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WORLD TECH M&A REPORT2017

www.corumgroup.com

“These days, investors really do come in all sizes, shapes and forms. It’s important to find the right cultural fit for your style and needs.”

RENÉ YANGVISTA EQUITY PARTNERS

2 corumgroup.com WORLD TECH M&A REPORT 2017

2017 promises to be the best year ever for tech M&A, due to a record $4+ trillion cash in buyer coffers, hot financial markets, low-cost debt and many new global buyers—all creating a strategic imperative to acquire, in order to stay

competitive and ahead of the trends. Speaking of trends, there are three new categories in Corum’s Top Ten Disruptive Trends—Visual Intelligence Systems, Data Science Monetization and Focused IT Services—as described in this report by our senior dealmakers globally.This report profiles all 30 market sectors covered by our research staff, including key deals and valuation metrics, plus our annual report on top buyers, financial trends and the Corum Index on tech M&A metrics.Special thanks to our international luminary panelists for their insights and contribution to this year’s report: Peter Coffee from Salesforce, Reese Jones from Singularity University, Henry Hu from IBM and Dr. Karl Popp from SAP in Germany. Our Private Equity panel includes industry leaders René Yang from Vista Equity (top overall acquirer for the past two years), Michael Libert from TA Associates, and Maurice Hernandez in London for Accel-KKR.We invite you to join us online for the latest sector valuation updates on the second Thursday of each month, and at one of our 150 live tech M&A seminars held in every major city, as profiled in the back of this report. These conferences and workshops are for sellers—the better educated you are on the process, the greater your chances to achieve an Optimal Outcome.

Bruce Milne Conference Chair

Data for this report was compiled by Corum Group, the world’s leading seller of privately held software, Internet, IT and related companies. For further information, please

contact Elon Gasper, EVP, Research at +1 425 455 8281 or [email protected].

© 2017 Corum Group Ltd. All Rights Reserved.

PRIVATE EQUITY PANEL

LUMINARY PANELOur thanks to our luminary panelists who took part in “Forecast 2017: Global Tech M&A.” For more of their thoughts on the technology landscape, view the original webcasts at corumgroup.com.

REESE JONES, SINGULARITY UNIVERSITY

“Language understanding needs continuous updating of context… Unless the body of data that the AI is recognizing from is continuously updated, it becomes out of date pretty quickly.”

DR. KARL POPP, SAP

“There are many opportunities for AI combined with enterprise applications, with digital assistants and recommendation functionalities, along with analytics.”

PETER COFFEE, SALESFORCE

“The ten trends discussed here today are well-founded predictions and people will do well to rely on them...Every one of those trends is enabled by massive, pervasive, 24/7, increasingly personal connection.”

HENRY HU, IBM

“To help your company and your clients grow and succeed, I would suggest that you and your clients start experimenting with some of these trends, proving the concept and piloting it before broad adoption.”

“SaaS companies are penetrating markets that have historically favored keeping their data in-house, but today are much more willing to leverage the cloud.”

MAURICE HERNANDEZACCEL-KKR

“To us, a great business is one that is capital efficient, one that is delivering great results on their investments, whether that is growth or profitability.”

MICHAEL LIBERTTA ASSOCIATES

2017 – ANOTHER RECORD YEAR?

Technology companies considering an exit cannot ignore the disruptive technologies changing lives and transforming markets. Even the largest firms must adapt to these trends or fall behind. No company has the foresight to always lead the innovation curve, so the most successful acquire the pioneering companies with the expertise to

help them continue that disruptive success.

Each year, Corum composes a list of the key trends driving tech M&A, drawn from transactions in every sector, spanning hundreds of events, global reports and information from conversations with all of the buyers. 2017 has produced a particularly instructive set, described below.

3corumgroup.comWORLD TECH M&A REPORT 2017

PUBLIC MARKETS REBOUND TO NEW HIGHSA short correction early last year reset some overextended SaaS valuations. Then, the major indices rebounded, capped by a post-election rally hitting many new highs by mid-December. The Dow rose 13%, NASDAQ was up 8% and the S&P Technology Index netted 5% growth over the course of the year. This marks the seventh year for this long-running bull market. Underlying trends and momentum continue to support tech M&A, with highly favorable conditions for sellers.

“YEAR OF THE MEGADEAL”The Corum Index Market metrics spotlighted a record year of $1B+ megadeals as buyers focused on opportunities to “move the needle” and keep up with the fierce pace of change.

Though that and supply issues held back the overall 2016 deal numbers, it set up the 2017 market to produce a “megadeal echo” with a wave of demand for bolt-on, tuck-in and competitive response follow-up acquisitions to round out the big transactions: filling gaps, patching holes and shaking out even more new buyers.

Pipeline metrics recorded PE deal flow, reflecting the great shift there away from the industry’s roots in old-line financial engineering toward tech-based strategic maneuver.

