoCompare for high street travel agent would seem to have products. The acquisitions were firstly to DMGT make 14x return £420m but this was rejected, having only gone the way of the dodo. enter the French market and secondly, a ‘‘ on ZPG sale recently demerged from Esure. small IP acquisition. The company won new customers on the core platform in Online estate agent Emoov has merged with COMMUNICATIONS Germany, Denmark and Spain, in addition Ideagen have completed another successful rival Tepilo in a deal that also includes the to the acquisition in France. The new year buying three businesses (two in the web-based lettings agency Urban.co.uk Gamma Communications acquired Dutch product launches include a new platform US). In the UK, they acquired Morgan Kai and makes the combined group the telecoms group DX Groep, or Dean One, for for scheduling community healthcare for £20.5m or nearly 4x revenues. Morgan UK’s second-largest digital estate agent. a total of €27m (about half up front and professionals and Cloudstaff, a platform Kai is a Leeds based audit management The acquisition of Urban.co.uk marks a half in an earn out). “It is an ideal way for us that enables trusts to share nurse banks, software provider but has nearly 80% of significant expansion into online lettings for to expand into a new geography” said Chief reducing agency spend. It has impressive its customers overseas. David Hornsby, Emoov, at a time when the property sales Executive Andrew Taylor. Indeed. This is its financial results with 17% revenue growth Executive Chairman of Ideagen, said: market in many parts of the UK is suffering first major acquisition in 6 years, but the and 22% EBITDA growth in 2017. “Morgan Kai is an extremely valuable as wage inflation is low and valuations high. focus on organic growth has not held back addition to the Group and is in line with The combined value of the three companies Gamma’s shares which have increased 4 fold Mandata the Northumberland-based our strategy of acquiring GRC business was £89m, and the newly enlarged business since its IPO in 2014. supplier of software for the transport and that have strong IP and growing recurring has secured £15m from existing and new logistics industry was sold by Synova to LDC revenues”. This is their 13th acquisition and shareholders. Included in that is an airtime- Listed broadband provider CityFibre has in another PE shuffle. It has not been an unlikely to be their last. for-equity investment from Channel 4’s been acquired by Antin Infrastructure overnight success having started way back commercial growth fund, which will see Partners and Goldman Sachs managed in 1974. Mandata was acquired by LDC for the broadcaster work on the company’s West Street Global Infrastructure Partners £20m or 3.5x revenues. That gave Synova a E-COMMERCE advertising campaign, and a cash investment (WSIP). They have paid £537.8m cash return of 8x money invested. Nice. from Northern & Shell, the UK media group for CityFibre, whose revenues doubled to MetaPack has been acquired by Stamps.com, and Tepilo’s largest shareholder. Online £35m with Adjusted EBITDA of just £4.5m. Escher has been acquired by Hanover Private the leading provider of postage online and agents accounted for just 7% of the market, CityFibre had been quite acquisitive itself Equity for £35m. It represents just under shipping software solutions, for £175m. clearly the expectation is that this will rise. buying assets from KCOM Group, Redcentric 3x revenues for the software supplier to the Stamps.com offers postage online and and Entanet as it aims to build a network postal sector. It is an exit for Liam Church the shipping software products in the US SME Moneysupermarket is to acquire home to compete with BT in certain markets. founder who has just been through a 2 year market whereas MetaPack’s platform is communications and mobile phone CityFibre think that this can best be done restructuring to kickstart growth. focused on the retail enterprise space comparison business Decision Technologies in private, rather than in public market. in Europe, so a good fit. London based for £40m, which operates brands including The 90% uplift from the share price before In July 2018 Kerridge Commercial Systems MetaPack is an e-commerce software broadbandchoices.co.uk as well as the approach may have helped persuade acquired listed Electronic Data Processing platform responsible for more than 600 supplying white label technology for the any doubters.

