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Technology M&A Outlook: Has the Era of Irrational Exuberance Returned?

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Technology M&A Outlook: Has the Era of Irrational Exuberance Returned? M&A INTERNATIONAL INC. Technology M&A Outlook: Has the Era of Irrational Exuberance Returned? 2011 www.mergers.net Table of Contents 1. Executive Summary ............................................................................................................................................................................... 3 2. Global Technology M&A Overview (2010–Q1 2011) –– Middle Market ................................................................................................ 5 Strategic Acquirors .......................................................................................................................................................................... 5 Financial Acquirors .......................................................................................................................................................................... 6 Most Active Acquirors ..................................................................................................................................................................... 7 3. M&A Transaction Statistics ................................................................................................................................................................... 8 Consideration Mix — Cash Is King .................................................................................................................................................. 8 Premiums for Public Company Targets ............................................................................................................................................ 8 Valuations ........................................................................................................................................................................................ 9 4. Global Financing Environment ........................................................................................................................................................... 11 Venture Capital .............................................................................................................................................................................. 11 Global VC Investments ............................................................................................................................................................ 11 Global Venture Capital Fundraising Activities ........................................................................................................................... 12 Global Technology IPOs ................................................................................................................................................................ 13 Aftermarket Stock Price Performance by Recent IPOs ............................................................................................................ 14 5. Technology M&A –– Hot Areas ........................................................................................................................................................... 15 Business Intelligence ..................................................................................................................................................................... 15 Notable Transactions ............................................................................................................................................................... 15 Compliance Software .................................................................................................................................................................... 16 Notable Transactions ............................................................................................................................................................... 17 Marketing Automation .................................................................................................................................................................... 17 Notable Transactions ............................................................................................................................................................... 18 Internet and Digital Media .............................................................................................................................................................. 19 Notable Transactions ............................................................................................................................................................... 20 Social Media .................................................................................................................................................................................. 20 Notable Transactions ............................................................................................................................................................... 21 Storage ......................................................................................................................................................................................... 22 Notable Transactions ............................................................................................................................................................... 22 6. Conclusions and Outlook ................................................................................................................................................................... 23 7. About M&A International Inc. .............................................................................................................................................................. 23 8. Representative Transactions Major Technology M&A Transactions ............................................................................................................................................. 24 Transactions Closed by Members of M&A International Inc. .......................................................................................................... 27 9. Main M&A International Inc. Technology Specialists ........................................................................................................................ 28 M&A International Inc. - the world’s leading M&A alliance 2 TECHNOLOGY M&A OUTLOOK Executive Summary 1 While the “irrational exuberance” of the late 1990s has yet to return to the technology world, we are seeing heightened investor excitement. This interest has been accent- ed by the successful IPOs of a number of high profile technology companies, which have attracted lofty valuations. Such a re- newed focus on technology is driving M&A activity in the space, with strategic as well as financial investors becoming increasingly interested in growing through M&A. Over a decade since “the internet bubble”, the excitement about the sector is palpable again but the areas of focus have shifted. Social media, internet and digital media companies are now in the spotlight. In ad- dition, in the enterprise software space, compliance, marketing automation, busi- ness intelligence and storage software have been extremely active areas within the tech- nology sector. In 2010 and Q1 20111, a total of 5,720 tech- acquirors, accounting for 22.3% of deals and the coming quarters is far from certain and nology deals were executed. 676 transac- 18.0% of total deal value. Google has domi- heavily dependent on global economic con- tions were completed in the middle market2 nated the overall technology sector since ditions (i.e. the prevailing sovereign debt (between $25mn and $1bn in value), with the beginning of last year, acquiring a total crisis), one thing that seems to be certain is an average deal value of $155.1mn. While of 27 companies (including deals where the that strong companies will continue to com- still below the levels of activity reported be- transaction value was and was not reported), mand high valuations. tween 2006 and 2008, the hangover caused operating in areas such as online price com- by the financial crisis seems to be abating. parison, social networking, virtual economy Similarly, increasing popularity of the tech- The significant increase in the number and platforms and similar fields. Its primary mo- nology sector among investors was re- value of deals (increasing 40.9% YoY by tive in initiating such transactions has been to flected in rising valuations, which brought number and 57.3% YoY by value in 2010) diversify its existing operations and expand market values of industry players closer in as well as heightened market chatter and its presence in areas that are tangentially line with industry fundamentals. As a result, media attention signals a strong recovery related to its core offerings. This follows the market-relative transaction premiums (most in the M&A market during the remainder of larger macro trend, with business diversifica- transaction values were based on funda- 2011. Financial acquirors should be further tion appearing to be the primary motivation mentals rather than market prices, even incentivized to invest in the technology sec- behind most deal activity in the sector. when markets were down) decreased dur- tor based on the strong results posted dur- ing the period from their 2009 highs to an ing the most recent reporting season. Higher deal valuations further underscore average level of around 30%, a figure which some of the renewed interest in tech- is more typical of the industry. Software companies have been
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