CORUM TOP TEN DISRUPTIVE TECHNOLOGY TRENDS 2017

ONLINE EXCHANGESCONNECTING CREATORS & CONSUMERS

DIGITAL CURRENCY FLOW

DECREASING FRICTION IN PAYMENTS &

EXCHANGES

CONNECTED HEALTH

LINKING PEOPLE TO THEIR HEALTH DATA &

SERVICES

OMNICHANNEL SALES

PURCHASING DECISIONS ANYWHERE,

ANY PLATFORM

IOTSOFTWARE

EMERGING PLATFORMS, STANDARDS &

ANALYTICS

FOCUSED IT SERVICES

DIFFERENTIATION DRIVES NEW VALUE IN A SLEEPY

SECTOR

AI ENABLEMENT

PUTTING AI TO WORK BY MEANS OF BIG DATA &

FEEDBACK

VISUAL INTELLIGENCE SYSTEMS

INTERSECTION OF AI, COMPUTER VISION &

ANALYTICS

DATA SCIENCE MONETIZATION

MAXIMIZING RETURN WITH REAL-TIME

ANALYTICS

DATASECURITY

BUILDING BARRIERS IN AN AGE OF

BLURRED LINESCO

NT

OU

RC

OR

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STRONG MARKETS AND STRONG DEAL FLOW

2016 PUBLIC MARKETS

2015 2016

Market

Transactions 4307 3948

Megadeals 59 76

Largest Deal $63B $39B

PipelinePrivate Equity Deals 232 323

VC-Backed Exits 648 658

Attributes

Cross-border Deals 34% 35%

Startup Acquisitions 13% 12%

Average Life of Target 14 yrs 15yrs

CORUM INDEX

TOP FINANCIAL BUYERS OUTPACE STRATEGICS

DISRUPTIVE TRENDS DRIVE TOP BUYER TURNOVER

BOLT-ONS AND MEGADEALS BOOM AS PRIVATE EQUITY FIRMS JOCKEY FOR POSITIONTop Private Equity buyers continued beating out top strategics. The top ten PEs averaged 19 deals, versus 15 for strategic buyers. Vista Equity underscored that trend as it held on to the leading spot with 15 more deals than the top strategic acquirer, J2 Global. KKR and Thoma Bravo moved up to join Vista in the top three, matching Alphabet’s total, replacing Insight and ABRY.

Change was the story of the remainder of the PE leaderboard as EQT and H.I.G. Capital made the list for the first time, along with Genstar and Providence Equity. GTCR returned to the chart after a year’s absence and Accel-KKR for the first time since 2013.

These top buyers earned their spots with a healthy mix of both platform and bolt-on acquisitions, as well as making contributions to the year’s megadeal trend. In total, the top three financial acquirers did seven megadeals in 2016, up from just one the previous year.

Notable sectors with increases in PE buyer activity included business intelligence, ERP and security. Deal flow increasingly depended on bolt-ons and tuck-ins to sustain these levels and deploy the immense amount of funds amassed and available to successful technology firms. Even smaller tech sellers need to address PE opportunities in their M&A process.

TOP PRIVATE EQUITY ACQUIRERS: 2016

TOP STRATEGIC ACQUIRERS: 2016


The ranks of top strategic acquirers welcomed five first-timers, riding a wave of trend-driven deals. An increased importance placed on AI and IoT drove acquisitions across sectors and will continue to do so.

J2 Global broke through as the top strategic acquirer with 24 acquisitions, primarily in its business cloud services arm, and with a heavy emphasis on security and secure backup tools. Other deal focus areas included email marketing and call management, with a handful on the digital media side, as well.

As we predicted last year, Alphabet returned to fight for the top spot after its restructuring. It won second place with 21 deals, largely focused on mobility. Nearly all went through Google, with just two executed directly by the parent company.

Several top acquirers demonstrated the market’s increased focus on IT services. In addition to J2, these included Accenture, ranking third with 20 deals, as well as Dentsu Aegis, Deloitte and WPP. Innovative digital

2015 2016 Change

General Electric 0 11 ∞Oracle 2 9 350%

Verizon 4 12 200%

Salesforce 6 12 100%

Hexagon AB 7 11 57%

Google 16 21 31%

J2 Global 19 24 26%

Deloitte 8 10 25%

Cisco 11 7 36%

Microsoft 20 10 50%

marketing agencies in particular were in demand among these buyers.

In the most dramatic shift among top acquirers, GE supported its rebranding by doing deals like a digital tech giant, racking up 11 technology company acquisitions, up from a standing start the year before.

Oracle had the second largest increase, more than quadrupling its 2015 total, with nine acquisitions including the NetSuite deal, its largest ever.

In contrast, Microsoft saw the largest drop in deal volume, as it focused on the LinkedIn megadeal, also its largest ever.


PRIMARY RESEARCH

ELON GASPEREVP, RESEARCH

AMBER STONERDIR. OF RESEARCH

THOMAS WRIGHTANALYST

YASMIN KHODAMORADI

DIR. OF VALUATIONS

NINA SEGHATOLESLAMI

SR. ASSOCIATE

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Corum tracks valuation multiples for publicly traded companies in 30 subsectors within six broad technology markets. The most notable trends of the last three years have been the decline of Internet valuations and the increase of IT Services.

Sales multiples for Internet companies completed their return to normal ranges, while Vertical continued gaining strength. Infrastructure and Horizontal valuations are converging, driven by related growth factors. Consumer declined while IT Services continued its steady climb in both sales and EBITDA. Internet EBITDA multiples barely retained the top spot as they converged with the other markets.

