OPTIMISING EXITS FOR EUROPEAN TECHNOLOGY COMPANIES 30 April 2018
1 M&A trends & valuation metrics Pietro Strada, Silverpeak page CONFIDENTIAL
What we do Advising Management & Shareholders Financial or Strategic parties around the world 25 years in Technology 50 transactions since 2015 Public & Private mid-market technology companies Funding, Full Sale Partial Sale 70% deals with overseas parties Global reach to 45+ countries worldwide Also on the ground in San Francisco Paris, Milan, Hamburg, Munich, Berlin Exceptional professionalism Blue-chip investment advisory service page 3 CONFIDENTIAL 9 partners c. 150 years of experience
1,200 1,100 1,000 900 800 700 600 500 400 TMT M&A deals with UK targets: drop in value of the 2017 deals 929 951 935 908 $39.0bn $36.3bn $31.8bn 1,007 1,021 $63.6bn $56.8bn $69.9bn 976 815 FTSE100 Index $70b $60b $50b $47.9bn $40b $30b 300 $23.7bn $20b 200 100 0 94 97 103 96 130 114 77 86 2010 2011 2012 2013 2014 2015 2016 2017 # of M&A deals # of M&A deals with a PE buyer Value of M&A deals As at 31st December, 2017 Source: Silverpeak / S&P Capital IQ 1: TMT defined as Software, Internet, IT, Hardware (selected), Clean-tech, Med-tech, Media and Telecommunications $10b -
00 TMT M&A deals with European targets: number peaked in 2015 $500b 00 3,447 3,879 3,536 3,201 3,544 3,994 3,657 3,456 $400b 00 $261.4bn S&P $300b Europe 350 Index 00 00 $141.9bn $178.7bn $196.5bn $162.7bn $175.6bn $160.5bn $200b $125.6bn $100b 0 370 450 398 385 423 524 428 439 2010 2011 2012 2013 2014 2015 2016 2017 # of M&A deals # of M&A deals with a PE buyer Value of M&A deals page 5 CONFIDENTIAL As at 31st December, 2017 Source: Silverpeak / S&P Capital IQ Note: all 51 European countries -
,000 TMT M&A deals with US targets: peaked earlier in 2014, sharp decrease in value $1,000b,000 3,596 3,709 3,505 3,554 4,124 4,060 $673.5bn 3,578 3,387 $900b NASDAQ $800b Index $700b,000 $600b $500b,000,000 $228.4bn $300.0bn $239.7bn $297.6bn $479.5bn $381.7bn $400b $283.1bn $300b $200b 0 295 311 368 295 364 356 374 332 2010 2011 2012 2013 2014 2015 2016 2017 # of M&A deals # of M&A deals with a PE buyer Value of M&A deals page 6 CONFIDENTIAL As at 31st December, 2017 Source: Silverpeak / S&P Capital IQ $100b -
Software sector valuation metrics: revenue multiples Median Revenue Multiple 8x Median revenue multiples 1 : Q1 2018 US SaaS 7.1x 6x US Vertical 4.5x 4x US Horizontal 4.4x 2x UK Small & Mid 4.1x 0x 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. As at 31 st March, 2018 Source: Silverpeak / S&P Capital IQ US SaaS US Vertical US Horizontal UK Small + Mid Cap Europe page 7 CONFIDENTIAL Europe 2.8x
Software sector valuation metrics: EBITDA multiples Median EBITDA Multiple 60x 50x 40x Median EBITDA multiples 1 : Q1 2018 US SaaS 48.4x US Vertical 22.8x 30x 20x 10x US Horizontal 19.6x UK Small & Mid 19.9x 0x 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. As at 31 st March, 2018 Source: Silverpeak / S&P Capital IQ US SaaS US Vertical US Horizontal UK Small + Mid Cap Europe page 8 CONFIDENTIAL Europe 17.7x
US software & SaaS giants dominate Geographical distribution based on HQ location USA China UK Canada Germany Israel France Japan New Zealand Switzerland Source: S&P Capital IQ, Silverpeak analysis 9% 2% 6% 4% 3% 3% 2% 1% 1% 69% page 9 CONFIDENTIAL
The most acquisitive software & SaaS giants Aggregate number of acquisitions per company, 2012-2017 Tier 1 [50-100 deals] 100 90 80 70 Tier 2 [21-50] 60 50 Tier 3 [11-20] 40 30 Tier 4 [0-10] 20 10 0 Source: S&P Capital IQ, Silverpeak analysis page 10 CONFIDENTIAL
The most acquisitive buyers in Tiers 1 and 2 are slowing down Aggregate number of acquisitions per tier TIER 1 TIER 2 TIER 3 TIER 4 95 76 60 34 24 87 83 66 66 66 49 40 36 36 37 34 33 42 43 38 67 37 31 31 Tier 1 buyers saw the most pronounced drop following a very active 2015-16 period Tier 2 buyers have slowed their acquisition activity following a peak in 2013 Tier 3 and 4 buyers have been more stable and at similar levels of deal numbers 2012 2013 2014 2015 2016 2017 Source: S&P Capital IQ, Silverpeak analysis page 11 CONFIDENTIAL
