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Hampleton Partners InsurTech M&A Webinar – Spring 2019 1STRICTLY CONFIDENTIALHampleton is authorised and regulated by the Financial Conduct Authority
Webinar: Can The Incumbents Survive?Can incumbent vendors survive the onslaught of well financed Insurtech startups?
Hampleton Partners InsurTech M&A Webinar – Spring 2019 2
Webinar logistics
Logistics
Welcome to Hampleton Partners’ Insurtech M&A webinar: Can The Incumbents Survive?
• Duration: 30 minutes, including Q&A
• Recording will be available at the end
• Presentation can be followed on screenNote: Webinar software can distort some graphics
• Q&A session at the end – but you can send questions throughout presentation
• Suggested hashtag: #HampletonTech
Hampleton Partners InsurTech M&A Webinar – Spring 2019 3
Agenda overview
Agenda
• Introductions
• Tech M&A Environment
• Insurtech hot trends
• New technologies
• Who’s buying/investing
• Partnerships
• Old school vs New school
• Maximising value
• Summary
• Q&A
• What’s next?
Hampleton Partners InsurTech M&A Webinar – Spring 2019 4STRICTLY PRIVATE & CONFIDENTIAL
Introduction
Speakers
Agenda
Hampleton
Our M&A research
Hampleton Partners InsurTech M&A Webinar – Spring 2019 5
Introductions
Introductions
Miro ParizekPrincipal Partner
Sana AfghanAnalyst
Hampleton Partners InsurTech M&A Webinar – Spring 2019 6
About Hampleton Partners
Introductions
Hampleton offers experienced deal-making across a targeted number of technology sectors
>100 Tech transactions executed
24 Seasoned professionals headquartered in London and Frankfurt
Satellite office in San Francisco to engage with US buyers
8 Core focus areas in which the team has entrepreneurial, operational, deal-making and investing experience
70 Percent cross-border transactions on sell-side engagements
Privately-owned companies
Entrepreneur-led businesses
Private equity portfolio companies
VC-backed companies
Selected buy-side engagements
Selected strategic high-tech start-ups
…in key geographies worldwide.M&A, growth capital and corporate finance advisory for
Hampleton Partners InsurTech M&A Webinar – Spring 2019 7
Focus areas
Introductions
The experienced Hampleton team focuses on eight targeted subsectors of the technology industry. Read our research for valuable insights on M&A transaction multiples, exit strategy and timing, potential buyers, as well as current and future technology trends
2019
Nine 1H2019 reports released looking back at 2018 and anticipating future trends
• Autotech
• Digital Marketing
• E-Commerce
• Enterprise Software
• Fintech/Insurtech
• Healthtech
• Industry 4.0 in the DACH* region
• IT & Business Services
• Growth Capital
You can download and subscribe to these semi-annual reports at http://www.hampletonpartners.com
*DACH = German-speaking region (Germany, Austria, Switzerland)
Hampleton Partners InsurTech M&A Webinar – Spring 2019 8STRICTLY PRIVATE & CONFIDENTIAL
M&A drivers
Success of the tech industry
Agenda
Reasons for deal activity
M&A is the new R&D
Hampleton Partners InsurTech M&A Webinar – Spring 2019 9
The NASDAQ factor
Source: S&P Capital IQ
Timing
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Hampleton Partners InsurTech M&A Webinar – Spring 2019 10
Global M&A activity
Source: 451 Research
Timing
2,078 3,033 3,995 3,632 3,008 3,023 3,290 3,786 3,651 3,303 3,978 4,429 4,065 3,558 3,648
$219b
$350b
$406b $405b
$248b
$144b
$180b
$233b
$192b
$247b
$391b
$575b
$457b
$344b
$580b
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Transaction Count Aggregate Disclosed Value
Hampleton Partners InsurTech M&A Webinar – Spring 2019 11
Reasons for high deal activity
Timing
Strategic
• M&A is increasingly becoming part of a normal economic business cycle
• Driven by required growth / rate of change / competitive pressure
• Markets consolidate – “be the gorilla, occupy a niche or watch out”
• Activity peaks when disruption accelerates (technological, regulatory, new or high growth markets)
• Scaling companies have limited ability to innovate – need increasingly to make acquisitions
• Largest R&D spenders are also the biggest M&A spenders (e.g. Alphabet, Amazon, Intel, Microsoft, Samsung, …) buying innovation and domain expertise
Financial
• New entrants in tech sector from traditional industries
• Tech companies are generating mountains of cash
• Interest rates are still low…
• …and share prices are still high
• Financial investors have record-breaking fund sizes and are active in Insurtech
Hampleton Partners InsurTech M&A Webinar – Spring 2019 12
Pacesetter report – M&A is the new R&D
Source: Pacesetters from Pinsent Mason together with Mergermarket – survey of 400 of Europe’s fastest-growing companies
Timing
41%
59%
What proportion of your firm’s revenue growth over the past three years is attributable to M&A activity? What do you anticipate for the next three years?