MARKET VALUATIONS

1. Record cash – strategic & financial buyers2. Strategic imperative – acquire or perish3. Record financial markets4. More global buyers than ever5. Accessible, inexpensive debt – PE buyouts

5 REASONS TECH M&A REMAINS STRONG

VALERIYA CHUMACHENKO

LEAD ANALYSTALEXANDER BETSANALYST

AMANDA TALLMANSR. ANALYST

LIUDMILA REVIAKINA

ANALYSTARTEM MAMAIEVANALYST

HORIZONTAL


Business Intelligence

EV/S 3.40 x

EV/EBITDA 14.95 x

MicroStrategy / NICE

Marketing & Ad Tech

EV/S 1.71 x

EV/EBITDA 14.66 x

Acxiom / Alliance Data

CRM

EV/S 1.71 x

EV/EBITDA 16.30 x

Salesforce / Convergys

ERP

EV/S 3.47 x

EV/EBITDA 20.28 x

Oracle / SAP

EBITDA metrics fluctuated throughout the year but ended with a net gain. SCM and HR sales multiples continued to lead, setting themselves apart in both sales and EBITDA multiples. BI and ERP sales multiples converged last year, with ERP coming out on top at the end of the year, with an increase in EBITDA mutliples as well.

The AI Enablement trend sparked deals across the Horizontal sector. Ebay joined the AI community, snapping up Expertmaker in an attempt to enrich its marketplace platform with machine learning, followed by Israeli visual search specialist Corrigon. Salesforce paid nearly $33M for deep learning image-recognition startup MetaMind.

Analytics companies were also in demand, as part of the white-hot AI Enablement trend. Corum client Lingospot was picked up by Piksel to improve its video metadata discovery. Israel’s device-mapping ad startup Crosswise was acquired by Oracle for an estimated $50M to integrate its tech into the Oracle Data Cloud.

The combination of AI and predictive analytics also generated deal flow. Vibrant Data was bought by Rakuten-owned Slice Technologies to expand its multidimensional data extraction offerings, while Viv Labs, a natural language processing startup from the creators of Siri, was purchased by Samsung to enrich the tech giant’s AI-based open ecosystem.

IoT predictive analytics SaaS provider Zementis was nabbed by Germany’s Software AG for an estimated $65M to strengthen its alliances with strategic players such as Bosch and Dell, drawing on the enhanced use of data. Israel’s speech analytics firm Nexidia was picked up by NICE for $135M, 2.7x revenue, to increase its customer analytics capabilities.

In other predictive analytics deals, retail-demand forecaster Predictix was grabbed by Infor for $125M to complement its enterprise cloud suite. And Preact, a subscription forecast analytics vendor, was bought by Spotify in an example of a consumer-focused buyer adding a horizontal seller.

Salesforce spent $110M, 22x revenue, for enterprise analytics SaaS provider BeyondCore, to amplify the Salesforce Analytics Cloud with AI following its $2.8B acquisition of e-commerce SaaS vendor Demandware.

In a deal springing from the Visual Intelligence Systems trend, French AI-based computer vision provider Spikenet Technology was purchased by Brainchip for its neural network software used in public security and gaming.

Human Resources

EV/S 6.40 x

EV/EBITDA 30.30 x

ADP / Workday, Inc.

SCM

EV/S 6.12 x

EV/EBITDA 21.98 x

AspenTech / Descartes

Payments

EV/S 3.88 x

EV/EBITDA 15.45 x

Paypal / Worldpay

Other

EV/S 3.18 x

EV/EBITDA 18.39 x

OpenText / Trimble

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In the high-value SCM sector, relationship management and trading partner collaboration SaaS Appterra was sold to Descartes Systems for $6M to help grow its logistics network, while e-procurement vendor Verian was bought by Finland’s Basware for $36M to complement its existing e-procurement capabilities.


AIs need data, ways to acquire that data, and tasks to attack based on learning from that data—then iterating

with feedback to improve even more. When we introduced this trend over a year ago, we predicted the flood of AI-related deals that followed. You don’t have to be a deep tech company to benefit: this continuing thirst for AI-driven applications drove M&A in 2016, not just for core AI capability, but around big data and analytics. Examples span nearly all application areas. In business intelligence, Salesforce acquired BeyondCore for $110M. Oracle acquired Crosswise for $50M to enhance mobile tracking for advertising. In retail forecasting, Infor spent

$125M on Predictix, while LinkedIn bought AI-powered recruitment engine Connectifier for $105M. IBM’s Watson, which kicked off this trend, capped its healthcare buying spree by adding “200 million lives” worth of data via Truven for $2.6B.All technology companies should consider the role of AI in their offerings, possibly building AI tools into their solutions—but optimal value may come from providing data, framework or feedback to enable an existing artificial intelligence.

