View
953
Download
3
Category
Tags:
Preview:
Citation preview
©COPYRIGHT 2012. FIRMEX. ALL RIGHTS RESERVED
About Firmex
Firmex focused on providing the best virtual data room solution for managing corporate transactions and financial compliance
Who uses Firmex?• Firmex community includes
over 200,000 users worldwide• Conducted over 10,000 deals
in the last 18 months
Why offer a Webinar Series?• As part of our value-added service, we believe it is important
to offer educational resources to our expanding community
Joel LessemCEOFirmex
©COPYRIGHT 2012. FIRMEX. ALL RIGHTS RESERVED
Firmex Webinar SeriesApril 17th, 2012
1:00 p.m. to 2:00 p.m.
Cyrus LamKPMG Corporate Finance LLCManaging Director757 3rd AvenueNew York, NY 10017212-872-5540clam3@kpmg.comkpmgcorporatefinance.com
Trends in Technology M&AAnd Outlook for the Remainder of 2012
@Firmex, #FirmexWebinar
©COPYRIGHT 2012. FIRMEX. ALL RIGHTS RESERVED
About Firmex
Firmex is focused on providing the best virtual data room solution for managing corporate transactions and financial compliance
Who uses Firmex?• Firmex community includes
over 200,000 users worldwide• Conducted over 10,000 deals
in the last 18 months
Why offer a Webinar Series?• As part of our value-added service, we believe it is important
to offer educational resources to our expanding community
Joel LessemCEOFirmex
©COPYRIGHT 2012. FIRMEX. ALL RIGHTS RESERVED
Cyrus LamCyrus Lam is a Managing Director with KPMG Corporate Finance LLC in New York with a technology focus specializing in IT Services, BPO, and Enterprise Software sectors. He has over 14 years of cross-border M&A experience, acting on buy-side and sell-side, as well as assisting on private placements (debt and equity). Cyrus holds a Masters Degree and a Bachelor of Commerce degree in Business and Accounting from the University of Mumbai, India. He is also a Chartered Accountant and is a Fellow of the Institute of Chartered Accountants, India.
Cyrus has been with KPMG for over 16 years, having started in India as an accountant and later transitioning to the Indian Corporate Finance Practice. In October 2000, Cyrus joined KPMG Corporate Finance in London, and subsequently moved to the U.S. Corporate Finance team in December 2006.
Cyrus specializes in the technology and support services vertical with a focus on:• Information technology services• Enterprise software (including both vertically and horizontally focused software companies)• Business process outsourcing
During his time with KPMG, Cyrus has developed significant cross-border transaction experience, having worked on M&A deals in India, the U.S., the U.K., Sweden, Germany, France, Spain and the Netherlands.
Trends in Technology M&AAn Outlook for the Remainder of 2012
Cyrus F. Lam
KPMG Corporate Finance LLC
April 17, 2012
CORPORATE FINANCE
ADVISORY
6©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Important notice
This presentation is confidential and does not carry any right of publication or disclosure to any other party. This presentation is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by KPMG Corporate Finance LLC. Neither this presentation nor any of its contents may be used for any other purpose without the prior written consent of KPMG Corporate Finance LLC.
The information in this presentation is based upon publicly available information and reflects prevailing conditions and our views as of this date, all of which are accordingly subject to change and such changes may be material. In preparing this presentation, we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by us.
The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
While the information presented and views expressed in this presentation and the oral briefing have been prepared in good faith, KPMG Corporate Finance LLC accepts no responsibility or liability to any party in connection with such information or views.