ICON Corporate Finance, 2019 Creating wealth from technology 23 Remote meetings company LoopUp Group Upland Software acquired Rant & Rave, Managed Services Provider, IT Lab (which business outsourcing, and will be combined acquired conference services provider a leading provider of cloud-based customer is backed by ECI Partners), has acquired with M2 – SCC’s existing specialist Managed MeetingZone from GMT Communications engagement solutions. Rant & Rave’s Microsoft partner, Content and Code. The Print business. Hobs On-Site provides Partners for £61.4m. The company also voice of customer (VoC) and voice of newly combined entity has revenue of almost specialist services in document digitisation, announced a chunky £50m share employee (VoE) applications enable £60m and 550 staff in London, Manchester document process re-engineering, print placement to fund the deal. MeetingZone users to capture, analyse and act on and Cape Town. Content and Code, founded room, mail room etc. is a UK-based AV conferencing specialist real-time customer and employee feedback in 2001, is a Microsoft specialist and with a worldwide customer base of across multiple channels including Short claims to be the UK’s largest SharePoint Claranet, which has pursued an active around 6,000 companies. LoopUp are Message Service (SMS), mobile, email, consultancy. Revenue in FY17 was £12m, acquisitive strategy growing to revenues UK listed, after their recent £40m IPO web and social media. The purchase with an operating margin of 15%. Tim Wallis, of over £200m (a third of which is in in 2016. They have paid 2.7x revenues price paid for Rant & Rave was $58.5m founder of Content and Code, has become the UK), has announced the acquisition or only 12.2x EBIT – a pretty reasonable in cash at closing, and a $6.5m cash Chief Digital Officer at IT Lab. IT Lab’s Peter of Surrey-based Union Solutions who price to add considerable scale to their holdback payable in 12 months (subject Sweetbaum remains CEO. have turnover of £10m and 30 employees. business. The shares had a tough to indemnification claims). Upland Union Solutions will help Claranet build second half. expects the acquisition to generate Document management and office services on its cloud-based capabilities. In ‘‘ annual revenue of approximately $21.0m, provider Restore has acquired TNT’s particular, its Azure capabilities and so is paying 3x revenues which are almost records management business, for £88m. back-up, disaster recovery and security entirely recurrent. Upland reckons it will It primarily provides records management of data are key focus areas. LoopUp calling the tune generate “at least $9.5m in Adjusted services but also has a presence in ‘‘ EBITDA annually once fully integrated” so scanning. The business employed more than “The worst set of results I have ever had is paying about 7x that amount. 250 staff, and in particular will strengthen to provide commentary for” said CEO Ian TalkTalk had agreed to sell its business Restore’s public sector exposure. Restore Smith of IT managed services provider broadband to Daisy for £175m, but Daisy funded the deal with a £51.5m placing with IDE Group. To stem the bleeding IDE sold pulled out having failed to agree final terms IT MANAGED SERVICES institutional investors and has developed 365 ITMS which it acquired in 2017 in after DD. Key lesson here is that a deal is into a sizeable business with a market cap a £5.4m cash and share deal. The MBO never done until it is done. HP acquired Apogee – a Maidstone of £400m. Much of this has come through team are paying £3m cash to IDE, financed based office equipment dealer (OED) and acquisitions like Cintas, Wincanton and by a 3-year loan from related shareholder, GTT Communications, has been on an Europe’s largest independent provider of PHS building a powerful market position in MXC Capital (also run by Ian Smith) for a aggressive acquisition spree buying UK print, outsourced services and document document management. 12% coupon. Let’s hope things improve based Interoute (formerly Easynet) for and process technology for £380m. The for Ian in 2019. IDE shares fell over 90% $2.3bn in 2018. Interoute is Europe’s attraction would seem to be the move to ‘‘ in 2018. IDE has an interesting history largest privately held cloud services Managed Print Services and other value- Upland is ranting stretching back to 2005, when ‘casual platform. The deal equates to 3x revenue for added solutions to add to product revenues. ‘‘ and raving dating service’ Easydate was admitted to the fibre optic carrier. It follows on Apogee themselves acquired Balreed Digitec AIM and rebranded as Cupid. The dating from 2017 deals – Giglinx, Hibernia in 2015 and have built an impressive activities were sold in 2013 (realising Networks, Perseus and Transbeam all business with over 24 offices. RedstoneConnect sold its managed services some £38.6m) and Cupid was renamed helping to swell GTT’s revenues and and system integration divisions for £21.6m Castle Street Investments and then bought profits. However, since the deal was Computacenter has acquired San Francisco to focus solely on its software development Selection Services. They were rebranded as announced GTT’s shares have halved and based, FusionStorm – a Sourcing and arm. Included in the sale is Commensus Coretx and then IDE. Colourful. this may put a brake on further deals in Professional Managed Services specialist. and Comunica. It will focus on its OneSpace the short term. Computacenter paid an initial cash occupancy management software solution. Elsewhere in IT services Lyceum (now consideration of $70m and will pay an Having received only 0.5x revenues for its IT Horizon), who acquired a new portfolio Basingstoke based call centre specialist additional $20m depending on profit levels. services businesses it was clearly very keen company DMC Canotec (printing and NewVoiceMedia was acquired for £275m That looks a canny price as FusionStorm to off-load them. document management services). From by US based VoIP platform provider, Vonage. had revenue of $600m and a profit before the same stable, Timico also made its first US shareholders don’t seem too happy tax of $4m. Computacenter has not made SCC (which is owned by Rigby) the acquisition – London based 25Seven, an IT though as the shares have dropped 40% that many acquisitions but also made a IT services player has announced the managed services provider which focuses on since the deal. purchase in the Netherlands in 2018. acquisition of Hobs Group who focus on the hospitality sector.