What proportion of capital has been allocated to M&A over the past three years? What proportion will be allocated to M&A over the next three years?
40%
60%
45%
55%
46%
54%
Past three years Next three years
M&A activity
Organic growth/non-M&A activity
M&A activity
Organic growth/non-M&A activity
Hampleton Partners InsurTech M&A Webinar – Spring 2019 13STRICTLY PRIVATE & CONFIDENTIAL
InsurTech market overview
Hot Trends In Insurance
Agenda
New Technology Adoption
Big Ticket Investments
Global M&A In InsurTech
Recent Acquisitions
Partnerships
Old School vs New School
Hampleton Partners InsurTech M&A Webinar – Spring 2019 14
Hot Trends In Insurance
Hot trends In Insurance
Cybersecurity Property & CasualtyTelematics
Adopted by few insurers, with two maintaining the lead
Biggest underwriting breakthrough since credit scoring
Smartphone UBI becoming a bigger strategic priority
Cybersecurity insurance market value is estimated to grow to $9 billion, double 2017
Anticipating future demand, Guidewire acquired cyber risk analytics provider Cyence in 2017
Growth driven by businesses increasingly understanding threats of IoT, as it gains traction
Changing trends in vertical industries e.g. auto – AV’s – could gradually shift ownership towards companies as opposed to individuals
Players are consolidating in order to increase product offering and geographical footprint
Address changing consumer profiles e.g. young, demanding and instant-access style millennials
Life & Pension
Source: CB Insights, Munich Re
Wearable tech is the telematics in the Life sector. Datasets enable insurers to manage risks or engage with their customers
Reinsurers are helping to drive innovation in life insurance, but non-traditional players also entering market
2018/19 improved annuity growth rates, supported by rising interest rates.
5.6%
Hampleton Partners InsurTech M&A Webinar – Spring 2019 15
New Technology Adoption
New Technology Adoption
3 %4 % 4 %
10 % 10 %
12 %13 %
20 %
% of InsurTech adoption of new technology
• New technologies support product innovation e.g. microinsurance, UBI & P2P
• Incumbents must adopt & master these technologies to offer solutions to under-served markets
• Value propositions of new technologies include:
• Introducing new products, services or entering new markets
• Lower cost for policy administration & claims management through digital and leaner processes
• >20% focused on lowering costs by providing customers with a digital interface and direct model
Source: McKinsey & Co
Hampleton Partners InsurTech M&A Webinar – Spring 2019 16
07.03.19
$128m
Big Ticket Investments
Sources: CB Insights; 451 Research
Big Ticket Investments
46 65 94 124 174 202 257
$0.3 B$0.3 B
$0.9 B
$2.7 B
$1.7 B
$2.2 B
$4.2 B
2012 2013 2014 2015 2016 2017 2018
Global Insurtech Investment
Transaction volume Transaction value
06.03.19
$125m
30.01.19
$500m
04.03.19
$60m
Hampleton Partners InsurTech M&A Webinar – Spring 2019 17
Global M&A In InsurTech
Sources: 451 Research
Global M&A In InsurTech
16
34 36 45 45 44 39$0.1 B
$2.8 B
$0.9 B
$7.6 B
$3.8 B
$1.9 B$2.2 B
2012 2013 2014 2015 2016 2017 2018
Global M&A Transactions
Transaction volume Transaction value
Number of buyers with
more than 1 acquisition
17
Number of acquisitions
since 2016
11213%
87%
Strategic buyers vs Private equity
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
40.0x
Trailing 30 MonthMedian EV/EBITDA
Hampleton Partners InsurTech M&A Webinar – Spring 2019 18
Recent Acquisition Drivers
Sources: 451 Research; CAPIQ
Recent Acquisition Drivers & Examples
acquired
Geography
• Sapiens – insurance management software – Israel
• Adtaptik – insurance management SaaS –US
• $19.5m, EV/S 1.6x
• Strengthen presence and build market share in US
acquired
Technology
• Zurich insurance –Swiss insurance agency
• BrightBox – SaaS-based connected car platform
• Founded in 2012, 200 employees
• Enhances Zurich’s capabilities in data insights and analysis
acquired
Channel
• DuckCreekTechnologies – P&C insurance software
• Outline Systems-P&C insurance distribution channel management software
• Lond-standing partner
acquired
Horizontal
• Solera – auto claims processing software - US
• In4mo – Finnish property claims management SaaS
• Extend P&C offerings with more innovative solutions
Hampleton Partners InsurTech M&A Webinar – Spring 2019 19
Partnerships
Source: CB Insights
Partnerships
Customised invoice insurance
Mobile phone insurance provider
Digital insurance for ride-hailing drivers
Insurance-as-a-service
Digital multi-line insurance platform
Home insurance paired with
sensor technology
Pet insurance App-based personal items
insurance
Flight insurance
Product insurance for ecommerce
Hampleton Partners InsurTech M&A Webinar – Spring 2019 20
“Old School” vs “New School”
Old School vs New School
2009 2019
Hampleton Partners InsurTech M&A Webinar – Spring 2019 21STRICTLY PRIVATE & CONFIDENTIAL
Value creation
How does a company’s “age” influence value?