AI ENABLEMENT

ALLAN WILSONVICE PRESIDENT

PETER PRINCEVICE PRESIDENT

All businesses, whether B2B or B2C, are seeking to bring their persuasion and purchasing as close to the customer

as possible. This trend is accelerating personalization, analytics and engagement to make the customer experience more seamless—available on every device, in every format, at the opportune moment.Emerging technology continues to disrupt how banks, retailers and others interact with consumers at the point of sale. As many formerly isolated systems come into conflict and cooperation, the urgency is spurring M&A, from the card networks that have become more than the glue that holds the system together, to the refrigerators where we can

now buy our groceries. More overlap will drive even greater consolidation. This will build on the many deals already seen in this space. On the B2C side, Demandware was acquired by Salesforce for $2.8B, linking e-commerce personalization across channels to CRM. On the B2B side, Microsoft acquired the ultimate Omni-channel sales tool—LinkedIn—for $26B. There’s more to come, as technology meets the challenge of bringing persuasion and transaction directly to the buyer.

OMNI-CHANNEL SALES

IVAN RUZIC, PH.D.VICE PRESIDENT

Online exchanges continue to present lucrative opportunities to shape relationships between providers

and consumers of products, services and information.Online marketplaces are the best known, pushing e-commerce to nearly $2 trillion in 2016, and the urgency of the opportunity has driven consolidation. Established players have aggressively sought new avenues for growth through M&A. Both established exchanges and enabling tech are in demand. Ebay’s StubHub acquired both Ticketbis, a Spanish language marketplace, and Ticket Utils, a provider of ticket broker software. We also see new buyers active, with Richie Brothers Auctions acquiring IronPlanet, essentially an eBay for heavy construction, and Polish auction site Allegro, acquired by a

private equity consortium for $3.2B. The need for novel technology will remain a significant driver of M&A activity in this sector. Key disruptive opportunities include personalization and social media integration, the application of machine learning/AI for security and efficiency, financial disintermediation (possibly via blockchain) and supply chain enhancements from on-demand carriers to drones.These principles apply across sectors, as companies with technology that successfully connects sellers and buyers in unique ways will continue to be in high demand.

ONLINE EXCHANGES

TOP DISRUPTIVE TECHNOLOGY TRENDS

A new AI epoch is emerging—not just doing the same kind of dumb, non-scalable AI at

higher speed and lower cost.

We have a qualitatively different opportunity for the tools that we use to become more intelligent through our act of using them.

Peter Coffee, Salesforce

“”SOLD TO

Valuations in the Vertical market ended the year on slightly higher levels than a year ago, showing robust growth dynamics all year long. Automotive, Government and Energy and Environment saw higher sales multiples while there was strong M&A activity across the sector, driven again by trends like AI technologies, predictive analytics, and the Internet of Things.

The evolution of connected and autonomous car technologies spurred interest from established industry players and newcomers alike. This included Ford, which picked up Israeli startup SAIPS to leverage its widely-applicable deep learning algorithms in the automaker’s self-driving car strategy.

Russian computer vision provider Itseez was bought by Intel to help the chip maker focus on autonomous vehicles, while Seattle-based Surround.io was purchased by its neighbor UIEvolution for its machine learning infrastructure, helping connected cars share more data with customers and manufacturers. Meanwhile, Uber spent nearly $700M for Otto and its retrofit-kits to create self-driving trucks.

In the AEC subsector, construction management SaaS vendor Textura was snapped up by Oracle for over $660M and 7x sales multiple to build up Oracle’s Primavera project management unit. Textura itself previously acquired Corum client PlanSwift. The construction SaaS market entailed cross-

border M&A as Munich-based CONJECT Holding inked a deal with the Australian collaboration SaaS provider Aconex for nearly $72M at 2.7x revenue.

Nebraska-based Design Data was sold to Germany’s Nemetschek for $46M, adding its steel-focused BIM solutions to Nemetschek’s capabilities in concrete. Mtelligence was acquired by AspenTech for over $37M to take its AI-driven predictive maintenance stack into the industrial asset management space. And Cincinnati’s construction data network provider, ConstructConnect, was picked up by Roper Technologies.

The healthcare M&A market remained active, in part driven by the Connected Health trend, as Press Ganey was taken private by Swedish PE EQT for over $2B at nearly 7x sales. Emmi, a patient engagement software provider, was picked up by Wolters Kluwer for $170M, adding patient-focused tools to its clinical suite. Healthiest You was acquired by Teladoc for $156M at 15x revenue to extend its telemedicine services.

On the services side, European IT provider Atos bought Dallas-based Anthelio, a health IT services provider with a

VERTICAL


Energy & Environment

EV/S 4.75 x

EV/EBITDA 19.20 x

Itron, Inc. / Schlumberger Ltd.

Real Estate

EV/S 7.04 x

EV/EBITDA 19.81 x

CoreLogic / Zillow

Automotive

EV/S 4.61 x

EV/EBITDA 18.61 x

CDK Global / BitAuto

Vertical Other

EV/S 4.53 x

EV/EBITDA 14.34 x

Amadeus / Sabre

A/E/C

EV/S 5.32 x

EV/EBITDA 21.01 x

Autodesk / Synopsys

Government

EV/S 1.85 x

EV/EBITDA 12.34 x

Raytheon / Tyler Tech.

Healthcare

EV/S 3.45 x

EV/EBITDA 14.77 x

Cerner / Allscripts

Financial Services

EV/S 4.86 x

EV/EBITDA 15.92 x

Broadridge / Fiserv

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suite of analytics tools, patient portals, databases and mobile apps for $275M, while Indian giant Wipro paid $460M for Florida’s HealthPlan Services, provider of the ExchangeLink health reform exchange integration platform-as-a-service.