M&A Market Landscape
Technology M&A Landscape
Deal Management
Questions
8©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Global and U.S. M&A activity
Source: Capital IQ and Financial Times
Global M&A activity U.S. M&A activity
2012 was expected to be a robust M&A year, but Q1 volumes have disappointed
Q1-12 global deal volume is the lowest since Q1-10
However, there has been a recent surge in the number of IPOs over the past 6 months
Private equity firms are using buoyant equity markets to take more of their portfolio companies public
There have been 36 private equity backed IPOs in Q1-12 representing 35% of global IPOs deals, the most since 2000
427 451
396
605
525 550 569
718
661 677
621
554 537
7,442 8,148
8,517
10,971 10,315
10,716 10,717
12,879
11,505
12,641 12,478
13,233
10,675
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
-
100
200
300
400
500
600
700
800
900
1,000
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
Deal V
olum
e
Dea
l Val
ue ($
b)
Deal Value Deal Volume
195 188
100
226
167 207 203 223 235 255 266
219
150
2,004 2,228 2,440 3,033 3,159 3,224 3,284
3,810 3,478
3,854 3,714 3,820 3,232
-
2,000
4,000
6,000
8,000
10,000
12,000
14,000
-
100
200
300
400
500
600
700
800
900
1,000
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
Deal V
olum
e
Dea
l Val
ue ($
b)
Deal Value Deal Volume
9©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
M&A volume by sector
Source: Capital IQ
Note: *2012 deal value and deal volume are annualized based on Q1-12
Consumer Discretionary Consumer Staples Energy Financials Healthcare
Industrials Information Technology Materials Telecommunications Utilities
-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*
Deal Value Deal Volume
-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*
Dea
l Val
ue ($
b)
-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*
Deal V
olum
e ('000s)
-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*
Dea
l Val
ue ($
b)
-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*
Deal Value Deal Volume
-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*-
5
10
15
-
100
200
300
400
500
600
700
2009 2010 2011 2012*
Deal V
olum
e ('000s)
10©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Average M&A multiples by sector
Source: Capital IQ
Consumer Discretionary Consumer Staples Energy Financials Healthcare
Industrials Information Technology Materials Telecommunications Utilities
1.2x
9.0x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
En
terp
rise
Val
ue M
ultip
le
1.2x
9.7x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
2.9x
7.0x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
EV/Revenue EV/EBITDA
3.6x
12.1x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
2.3x
9.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
1.3x
9.2x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
En
terp
rise
Val
ue M
ultip
le
1.7x
10.1x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
1.1x
8.9x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
EV/Revenue EV/EBITDA
2.0x
10.1x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
2.2x
9.8x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
2009 2010 2011 Q1-12
11©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
M&A volume by deal size
Source: Capital IQ
Note: Chart represents only transactions with disclosed values
Global M&A volume by deal size
1,321 1,534 1,475 1,764 1,639 1,648 1,582 1,832 1,640 1,832 1,800 1,907 1,415
1,029 1,356 1,437
2,052 1,729 1,958 1,928
2,413 1,924
2,214 2,214 2,285
1,591
444
566 713
1,039
847 941 1,031
1,301
1,022
1,234 1,118 1,163
835 104
120 137
176
152
184 208
264
234
231 197
193
166
-
1,000
2,000
3,000
4,000
5,000
6,000
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
De
al V
olu
me
$0m - $5m $5m - $50m $50m - $500m > $500m
12©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Average M&A multiples by deal size
1.0x
1.7x
1.9x
2.7x
8.0x
9.6x
10.0x
11.4x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
En
terp
rise
Va
lue
Mu
ltip
le
$0m - $5m $5m - $50m $50m - $500m > $500m
Global M&A multiples by deal size
Source: Capital IQ
Note: Chart represents only transactions with disclosed values
EV/ EBITDA
EV/ Revenue
13©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
916 1,005 1,045
1,494 1,559 1,687
0
300
600
900
1,200
1,500
1,800
2006 2007 2008 2009 2010 2011
Cas
h a
nd
equ
ival
ents
($b)
S&P 500 Companies Cash Balance
197
257
333
439478
521477
425
$-
$100
