Technology, Media, and Telecommunications (TMT) quarterly update Q1 2018 Deloitte Corporate Finance LLC | www.investmentbanking.deloitte.com Quarterly update | Q1 2018 | TMT TMT trends In this update 5G and the internet of things Financial technologies2 (IoT)1 • TMT trends 5G technology promises to Financial applications are • Economic outlook bring reliability, latency, growing in sophistication and • Industry analysis scalability, security, and SaaS adoption is accelerating. ubiquitous mobility, making Gartner estimates that by 2020 • Select M&A transactions it a key component of the 20 percent of non-valued • Appendix communications and added tasks within the office of connectively layer of the IoT finance will be automated as technology stack. By 2021, cloud-based finance systems This update will focus on news 5G’s enablement of IoT use leverage AI capabilities that and trends in the following cases is expected to drive were not possible on premise areas: 70 percent of Forbes G2000 …….. due to data and companies to spend $1.2B ……….processing limitations. on connectivity solutions. • Software • Internet Automotive technology3 Artificial intelligence (AI)4 • IT Services The increased focus on making The proliferation of AI • Hardware vehicles more connected, technologies is allowing • Media & Telecommunications automated, and driverless has organizations to automate and transformed vehicles from scale with hyper-efficiency. • Automotive Technology independent, closed systems Next-generation AI systems to connected ecosystems, will require significant creating new security investment in integrated Who we are vulnerabilities. Frost & Sullivan systems with rich data research shows that the streams, software, and Deloitte Corporate Finance LLC automotive industry’s spend on closed-loop self-training model cybersecurity is expected to management services, is a leading global middle grow at a 24.4 percent CAGR providing a significant market M&A adviser. The from 2015-2025 to combat these opportunity for providers of firm’s professionals have ever-increasing cyber risks. such technology. extensive knowledge in the TMT space and use their In the news experience to help the firm’s clients maximize value. March 26, 20185 – Foxxconn Interconnect Technology Limited (SEHK:6088) entered into a definitive agreement to acquire Belkin International, Inc., a provider of routers and consumer Contacts electronics accessories, for $866.0M. The transaction provides marque brands such as Belkin, Linksys, and Wemo and takes Ron Rivera Foxxconn from a behind-the-scenes manufacturing partner to an owner of major consumer brands. Managing Director [email protected] March 20, 20186 – Salesforce.com (NYSE:CRM) entered into +1 (404) 631-3710 a definitive agreement to acquire Mulesoft (NYSE:MULE), a leading platform for building networks that connect information Jonathan Ohm from various enterprise applications, for $6.6B. Mulesoft will Managing Director power the new Salesforce Integration Cloud, which will enable [email protected] enterprises to surface any data, regardless of where it resides, +1 (212) 436-2287 to help drive digital transformation. Byron Nelson Managing Director [email protected] +1 (469) 417-2462 www.investmentbanking.deloitte.com | Page 2 Quarterly update | Q1 2018 | TMT Macroeconomic outlook US 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 rate Interest 1.0% YoY percent change percent YoY 0.5% $0.0 0.0% 0.0% GDP ($ in Trillions) YoY % Growth (Adj. for Inflation) Real Yield (%) Nominal Yield (%) US unemployment rate ISM non-manufacturing index (% unemployed)3 and consumer confidence index4 10.0% 600 64 135 550 62 125 500 60 115 8.0% 450 58 105 400 56 95 manufacturing 350 - 54 85 % unemployed 6.0% 300 52 75 * confidence Consumer 250 Non ISM 50 65 Jobless claims (thousands)Jobless claims 4.0% 200 48 55 ISM Non-Manufacturing Consumer Confidence Unemployment Rate (%) Initial Jobless Claims *An ISM Non-manufacturing index value above 50 signals economic expansion. TMT sector outlook Global technology industry revenue5 Private investment in computers and software5 $3,200.0 $1,200.0 8.0% $3,150.0 7.0% $3,100.0 $1,000.0 6.0% $3,050.0 $800.0 $3,000.0 5.0% $2,950.0 $600.0 4.0% $ in billions $ in $ in billions $ in $2,900.0 3.0% change percent YoY $2,850.0 $400.0 2.0% $2,800.0 $200.0 $2,750.0 1.0% $2,700.0 $0.0 0.0% 2014(A) 2015(A) 2016(A) 2017(A) 2018(P) www.investmentbanking.deloitte.com | Page 3 Quarterly update | Q1 2018 | TMT TMT sector breakdown & trading statistics1 LTM NTM Sector Number of % of 52 Median Median Median Median EV/ EV/ EV/ companies Week high revenue CAGR($M) LTM EBITDA EBITDA margin EV Revenue EBITDA EBITDA (3 Yr) ($M) ($M) Application