Visual Intelligence lies at the intersection of three multi-industry disrupting trends, Artificial Intelligence,

Computer Vision and Analytics. Intel took a 15 percent stake in HERE, the mapping and location services company owned by a consortium of car manufacturers, which are evolving into software companies as they collect, process and act upon not only street and location data, but also object, vehicle, human and animal behavior.Billions of images stored on eBay can now be intelligently analyzed and classified with the help of Corrigon, an image recognition and visual search technology company. Netgear’s acquisition of Placemeter integrates proprietary computer vision algorithms into its Arlo Smart Home

security product. There is no end in sight for Visual Intelligence, as it will transform nearly every sector. For example, new software technologies built into cameras will find their way to drones, which collect and monitor complex data regarding the health of crops autonomously. Facial recognition is taking huge leaps forward beyond biometrics, so that multiple faces can be quickly identified from a single image and cross-referenced with law enforcement databases, making vulnerable and high-traffic public spaces more secure.

VISUAL INTELLIGENCE SYSTEMS

DAN BERNSTEINVICE PRESIDENT

Consumers are creating and curating their own health data, seeking closer connection to health services and

records. This demand for improved interoperability between previously siloed data for population health analytics, genomics, and predictive and personalized medicine, will continue to produce M&A. In addition to these social changes, demographic changes are making health care concerns more pressing, while regulatory barriers appear to be softening—from the 21st Century Cures Act recently signed, to the next round of the US healthcare fight.On the deal side, reflecting the importance of connecting with patients, more money was spent on patient engagement

solutions in 2016 than on more traditional EHR M&A. Key deals include EMMI, acquired by Wolters Kluwer, and Healthiest You, acquired by TelaDoc. The largest check came from Swedish PE EQT, acquiring patient survey giant Press Ganey for $2.3B.And while Fitbit struggled in the public market, Apple’s new Carekit offering and Nokia’s acquisition of Withings indicate significant opportunities for truly connected health via wearables, mobile and more.M&A will continue to be core to healthcare’s digital transformation into patient-centric, connected care.

CONNECTED HEALTH

DAVE LEVINEVICE PRESIDENT


Digital Currency Flow is powering massive opportunity for strategic acquisition in 2017, as the urgency

of consumer expectations for payment to be mobile, personalized, customizable and accessible 24/7 drives M&A. In addition to payments technology, anything facilitating automation and improved efficiency of banking, insurance, POS, wealth management, robo-advisors and lending, are all areas for M&A. The technology will greatly impact the front, middle and back office of every brokerage, bank, insurance company, healthcare exchange and all things commerce-driven.Credit card companies are themselves becoming technology

companies, as EMV chips finally come online in the US and the Internet of Things breaks open entirely new markets, driving deals up and down the payment chain. Meanwhile, the threat and opportunity that distributed ledger technology represents looms over the global commerce system.Staid financial players watched it move toward reality last year, with Broadridge and Rakuten making the first true strategic blockchain-driven acquisitions.Will the coming disruption reach Netflix/Blockbuster levels, or will current fintech companies make the leap? The tech firms acquired this year will help determine the course of an industry.

DIGITAL CURRENCY FLOW

ROB GRIGGSVICE PRESIDENT

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The Cambrian Explosion of species about a half-billion years ago coincided with vision and other senses evolving in

organisms... This seems to be happening to computer devices, and will create a great

diversity of new possible products.

Reese Jones, Singularity University

“”

CONSUMER

10corumgroup.com WORLD TECH M&A REPORT 2017

Casual Gaming

EV/S 3.03 x

EV/EBITDA 21.24 x

Nintendo / Zynga

Core Gaming

EV/S 2.04 x

EV/EBITDA 10.85 x

Electronic Arts / Activision

Other

EV/S 1.64 x

EV/EBITDA 52.29 x

Netflix / Pandora

Valuations in the Consumer sector declined slightly following encouraging metrics through the second and third quarters. However, Casual Gaming remained stable in both sales and EBITDA valuation, and the value of non-gaming entertainment powerhouses supported overall EBITDA multiples.

China continued to dominate gaming M&A around the globe. Tencent bought Finland’s Supercell for $8.5B in its largest-ever acquisition. Corum client Jagex, publisher of classic MMO Runescape, was sold to Zhongji Holding, another example of a non-tech buyer diversifying into gaming.

In the wagering space, Quebec-based DEQ Systems, a global supplier of table games to casinos, was acquired by Scientific Games for over $20M. London-based OpenBet was bought by NYX Gaming for over $250M to help it gain a share in the regulated markets. Hong Kong-based XIN Gaming picked up Swedish sportsbook suppliers Tain and Betting Promotion for nearly $10M dollars combined.

The wearables sector also produced notable deals in 2016. Among them was ASICS’ acquisition of FitnessKeeper for $85M, as the Japanese sporting goods giant raced to catch up with Adidas, Nike and particularly UnderArmour. Ireland-based PlayerTek, a provider of athlete tracking systems, was acquired for $2.7M by Australia’s Catapult, while Nokia bought health and activity tracker maker Withings for $190M.

Facial animation and analysis was a particular focus for Facebook, which snapped up Masquerade and FacioMetrics.