$200
$300
$400
$500
$600
2004 2005 2006 2007 2008 2009 2010 2011
Cap
ital O
verh
ang
($b)
Abundance of available investable capital
The market is flush with capital that needs to be deployed; financial investors have over $400b in dry powder
Strategic acquirers (made up of the S&P 500) are holding an additional $1.7 trillion in investable cash
The M&A markets should benefit from the nearly $2.1 trillion of “dry powder”
PE Investors Sitting on $425b of Dry Powder
Source: Private Equity Growth Capital Council and Capital IQ
14©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Increased leverage capability for M&A
Leverage on M&A transactions has remained stable, and is currently above 4.0x EBITDA
Total loan volumes in Q1 2012 have increased since Q4 2011, but are still below Q2 2011 levels
2011 total leverage on middle market transactions reached $374 billion, compared to $236 billion in 2010
However, the volatility in Q4 2011 has put deal pricing under some pressure
Actual pricing varies by size, ABL vs. cash flow and credit rating
Tranche Pricing (bps)
Revolver L + 350 - 450
Senior Term A L+ 550 - 650
Senior Term B L+ 650 - 700
Mezzanine 13% - 14% current pay & 3% - 4%PIK
Middle Market LBO Credit Statistics
Total Leveraged Loan Volume
Representative Debt Pricing
Source: LCD and Capital IQ
0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
Jan-
10Fe
b-10
Mar
-10
Apr
-10
May
-10
Jun-
10Ju
l-10
Aug
-10
Sep
-10
Oct
-10
Nov
-10
Dec
-10
Jan-
11Fe
b-11
Mar
-11
Apr
-11
May
-11
Jun-
11Ju
l-11
Aug
-11
Sep
-11
Oct
-11
Nov
-11
Dec
-11
Jan-
12Fe
b-12
Mar
-12
Mul
tiple
of E
BIT
DA
First Lien Debt/EBITDA Second Lien Debt/EBITDA
Other Sr. Debt/EBITDA Sub Debt/EBITDA
43.4 65.9 54.2 72.7 141.2 119.0 53.1 60.8 109.8-
20
40
60
80
100
120
140
160
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 3Q12
$ in
bill
ions
15©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Factors impacting M&A in 2012
Low borrowing cost
Anticipated 2013 capital gains/ dividends tax
increase
China and Eurozone
uncertainty
Oil prices and Middle East instability
U.S. 2012 Presidential election year
16©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Knowledge @ Wharton/KPMG survey
KPMG and Knowledge@Wharton, The Wharton School of the University of Pennsylvania, have teamed to conduct the 2012 M&A Outlook Survey
Survey is based on 875 executives’ insights and opinions with 70% of executives expecting to complete an acquisition in 2012
One-third of respondents remain optimistic for 2012 M&A
However deal environment still murky, with two-thirds of respondents expecting full recovery in 2013 or later
Companies that survived the economic downfall are leaner and better prepared to weather uncertain conditions
U.S. election cycle, tax uncertainty and European economic woes will have significant impact on how companies pursue transactions
Interest in emerging markets still present, but stability of developed markets continues to hold allure
Due diligence issues continues to challenge dealmakers
KPMG Link:http://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Pages/executives-show-guarded-optimism.aspx Source: KPMG International and The Wharton School
17©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
KPMG M&A Predictor
KPMG Link:http://www.kpmg.com/global/en/issuesandinsights/articlespublications/ma-predictor/Pages/default.aspxSource: KPMG International
KPMG’s M&A Predictor is a forward-looking tool that helps clients forecast worldwide trends in mergers and acquisitions. The Predictor was established in 2007. It looks at the appetite and capacity for M&A deals by tracking and projecting important indicators 12 months forward.
Despite still being up on the dark days of 2009, the first six months of 2012 look set to be challenging
Confidence dips in global market
Lack of confidence will restrict deal flow
Consumer staples, technology, and healthcare sectors are predicted to fare better than others
Forward P/E ratios down 5% since June 2011
M&A Market Landscape
Technology M&A Landscape
Deal Management
Questions
19©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
General technology M&A activity
Source: Capital IQ
U.S. technology M&A activityGlobal technology M&A activity
■ In Q1-12 global technology M&A deal values have had a good start, however, deal volumes are lower than Q4 2011
■ U.S. technology deal values have declined since Q3-10, while deal volume has been relatively consistent
