WORLD TECH M&A REPORT 2016

www.corumgroup.com 2016 – ANOTHER RECORD YEAR?

2016 will continue the LUMINARY PANEL record pace established Thanks to our luminary panelists who took part in “Forecast 2016: last year in all 30 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. This report profiles those sectors, “The most interesting conversations we’re having including top buyers, result not from any one trend, because anyone can jey deals and valuation extrapolate, but from triangulating, looking for ways metrics. For the third these trends will play off of each other.” year, we are presenting PETER COFFEE, SALESFORCE the Corum Top Ten Disruptive Technology Trends with individual “There is an arms race in data security between good reports by Corum’s top executives. These trends guys and bad guys, and making it convenient for the are driving tech M&A, fueled by over $4 trillion good guys to use the best stuff is probably the bigger dollars available to both strategic and financial challenge now, rather than the technical challenge.” buyers. REESE JONES, SINGULARITY UNIVERSITY Special thanks to our panel of industry luminaries “I’m very excited to see more companies getting formed for their insights and contribution to this report: in the areas of predictive analytics, in the area of being Peter Coffee from Salesforce, Reese Jones from able to help industry-specific verticals, to be able to Singularity University, Mukund Mohan from understand what to do with large amounts of data.” Ventures and Dr. Karl Popp from MUKUND MOHAN, MICROSOFT SAP. They were followed by our Private Equity panel, including Rob Palumbo from Accel-KKR, “Artificial intelligence enablement is a very hot topic Joe Manning from Riverside, Peter Freeland from because we see opportunities to help and augment, BuildGroup and Geoffery Baird from Tailwind. but also hand over, some of the more complex work All presentations are archived under “Forecast tasks in the industry to AI.” 2016 – World Tech M&A Report” at our website, DR. KARL POPP, SAP www.corumgroup.com. We invite you to join us for monthly valuation updates the second Thursday of each month. Further, we look forward to seeing you at one of our 150 live tech PRIVATE EQUITY PANEL M&A educational events this year in every major city (profiled in the back of this report). These “For tech companies, the go-to-market model itself conferences and workshops are for sellers – the is just as important in creating a valuable asset as the better educated you are on the complexities that underlying intellectual property. ” derail most mergers, the greater your chances to ROB PALUMBO successfully sell your company. ACCEL-KKR “Nearly every company with a software component is Bruce Milne Conference Chair marketing themselves as SaaS, but the PE and strategic buyer markets are very familiar with what SaaS revenue and technology models really look like.” JOE MANNING THE RIVERSIDE COMPANY

“You don’t see many multi-billion dollar markets lacking a SaaS disruptor, so we’ll do investments to gain meaningful share of smaller markets.” Data for this report was compiled by Corum Group, the PETER FREELAND world’s leading seller of privately held software, Internet, BUILDGROUP IT and related companies. For further information, please contact Elon Gasper, V.P. Research at +1 425 455 8281 or [email protected]. “The combination of technology miniaturization, battery tech and pervasive connectivity is going to © 2016 Corum Group Ltd. All Rights Reserved. cause a huge change in the B2B space.” GEOFFREY BAIRD TAILWIND CAPITAL 2 corumgroup.com WORLD TECH M&A REPORT 2016 MARKET SET NEW HIGH

TECH MARKETS DIVERGE AS M&A RISES 2015 PUBLIC MARKETS Public stock markets set record highs in mid-2015 before hitting the first correction of the post-financial crisis bull market in August. Despite a rebound, most major indexes finished 2015 still off those all-time peaks by about 4%. However, tech-oriented indexes gained for the year, with the NASDAQ up nearly 6%, diverging from broader indexes. The oil price collapse, volatile Asian markets and interest rate uncertainties continued to weigh on the broader markets, but tech M&A never slowed, powered by the near-perfect combination of factors continuing to make this one of the best times ever to sell a tech company. CORUM INDEX 2014 - 2015 TECH M&A HITS NEW RECORDS 2014 2015 Overall M&A hit an all-time high of $4.7T, and tech M&A set records as well. The Corum Index shows total tech transactions Transactions 3879 4307 up 11%, including a historic 59 “megadeals” of $1B or more. Market Megadeals 46 59 The continuing waves of consolidation represented by these Largest Deal $22B $63B major transactions are one more factor making this a great time for sellers to calibrate and realize strategic value. Private Equity Deals 219 232 Pipeline Our Pipeline readings show Private Equity deals continued to VC-Backed Exits 671 648 take share from direct VC-backed exits, while our Attributes Cross-border Deals 35% 34% metrics show a slight drop in cross-border deals, as the Startup Acquisitions 13% 13% proportion of startup acquisitions held steady, along with Attributes average age of acquired companies. Average Life of Target 14 yrs 14 yrs

CORUM TOP Technology companies cannot ignore the help them continue that disruptive success. disruptive technologies changing lives and TEN DISRUPTIVE Each year, Corum composes a list of transforming markets. Even the largest the key trends driving deals, drawn from TECHNOLOGY firms must adapt to these trends or fall transactions in every sector, spanning TRENDS 2016 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, so the most successful acquire the the buyers. 2016 has produced a particularly pioneering companies with the expertise to instructive set, described below.