ICON Corporate Finance, 2019 Creating wealth from technology 25 DIGITAL MEDIA Inflexion has completed the buyout of the share price and is pitched at less than been sold to US HealthTech provider IQVIA, Chambers, a provider of legal rankings. 0.5x revenues and about 9x EBIT, so hardly which was formed following the merger of Fast growing digital agencies (who in Founded in 1990, Chambers ranks over a racy valuation. It is an interested move for Quintiles and IMS Health. another era might have been acquired by 80,000 lawyers and law firms by practice OSG which has made 17 acquisitions and the large media and advertising groups area in almost 200 jurisdictions. The is controlled by investment fund Aquiline like WPP and Interpublic) continue are now rankings are relied upon by corporates Capital Partners who are aggressively ‘‘ being consistently acquired by the large when selecting their legal advisers and running buy and build programs in IQVIA makes global Systems Integrators as they look to by law firms and individual lawyers to several verticals. ‘‘ optimum contact build internal advertising technology and support their business marketing activities. marketing analytic capabilities. Accenture There has been quite a bit of activity in Tech industry sourcing intelligence supplier have been aggressively acquiring 20-30 the legal sector in the past few years. For Pivotal iQ has been acquired by US based companies a year but other examples in the example, AbacusNext acquired HotDocs, market intelligence firm HG Data. IQVIA is a $20bn information and technology last few years include: the Edinburgh based document automation services organisation with more than 55,000 software provider; Thomson Reuters and US listed Upland (Enterprise Work employees who already supports the NHS Mitratech have also been particularly active. Management software), acquired Adestra, at both national and local levels, supplying an Oxford based provider of email marketing, costing, benchmarking and analytical Buyer Target Apple paid $400m for music recognition transaction and automation software from services. With the addition of Optimum app Shazam, which was originally counted BGF. This is their 17th acquisition. The Contact, those services will now be available Cap Gemini June21 amongst UK’s Unicorns. So, it has faced a customer engagement market is apparently to over 156 NHS Trusts and Healthcare big drop in valuation, but still achieved a growing at over 20% per annum. The price organisations. Terms were not disclosed but it Tata Consulting W12 Studios 10x revenue multiple on exit. of $60m is 3.3x revenues but according to is another example of very large US corporate Jack McDonald, CEO of Upland Software “ acquiring a UK based technology provider. Cap Gemini Adaptive Labs NDS have had an interesting history. The is immediately and meaningfully accretive Staines based business was started in to Adjusted EBITDA per share” and is within Israel and was listed in the USA in the late Upland’s target range of 5-8x pro forma Cognizant Zone 1990s. It was privatised in 2009 by News Adjusted EBITDA. Corp and Permira for $3.6bn, and then Cognizant Netcentric acquired by Cisco in 2012 when it changed name to Videoscope. Earlier this year HEALTH Infosys Brilliant Basics Cisco announced that it has sold the video technology assets of NDS (subsequently Dublin-based Clanwilliam Group has TechMahindra BIO Agency rebranded as Synamedia) back to Permira acquired medical correspondence and

again for an estimated $1bn as it separates clinical reporting specialist Dictate IT

out the Pay TV assets. (£10m revenues) which provides digital dictation, outsourced transcription, and ‘‘ speech recognition services to 27 healthcare Facebook acquired UK based Bloomsbury providers. Impressively it’s the 18th business AI. “The Bloomsbury team has built Clanwilliam has acquired since it was leading expertise in machine reading and SI’s grab digital agencies formed in 2014. Others include Informatica understanding unstructured documents ‘‘ Systems (based in Cobham, Surrey which in unnatural language to answer any provides practice management), Maxwell questions,” a Facebook spokesperson said. Stanley Consulting and Medisec Software. Bloomsbury AI developed an artificial Communisis, which offers integrated All part of the move to improve efficiency and intelligence system called Cape that reads marketing services and communications automation in the NHS. documents and answers content-related for brands, has been acquired by US questions. I guess that AI based businesses outsourced billing, communications and Chippenham based Optimum Contact a like this are very useful for Facebook to payments provider OSG. The £154m leading provider of SaaS-based Patient identify “fake news”. valuation represents a 40% premium over Feedback and Audit Compliance Software has

