Median Revenue Growth
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Over a Decade of Capstone Partners M&A Excellence Investment Banking Advisors Mobile M&A and Valuation Update Q4 2013 BOSTON ¡ CHICAGO ¡ LONDON ¡ LOS ANGELES ¡ PHILADELPHIA ¡ SAN DIEGO ¡ SILICON VALLEY Capstone Partners CapstoneInvestment BankingPartners Advisors 1 Investment Banking Advisors WORLD CLASS WALL STREET EXPERTISE.1 BUILT FOR THE MIDDLE MARKET.TM Over a Decade of Table of Contents M&A Excellence Section Page Introduction n Research Coverage: Mobile 4 n Key Takeaways 5-6 M&A Activity & Multiples n M&A Dollar Volume 8 n M&A Transaction Volume 9-11 n 2013 Revenue Multiples 12-13 n Revenue Multiples by Segment 14 n Highest Revenue Multiple Transactions 15 n Notable M&A Transactions 16 n Most Active Buyers 17-18 Public Company Valuation & Operating Metrics n Mobile 130 Public Company Universe 20-22 n Recent IPOs 23-28 n Stock Price Performance 29 n 2013 Revenue, EBITDA & P/E Multiples 30-32 n Revenue, EBITDA and EPS Growth 33-35 n Margin Analysis 36-37 n Best / Worst Performers 38-39 Notable Transaction Profiles 41-50 Public Company Trading & Operating Metrics 52-58 Technology & Telecom Team 60-62 Capstone Partners CapstoneInvestment BankingPartners Advisors 2 Investment Banking Advisors 2 Over a Decade of Capstone Partners M&A Excellence Investment Banking Advisors Observations and Introduction Recommendations Capstone Partners CapstoneInvestment BankingPartners Advisors 3 Investment Banking Advisors WORLD CLASS WALL STREET EXPERTISE.3 BUILT FOR THE MIDDLE MARKET.TM Over a Decade of Research Coverage: Mobile M&A Excellence n Capstone’s Technology & Telecom Group focuses its research efforts on the following market segments: Enterprise SaaS & Mobile Consumer Internet Cloud 4 App Stores & Content Aggregators 4 Carrier Back Office 4 Games / Virtual Goods 4 M-Commerce Enablement 4 Messaging & VoIP 4 Mobile / Local Marketing E-Commerce Consumer, IT & 4 Mobile Devices Telecom Hardware 4 Mobile OS & Utility SW 4 Mobility & Monitoring 4 Portals & Social Networks 4 Search, Referral & Navigation 4 Video, Music & eBooks 4 Wireless Network Equipment 4 Wireless Network Operators 4 Wireless Semiconductors Capstone Partners CapstoneInvestment BankingPartners Advisors 4 Investment Banking Advisors 4 Over a Decade of Key Takeaways – M&A Activity & Multiples M&A Excellence n M&A dollar volume has surged from $64.5B in 2012 to $100.6B in 2013 } Both Private and Public company M&A dollar volume has risen sharply with Private setting a new five year high n Transaction volume has risen to approximately 500 deals per annum in ‘11-’13 from less than 350 in ‘08-09 } Wireless Network Operators; Mobility & Monitoring, Mobile OS & Utility Software and Mobile/Local Marketing segments were particularly active with 50+ deals in 2013 in each segment n Private company deal volume jumped significantly in 2011 and has remained near 480 deals per annum since then } The median deal value dropped slightly to $27M in 2013 from $30M in 2012 n Public company median deal value jumped to $607M in 2013 compared to $384M in 2012 } M&A transactions with values greater than $500M constituted more than half of public target deals in 2013 n M&A valuations vary considerably across the various Mobile segments with Wireless Tower and hot Software segments commanding more than 4x revenue while the majority of segments trade in the 1.5-2.5x range n Notable M&A transactions in Q4’13 } Oi / Portugal Telecom ($19.0B) } Softbank / Brightstar ($1.3B) } UnderArmor / MapMyFitness ($150M) } Hong Kong Telecom / CSL ($2.4B) } Tsinghua Unigroup / RDA ($835M) } i.TV / GetGlue ($79M) } NCR / Digital Insight ($1.7B) } IBM / Fiberlink ($300M) } Softbank / Supercell ($1.5B) } Tribune / Gracenote ($170M) n Most active buyers include Facebook, Google, Yahoo!, Apple, Intel, Twitter, Groupon, Verizon, American Tower, Cisco & Zynga n Capstone expects the robust M&A activity and attractive exit valuations in Mobile to continue in 2014 } There is some risk that a significant market correction could negatively impact activity levels and valuation multiples Capstone Partners CapstoneInvestment BankingPartners Advisors 5 Investment Banking Advisors 5 Over a Decade of Key Takeaways – Public Company Metrics M&A Excellence n Q4’13 saw six IPO companies added to the Mobile 130, with generally strong performance } Twitter was priced conservatively at $26.00, opened at $45.10 and ended 2013 at $63.65 n Mobile 130 median gain has performed on par with the NASDAQ over the past year } The Mobile 130 median gain for Q4 was 10.3%, almost identical to the NASDAQ’s 10.7% gain } Search Referral & Navigation , App Stores & Content Aggregation and Games / Virtual Goods posted 20+% gains n Median 2013 Revenue Multiple of 3.1x represents a five year high amid increased confidence in future growth as the market recovery continues } Medians vary significantly with Wireless Towers at 12.0x and Carrier Back Office at just 1.2x n Median 2013 EBITDA multiples continued to recover, jumping to a near five year