ONLINE DIGITAL CONNECTED OMNICHANNEL IOT EXCHANGES CURRENCY FLOW HEALTH SALES SOFTWARE CONNECTING DECREASING FRICTION LINKING PEOPLE TO PURCHASING EMERGING PLATFORMS, CREATORS & IN PAYMENTS & THEIR HEALTH DATA & DECISIONS ANYWHERE, STANDARDS & CONSUMERS EXCHANGES SERVICES ANY PLATFORM ANALYTICS CONNECT

ENMESHED AI ENABLEMENT POSITIONING SPORTS & DATA SYSTEMS INTELLIGENCE GAMING SECURITY BLURRING THE LINES PUTTING AI TO WORK BY PIVOTAL LEVELS NEW HEIGHTS IN BUILDING BARRIERS

CREATE BETWEEN SOFTWARE & MEANS OF BIG DATA & OF PRECISION & CULTURE AND NEW IN AN AGE OF HARDWARE FEEDBACK UNDERSTANDING FRONTIERS IN TECH BLURRED LINES

WORLD TECH M&A REPORT 2016 corumgroup.com 3 TECHNOLOGY ACQUIRERS SET NEW RECORDS

MICROSOFT SOARS, GOOGLE SLOWS Microsoft broke through as the top TOP STRATEGIC ACQUIRERS: 2015 strategic acquirer, confirming our predicted sea change in the company’s M&A strategy brought by CEO . The company’s broad, gap- filling strategy assembled assets in the mobile, security, analytics and enterprise spaces, though it reached for a few others, including stylus maker N-Trig and 3D physics platform , divested by Intel. Second place was shared by Accenture and j2 Global, both just under Even with individual buyers, M&A 2014 2015 Change Microsoft’s total. Internet marketing goes in waves; potential sellers must Accenture 5 19 280% conglomorate j2 continued the active watch for these opportunities, not M&A trend it began a year prior, just their own company’s maturity, IBM 5 15 200% rolling up small businesses globally in when considering exit timing. Cisco 6 11 83% waves, including nine deals announced Apple maintained its quicker post- Microsoft 13 20 54% in October alone. Jobs M&A pace, while the most In contrast, Accenture only recently notable drop in leaderboard position Intel 6 9 50% increased its tech acquisition pace, was Google’s. The company that has Amazon 6 9 50% more than tripling 2014’s total, with topped the charts four of the last five J2 Global 18 19 5% many IT Services deals to strengthen years dropped by over half, which its position against rival IBM. Big Blue was still enough for fourth place. As Apple 9 9 0% also tripled its deal count, with many of the Alphabet reoganization finishes Google 37 16 57% its 15 purchases related to expansion up, though, expect them to fight for WPP 22 9 of its Watson AI unit. the top spot again in 2016. 59% PRIVATE EQUITY BUILDS ON ITS RECORD DEAL FLOW Top Private Equity buyers continued the trend of beating the prior year—Thoma Bravo, KKR andTA Associates. They out the top strategics. Vista Equity underscored that trend were followed by Marlin Equity, returning to the chart after by taking over the leading spot, and doing it with more than a year’s absence. twice the deals of the top strategic buyer. Notable sectors seeing increases in PE activity included Vista traded places with perennial top acquirer Insight Venture security, supply chain management and media technology. Partners, which saw its vigorous deal flow dip only slightly. Though platform-level deals continued, deal flow increasingly ABRY Partners again rounded out the top three. counted on bolt-ons to sustain these levels and deploy the Stability was, perhaps appropriately, the overall story of the PE immense amount of funds amassed and available to successful leaderboard, as the next three also contain the same buyers as technology firms.

TOP PRIVATE EQUITY ACQUIRERS: 2015

4 corumgroup.com WORLD TECH M&A REPORT 2016 MARKET VALUATIONS

EV/Sales EV/EBITDA 5.00 21.00

4.50 19.00 4.00 17.00 3.50 15.00 3.00 13.00 2.50 11.00 2.00

1.50 9.00

1.00 7.00

0.50 5.00 Q3:13 Q4:13 Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 Q4:15 Q3:13 Q4:13 Q1:14 Q2:14 Q3:14 Q4:14 Q1:15 Q2:15 Q3:15 Q4:15

Corum tracks valuation multiples for publicly traded companies in 30 subsectors within six broad markets: Horizontal, Vertical, 5 REASONS TECH M&A REMAINS STRONG Consumer, Infrastructure, Internet and IT Services. 1. Record cash – strategic & financial buyers With the exception of the volatile Internet sector, tech company valuation to sales ratios remained surprisingly stable in order 2. Strategic imperative – acquire or perish and range, while EBITDA metrics have been converging as 3. Solid economic growth Consumer and IT Services sector values rise. Broadly speaking, 4. More global buyers than ever nearly all metrics tested or broke through their historic highs. 5. Accessible, inexpensive debt – PE buyouts Subsequent sections of this report will unpack each market, along with the 30 subsectors, in detail.

PRIMARY RESEARCH

ELON GASPER AMBER STONER AARON KING YASMIN KHODAMORADI DEBBI DAVIS UNITED STATES VP, RESEARCH SR. ANALYST ANALYST ANALYST ANALYST EUROPE

NINA SEGHATOLESLAMI ARTEM MAMAIEV VALERIYA CHUMACHENKO ALEXANDER BETS LIUDMILA REVAKINA SR. ASSOCIATE ANALYST ANALYST ANALYST ANALYST WORLD TECH M&A REPORT 2016 corumgroup.com 5 HORIZONTAL

EV/EBITDA EV/S

22.00 x 4.00 x Human Resources

20.00 x EV/S 6.24 x 3.50 x 18.00 x EV/EBITDA 35.12 x ADP / Workday, Inc. 16.00 x 3.00 x Horizontal Other 14.00 x

2.50 x EV/S 2.74 x 12.00 x EV/EBITDA 28.33 x 10.00 x 2.00 x Nuance Comm. / OpenText 8.00 x

6.00 x 1.50 x ERP Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 EV/EBITDA 17.85 x 17.20 x 18.85 x 20.12 x 19.86 x 18.88 x 17.28 x 16.94 x 16.07 x 15.70 x 17.60 x 17.79 x 16.42 x EV/S 2.90 x EV/S 3.74 x 3.33 x 3.55 x 3.57 x 3.40 x 3.51 x 3.39 x 3.42 x 3.30 x 3.32 x 3.55 x 3.63 x 3.54 x EV/EBITDA 14.25 x Oracle / SAP