ICON Corporate Finance, 2019 Creating wealth from technology 27 UK LISTED TECHNOLOGY COMPANIES BEST AND WORST PERFORMERS 2018 risers uk rising & falling stars

Sopheon the product development lifecycle software provider had a fantastic year steadily rising after continued strong revenue FALLERS Sopheon performance. Earthport (the cross border payments network) shares bounced at year Alfa Financial provides software for asset +231% end as it was approached by VISA who leasing industry including cars. Having tabled a £198m bid after a tough year. Its only listed in 2017 it initially did well being 250% premium looks a winner. Corero the valued above £5 a share at the start of the network security company had an interesting year but has been massively de-rated to just earthport investment from Juniper Networks who will over £1 by year end. A combination of lofty +170% re-sell Corero products. That has already led valuations, crumbling car sales and delayed to new orders that should boost revenues orders are the main reasons. It is a similar that have been pretty flat for the past three tale at both Appscatter and BigSofa which years. Zoo Digital provides cloud-based are other recent UK listings that have seen media production services and software to their shares fall by more than 60% this year creative organisations, predominantly in the and are now well below IPO prices. Clearly entertainment industry and was re-rated after not good news for the IPO market. iDe a significant uptick in revenues showed a step change in growth. Scottish based Craneware Audioboom Group acquired podcasting –93% sells software to US healthcare industry and platform Triton Digital, for $185m cash. Or continues to perform well as reflected in its at least that was the plan. The deal fell apart corero valuation of 10x revenues. as it could not raise the significant financing. % It was a pretty big move as Audioboom itself +85 Alfa financial Several high growth technology companies has a market cap of just £35m. It was in had a great first half of the year and then many respects a reverse takeover. AudioBoom –78% zoo digital with the de-rating of the Technology sector is a kind of NetFlix for audio. Audioboom’s fell by more than 50% in the second half deal seems to have blown up. +78% of the year. A few examples are – Seeing Machines shares have had an interesting IQE who are now one of the few UK listed year, more than doubling by mid-year but semi-conductor related companies, has seen audioboom then falling 65%. Their software detects its valuation slump to just 3x revenues as driver fatigue. The shares themselves look investors have become more cautious about –65% pretty tired. It was similar tale at Learning revenue prospects, particularly to Apple who Technologies the e-learning company, is investing heavily to bring its supply chain despite good results and a plan to hit in-house. Revenue expectations were also craneware £200m in run rate revenues by 2021 as it clipped by supply chain overbuild. % makes a deeper push into HR and corporate +69 learning. Keywords Studios also bought big Micro Focus have had a tough 2018 with its in the US in 2017 with the $66m acquisition shares dropping 50% in March following fall iqe of VMC Consulting as it boosts technical out from its massive $8.8bn HPE acquisition services for the booming video gaming after revenues fell short of expectations. –52% industry, although it hasn’t had the same However, they subsequently sold their Linux effect on the share price, not yet anyway. business (SUSE). The sale of SUSE for WANdisco is the world leader in Active $2.3bn will change the Balance Sheet and Data Replication which allows distributed an exit value of 8x revenues or 24x EBIT and development teams to collaborate, as if will lead to a significant gain. The shares micro they are all working in one location. Many of have started to recover a bit as a result. focus these company valuations just got ahead of themselves for example WANdisco rating fell –42% from 20x to 10x revenues.

ICON Corporate Finance, 2019 Creating wealth from technology 2929

UKh tec IPOs An up-and-down‘‘ year £50m, so not ideal. The business floated ‘‘ for IPOs at a tricky time with house prices soft and estate agents feeling the pain. It is also busy spending on marketing to increase its coverage and grow the brand.