■ Quarterly technology deal values are impacted by the timing of large deals
■ Scientific Atlanta - NDS in Q1 2012
■ HP – Autonomy in Q3 2011
13.2 10.8 28.9 12.4 8.2 28.6 38.6 22.6 23.4 26.4 33.1 17.5 31.0
643 645
728
831 902
871 906
962 973 991 971 948 895
-
200
400
600
800
1,000
1,200
-
5
10
15
20
25
30
35
40
45
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
Deal V
olum
e
Dea
l Val
ue ($
b)
Deal Value Deal Volume
8.8 3.7 20.4 8.2 4.7 21.9 27.8 14.5 14.1 15.7 13.6 12.4 8.9
242 232 298
362 418
349 413 426 411 396 415 393 380
-
200
400
600
800
1,000
1,200
-
5
10
15
20
25
30
35
40
45
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
Deal V
olum
e
Dea
l Val
ue ($
b)
Deal Value Deal Volume
20©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Global technology M&A – valuations and deal size
■ Enterprise software deals values were at their lowest point in the 6 quarters ending Q2 10
■ Q1-12 average enterprise value/ revenue and EBITDA multiples are 2.4x and 11.0x, respectively
■ The largest software transaction was Hewlett-Packard’s acquisition of Autonomy in August 2011 for ≈$11b
Average enterprise software deal value and multiples
Source: Capital IQNote: All charts represent only transactions with disclosed values and multiples
Average BPO and IT services deal value and multiples
■ BPO and IT services industry has seen relatively sustained deal values
■ Q1-12 average enterprise value/ revenue and EBITDA multiples are 1.7x and 10.2x, respectively
■ Average enterprise value/ EBITDA multiples have gradually decreased during 2011
17 100 72 51 36 82 118 100 105 153 281 147 255
2.4x
1.3x 1.5x 1.9x 1.8x 2.0x 1.7x 1.7x2.7x 2.6x
2.0x 2.0x 2.4x
6.3x
5.7x
10.4x
13.1x
8.4x
13.2x
8.2x8.3x
12.9x
16.4x
21.4x
9.4x11.0x
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
-
50
100
150
200
250
300
350
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
En
terprise V
alue Multiple
Dea
l Val
ue ($
m)
Average Deal Value Average EV/ Revenue Average EV/ EBITDA
123 136 112 130 99 187 199 127 105 143 169 132 210
1.2x 1.2x 1.2x 1.2x 1.4x 1.3x 1.3x 1.2x 1.5x 1.6x 1.7x 1.6x 1.7x
8.3x
11.1x10.1x
7.6x
14.0x
9.6x 8.5x
11.9x 12.3x
10.8x 10.3x
8.3x
10.2x
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
-
50
100
150
200
250
300
350
Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Q4-10 Q1-11 Q2-11 Q3-11 Q4-11 Q1-12
En
terprise V
alue Multiple
Dea
l Val
ue ($
m)
Average Deal Value Average EV/ Revenue Average EV/ EBITDA
21©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Top ten recent technology M&A transactions
Source: Capital IQ and company filings;
Large Precedent Technology M&A Transactions (in $USD millions unless otherwise noted)
Announcement Date Status Buyers/Investors Target
Enterprise Value
EV / Revenue
EV / EBITDA
Mar-12 Announced Scientific-Atlanta, LLC NDS Group Ltd. 4,965 5.0x 17.5x
Mar-12 Announced Insight Venture Partners Quest Softw are Inc. 1,947 2.3x 12.7x
Feb-12 Announced Oracle Corporation Taleo Corp. 1,805 5.7x 60.9x
Feb-12 Announced Vista Equity Partners Misys plc 2,042 3.2x 16.1x
Dec-11 Closed SAP America, Inc. SuccessFactors, Inc. 3,516 12.0x NM
Aug-11 Closed Hewlett-Packard Company Autonomy Corp. plc 10,301 11.1x 25.2x
Aug-11 Closed Datatel, Inc. SunGard Higher Education, Inc. 1,775 - -
Jun-11 Closed Providence Equity Partners LLC Blackboard Inc. 1,767 3.7x 22.3x
May-11 Closed Schneider Electric España, S.A. Telvent Git S.A. 1,917 1.8x 11.4x
Apr-11 Closed CenturyLink, Inc. Savvis, Inc. 2,963 3.0x 12.9x
■ In the past 12 months there have been 20 technology transactions with values in excess of $1billion
■ PE has been relatively active in the >$1bn value range
■ Average enterprise value/revenue and EBITDA multiples were 5.3x and 22.4x, respectively
22©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Public enterprise software company comparables
Enterprise software comparables for select application software, infrastructure software, operating systems and SaaS public companies are presented below, with mean forward revenue and EBITDA multiples of 4.5x and 15.3x.
Presented application software companies experienced an average share price gain of 12.8% in the past year. Mean forward revenue and EBITDA multiples are expected to be 3.5x and 14.3x respectively.
Presented infrastructure companies experienced an average share price gain of 4.4% in the past year. Mean forward revenue and EBITDA multiples are expected to be 4.5x and 13.8x respectively.