Business Intelligence Marketing & AdTech CRM SCM Payment EV/S 3.65 x EV/S 1.94 x EV/S 1.59 x EV/S 6.89 x EV/S 4.13x EV/EBITDA 15.81 x EV/EBITDA 16.74 x EV/EBITDA 20.88 x EV/EBITDA 25.88 x EV/EBITDA 16.03 x Tableau / Verint Acxiom / Alliance Data Salesforce / Convergys Descartes / AspenTech Paypal / ACI

The Horizontal market saw fluctuations in sales multiples all

year, eventually ending 2015 up from the numbers in January. SOLD TO EBITDA multiples, however, ended the year slightly down from where they began the year. year, while competitor MOBI Wireless was snagged by Bregal The BI, CRM and ERP subsectors all saw drops in sales Sagemount. With Private Equity making bold moves in the and EBITDA multiples, while SCM and HR continue to set space, it is worth watching watching to see if traditional telecom themselves apart from the rest. The newly introduced Payments expense management firms like Tangoe become targets. subsector is the highest valued of those others, with over 4x sales and 16x EBITDA multiples. The twin trends of Omni-Channel Sales and Digital Currency Flow are driving consolidation in the e-signing space. In Europe, Corum client SIGNificant Software was acquired by Namirial. SOLD TO In Canada, Silanis Technology was bought by VASCO Data Security for $85M, adding e-signature capabilities to its digital authentication products. Proof-of-delivery solution provider Big data, intelligence and predictive analytics were key themes JumpTrack was snapped up by Carlyle-backed ECi to integrate across the sector. Microsoft made five analytics acquisitions, its e-signature capture software into ECi’s offerings to SMBs. including R programming language-based predictive analytics provider for an estimated $115M. And while omni-channel trends are driving disruption, the e-mail channel continues to be a top marketing priority, marked Other analytics deals included the purchase of predictive by significant consolidation. Corum client EmailDirect was analytics company Prelytix by financial software vendor First acquired by top buyer j2 Global, while Bronto Software was Derivatives, and marketing analytics provider MarketShare’s gobbled up by NetSuite in a $200M transaction. The trend was acquisition by NeuStar for $450M, an 8x revenue multiple, to bolster the buyer’s growing marketing technology division. In the back-office realm, Enterprise Mobility has been a hot SOLD TO topic as companies strive to minimize their costs on managed services. Corum client eMOBUS was picked up by Asentinel capped by the Constant Contact megadeal, with Endurance for its unique technological approach to the problem. Asentinel International adding one of the top email marketing names to itself was acquired by Marlin Equity at the beginning of the its suite of products layered on top of its web-hosting core.

6 corumgroup.com WORLD TECH M&A REPORT 2016 TOP DISRUPTIVE TECHNOLOGY TRENDS

Moving from email to snail mail, postal services companies made acquisitions in the SCM and logistics sectors. The Royal Mail I think curating a community of trusted bought three companies: parcel tracking and labelling platform advice around search is going to become the NetDispatch, shipping & logistics SaaS provider StoreFeeder, as way people prefer to engage with providers. well as online same-day delivery company eCourier. Singapore “ Post followed suit, picking up two US-based SCM software Peter Coffee, Salesforce providers: Tampa-based Jagged Peak, paying $11.5M for a 70% stake, and Cincinnati-based TradeGlobal, acquired from Bregal ” Sagemount for $168M. On the B2B side, the two most important trends for analytics are machine learning and in the area of mixed, augmented, and SOLD TO “ virtual reality. Mukund Mohan, Microsoft AI ENABLEMENT ” Young artificial intelligence systems from companies Watson is the furthest along of these like Google, Apple, IBM and others are hungry for data new conversational AIs and is already and for problems to solve with that data. Big Data analytics driving M&A, with Merge Healthcare and is the foundation for all AI, from Siri pulling a restaurant the Weather Company now available to from a repository based on a GPS location and cuisine provide input and output for Watson. The preferences, to a home’s climate control system learning the others—Cortana, Siri, Alexa and many ALLAN WILSON behavior of the residents and adjusting dynamically based more—won’t be far behind. VICE PRESIDENT on needs, time of day and temperature, to IBM’s Watson In particular, they’ll be seeking companies making a medical diagnosis using patient history, current with unique stores of data and unique opportunities for AIs data and the entire history of medical literature. to prove their value.

OMNI-CHANNEL SALES In an age when consumer platforms and devices are Amazon’s same day delivery initiative. continually fragmenting, Omni-Channel Marketing led This trend is making its way into the the way, seeking to reach the consumer with messaging no enterprise, as companies like Cloze matter the medium. The next phase is Omni-Channel Sales, transform small workforces into more uniting buyers and sellers at the point when a consumer is effective omnichannel sales organizations. ready to purchase. To meet the challenge of Omni-Channel DANIEL BERNSTEIN Whether it’s ecommerce integrated into a Twitter feed, TV Sales, technology companies must VICE PRESIDENT set-top box or online, you can now order Domino’s Pizza leverage data science, mobilization, social anywhere you are. If you run a Bigcommerce site and live network integration and many other technologies that bring in San Francisco, you can integrate a same-day delivery both persuasion and transaction as close to the buyer as platform courtesy of Uber, effectively competing against possible.