uk technology ipos (no.) Mind Gym the behavioural science business listed in 2018 and has also had a tough start. It has benefitted from the #MeToo 70 movement to improve corporate culture IPOs and deal with harassment. “Mind Gym’s IPO will raise our profile and help us lead 60 Delisted the development of psychological tools to make companies more diverse, ethical, agile, productive, innovative, healthy and 50 profitable,” said founder and wonderfully named Octavius Black. Unfortunately, the shares are not behaving. Technology listings in the UK are making a 40 gradual comeback with the number of new Funding Circle is more of a SME lender listings in UK well ahead of the previous than a Fintech but even so has had a mixed year. 2018 listings include: start to public life its shares priced at 440p 30 falling over 20% by year end. Yet growth is Prague-headquartered cyber security impressive and a loan book approaching company Avast Software listed in May £3bn that is growing at 60%pa. 20 and now has a market cap of £2.7bn after a strong first year of listing. Backed Panoply is a relative tiddler but looks like by CVC Partners, Avast acquired rival AVG it may grow rapidly by acquisition if its for $1.3bn in 2016 and UK-based Piriform first few weeks as a newly listed company in 2017. are anything to go by. It made its first acquisition (a digital agency) just a week Codemasters is a video game developer after listing in December. 1998 2002 2006 2010 2014 2018 specialising in racing games but their share price movement seems to be stuck Sensyne Health is looking a bit “under the in reverse falling 40%. Although with a weather” having fallen below its IPO price. market cap of over £220m and trading at It develops health products using artificial 3.5x trailing revenues, the valuation is no intelligence for example by improving longer very racy. patient care and generating value from anonymised NHS patient data. Having listed Integrafin provides an investment platform in August it is now below its IPO price having for asset management, its shares are ahead de-rated along with many other high growth despite falling in the autumn and with a tech companies. market cap of £1.2bn equates to over 12x trailing revenues.

OnTheMarket the online agent backed property portal raised £30m on IPO, valuing the company at £100m It is now worth

ICON Corporate Finance, 2019 Creating wealth from technology 31 Outlook

Markets have corrected in 2018, as equity In the UK, we remain confident that Brexit For further details contact: and bond markets adjust to the end of uncertainty will be resolved in due course, quantitative easing and rising US interest although slightly fearful that Jeremy is Brian Parker, Head of M&A rates, with liquidity tightening a notch. waiting patiently in the wings. +44 (0) 207 152 6375 After an extended 10-year bull market run, ‘‘ [email protected] a return to more “normal” market volatility You may think that Brexit uncertainty would Year of The Pig, is long overdue. have put off M&A investors but that didn’t ‘‘ lets hope not Alan Bristow, CEO stop the likes of Civica, Allocate, MRI, +44 (0) 207 152 6375 However, we continue to live in a low ClearCourse, VISA, Upland, Northgate, [email protected] growth, low inflation world where interest Verisk, EMIS, Netwrix, Access Group, rates will remain relatively low for some Servelec and Tata all closing UK M&A deals  ICONcorpfin time to come. Growth looks set to slow recently.  icon-corporate-finance everywhere, so the value of higher growth businesses will remain at a premium and 2018 was very much a “game of two the pressure remains for all businesses to halves”, a great start and a tough finish. continue to drive efficiency and automate The Year of The Pig may also turn out to to boost profits when revenue growth is be the same, only in reverse. Lets hope it difficult. Artificial intelligence, robotics, doesn’t live up to its name. ICON Corporate Finance machine learning, cyber security, IoT and London Office: 53 Davies Street, a continued push into the cloud are some London W1K 5JH of the innovation growth drivers that will Brian Parker, Head of M&A +44 (0)207 152 6375 continue to stimulate growth for some time to come. The technology sector continues Regulated by the Financial Conduct Authority. Member of to look relatively attractive. the BVCA. Registered in England & Wales No. 3714426 Note: The information and opinions in this report were prepared by ICON Corporate Finance Ltd. The data was partly provided by Zephyr, a Bureau Van Dijk database product plus various public sources and includes estimates as often full financial info is not disclosed. We have endeavoured to provide accurate and timely information but we cannot guarantee it. The brief sector overview is provided for information purposes only and is based on deals announced in the period under review. Note EV referred above is Enterprise Value which is the value of the deal including earn out adjusted for the level of debt/cash held by the target.

ICON Corporate Finance, 2019 Creating wealth from technology 33 ICON selected M&A deals

sold to MBO sold to Sold to sold to sold to

sector sector sector sector sector sector Membership software Cyber security FinTech Unified Comms Collaborative Doc Mgmt ITSM Consulting

sold to sold to funding Sold to sold to funding

sector sector sector sector sector sector HealthTech FinTech FinTech IoT LegalTech FinTech

ICON Corporate Finance, 2019 Creating wealth from technology 35 ICON Corporate Finance 53 Davies St, London W1K 5JH +44 (0)207 152 6375 www.iconcorpfin.co.uk  twitter.com/ICONcorpfin  linkedin.com/company/icon-corporate-finance