And through Oculus, it added The Eye Tribe, a developer of sensor-based eye tracking systems.

In the world of virtual reality, live-action VOKE was bought by Intel with hopes to enrich its VR sports content, and VR studio Surreal was acquired by media company STX with recent funding from Tencent.

Travel giants TripAdvisor and Expedia both reached out of the Internet sector for consumer apps, with TripAdvisor buying Citymaps and Expedia acquiring photo sharing startup Trover.

DATA SCIENCE MONETIZATION

Data Science Monetization is revolutionizing all disciplines of technology after emerging in the games industry. Asian game studios applied it first

to perfect free-to-play models, monitoring everything consumers did, liked, played and paid for. Developers worldwide extended this to all sorts of applications, analyzing customer behavior to identify, exploit and optimize monetization opportunities. This has led to a flurry of M&A for both analytics firms (Games Analytics acquired by China’s Mobvista) and software firms, especially data-driven game companies—witness data-driven Corum clients Jagex, acquired by Zhongji for its successful RuneScape franchise, and Digital Extremes, with its free-to-play hit Warframe, acquired by

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INTERNET

Diversified Internet

EV/S 4.88 x

EV/EBITDA 17.67 x

Alphabet / Tencent

eCommerce

EV/S 1.02 x

EV/EBITDA 29.82 x

eBay / JD.com

Social Network

EV/S 4.57 x

EV/EBITDA 20.22 x

Facebook / Mixi

Travel & Leisure

EV/S 5.75 x

EV/EBITDA 19.21 x

Expedia / JustEat

Internet sector valuations ended the year down after months of robust performance, though Travel & Leisure’s increased sales multiples served as the exception.

English cruise booking site Cruise.co.uk was bought for $69M by Bridgepoint Capital, hoping to take advantage of the UK’s ocean cruise market, the second largest globally. India’s largest online travel agent Yatra was sold to Terrapin for $218M to build on its recent IPO and expand internationally. French hotel group Accor entered the private rental market, paying $170M for Onefinestay out of London.

There was also high demand for disruptive ticketing technology. Spanish platform Ticketbis was grabbed by eBay’s StubHub for an estimated $166M to increase its footprint in Europe and the Spanish-speaking world. Top acquirer Vista Equity partnered up with Vivid Seats to take advantage of the growing secondary

ticket exchange market. CHARGED.fm, out of New York, was picked up by Vendini in an effort to amplify its audience for both primary and secondary event ticketing markets. Elsewhere, Wantickets was wrapped up by LiveXLive which seeks a foothold in digital music ticketing.

Horse-racing sites came out of the gate strong, as Australia’s largest digital racing publisher Punters.com.au, a Corum client, was acquired by News Corp to expand its offerings for the Australian racing community. In London, horse-betting publisher Racing Post was acquired by Exponent Private Equity.

Consolidation in the food delivery space continued into 2016, capped off by Foodpanda’s sale to DeliveryHero in an increasingly winner-take-all market. Previous deals took place across Russia, Britain, Canada and beyond. DeliveryHero’s largest rival, Just Eat, was still hungry after its M&A feast last year, dishing out over $253M for British rival Hungry House and for dessert purchased SkipTheDishes for over $83M to bolster its presence in Canada. Meanwhile, the Benelux part of Just Eat was gobbled up by Takeaway.com for more than $20M. And in China, JD.Com subsidiary Daojia teamed up with Dada Nexus for $200M to streamline its food delivery crowdsourcing model under Dada’s brand.

JIM PERKINS EXECUTIVE VP

Perfect World and Leyou. Beyond games, video ads are benefiting from this trend, with Facebook a key beneficiary thanks to its earlier acquisition of LiveRail. Adobe’s half-billion acquisition of TubeMogul in November suggests similar aims. Similarly, B2B SaaS providers tracking successful and unsuccessful strategies within an ecosystem can provide this monetization capability to customers, always seeking the shortest distance between data and dollars. From an M&A perspective, the better the data is utilized, the more attractive and valuable a company.

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INFRASTRUCTURE


Network Management

EV/S 2.36 x

EV/EBITDA 9.81 x

Cisco / Juniper Networks

Storage & Hosting

EV/S 2.68 x

EV/EBITDA 11.01 x

NetApp / Brocade

Security

EV/S 3.27 x

EV/EBITDA 16.71 x

Gemalto / Check Point

Endpoint

EV/S 3.67 x

EV/EBITDA 13.63 x

VMware / Citrix

Sales multiples in the Infrastructure sector experienced fluctuations, but remained fairly stable overall, and EBITDA multiples jumped in Q4. Storage & Hosting saw gains in both sales and EBITDA multiples, while Endpoint had increased sales multiples and Security experienced a bump in EBITDA multiples.

Data Security stood at the forefront of M&A for both industry incumbents and buyers seeking to protect an established technology stack. FireEye paid $200M, 5x sales, for cybersecurity firm ISight Partners, and followed that up by spending $20M more for Invotas to complement its threat management platform with security automation.

Proofpoint snatched up Return Path’s e-mail fraud protection unit for $18M to strengthen its portfolio of threat protection products. Blue Coat, founded by former Corum client Joe Pruskowski, was sold to Symantec for $4.7B, nearly 8x revenue, to complement its on-premise products.