Source: Capital IQ and company filings(1) Market Capitalization amounts are in millions, based on closing share prices as of March 31, 2012; (2) Market Capitalization and Share Prices are based on foreign exchange listed securities and converted to $USD(3) Enterprise Value (EV) equals Market Capitalization plus Debt, Preferred Equity, and Minority Interest, minus Cash and Cash Equivalents; (4) EBITDA equals Earnings before Interest, Taxes, Depreciation, and Amortization
KPMG Corporate Finance LLC - Enterprise Software Public Comparables
Enterprise Value / Equity Value
CompanyMarket Cap (1,2)
EnterpriseValue (3)
SharePrice (1,2)
% of 52-Wk High
ChgPct 1Yr
Cur QtrRev RR
Cur QtrEBITDA(4) RR
2012E Revenue
2012E EBITDA(4)
2012E P/E
2013EP/E
Application SoftwareAriba Inc. 3,118 2,953 32.71 88.1% -4.2% 5.9x NM 5.4x 23.3x NM 28.9xDeltek, Inc 684 816 10.66 91.6% 40.3% 2.3x 12.7x 2.2x 9.6x 27.2x 15.9xInformatica Corporation 5,680 5,078 52.90 84.7% 1.4% 5.6x 20.4x 5.6x 18.7x 38.2x 28.0xJ DA Software Group Inc. 1,169 1,157 27.48 78.5% -9.2% 1.7x 5.8x 1.6x 5.9x 12.7x 10.6xManhattan Associates, Inc. 977 879 47.53 94.7% 45.2% 2.6x 12.5x 2.4x 10.1x 21.3x 17.1xMICROS Systems, Inc. 4,419 3,686 55.29 99.2% 11.9% 3.4x 15.9x 3.2x 13.1x 30.1x 22.9xMicroStrategy Inc. 1,510 1,310 140.00 78.4% 4.1% 2.0x 26.4x 2.1x 21.0x NM 29.0xOpen Text Corp. 3,545 3,743 61.16 84.6% -1.9% 2.9x 9.3x 2.9x 9.7x 15.0x 11.4xP egasystems Inc. 1,443 1,331 38.16 80.3% 0.5% 2.9x NM 2.7x 23.5x NM 30.1xQlik Technologies, Inc. 2,703 2,526 32.00 89.8% 23.1% 5.8x 23.2x 6.2x NM NM NMSage Group plc 6,206 6,224 4.78 95.5% 7.2% NM NM 2.8x 9.8x 15.7x 13.1xSAP AG 83,197 81,330 69.88 95.6% 14.1% 3.5x 8.0x 3.9x 11.1x 19.2x 15.2xTeradata Corporation 11,467 10,985 68.15 97.8% 34.4% 4.1x 17.1x 4.1x 15.8x 29.9x 22.5xApplication Software Mean 12.8% 3.6x 15.1x 3.5x 14.3x 23.3x 20.4x
Infrastructure SoftwareBMC Software Inc. 6,595 5,587 40.16 71.0% -19.3% 2.5x 6.6x 2.5x 5.9x 13.5x 11.4xCA Technologies 13,384 12,343 27.56 98.4% 14.0% 2.4x 6.3x 2.5x 6.7x 14.1x 11.2xCitrix Systems, Inc. 14,644 13,904 78.91 89.2% 7.4% 5.6x 19.2x 5.5x 17.6x 32.3x 25.3xCommVault Systems, Inc. 2,194 1,937 49.64 89.9% 24.5% 4.7x NM 4.4x 22.6x NM NMCompuware Corporation 2,009 2,036 9.19 78.5% -20.4% 2.0x 11.3x 1.9x 8.8x 20.0x 18.4xF5 Networks, Inc. 10,688 10,131 134.96 98.9% 31.6% 7.9x 24.0x 7.0x 17.3x 36.3x 25.4xOP NET Technologies Inc. 654 557 29.00 60.5% -25.6% 3.0x 14.1x 2.8x 12.0x NM 26.9xOracle Corporation 145,074 130,502 29.16 79.9% -12.8% 3.6x 8.3x 3.4x 6.8x 13.4x 11.1xP rogress Software Corp. 1,481 1,166 23.62 77.7% -18.8% 2.3x 13.5x 2.2x 9.5x 16.4x 16.3xQuest Software Inc. 1,944 1,874 23.27 89.0% -8.4% 1.9x 6.9x 2.0x 6.7x 17.4x 12.5xRiverbed Technology, Inc. 4,423 3,953 28.08 67.1% -25.4% 4.9x 28.8x 4.6x 14.5x 31.4x 21.6xSolarWinds, Inc. 2,799 2,647 38.65 91.5% 64.7% 11.9x 24.6x 10.5x 23.3x 38.9x 28.2xTIBCO Software Inc. 4,967 4,750 30.50 92.4% 11.9% 5.3x NM 4.4x 14.4x 32.8x 22.2xVMware, Inc. 47,768 43,705 112.37 98.8% 37.8% 10.3x NM 9.6x 26.8x NM 36.8xInfrastructure Software Mean 4.4% 4.9x 14.9x 4.5x 13.8x 24.2x 20.6x
Operating SystemsMicrosoft Corporation 270,644 232,756 32.26 97.9% 27.0% 2.8x 6.7x 3.0x 7.3x 12.5x 10.7xRed Hat, Inc. 11,541 10,727 59.89 97.1% 31.9% 9.0x NM 7.9x 28.2x NM NMOperating Systems Mean 29.5% 5.9x 6.7x 5.5x 17.8x 12.5x 10.7x
23©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Public enterprise software company comparables (2)
Source: Capital IQ and company filings
Presented SaaS companies experienced an average share price gain of 16.4% in the past year. Mean forward revenue and EBITDA multiples are expected to be 5.4x and 19.9x respectively.