Agenda
Value maximisers and reducers during the transaction process – dos and don’ts
Transaction timeline
Maximising value
Hampleton Partners InsurTech M&A Webinar – Spring 2019 22
How does a company’s age influence value?
Value creation & preservation
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
0-2 2-4 4-6 6-8 8-10 10-12 12-14 14-16 16-18 18-20 20-22 22-24 24-26 26-28 28-30
Med
ian
EV
/S
Years since company founded
Median enterprise value to revenue ratio (EV/S) for companies sold in 2018
Hampleton Partners InsurTech M&A Webinar – Spring 2019 23
Example transaction timeline
Typical M&A process
IM, financials, and discreet profile/teaser preparation
Target buyer list preparation
Buyer outreach
Initial management Webex meetings
Physical management meetings
Data room available
LOI finalisation - Auction
Due diligence
SPA negotiation
Closing PhaseMarketing Phase
Month 1 8765432
Preparation Phase
Go to market
Submissions of Initial bids
Submissions of Final bids
Signing of SPA & Closing
Hampleton Partners InsurTech M&A Webinar – Spring 2019 24
Maximsing company value
Value creation & preservation
Consistent figures
Visionary management
Compelling investment case
Multiple bidders
Excellent management presentation
Attractive positioning
Structured DD
Brain drain / key employee loss
Hockeystick planningInconsistent financials
Missed budgetUnstructured due diligence IP disputes
Shareholder disagreement
Lost reference clients
Day-to-day operations neglect
Median enterprise value
Increase in value
Decrease in value
Hampleton Partners InsurTech M&A Webinar – Spring 2019 25
Maximising deal value
Typical M&A process
• Pay attention to timing
• Consider left-field buyers and tangential sectors / buyer groups
• Ensure the process is structured – create a managed auction environment to
maximise value
• Set expectations early as relationships develop… but not too early
• Think about and begin talking as early as possible about integration
• Good advisors (of course), and good lawyers
• Don’t lose sight of the day-to-day running of your company – meet your budget!!!
Hampleton Partners InsurTech M&A Webinar – Spring 2019 26STRICTLY PRIVATE & CONFIDENTIAL
Q&A
What’s next?
Contacts
Agenda
Hampleton Partners InsurTech M&A Webinar – Spring 2019 27
Q&A
Next steps
Hampleton Partners InsurTech M&A Webinar – Spring 2019 28
What’s next?
Next steps
• Go to www.hampletonpartners.com/research to download our sector
reports
• Join one of our face-to-face M&A Executive Briefings to learn more:
UK, Germany, Scandinavia
• Contact me directly if you have any more questions, would like to
discuss your specific needs or go on our mailing list
Hampleton Partners InsurTech M&A Webinar – Spring 2019 29
Information and opinions in this document have been gathered by Hampleton Partners (“Hampleton”) from sources assumed to be reliable, however, no representation or warranty, expressed or implied is made as to their accuracy orcorrectness. This document is not to be relied upon as authoritative or taken in substitution for the exercise of own judgement and Hampleton accepts no liability whatsoever for any direct or consequential loss arising from the use of thisdocument or its contents. Distribution or disclosure of this document and the opinions and conclusions contained in this document to any 3rd parties is subject to the prior written consent of Hampleton.
Hampleton offices:
London17 Woodstock StreetLondon, W1C 2AJT: + 44 20 3728 6910
FrankfurtTaunusanlage 160329 FrankfurtT: +49 5050 60 713
San Francisco1390 Market St. #200San Francisco, CA 94102T +1 415 715 4522
Contact details & next steps
Contact details
Miro ParizekPrincipal Partnermiro@hampletonpartners.com+49 172 8222 622
To subscribe to our twice yearly complimentary reports, please fill out your details on our website:
http://www.hampletonpartners.com/research/
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