ONLINE EXCHANGES The Internet creates a potential real-time connection can be difficult to get a foothold, but they between every person and every thing in the world. Online may be a potential acquirer. In the ticketing exchanges turn potential connections into real connections space, Ticketmaster has done four deals in to create transactions. Amazon and eBay started early and just the last two years. established global exchanges of buyers and sellers of goods. Larger exchanges will continue to diversify Innovative newcomers like OfferUp are challenging their and grow through acquisition, taking out NAT BURGESS positions. Illicit exchanges such as Silk Road have popped emerging competitive threats, but online PRESIDENT up in the darker corners of the Web, and we are now seeing exchanges breaking new ground in the exchanges for increasingly specialized products and services. enterprise will be particularly attractive targets, as procurement Choosing a category and building an exchange is the easy part. departments find the same value that consumers have. In the Drawing enough participants to make an exchange viable is longer term, the Internet of Things will enable B2B and B2C another matter. When your market has a dominant player, it exchanges that create transactions without human intervention.

WORLD TECH M&A REPORT 2016 corumgroup.com 7 VERTICAL

EV/EBITDA EV/S Energy &

20.00 x 5.00 x Environment EV/S 3.34 x 18.00 x 4.50 x EV/EBITDA 15.78 x 16.00 x 4.00 x Itron, Inc. / Schlumberger Ltd.

14.00 x 3.50 x Real Estate 12.00 x 3.00 x EV/S 7.17 x

10.00 x 2.50 x EV/EBITDA 31.16 x LoopNet / Zillow 8.00 x 2.00 x Automotive 6.00 x 1.50 x Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 EV/S 3.98 x EV/EBITDA 15.39 x 15.03 x 16.09 x 16.52 x 17.11 x 18.35 x 17.52 x 17.23 x 15.95 x 15.67 x 16.69 x 16.70 x 15.85 x EV/S 3.91 x 3.55 x 4.28 x 4.09 x 4.44 x 4.43 x 4.29 x 4.18 x 4.12 x 4.05 x 4.30 x 4.50 x 4.37 x EV/EBITDA 36.54 x CDK Global / BitAuto

A/E/C Government Healthcare Financial Services Vertical Other EV/S 5.13 x EV/S 1.75 x EV/S 5.23 x EV/S 4.80 x EV/S 4.46 x EV/EBITDA 17.25 x EV/EBITDA 12.25 x EV/EBITDA 18.31 x EV/EBITDA 15.24 x EV/EBITDA 14.83 x Autodesk / Synopsys Raytheon / Harris Cerner / Allscripts Broadridge / Fiserv Amadeus / Sabre

Vertical market multiples ended the year slightly higher than picked up by Swiss wireless health IT firm Ascom. they began, after plenty of fluctuation during the year. The Healthcare analytics also drew significant interest, including gains in Healthcare, Financial Services, and Architecture, Premier’s $65M acquisition of Healthcare Insights, and Engineering and Construction sub-sectors helped to somewhat Centene’s purchase of LiveHealthier, which provides employee buoy stagnation in other verticals. wellness analytics, a notable diversification from Centene’s In the Healthcare sector, the consolidation of electronic health core Medicaid business. records has continued, albeit at a slower pace. Though there were no EHR-related megadeals, after a flurry in 2014, there SOLD TO are more middle-market deals to be done in this sector, as acquirers fill gaps in their specialties and geographies going forward. The insurance industry has always been on the forefront Key EHR deals included the $165M acquisition of SaaS EHR of innovation in analytics, and DriveFactor, an automotive provider HealthFusion by Quality Systems and the rollup of telematic analytics provider to insurers, continued that trend, e-MDs, Corum’s Austin-based client, by Marlin Equity with its selling to CCC for $22M. portfolio company MDeverywhere. Chicago-based workers comp specialist Vikaran was sold to outsourcing provider Patriot National, with Vikaran’s Indian

SOLD TO development center a key asset in the deal. Insurance agency tech was also in demand, as Corum client QQ Solutions, a maker of software for smaller agencies, was Europe saw a notable uptick in health IT M&A, with multiple acquired by Vertafore. Canadian company Brovada, which deals towards the end of the year. US-based CompuGroup offers tools for agencies, brokers and carriers, was acquired by Medical made four deals through assorted European Towers Watson. subsidiaries, acquiring BS Concept Realization and CareTrace out of the Netherlands, Germany’s LMZSOFT and Italian healthcare website Medicitalia. SOLD TO Also in Italy, United Medical Software, a digital medical records solutions vendor and medical device integration provider, was

8 corumgroup.com WORLD TECH M&A REPORT 2016 TOP DISRUPTIVE TECHNOLOGY TRENDS

In Fintech, analytics was again a key theme. CoreOne was one management software, was bought by Rubicon Technology of three acquisitions made by Markit Group last year, which Partners. spent $200M to get the New York-based regulatory reporting provider. Broadridge did five deals, most recently QED Financial, an investment accounting solutions vendor, and in SOLD TO England, financial modeling tool Tyche was acquired by RPC Consulting. Finally, Shanghai-based real estate Internet platform Anjuke There were also a number of analytics deals in the Real Estate was bought out by online classifieds platform 58.com for subsector. FNC, a property appraisal automation software $267M, as it takes on established Chinese real estate sites like firm, was snapped up by CoreLogic for $475M. 4tell Solutions, Soufun and Leju. a provider of real estate and infrastructure performance

POSITIONING INTELLIGENCE

As an amateur race car driver, I never underestimate Drones are becoming ubiquitous, finding the importance of location precision and intelligence. commercial applications beyond consumer Knowing the car’s speed, attitude and position relative to markets, with retail delivery no longer just other objects is critical. Use cases for proximity technology a dream. are also racing ahead, enabled by evolution of tools and The imminent reality of autonomous data for a new level of precision and awareness. vehicles relies on these new levels of WARD CARTER CHAIRMAN With proximity marketing, consumers receive targeted precision, situation awareness and messages based on proximity to retailers, allowing delivery contextual insight. Google, Ford, Uber, GM, Lyft, Toyota of discounts, coupons, recommendations and awards to and others making major investments here demonstrate the potential customers. scale of the opportunity.

