World Tech M&A Report 2015
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WORLD TECH M&A REPORT 2015 www.corumgroup.com 2015 – ANOTHER RECORD YEAR? 2015 will continue the LUMINARY PANEL record pace established Thanks to our luminary panelists who took part in “Forecast 2015: last year in all 29 Global Tech M&A.” For more of their thoughts on the technology market sectors around landscape, view the original webcasts at www.corumgroup.com. the world, with Asia growing the fastest. This “I think the big disruption is going to come from report profiles those building ‘containers for trust’ for data, rethinking the sectors, who’s doing the way things are done so that identity and protection deals and valuations. and trust are the new defaults.” For the second year, we PETER COFFEE, SALESFORCE are profiling the Corum Top Ten Disruptive Technology Trends, with “Things become apps become services that individual reports by Corum’s top executives. become context available, which changes the way These trends are driving tech M&A, fueled by entertainment, social, work, transportation, and even nearly $2 trillion available to both strategic and reality function.” financial buyers. REESE JONES, SINGULARITY UNIVERSITY Special thanks to our panel of industry luminaries “We’re excited about software-enabled business models, for their insights and contribution to this report: not software or SaaS oriented, but consumer-related Peter Coffee from Salesforce, Reese Jones from services that allow an end user to subscribe to a solution Singularity University, Mukund Mohan from as opposed to buy or rent a piece of software.” Microsoft Ventures and Dr. Karl Popp from MUKUND MOHAN, MICROSOFT VENTURES SAP. They were joined by leaders from the Private Equity community: George Kase from “SAP as a company has a clear strategy. Marlin Equity, John Hodge from Rubicon, Blair We want to make the world run better and Greenberg from Bregal Sagemount and Martin improve people’s lives.” Scott from Riverside. DR. KARL POPP, SAP All presentations are archived under “Forecast 2015 – Global Tech M&A Report” at our website, corumgroup.com. We invite you to join us for monthly valuation updates the second PRIVATE EQUITY PANEL Thursday of each month. Further, we look forward to seeing you at one of our 150 live tech “Larger corporations are looking for smaller, innovative M&A educational events this year in every major companies to grow their top line. M&A is a major tool city (profiled in the back of this report). These for the larger strategics to grow their business. ” conferences and workshops are for sellers – the JOHN HODGE better educated you are on the complexities that RUBICON TECHNOLOGY PARTNERS derail most mergers, the greater your chances to successfully sell your company. “We are particularly seeking areas where innovative technology can enter well-established markets and Bruce Milne Conference Chair provide market innovation or disruption.” MARTIN SCOTT THE RIVERSIDE COMPANY “If I were a CEO of a technology business, I would make sure I had the KPIs right to ensure the quality of my recurring revenue.” Data for this report was compiled by Corum Group, the GEORGE KASE world’s leading seller of privately held software, Internet, MARLIN EQUITY PARTNERS IT and related companies. For further information, please contact Elon Gasper, V.P. Research at +1 425 455 8281 or “As executives build out their businesses, retention [email protected]. rates and deep integrations with their customers are what we look at most stringently.” © 2015 Corum Group Ltd. All Rights Reserved. BLAIR GREENBERG BREGAL SAGEMOUNT 1 corumgroup.com WORLD TECH M&A REPORT 2015 MARKET SET NEW HIGH ROBUST PUBLIC MARKETS DRIVE M&A 20% 2014 Public Markets Public stock markets hit new records in 2014, fueled by easy Weekly Percentage Change money and global growth, trends that continued in 2015. In NASDAQ S&P TECH Dow Jones 15% the technology sector, the disruptive tech trends profiled in this report resulted in double-digit M&A gains. Both strategic and 10% financial buyers set new highs for acquisitions, fueled by excess cash and record debt financing due to low interest cost. 2015 5% continues this pace. 0% TECH M&A PEAKS TRACK MARKET PEAKS -5% Technology acquisitions closely track the success of public JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC markets as reflected in the adjoining chart. With new peaks in the stock market, we expect the current high in valuations and deal NASDAQ PEAKS 1995–2015 volume to continue. However, if the tide turns, the M&A markets 5K drop quickly and precipitously. Not only do valuations tumble, but offers dry up. 4K While the current bull market is one of the longest in modern 3K history, there is increased turbulence in the geopolitical scene, along with concerns about currencies, interest rates and inflation. 