high of 12.0x } Just three Mobile segments are trading at medians below 10.0x 2013 EBITDA n Median 2013 P/E multiples continued to climb, reaching 21.4x which is a 5 year high } All segments trade above 15x with five segments above 30x n Mobile 130 median revenue growth continued to decline rapidly to 8.9% in 2013 but is expected to rebound to 9.8% in 2014 } Six segments are projecting median 2014 revenue growth of over 20% while five are projecting single digit median growth rates n Mobile 130 posted median EBITDA growth of 7.8% for 2013 with improved growth projected at 16.8% for 2014 n Median gross margins currently stand at 52.0% in 2013, near five year highs n Median EBITDA margins decreased to 22.0% in 2013 from 23.9% in 2012 as many of the Mobile 130 sacrificed near term profitability to invest in growth Capstone Partners CapstoneInvestment BankingPartners Advisors 6 Investment Banking Advisors 6 Over a Decade of Capstone Partners M&A Excellence Investment Banking Advisors M&AObservations Activity & and MultiplesRecommendations Capstone Partners CapstoneInvestment BankingPartners Advisors 7 Investment Banking Advisors WORLD CLASS WALL STREET EXPERTISE.7 BUILT FOR THE MIDDLE MARKET.TM Over a Decade of 2013 M&A Dollar Volume M&A Excellence n M&A dollar volume has surged from $64.5B in 2012 to $100.6B in 2013 } Both Private and Public company M&A dollar volume has risen sharply with Private setting a new five year high } Dollar volume tends to be driven by multi-billion dollar carrier deals and is not necessarily indicative of trends across all mobile segments Capstone Partners CapstoneInvestment BankingPartners Advisors 8 Investment Banking Advisors 8 Over a Decade of 2013 M&A Transaction Volume by Segment M&A Excellence n Transaction volume has risen from less than 350 deals per annum in ‘08-09 to approximately 500 deals per annum from 2011 forward } Wireless Network Operators, Mobility & Monitoring, Mobile OS & Utility Software and Mobile/Local Marketing segments were particularly active with 50+ deals in 2013 in each segment Capstone Partners CapstoneInvestment BankingPartners Advisors 9 Investment Banking Advisors 9 2013 M&A Transaction Volume by Deal Size – Over a Decade of Private Targets M&A Excellence n Private company deal volume jumped significantly in 2011 and has remained near 480 deals per annum since then n There were 16 billion dollar private deals in 2013 which set a new five year high n The median deal value dropped slightly to $27M in 2013 from $30M in 2012 Capstone Partners CapstoneInvestment BankingPartners Advisors 10 Investment Banking Advisors 10 2013 M&A Transaction Volume by Deal Size – Over a Decade of Public Targets M&A Excellence n M&A transactions with values greater than $500M constituted more than half of public target deals in 2013 } $1B+ transaction activity has been strong for 2010 to current with four $1B+ deals in 2013 } Median deal size jumped to $607M in 2013 as deal mix has shifted toward larger transactions with just four transactions under $250M Capstone Partners CapstoneInvestment BankingPartners Advisors 11 Investment Banking Advisors 11 Over a Decade of 2013 Revenue Multiples – Private Targets M&A Excellence n The Median 2013 Revenue Multiple paid for private company targets fell significantly in 2013 } There were 10 small deals (<$20M)with multiples of less than 1.0x in 2013 versus zero in 2012 } Excluding small deals (<$20M), the Median Revenue Multiple for Software & Services is 4.1x for 2013 vs 3.5x for 2012 n Hot companies and sectors can achieve double digit multiples upon exit but those are the exception with most companies being acquired at more modest multiples Capstone Partners CapstoneInvestment BankingPartners Advisors 12 Investment Banking Advisors 12 Over a Decade of 2013 Revenue Multiples – Public Targets M&A Excellence n The Median 2013 Revenue Multiple paid for public company targets jumped for Mobile Software & Services to a five year high, though Hardware remains relatively flat with recent years n With less than 20 public company target data points in a given year, the median multiple tends to be quite volatile so it is difficult to reliably draw conclusions on M&A valuation trends Capstone Partners CapstoneInvestment BankingPartners Advisors 13 Investment Banking Advisors 13 Median Revenue Multiples by Segment – 2008 Over a Decade of to Current M&A Excellence n M&A valuations vary considerably across the various Mobile segments } The premium multiples paid for Wireless Tower companies are driven by high margins and stable cash flows } m-Commerce Enablement, Mobile Games/Virtual Goods and Mobile/Local Marketing represent the hottest segments in mobile software with median multiples of 4x+ while most other segments trade in the 1.5-2.5x range } Hardware segments all trade at under 2x with mobile devices at just 0.6x Capstone Partners CapstoneInvestment BankingPartners Advisors 14 Investment Banking Advisors 14 Over a Decade of Highest Revenue Multiple Transactions for 2013 M&A Excellence LTM Multiple Premium Deal Ann.