CONNECTED HEALTH As consumers of health care services use mobile apps, and Weight Watchers also acquired fitness smart-phones and wearable tech, the type and amount apps, while IBM acquired a digital imaging of available medical information has grown exponentially. business and a couple of healthcare data Harnessing this data to extract actionable and predictive companies to bolster its Watson health intelligence will be a key driver for connecting the entire business. Meanwhile, GlaxoSmithKlein and healthcare ecosystem in ways that will improve the delivery Qualcomm are rumored to be setting up a DAVE LEVINE of health services. $1B joint medical device venture. VICE PRESIDENT This Connected Health trend drove deals well beyond This activity will accelerate as companies with patient-centric traditional health IT and life science acquirers—Under technology successfully driving healthcare disintermediation Armour’s acquisition of MyFitnessPal and Fossil’s and pushing inefficiencies out of healthcare systems will acquisition of Misfit wearables highlight the convergence of demand the attention of both traditional and non-traditional health and ‘non-traditional’ health sectors. In 2015, Adidas health-tech acquirers.

DIGITAL CURRENCY FLOW

Payments M&A dominated Fintech transactions in through acquiring payments technology 2015, and we believe this trend will continue in 2016. vendors. Mobile payments have finally become a reality. Apple Pay Banks are under threat by new entrants is now accepted by national retailers across the US and in transforming the customer experience and Europe with collaborations with the largest card issuers. therefore commanding a higher market The other leading handset manufacturers and OS vendors share of the total profits. Additionally, DOUGAN MILNE VP OF INT’L DEV are following suit, deploying products such as Google Pay, cross-border payment inefficiencies remain, Samsung Pay and LG Pay. creating opportunities for new technology solutions. There is massive opportunity for banks, card issuers, and And finally, digital payments continues to grow, driven by payments processors to deliver mobile payments to more low costs, ease of use and improved banking infrastructure. global markets and a wider distribution of customers

WORLD TECH M&A REPORT 2016 corumgroup.com 9 CONSUMER

EV/EBITDA EV/S Entertainment 19.00 x 3.50 x EV/S 3.51 x

17.00 x EV/EBITDA 62.51 x 3.00 x 15.00 x Netflix / Pandora

2.50 x 13.00 x Video Games 11.00 x 2.00 x EV/S 2.74 x 9.00 x EV/EBITDA 14.15 x 1.50 x 7.00 x Electronic Arts / Activision

5.00 x 1.00 x Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Education EV/EBITDA 11.77 x 13.87 x 13.18 x 13.04 x 14.01 x 15.24 x 15.50 x 16.69 x 14.47 x 13.17 x 15.43 x 16.64 x 14.35 x EV/S 2.71 x 2.42 x 2.30 x 2.45 x 2.97 x 3.10 x 2.84 x 3.30 x 2.97 x 2.64 x 2.67 x 2.46 x 2.54 x EV/S 1.54 x EV/EBITDA 14.35 x Rosetta Stone / Chegg

Valuations in the Consumer sector went on a bit of a roller Canadian Longtail Studios, now Ubisoft Halifax, with an coaster ride this year, as fitness, entertainment, wearables and unorthodox focus on triple-A mobile games. media continue to intermingle and fuse. Sales and EBITDA multiples both ended the year very slightly above where they began and began to climb again after the August market SOLD TO correction. Fitness tracking became a fight club for consumer players such And Sega is trying to get back into the fight by going after as Under Armour, which knocked out Nike and Adidas this studios in the US and UK, including Demiurge Studios from year to claim the champion title of largest fitness community. Boston, San Francisco-based Ignited Artists and England’s In February, the Baltimore-based giant grabbed Danish fitness Space Ape Games. app Endomondo and food tracker app maker MyFitnessPal, In the music arena, Pandora bought music analytics firm for $85M and $475M respectively, finishing up with workout Next Big Sound and spent $75M for Rdio and its on-demand finder app Gritness. streaming service, while US-based Soundtracker was nabbed by Italy’s Sounday, enhancing the latter’s music ecosystem with SOLD TO geolocation tech.

Not just fitness but fashion moved into wearables, with global SOLD TO fashion brand Fossil acquiring health tracking startup Misfit for $250M. The Internet of Things is pushing other traditional companies toward technology acquisitions, including retail giant Sears SPORTS AND GAMING absorbing moisture sensing tech WallyHome. Sports & gaming continue their ascent to cultural In the UK, AlertMe, a connected home tech pioneer, was dominance. In the gaming space, that’s reflected in sold to British Gas for over $67M. Apart from solidifying the disclosed deal value that’s higher than ever, driven by the energy giant’s footprint on the home automation front, the sector’s record deals – first Microsoft’s $2.5B acquisition transaction should expand AlertMe’s services offshore since of Mojang and the runaway hit Minecraft, soon dwarfed British Gas is a part of a larger Centrica Group. by Activision Blizzard grabbing King Digital and Candy Crush for $5.9B. This indicates more to come from major players – and SOLD TO from China – but at the moment fewer small studios are being picked up as the giants focus on consolidating. In the gaming space, Ubisoft took a shot at buying up studios Deals are happening, though, where sports & gaming blur, with a trusted partnership background. It started with Ivory in emerging sectors like esports and daily fantasy, plus Tower, French developer of The Crew, and closed out with

10corumgroup.com WORLD TECH M&A REPORT 2016 INTERNET

EV/EBITDA EV/S Diversified Internet 6.00 x EV/S 5.63 x 31.00 x EV/EBITDA 20.00 x

26.00 x Alphabet /

21.00 x 4.00 x E-commerce EV/S 1.53 x 16.00 x EV/EBITDA 26.55 x 11.00 x eBay / JD.com