Most active software & SaaS acquirers (Tier 1) 16 17 15 25 17 7 6 7 13 11 22 9 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 11 13 13 21 18 16 11 8 5 15 18 8 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 20 11 11 11 10 17 12 10 9 4 10 10 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 Source: S&P Capital IQ, Silverpeak analysis page 12 CONFIDENTIAL
Nordics collectively similar to Germany and France Breakdown of number of acquisitions by location of target from 2012-2017 United Kingdom Germany France Netherlands Sweden Finland Norway Denmark Spain Switzerland Belgium Ireland Italy Austria Other 14% 6% 5% 15% 3% 3% 3% 3% 3% 2%2%2% 2% 7% 30% The UK alone had a 30% share of all deals Germany and France saw a similar level of deals at 15% and 14% respectively Nordic countries collectively represented a significant share of software and SaaS M&A deals comparable to France and Germany Source: S&P Capital IQ, Silverpeak analysis 100% = 1,469 deals page 13 CONFIDENTIAL
Over half of all buyers are foreign but varies greatly between countries Ireland has the highest rate across Europe where 91% of deals are cross-border Spain, Netherlands, Belgium and Denmark also have high rates of cross-border deals ranging from 75% to 85% France and Germany, however, tend to have more in-country deals with only 50% to 60% of foreign buyers Source: S&P Capital IQ, Silverpeak analysis page 14 CONFIDENTIAL
Most active strategic US buyers of European software businesses 8 6 5 4 3 Source: S&P Capital IQ, Silverpeak analysis page 15 CONFIDENTIAL
Most active strategic European buyers of European software businesses 8 7 6 5 4 Source: S&P Capital IQ, Silverpeak analysis page 16 CONFIDENTIAL
Take away points Of European software exits: 25% to US buyers 65% to European buyers Financial buyers completed c.10% of all deals within the last 3 years Dassault is the most acquisitive European large software company (Ranked #9) 9 of the 16 most active buyers of software companies are NOT one of the 69 global software leaders Few strategic and financial acquirers are repeat-buyers of European software businesses page 17 CONFIDENTIAL
2 My Exit Experience Charlotte Dales, Cake Technologies page CONFIDENTIAL
3 Achieving strategic value Paddy MccGwire, Silverpeak page CONFIDENTIAL
The 3 hats Be clear on your objectives page 20 CONFIDENTIAL
The 3 hats Company Shareholder Management Identify individual objectives page 21 CONFIDENTIAL
Different positive outcomes Artificial Intelligence sold to InsurTech sold to Shareholder refresh 20m growth capital 25m existing share sale Private Equity page 22 CONFIDENTIAL
Getting strategic value INCREASING STRATEGIC PRICE PREMIUM Intrinsic company value Size of Market Opportunity Scarcity & Defensibility Scalability & Operating Leverage page 23 CONFIDENTIAL
Getting strategic value INCREASING STRATEGIC PRICE PREMIUM Intrinsic company value Size of Market Opportunity Scarcity & Defensibility Scalability & Operating Leverage High sustained growth Low churn rates Move the dial Market accessibility Time to market page 24 CONFIDENTIAL
Getting strategic value INCREASING STRATEGIC PRICE PREMIUM Intrinsic company value Size of Market Opportunity Scarcity & Defensibility Scalability & Operating Leverage Absence of competition Barriers to entry Strong IP differentiated & defensible High opportunity cost : build vs. buy Product pricing premium Value to multiple strategic buyers page 25 CONFIDENTIAL
Getting strategic value INCREASING STRATEGIC PRICE PREMIUM Intrinsic company value Size of Market Opportunity Scarcity & Defensibility Scalability & Operating Leverage High scalability + high operating leverage = higher operating margins page 26 CONFIDENTIAL
Getting strategic value INCREASING STRATEGIC PRICE PREMIUM Intrinsic company value Size of Market Opportunity Scarcity & Defensibility Scalability & Operating Leverage Value to Buyer How do we share the combined value that is not available to either individually? page 27 CONFIDENTIAL
Getting strategic value Start when ready Create a market Prepare thoroughly Articulate clearly Target acquirers globally Help the acquirer help you Be realistic and run a competitive process Appoint quality advisers! page 28 CONFIDENTIAL
Getting strategic value So what is a Stellar Exit? HIGH VALUE High revenue multiple? High return on capital invested? High earnings multiple? page 29 CONFIDENTIAL
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