The Visual Intelligence Systems trend made an impact as well, with machine vision specialist Cognex buying two 3D vision firms in Europe—EnShape and AQSense—for more than $10M combined, underlining the rising demand for solid 3D

tech across a range of traditional markets.

AI and AI Enablement were prevalent in the Infrastructure sector in 2016. Apple fortified its machine learning infrastructure by acquiring Turi for $200M while also picking up facial recognition startup Emotient and data-mining platform Tuplejump, Apple’s first deal in India.

There were IoT Software acquisitions by tech buyers great and small. Microsoft bought Italian startup Solair to boost its Azure IoT suite. SAP fueled even more consolidation in the space by acquiring another Italian firm PLAT.ONE, to build IoT interoperability into its Hana Cloud. Israel-based IoT security specialist Dojo-Labs was acquired by anti-virus company BullGuard. Bluvision, specializing in Bluetooth-Low-Energy tracking solutions, was nabbed by HID to dive deeper into enterprise IoT.

The cloud management space has been active as well with Cisco spending $260M for cloud application management firm CliQr, and ServiceNow paying $15M for ITapp to plug into hybrid cloud environments.

Upheaval in programmatic communication led to Google buying the API management company Apigee for $625M, 6.5x

IT Services Management

EV/S 4.14 x

EV/EBITDA 24.83 x

CA Technologies / Red Hat

Other

EV/S 5.32 x

EV/EBITDA 14.78 x

Atlassian/ Progress

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revenue, to help the search giant catch up in the cloud with rivals Microsoft and Amazon. API management company 3Scale was picked up by Red Hat for $29M, over 7x revenue, to amplify the API economy throughout its product stack.

The complex Internet of Things ecosphere continues to coalesce. While more players are still emerging,

networks of alliances are forming to achieve more unified environments, providing accelerated growth opportunities for the IoT software community. In particular, watch the crystallization around Google’s Android Things, GE’s Predix, PTC’s ThingWorx and Siemens’ MindSphere, especially after its acquisition of Mentor Graphics, while cloud providers Amazon and Microsoft spread their bets around the table. Major industrial firms emerged as top buyers last year, hungry for deals in every imaginable area of IoT software—in particular, security, analytics, connectivity, controls, data

storage and application development. In addition to Siemens’ $4.5B acquisition of Mentor Graphics, five out of GE’s seven IoT acquisitions in 2016 were SaaS plays, including nearly $1B spent on the ServiceMax field service management platform. We expect to see other industrial players enter the tech M&A fray in 2017.With the compression of IoT tech cycles, we anticipate consolidation on both the platform and hardware fronts this year. Though much of the technology is still nascent, the buyers are active and it’s a great time to calibrate the M&A market.

IOT SOFTWARE

ROB SCHRAM SR. VICE PRESIDENT

Demand is rising for IT Services firms that are focused on particular platforms and problem sets. Inefficiencies

continue to grow in the ecosystem of large software installations, while enterprise solutions have evolved to modular or object-based architectures, enabling customers to demand more adaptable implementations. Meanwhile, aligning business processes and best practices with new systems has become fundamental to business success.We’ve been watching IT Services valuations steadily increase for the last few years, and EBITDA multiples have nearly doubled since 2012. Deals are clustering around vertical domains such as SCM, HR and CRM in particular, with 16

acquisitions of Salesforce-focused services companies in 2016, nearly three times the previous year.Services firms with a specific focus coupled with comprehensive capabilities will be attractive targets for partnerships and acquisition in the coming year. Targets with expertise in custom app integration, core development, and technology services must also provide strategic consulting services with specific, deep domain expertise. This powerful combination will not only capture market share but increase valuations at this uniquely advantageous moment.

FOCUSED IT SERVICES

STEVE JONESVICE PRESIDENT

Major data breaches continue to harm consumers, governments and enterprises, helping make Data

Security one of the hottest trends in tech M&A. Today’s big players can’t keep up with the pace of innovation, but they can fill product gaps and acquire innovative teams. We see companies in predictive threat intelligence, multi-factor authentication, and highly-secured cloud platforms for short-term sharing of data as particularly attractive targets. Further, by 2020 there will be 80 billion connected IoT devices generating huge volumes of data that will need to be analyzed to protect these devices and their networks. Expect more major breaches and significant new

vulnerabilities to be uncovered this year. Large security companies will continue to be highly acquisitive, including Symantec, which reenergized its security product strategy by selling its Veritas division last year while acquiring Blue Coat for $4.7B and Lifelock for $2.3B. Other key deals included the AVG acquisition by Avast, and Intel’s sale of the MacAfee product line to TPG Capital.With big moves like these, security buyers of all sizes are also looking for tuck-ins to fill gaps.

DATA SECURITY

JON SCOTTMANAGING DIRECTOR


SOLD TO

On the topic of cybersecurity, we are living in a nuclear era, with weapons but no bomb

shelters. There is good technology for attacking other cyber systems, but very little in the way of defense. This is obviously a huge

business opportunity.

Reese Jones, Singularity University

“”

IT SERVICES


Developed market IT Services valuations continued their years-long ascent, driven in large part by the Focused IT Services trend. Emerging market valuations continued their convergence towards Developed market metrics, but still remained significantly higher in sales multiples.