6.00 x 2.00 x Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Social Network EV/EBITDA 28.01 x 27.67 x 29.78 x 29.01 x 33.23 x 32.43 x 30.32 x 28.14 x 22.49 x 22.21 x 26.11 x 26.23 x 25.04 x EV/S 5.11 x 4.73 x 5.21 x 4.93 x 4.63 x 4.93 x 4.85 x 4.57 x 4.13 x 3.93 x 4.03 x 4.01 x 3.83 x EV/S 7.75 x EV/EBITDA 42.11 x Facebook / LinkedIn

Travel & Leisure The Internet sector did not recover as much momentum as others conglomerate’s largest EV/S 5.25 x after the midyear market drop, but remains a pressure cooker of travel investment yet. EV/EBITDA 25.92 x tech change. Its social network subsector retained the top value Elsewhere in the Travel Expedia / JustEat position, while eCommerce fell amid a perception of depleted & Leisure subsector, opportunities. Diversified models defied commoditization to in the online take-out rise in value. buffet, Just Eat put away 2015 marked milestones in the online travel industry, with the largest single portion, dishing out $682M for Australia’s Seattle-based Expedia taking in competitors Travelocity and food marketplace Menulog, plus a couple of Italian ordering Orbitz, paying about $1.5B for the pair. Expedia’s latest and platforms – Clicca e Mangia and DeliveRex, with Canada’s largest purchase, vacation rental site HomeAway for nearly $4B, Orderit for dessert. addressed the threat of newcomer AirBnB as well as longtime rivals Priceline and TripAdvisor. SOLD TO

SOLD TO Rocket Internet and Foodpanda again made the most deals in the space, a varied diet of six food ordering acquisitions – all in the And before being grabbed by Expedia, HomeAway struck first four months of the year. The top food ordering acquirers a couple of deals itself, acquiring Singapore-based startup were rounded out by GrubHub’s three deals and Delivery Hero Travelmob to pump up its Asia-Pacific business arm, and making Middle East inroads, acquiring Yemeksepeti – Turkish Seattle-based vacation rental app Dwellable. for Market Basket – for $589M, and Kuwait’s Talabat. In the EU, Swedish online agency eTRAVELi was acquired by The online dating space was nearly as active as travel and leisure, ProSiebenSat.1 out of Germany for nearly $265M, the media set against the romantic backdrop of Match Group’s successful IPO in November. Ahead of that, Match Group acquired the continually in gambling technology. The Canadian Plentyoffish dating service for $575M. importance of gaming also means that even when the market for studios is slow, high quality companies who have built superior games using their own IP are in SOLD TO

demand, particularly from Asian buyers, JIM PERKINS with deals getting done even in the face SR. VICE PRESIDENT of volatile public markets. Other dating matches happened globally. In China, Jiayuan A good example was -based and hooked up with competitor Baihe’s LoveWorld for $250M; Beijing’s Perfect World acquiring Corum client Digital Britain’s Oakley Capital paired up two German dating services, Extremes. It will be instructive to see where Leyou and Parship and ElitePartner; and JSwipe found another nice Jewish- other Asian-based gaming companies expand in 2016. focused dating platform, as it was acquired by JDate’s parent company Spark Networks for an estimated $7M.

WORLD TECH M&A REPORT 2016 corumgroup.com 11 INFRASTRUCTURE

EV/EBITDA EV/S

18.00 x 4.50 x

16.00 x 4.00 x

14.00 x 3.50 x IT Services Management 12.00 x EV/S 6.20 x 3.00 x 10.00 x EV/EBITDA 27.40 x

2.50 x CA Technologies / redhat 8.00 x Infrastructure Other 6.00 x 2.00 x Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 EV/S 4.32 x EV/EBITDA 16.03 x 14.90 x 15.14 x 14.87 x 15.68 x 15.40 x 15.79 x 16.06 x 15.21 x 14.22 x 13.30 x 14.12 x 13.78 x EV/S 4.14 x 3.92 x 4.15 x 4.02 x 4.09 x 4.13 x 4.22 x 4.37 x 4.02 x 3.66 x 4.19 x 4.32 x 3.96 x EV/EBITDA 13.78 x Atlassian/ Progress

Network Management Storage & Hosting Security Endpoint EV/S 2.29 x EV/S 2.34 x EV/S 4.84 x EV/S 3.23 x EV/EBITDA 19.22 x EV/EBITDA 6.68 x EV/EBITDA 15.42 x EV/EBITDA 14.93 x Cisco / Juniper Networks NetApp / Brocade Gemalto / Check Point VMware / Citrix

Sales multiples in the overall Infrastructure sector fluctuated in acquisitions, alongside a number of other major players— the latter half of 2015, but ended the year roughly in line with Intuit, which snapped up Porticor, another Israeli data where it began. EBITDA multiples didn’t fare as well, ending encryption SaaS vendor; Hewlett-Packard, which acquired down from the beginning of the year. Voltage Security, a data-centric encryption technology provider Valuations among the six infrastructure subsectors mirrored for an estimated $175M at 5x revenue; and France’s Thales the sector as a whole with only IT Services Management rising Group, which paid $400M for data protection firm Vormetric. in both sales and EBITDA multiples, as Storage and Network