Software / SaaS 16 89.6 % 9.6 % $1,153 27.1 % $30,966 8.1 x 20.0 x 18.0 x Internet & Digital Media 13 85.9 27.3 2,941 30.7 66,588 5.6 29.8 15.4 IT Services 9 91.6 7.0 2,876 20.5 34,386 2.6 11.7 11.1 Hardware 17 85.6 4.3 5,861 24.1 42,269 2.2 9.3 8.1 Traditional Media 20 86.2 2.4 2,093 20.4 18,970 2.2 10.0 9.3 Telecommunications 20 83.5 2.2 14,373 28.2 92,856 2.0 7.1 6.5 Automotive Technology 9 81.1 5.9 633 16.2 10,303 2.1 16.3 10.6 TMT Index 104 86.1 % 25.3 % $2,814 25.3 % $35,349 3.0 x 11.5 x 9.8 x Public comparables three-year stock market performance2,3 S&P 500 Index 27.71% NASDAQ composite index 44.13% Technology index 70.76% Media index (2.28)% Telecommunications index (2.96)% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% -20.0% S&P 500 (^SPX) - Index value NASDAQ composite index (^COMP) - index value Technology index - index value Media index - index value Telecommunication index - index value www.investmentbanking.deloitte.com | Page 4 Quarterly update | Q1 2018 | TMT Recent transactions1 Select TMT M&A transactions Enterprise EV / Close date Target/Acquiror Industry Target business description value ("EV") EBITDA ($ in millions) Provides yield-enhancing and process-enabling Pending Orbotech Ltd. solutions for the manufacturers of printed circuit Hardware $3,191.1 17.7 x KLA-Tencor Corporation boards, flat panel displays, semiconductor devices, and other electronic components. Pending Microsemi Corporation Designs, manufactures, and markets analog and Hardware 10,078.3 18.1 Microchip Technology Incorporated mixed-signal semiconductor solutions. Provides communications and home entertainment Pending TDC A/S Telecommunications solutions primarily to residential and business 10,048.2 7.3 PFA Pension, Macquarie; DK markets. Pending Xerox Corporation Designs, develops, and sells document management Hardware 16,961.9 11.3 FUJIFILM Holdings Corporation systems and solutions worldwide. Provides a range of prepaid gift, telecom, and debit Pending Blackhawk Network Holdings, Inc. IT Services cards in physical and electronic forms; and related 3,019.2 16.0 Silver Lake; P2 Capital Partners prepaid products and payment services. Pending DST Systems, Inc. Provides technology-based information processing IT Services 5,671.1 11.5 SS&C Technologies Holdings, Inc. and servicing solutions. Delivers a range of information technology solutions Apr-18 CSRA Inc. Application and professional services to its U.S. government 9,871.1 11.7 General Dynamics Corporation Software/SaaS customers. Mar-18 Aricent Inc. Provides software development, engineering, and IT Consulting & Services 2,000.0 10.4 Altran US product design services. Provides a range of wireless, data, video, voice, and Mar-18 General Communication, Inc. managed services to residential customers, Telecommunications 2,785.8 10.3 Liberty Ventures businesses, governmental entities, and educational and medical institutions. Provides software and services that enable Feb-18 BroadSoft, Inc. Application telecommunications service providers to deliver 1,917.0 80.7 Cisco Systems, Inc. Software/SaaS hosted cloud-based unified communications (UC) to their enterprise customers. Feb-18 Nets A/S Application Provides payment services and related technology 6,677.9 19.0 Advent International Corporation Software/SaaS solutions. Annual TMT M&A transaction volume2 8,000 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 1,448 1,179 Number of dealsof Number 1,000 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD 2017YTD 2018 Undisclosed <$100M $100M-$250M $250M-$500M $500M-$1B >$1B www.investmentbanking.deloitte.com | Page 5 Quarterly update | Q1 2018 | TMT Software acquisition activity – strategic acquirors1,2 Q1 2018 70 63 Top 10 most active strategic acquirors of software assets by volume 2017 60 2016 46 50 28 2015 10 40 35 2014 29 volume 6 30 12 18 4 24 18 21 13 10 Deal Deal 16 16 20 9 4 15 9 6 7 3 4 9 3 8 8 10 14 8 9 9 8 6 3 8 4 2 2 1 0 3 2 2 1 3 3 2 5 Alphabet Microsoft IBM Cisco Oracle Intel Intuit Salesforce Constellation SAP Software acquisition activity – financial acquirors1,2 Q1 2018 Top 10 most active financial acquirors of software assets by volume 2017 50 2016 37 2015 40 2014 9 30 23 6 21 21 volume 5 18 5 17 15 20 3 5 12 12 4 12 12 7 3 3 Deal Deal 6 7 3 3 4 10 4 5 8 5 7 2 4 10 6 4 6 3 7 1 7 6 5 5 3 2 0 3 2 1 Francisco 2 Vista Equity Thoma Bravo Francisco InsightInsight Venture ProvidenceProvidence Accel-KKR Marlin Equity Summit JMI Equity LLR Partners Partners Partners VenturePartners EquityEquity Partners Partners Internet and digital media acquisition activity – strategic acquirors1,2 60 Most 10 active strategic acquirors of internet and digital media assets by volume Q1 2018 48