Accenture, one of the year’s top three acquirers, did twenty different deals for a range of IT Services providers, from systems integrators to an SCM consultancy. With one acquisition in Australia, twelve in Europe, one in the Middle East, five in North America and one in Asia, the company diversified across

most of the major markets. Key deals included spending $130M for the French digital consultancy OCTO Technology, as well as Workday integrator DayNine Consulting, SCM analytics consultancy OPS Rules, Defense Point Security to integrate into its Federal Services group, and Netherlands-based GIS solutions provider Realworld OO Systems.

Security, an early beneficiary of the higher services valuations driven by the Focused IT Services trend, continued to be in demand. Aquilent, a cloud service provider for the US government, was snapped up by Booz Allen for $250M. Siege and its robust portfolio of security products was rolled up into Nehemiah Security’s portfolio, and Pasadena-based Advancive was bought by Optiv to bolster its identity and access management practice.

Other key trends also drove deals, including IoT Software fueling demand for systems integrators in that complex space.

Nfrastructure was snapped up by Zones to foster its evolution as a services provider for networked devices. Extensys sold its IoT division to CompuCom Systems in an attempt to apply its sensor-based monitoring services to IoT solutions. Portland’s Rivetry joined forces with Bluetooth module maker Rigado for more comprehensive IoT capabilities.

In India, servicing and maintaining the massive and growing cloud infrastructure was a high priority. Development and testing automation specialist Opex was acquired by AWS partner REAN Cloud, in a stated effort to fortify REAN’s infrastructure automation capabilities. In China, digital marketing firms were in demand, including NY-based PR firm Ruder Finn acquiring Daylight Partnership out of Hong Kong.

DEVELOPED MARKETS

EMERGING MARKETS

Bet on velocity... Whatever cycle you have been using

needs to be drastically compressed, or even your accurate predictions will

not keep you ahead of the curve.

Peter Coffee, Salesforce

“”

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AmsterdamAtlantaAucklandAustinBaltimoreBarcelonaBeijingBerlinBostonBrisbaneCalgaryCapetownChicagoCincinnatiClevelandCologneColumbusDallasDayton

DenverDetroitDublinEdinburghFrankfurtHamburgHarrisburgHelsinkiHong KongHoustonJohannesburg Kansas CityLas VegasLisbonLondonLos AngelesMadridMelbourneMexico City

MiamiMilwaukeeMinneapolisMontreal MunichNashvilleNashuaNew YorkOmahaOrlandoOsloOttawaParisPhiladelphiaPittsburghPortlandPragueRaleighReading

Salt Lake CitySan DiegoSan FranciscoSan JoseSanta ClaraSeattleShanghaiSingaporeSt. LouisStockholmSydneyTel AvivTorontoVancouverViennaWarsawWashington DCWellingtonZurich


SELLING YOUR SOFTWARE, IT OR RELATED TECH COMPANY?

2017 CONFERENCE LOCATIONS

Executed professionally, done right, it leads to fortune. Unfortunately, most owners’ efforts to sell end in failure due to lack of experience and knowledge. For the most important transaction of your life, it’s imperative to get the necessary education. Corum is the leading tech M&A educator in the world—we share the experience gained in selling more firms than anyone else over the past 30 years. Our experts offer a number of live events designed to give you the knowledge you need to achieve what we call an Optimal Outcome—maximum price and best structure.

Thinking about selling in the next one to three years? The Merge Briefing is a 90-minute executive seminar that provides a current M&A market update (trends, valuations, etc.), as well

as a brief overview of the Tech M&A process: “8 Stages to an Optimal Outcome.”

Ready to go to market? During the half-day workshop Selling Up, Selling Out, learn to prepare, position, research, value, negotiate and execute due diligence for maximum price and optimal structure. This is the most attended tech M&A event ever, participants having done over $2T in transaction

value.

World Financial Symposiums (WFS) brings together experts, luminaries, newsmakers and global leaders in tech

and finance for events across the globe. Corum is a Platinum Sponsor, one of many organizations that support the WFS. Its primary conference, Growth and Exit Strategies for

Software & IT Companies, is a full-day symposium held in New York, London, Silicon Valley and Seattle, with half-day events in cities including Austin, Vancouver BC and others.

The event educates owners and CEOs of software, IT and related technology companies on the key developments in today’s technological and financial landscapes and helps

them prepare their strategies for growth and eventual exits. To register for a conference, visit www.wfs.com.

MARKET SPOTLIGHTMarket Spotlights are monthly webcasts sponsored by the World Financial Symposiums, focusing on the opportunities

for technology companies in specific sectors, topics and regions. Recent topics have included healthtech, security,

patents, the connected car and more.

To learn more, visit www.wfs.com.

TECH M&A MONTHLY WEBCAST

Want to stay on top of M&A and build more value in your technology company? Every month, this 30-minute global webcast brings you the news you need to know on markets, trends, deals and valuations—plus invaluable special reports from buyers, technologists, dealmakers and industry leaders. And be sure not to miss the quarterly and mid-year reports

with valuation data on all 30 technology subsectors.

Join us on the second Thursday of every month at www.corumgroup.com.

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