Management saw gains in sales and EBITDA multiples, SOLD TO respectively. And while the Security subsector did have dips in both metrics, the critical nature of security kept deals happening at a rapid pace. Elsewhere in the enterprise threat prevention space, This includes the acquisition of Websense by US defense CirroSecure, a cloud application control vendor, was snatched contractor Raytheon for $1.3B, making it clear that data security up by Palo Alto Networks to protect collaborative tools such is an unavoidable component of national security. as Box and Salesforce. Boston-based machine data search vendor RevelOps was sold to newly-public Rapid7 for $68M following Rapid7’s earlier SOLD TO acquisition of NT OBJECTives, a penetration testing firm, for $6.5M. Akamai dipped into the email security space as well, acquiring Bloxx, a Scottish Web gateway and email filtering Enterprise data encryption was a key component of the solution provider, for a reported $18.7M. security trend, provoking a number of industry juggernauts into M&A activity. SOLD TO Microsoft did its third Israeli deal in a year, buying enterprise data encryption provider for an estimated $85M. With Aorato and Adallom already onboard, Microsoft In the storage space, Sanbolic, a virtual storage optimization is reinforcing its enterprise security capabilities via outbound company, was bought by Citrix for almost $90M to optimize Citrix’ virtualization technologies, while SolidFire, an all-flash storage maker, was acquired for $870M by NetApp, as the

SOLD TO industry veteran races to keep up with new technologies amid shrinking revenues.

12 corumgroup.com WORLD TECH M&A REPORT 2016 TOP DISRUPTIVE TECHNOLOGY TRENDS

Finally, in a deal driven by the Enmeshed Systems trend, Ottawa provider of M2M intelligence solutions B+B SmartWorx was The theme for security is an purchased by Advantech for nearly $100M, as the Taiwanese immune system developing for PC maker angles for a piece of the North American and “ the Internet, which monitors European industrial connectivity market. what is normal and makes interventions if something is aberrant.

SOLD TO Reese Jones, Singularity University ” IOT SOFTWARE The Internet of Things drove over $21B in 2015 deal As IoT hardware moves towards value. As billions more “things” come online, the IoT’s commoditization, the true opportunity lies virtualization of the physical world could create as much with the innovative software and platform value for consumers and enterprises as the Internet itself. providers creating value in areas such as edge IoT M&A was active across the board, with diverse analytics, IoT operating systems, gateways, buyers like Google, Qualcomm, Adidas, Cisco, even farm aggregation, modules, wearables, big data, cloud, middleware and applications that ROB SCHRAM machinery maker Deere & Company. SR. VICE PRESIDENT also provide data privacy and cybersecurity. Automotive was a dominant sector with strong trends in vehicle-to-vehicle communications, intelligent Both established IoT players and traditional companies that transportation systems, remote diagnostics, usage-based find themselves needing to add IoT capabilities will be in insurance solutions and traffic data services. These trends acquisition mode in the coming year. Companies poised to will only pick up speed as the car continues to cement its address this spectrum of IoT requirements will be highly place as the true center of the IoT. attractive acquisition candidates in 2016 and beyond.

ENMESHED SYSTEMS

Enmeshed Systems fuse millions of lines of software M&A activity in 2015 such as the $11.8B code into ever smaller and faster hardware platforms acquisition of Freescale Semiconductor by that power new generations of consumer and commercial Dutch firm NXP and Intel’s acquisition applications. Such fusion is driven primarily by the need for of Altera Corporation, whose $16.7B exponential performance improvements in applications as purchase in December was Intel’s largest widespread as connected cars, Internet security, advanced ever acquisition. JOHN SIMPSON VICE PRESIDENT avionics, factory robotics, global data search, facial These huge amounts of money are also recognition accuracy and self-diagnostics for malfunctioning finding their way to the middle market, for technology jet engines. companies that are building out successfully and creating Such fundamental market opportunities drove significant real value in key niches of this complex ecosystem.

DATA SECURITY All these trends result in new vulnerabilities, and major Often by the time a new threat is identified, data breaches have affected nearly all consumers, many it does not make economic sense for a governments and large enterprises. This is complicated by large vendor to spec, hire and develop new new types of attacks such as the advanced persistent threat, functions when they can go out and buy or APT, and the many new vulnerabilities opened up by the a solution immediately, and these smaller Internet of Things. In response, the major security suppliers companies can capture significant value. JON SCOTT Symantec, McAfee and Palo Alto Networks founded an Examples of this trend are Cisco acquiring SR. VICE PRESIDENT organization called the Cyber Threat Alliance to coordinate Lancope, focused on monitoring suspicious traffic patterns, defense efforts. for $453M, and Splunk’s $190M acquisition of Caspida, With such a wide range of threats, an outsized amount of a behavior analytics provider. Innovative companies like cybersecurity innovation is carried out by small startups who these will make 2016 another record year for data security become significant subject matter experts in their specialties. acquisitions.

WORLD TECH M&A REPORT 2016 corumgroup.com 13 IT SERVICES

DEVELOPED MARKETS EV/EBITDA EV/S

12.00 x 1.10 x The customer expects their 11.00 x 1.00 x identity and experience to 10.00 x 0.90 x “ move across all channels of 9.00 x 0.80 x interaction with a provider

8.00 x 0.70 x of goods or services. That expectation is only going to 7.00 x 0.60 x become further cemented. 6.00 x 0.50 x Peter Coffee, Salesforce 5.00 x 0.40 x Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 EV/EBITDA 8.77 x 9.00 x 9.31 x 9.66 x 10.05 x 10.06 x 9.55 x 9.53 x 9.12 x 9.74 x 10.29 x 10.76 x 10.82 x ” EV/S 0.81 x 0.79 x 0.85 x 0.98 x 0.95 x 0.93 x 0.91 x 0.92 x 0.89 x 0.85 x 1.00 x 1.03 x 0.97 x