2K History has taught us that no bull market lasts forever. During past market peaks, some firms have waited for the perfect moment, 1K only to wait too long. There’s no harm going to market early; it 0 can provide valuable feedback and build important relationships ‘95 ‘00 ‘05 ‘10 ‘15 that could increase a company’s ultimate value. CORUM TOP Technology companies cannot ignore the help them continue that disruptive success. disruptive technologies changing lives and TEN DISRUPTIVE Each year, Corum compiles a list of the transforming markets. Even the largest key trends driving deals, drawn from TECHNOLOGY firms must adapt to these trends or fall transactions in every sector, spanning TRENDS 2015 behind. No technology leader has the hundreds of events, global reports and foresight to always lead the innovation information from conversations with all of curve, and the most successful acquire the the buyers. 2015 has produced a particularly pioneering companies with the expertise to instructive set. MAJORITY ONLINE OMNI-CHANNEL DIGITAL IOT MOBILIZATION EXCHANGES MARKETING CURRENCY FLOW SOFTWARE CRITICAL MASS OF CONNECTING CONSISTENT DECREASING FRICTION EMERGING PLATFORMS, CONNECTED USERS CREATORS & MESSAGING ACROSS IN PAYMENTS & STANDARDS & CONSUMERS CHANNELS EXCHANGE ANALYTICS CONNECT ENMESHED DIGITAL FORCE POSITIONING SPORTS & DATA SYSTEMS MULTIPLIERS INTELLIGENCE GAMING SECURITY BLURRING THE LINES IN-HOUSE TOOLS PIVOTAL LEVELS REACHING PIVOTAL BUILDING BARRIERS CREATE BETWEEN SOFTWARE & TRANSFORM TRADITIONAL OF PRECISION & MOMENT IN IN AN AGE OF HARDWARE FIRMS INTO TECH FIRMS UNDERSTANDING CULTURE & TECH BLURRED LINES WORLD TECH M&A REPORT 2015 corumgroup.com 2 TECHNOLOGY ACQUIRERS SET NEW RECORDS STRATEGIC BUYERS SET NEW M&A RECORD Google reclaimed its top spot on the buyers TOP STRATEGIC ACQUIRERS: 2014 leaderboard with 37 acquisitions, a new high 37 for annual acquisitions by a strategic buyer. They started 2014 with two bold major acquisitions: consumer product purchase of Nest for $3.6B and London-based AI lab, 22 DeepMind. They both became platform 19 18 companies for Google to make other 14 14 13 12 acquisitions. Nest acquired home security 10 10 9 9 9 and monitoring firm Dropcam for $555M. DeepMind made two bolt-on acquisitions in artificial intelligence and online advertising, capping their buying spree by paying $500M for Skybox Imaging, a leader in light- ramped its deal volume by 157%, rolling TOP STRATEGIC BUYERS TOP PRIVATE EQUITY BUYERS weight satellites, imagery and related data 2012 2013 2014 2012 2013 2014 processing. up companies in digital media, backup and email security. 39 The runner-up among the acquirers was 37 Another fast mover, Dropbox, more 31 WPP, who, along with competitor Publicis, 30 than doubled its tech M&A purchases, led a wave of digital ad agency consolidation. 26 including facial and object recognition firm While some deals were direct, most 22 21 20 Kriegman-Belhumeur Vision Technology 19 acquisitions were through nearly a dozen 18 17 different subsidiaries. (KBVT) to help organize photos stored in 14 Dropbox accounts. 13 12 Yahoo, the previous year’s leader, dropped 7 8 to third, narrowing its strategy with a twin A number of perennial top buyers increased 5 6 focus on monetization and mobility. their pace, including Microsoft, EMC and Google WPP Yahoo Insight Venture Vista Equity Partners ABRY Partners Facebook. Partners Just behind Yahoo was business cloud TOP STRATEGIC BUYERS TOP PRIVATE EQUITY BUYERS services vendor j2 Global. The company 2012 2013 2014 2012 2013 2014 39 PRIVATE EQUITY SETS NEW RECORD FOR ACQUISITIONS37 Private Equity also made a record-breaking The chart showing the number of deals 31 number of deals in 2014, many of them from 2012-2014 for leading Strategic3 0vs. smaller tech bolt-ons for existing portfolio Financial buyers 26shows that the top PE 22 21 companies. Such acquisitions enabled firms dramatically increased the number 20 19 Insight Venture Partners to nearly double of transactions18 in 2014 due to smaller 17 14 its number of transactions, repeating as top transactions funded through1 their3 portfolio 12 PE acquirer for the year. companies. For the first7 time, the top ten 8 5 6 Vista Equity, while second in deal number, PE buyers beat the top ten strategic buyers in volume. Google WPP Yahoo Insight Venture Vista Equity Partners ABRY Partners was the top acquirer in terms of total value Partners with three megadeals, including the largest PE deal of the year, the $4.3B acquisition of 39 TOP PRIVATE EQUITY ACQUIRERS: 2014 TIBCO. Vista quickly followed up buying transaction processing services provider 31 TransFirst for an estimated $1.5B, then UK ERP provider, Advanced Computer Software, for $1.1B, a 3.3x multiple. 20 17 Coming in third was ABRY Partners with 20 16 15 transactions, most through bolt-ons to their 13 13 13 12 11 10 10 10 existing portfolio. For example, in the M2M space, RacoWireless was added to ABRY’s KORE Wireless, and Hopster acquired the digital coupon company, Inmar, and other firms.