Technology, Media, and Telecommunications Quarterly Update
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Technology, Media, and Telecommunications Quarterly Update Q4 2017 Deloitte Corporate Finance LLC | www.investmentbanking.deloitte.com Quarterly Update | Q4 2017 | TMT TMT Trends In This Update Digital/Augmented Reality1 Financial Technologies (“Fintech”)2 • TMT Trends Over the next decade, Blockchain technologies are • Economic Outlook advances in digital reality on a path toward broad • Industry Analysis will likely lead to new and adoption, with proofs of • Select M&A Transactions innovative ways in which concept shifting toward these technologies can production and many leading • Appendix improve our lives. organizations exploring use International Data Corp. cases. Gartner Inc. projects projects that total spending that blockchain’s business This update will focus on news on AR/VR products and value-add will grow to $176B and trends in the following services will soar from $9.1B by 2025. areas: in 2017 to nearly $160B in 2021, representing a 113.2% CAGR. • Software • Internet Automotive Technology3 Machine Learning4 • IT Services The increasing global adoption Machine Learning is of smartphone technologies is increasingly being incorporated • Hardware forcing the automotive industry into mobile devices and smart • Media & Telecommunications to rethink how cars are made, sensors, expanding the • Automotive Technology bought, and driven. Software technology’s applications to competence is increasingly smart homes and cities, becoming one of the most autonomous vehicles, wearable Who We Are important differentiating factors technology, and the industrial for the industry. Driven by Internet of Things. Large and shared mobility, connectivity medium-sized enterprises are Deloitte Corporate Finance LLC services, and feature upgrades, intensifying their use of is a leading global middle new business models could machine learning, with the expand automotive revenue number of implementations market M&A adviser. The pools by $1.5 trillion. and pilot-programs expected firm’s professionals have to double in the next year. extensive knowledge in the TMT space and use their In the News experience to help the firm’s November 6, 20175,6,7 – Broadcom Limited (NasdaqGS:AVGO), a clients maximize value. leading digital and mixed-signal semiconductor company, made a proposal to acquire QUALCOMM Incorporated (NasdaqGS:QCOM) for approximately $130B. If completed, the acquisition would be Contacts the largest technology deal in history. QUALCOMM subsequently rejected the offer. On December 4, 2017, Broadcom marked their Ron Rivera first steps towards a hostile bid by unveiling their nominees for the Managing Director QUALCOMM Board of Directors. [email protected] December 14, 20178 – The Walt Disney Company (NYSE:DIS) +1 (404) 631-3710 entered into a definitive agreement to acquire Twenty-First Century Fox, Inc. (NasdaqGS:FOXA) for $70B. The deal will see Disney Jonathan Ohm acquire film and television studios, cable entertainment networks Managing Director and international TV businesses. Disney has been seen as trying to [email protected] bolster its Hollywood and TV positions by getting the Fox library of content to strengthen its arsenal against Netflix and other rivals. +1 (212) 436-2287 December 17, 20179 – Thales S.A. (ENXTPA:HO) entered into a Byron Nelson definitive agreement to acquire Gemalto N.V. (ENXTAM:GTO), one Managing Director the world’s largest manufacturers of SIM cards and credit cards, for [email protected] $6.6B. If completed, the acquisition would mark the largest technology deal in Europe of 2017. The companies believe the +1 (469) 417-2462 acquisition would form a global market leader in digital security. www.investmentbanking.deloitte.com | Page 2 Quarterly Update | Q4 2017 | TMT Macroeconomic Outlook U.S. Gross Domestic Product1 U.S. Treasury Yield Curve (Nominal vs. Real)2 $20.0 5.0% 3.5% 3.0% 4.0% $15.0 2.5% 3.0% 2.0% $10.0 2.0% 1.5% $ in Trillions $ in 1.0% $5.0 Interest Rate Interest 1.0% Percent Change YoY 0.5% $0.0 0.0% 0.0% Real Yield (%) Nominal Yield (%) GDP ($ in Trillions) YoY % Growth (Adj. for Inflation) U.S. Unemployment Rate ISM Non-Manufacturing Index (% Unemployed)3 and Consumer Confidence Index4 64 135 10.0% 600 62 125 550 60 115 500 8.0% 450 58 105 400 56 95 Manufacturing 350 - 54 85 6.0% % Unemployed 300 52 75 * Consumer Confidence Consumer 250 Non ISM 50 65 Jobless Claims (Thousands)Jobless Claims 4.0% 200 48 55 ISM Non-Manufacturing *An ISM Non-Manufacturing Index value above 50 signals economic expansion. TMT Sector Outlook Global Technology Industry Revenue5 Private Investment in Computers and Software6 $3,200.0 $1,200.0 5.0% $3,150.0 $1,000.0 $3,100.0 4.0% $3,050.0 $800.0 $3,000.0 3.0% $2,950.0 $600.0 $2,900.0 Trillions $ in $ in Billions $ in 2.0% Percent Change YoY $2,850.0 $400.0 $2,800.0 1.0% $200.0 $2,750.0 $2,700.0 $0.0 0.0% 2014(A) 2015(A) 2016(A) 2017(E) 2018(P) www.investmentbanking.deloitte.com | Page 3 Quarterly Update | Q4 2017 | TMT TMT Sector Breakdown & Trading Statistics1 LTM NTM Sector Number of % of 52 Median Median Median Median EV/ EV/ EV/ Companies Week High Revenue CAGR($M) LTM EBITDA EBITDA Margin EV Revenue EBITDA EBITDA (3 Yr) ($M) ($M) Application Software / SaaS 15 95.6 % 0.4 % $1,387 29.4 % $32,889 7.6 x 22.2 x 15.1 x Internet & Digital Media 12 99.8 27.7 3,209 29.3 85,944 7.3 39.3 18.5 IT Services 9 96.9 7.5 2,714 19.9 34,538 2.6 13.7 11.6 Hardware 17 93.9 3.2 5,250 26.4 43,591 2.6 9.7 8.7 Traditional Media 23 89.6 0.9 1,465 19.5 19,837 2.1 10.2 10.1 Telecommunications 20 91.5 2.9 13,601 29.2 86,807 2.0 7.3 5.8 Automotive Technology 9 99.4 3.5 609 16.8 11,310 2.5 18.6 13.2 TMT Index 105 94.8 % 23.7 % $2,646 23.7 % $37,636 3.0 x 11.5 x 10.5 x Public Comparables Three-Year Stock Market Performance2,3 S&P 500 Index 45.94% NASDAQ Composite Index 66.62% Technology Index 90.05% Media Index 6.19% Telecommunications Index 0.03% 100.00% 80.00% 60.00% 40.00% 20.00% 0.00% -20.00% S&P 500 (^SPX) - Index Value NASDAQ Composite Index (^COMP) - Index Value Telecommunications - Index Value Technology - Index Value www.investmentbanking.deloitte.com | Page 4 Quarterly Update | Q4 2017 | TMT Recent Transactions1 Select TMT M&A Transactions Enterprise EV / Close Date Target/Acquiror Industry Target Business Description Value ("EV") EBITDA ($ in millions) Pending Gemalto N.V. Gemalto N.V. provides digital security products and Software $6,637.0 11.9 x Thales S.A. services worldwide. Twenty-First Century Fox, Inc., together with its Pending Twenty-First Century Fox, Inc. Traditional Media subsidiaries, operates as a diversified media and 70,170.7 9.9 The Walt Disney Company entertainment company. Pending Barracuda Networks, Inc. Barracuda Networks, Inc. designs and delivers IT Services 1,405.3 43.1 Thoma Bravo, LLC security and data protection solutions. Cavium, Inc. designs, develops, and markets Pending Cavium, Inc. Hardware semiconductor processors for intelligent and secure 6,690.6 37.1 Marvell Technology Group Ltd. networks in the United States and internationally. QUALCOMM Incorporated designs, develops, Pending QUALCOMM Incorporated Telecommunications manufactures, and markets digital communication 127,629.6 14.0 Broadcom Limited products worldwide. BroadSoft, Inc. provides software and services that Pending BroadSoft, Inc. enable telecommunications service providers to Software 1,917.0 80.7 Cisco Systems, Inc. deliver hosted cloud-based unified communications (UC) to their enterprise customers. Pending Nets A/S Application Software / Net A/S provides digital payment services and related 6,490.9 19.0 Advent International Corporation SAAS technology solutions. Pending Scripps Networks Interactive, Inc. Scripps Networks Interactive, Inc. develops lifestyle- Traditional Media 14,926.6 9.3 Discovery Communications, Inc. oriented television content. Worldpay Group plc, together with its subsidiaries, Pending Worldpay Group plc Software provides payments processing technology and 11,710.9 19.7 Vantiv, Inc. solutions for merchant customers. Tribune Media Company, through its subsidiaries, Pending Tribune Media Company Traditional Media operates as a media and entertainment company in 6,570.9 11.7 Sinclair Broadcast Group, Inc. the United States. IntraLinks Holdings, Inc. provides SaaS solutions for Nov-17 IntraLinks Holdings, Inc. Application Software / secure enterprise content collaboration within and 1,020.8 46.1 Siris Capital Group, LLC SAAS among organizations. Annual TMT M&A Transaction Volume2 7,000 6,209 5,884 5,773 6,000 5,256 5,309 5,253 5,192 4,874 4,774 5,000 3,976 4,000 3,000 2,000 Number of Dealsof Number 1,000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Undisclosed <$100M $100M-$250M $250M-$500M $500M-$1B >$1B www.investmentbanking.deloitte.com | Page 5 Quarterly Update | Q4 2017 | TMT Software Acquisition Activity – Strategic Acquirors1,2 70 68 Top 10 Most Active Strategic Acquirors of Software Assets by Volume 2013 8 60 2014 51 15 2015 50 44 9 2 38 2016 40 12 9 32 2017 14 8 30 4 25 25 7 23 22 18 8 3 3 13 2 2 18 Deal Deal Volume 20 28 3 6 3 10 9 9 3 5 6 9 8 1 10 4 4 10 6 8 3 9 9 9 9 1 9 5 5 8 5 4 0 1 Google Microsoft IBM Cisco Oracle Intel intuit Salesforce Constellation SAP Software Acquisition Activity – Financial Acquirors1,2 50 44 Top 10 Most Active Financial Acquirors of Software Assets by Volume 2013 2014 40 10 2015 30 2016 26 25 12 23 22 2017 6 7 19 18 20 6 6 5 1 15 4 2 14 7 5 5 13 3 1 Deal Deal Volume 3 1 9 8 4 1 10 5 7 3 5 7 7 4 3 2 6 5 3 6 3 3 7 5 4 4 3 4 5 3 3 0 1 2 2 1 Insight Vista Equity Thoma Bravo FranciscoFP Insight Providence Equity