EMERGING MARKETS EV/S EV/EBITDA

21.00 x 3.90 x Valuations are up across the board in 19.00 x 3.40 x

IT Services, with sales and EBITDA 17.00 x 2.90 x

multiples rising over the year in both 15.00 x 2.40 x developed and emerging markets. Sales 13.00 x multiples are rising slightly faster than 1.90 x 11.00 x EBITDA, especially in emerging markets, 1.40 x 9.00 x indicating that IT services companies are 7.00 x 0.90 x improving their margins. 5.00 x 0.40 x Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 CSC spent over $1B across three major EV/EBITDA 14.15 x 13.45 x 15.12 x 15.21 x 14.54 x 15.76 x 17.62 x 16.35 x 17.47 x 16.77 x 19.21 x 16.65 x 15.07 x transactions around the globe, plus EV/S 2.48 x 2.35 x 2.81 x 3.00 x 2.75 x 2.95 x 2.61 x 3.16 x 3.24 x 3.16 x 3.34 x 3.18 x 3.20 x two more with values undisclosed. It bought Australian firm UXC for almost $308M, at 0.6x sales and 9.6x EBITDA. UK’s Xchanging was snapped up for $720M and 0.9x sales despite a negative Meanwhile, ecommerce integrator CrossView, with dual skills in EBITDA, while Chicago-based Fruition Partners, a ServiceNow IBM WebSphere Commerce and SAP hybrid integration, was consulting firm, was grabbed for $130M at a notable 2.4x snatched for $38M by digital agency and ecommerce solution revenue. As with many services buyers, CSC appears to be filling provider PFSweb. gaps in geography and expertise. In the emerging markets, Ukrainian near-shore developer Ciklum, a Corum Client for an earlier investment by Horizon Capital, was handed over to the Soros Fund for $180M. SOLD TO Polish web hosting service Home.pl was picked up by 1&1 Internet for nearly $150M, consolidating the Polish market as Other cloud-oriented services firms also did well for themselves. 1&1 considers an IPO. KPMG picked up experts in Dynamics from Crimsonwing and the Workday-focused HR service practice from Towers Watson. SOLD TO IBM also picked up Workday consultants, paying $120M and a remarkable 3x sales for Boston-based Meteorix. India’s Wipro grabbed SAP expertise for $77M via Germany’s Cellent, In India, BPO operations provider Intelenet Global Services and Salesforce picked up services for its own SaaS offerings, was purchased by US-based Blackstone Group from UK’s Serco spending $24M on Paris-based Kerensen Consulting. Group for almost $400M and 7x EBITDA, the largest-ever acquisition by Blackstone in India.

SOLD TO Finally, in China, Hangzhou Maimiao Network Tech, a software developer focused on online marketing for Alibaba, was sold to Comix Group for over $55M at 13x revenue.

14 corumgroup.com WORLD TECH M&A REPORT 2016 SELLING YOUR SOFTWARE, IT OR RELATED TECH COMPANY?

Executed professionally, done right, it leads to fortune. Unfortunately, most owners’ efforts to sell end in failure due to lack of experience and knowledge. For the most important transaction of your life, it’s imperative to get the necessary education. Corum is the leading tech M&A educator in the world—we share the experience gained in selling more firms than anyone else over the past 30 years. Our experts offer a number of live events designed togive you the knowledge you need to achieve what we call an “Optimal Outcome”—maximum price and best structure.

Thinking about selling in the next 1-3 years? The Merge Briefingis a 90-minute executive briefing that provides a World Financial Symposiums (WFS) brings together current M&A market update (trends, valuations, etc.), as well as experts, luminaries, newsmakers and global leaders in tech a brief overview of the Tech M&A process: and finance for events across the globe. Corum is a Platinum “8 Stages to an Optimal Outcome.” Sponsor, one of many organizations that support the WFS. Its primary conference, Growth and Exit Strategies for Software & IT Companies, is a full-day symposium held in New York, London, Silicon Valley and Seattle, with half-day events in cities including Austin, Vancouver BC and others. The event educates owners and CEOs of software, IT and related technology companies on the key developments in Ready to go to market? During the half-day workshop today’s technological and financial landscapes and helps Selling Up, Selling Out (SUSO), learn to prepare, position, them prepare their strategies for growth and eventual exits. research, value, negotiate and execute due diligence for To register for a conference, visit www.wfs.com. maximum price and optimal structure. This is the most attended tech M&A event ever, participants having done over $2T in transaction value. MARKET SPOTLIGHT

Market Spotlights are monthly webcasts sponsored by 2016 CONFERENCE LOCATIONS the WFS, focusing on the opportunities for technology Amsterdam Detroit Mexico City Reston companies in specific sectors, topics and regions. Recent Atlanta Dublin Miami Sacramento topics have included healthtech, security, patents, the Auckland Durham Milwaukee Salt Lake City connected car and more. Austin Edmonton Minneapolis San Diego To learn more, visit www.wfs.com. Bangalore Halifax Monterrey San Francisco Barcelona Hamburg Montreal San Jose Beijing Helsinki Munich Santa Clara Berlin Hong Kong Nashville Seattle TECH M&A MONTHLY WEBCAST Boston Houston Nashua Shanghai Want to stay on top of M&A and build more value into your Brisbane Indianapolis New York Singapore technology company? Every month, this 30-minute global Calgary Kansas City Orlando St. Louis webcast brings you the news you need to know on markets, Chicago Las Vegas Oslo Stockholm trends, deals and valuations. Plus, invaluable special reports by Cincinnati Lisbon Ottawa Sydney buyers, technologists, dealmakers and industry leaders. And Cleveland London Paris Tel Aviv Cologne Los Angeles Philadelphia Toronto be sure not to miss the quarterly and mid-year reports with Columbus Madison Pittsburgh Vancouver valuation data on all 30 technology subsectors. Costa Mesa Madrid Portland Vienna Dallas Melbourne Prague Wellington Join us on the second Thursday of every month at Denver Memphis Raleigh Zurich www.corumgroup.com.

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