2012E EV/EBITDA and 3-year revenue CAGR 2012E EV/EBITDA and 2012E EBITDA margin
Source: Capital IQ and company filings(1) Market Capitalization amounts are in millions, based on closing share prices as of March 31, 2012(2) Market Capitalization and Share Prices are based on foreign exchange listed securities and converted to $USD(3) Enterprise Value (EV) equals Market Capitalization plus Debt, Preferred Equity, and Minority Interest, minus Cash and Cash Equivalents(4) EBITDA equals Earnings before Interest, Taxes, Depreciation, and Amortization
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
EV / EB
TID
A
2012E EBITDA Margin
0.0x
5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
EV / EB
TID
A
3-year Revenue CAGR
KPMG Corporate Finance LLC - Enterprise Software Public Comparables
Enterprise Value / Equity Value
CompanyMarket Cap (1,2)
EnterpriseValue (3)
SharePrice (1,2)
% of 52-Wk High
ChgPct 1Yr
Cur QtrRev RR
Cur QtrEBITDA(4) RR
2012E Revenue
2012E EBITDA(4)
2012E P/E
2013EP/E
SaaSCarbonite, Inc. 278 205 11.01 52.2% NM 3.0x NM 2.4x NM NM NMConcur Technologies, Inc. 3,128 2,903 57.38 91.7% 3.5% 7.2x NM 6.2x 26.9x NM NMConstant Contact, Inc. 900 760 29.79 82.0% -14.6% 3.3x 29.3x 3.0x 16.4x NM 26.1xCornerstone OnDemand, Inc. 1,079 997 21.84 92.9% 19.8% 11.1x NM 8.8x NM NM NMKenexa Corp. 851 768 31.24 94.1% 13.2% 2.5x 20.0x 2.1x 13.5x 37.9x 25.0xLogMeIn, Inc. 865 667 35.23 74.3% -16.4% 5.2x NM 4.7x 22.2x NM 39.5xNetSuite Inc. 3,493 3,358 50.29 97.1% 72.9% 13.1x NM 11.3x NM NM NMResponsys, Inc. 568 475 11.97 65.8% NM 3.2x 21.7x 2.9x 18.6x NM NMsalesforce.com, inc 21,168 20,947 154.51 96.5% 15.7% 8.3x NM 7.1x NM NM NMTaleo Corp. 1,935 1,819 45.93 99.9% 28.8% 5.4x NM 4.8x 21.4x NM 36.6xThe Ultimate Software Group, Inc. 1,933 1,884 73.28 97.7% 24.7% 6.5x NM 5.7x NM NM NMSaaS Mean 16.4% 6.2x 23.7x 5.4x 19.9x 37.9x 31.8x
Total Enterprise Software Mean 11.4% 4.9x 15.7x 4.5x 15.3x 23.9x 21.7x
24©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Public BPO and IT services company comparables
BPO comparables for select CRM and voice, financial/ transaction processing, HR/ administration, and offshore BPO public companies are presented below, with mean forward revenue and EBITDA multiples of 1.7x and 7.7x.
Presented CRM and voice companies experienced an average share price gain of -17.1% in the past year. Mean forward revenue and EBITDA multiples are expected to be 0.6x and 4.8x respectively.
Presented HR and administration companies experienced an average share price gain of 2.7% in the past year. Mean forward revenue and EBITDA multiples are expected to be 2.0x and 8.3x respectively.
KPMG Corporate Finance LLC - BPO and IT services public comparables
Enterprise Value / Equity Value
CompanyMarket
Cap (1)
EnterpriseValue (3)
SharePrice (1,2)
% of 52-Wk High
ChgPct 1Yr
Cur QtrRev RR
Cur Qtr EBITDA(4) RR
2012E Revenue
2012E EBITDA(4)
2012E P/E
2013EP/E
BPO
CRM and VoiceConvergys Corporation 1,550 1,232 13.35 91.3% -7.0% 0.5x 4.1x 0.6x 4.9x 13.4x 13.2xSykes Enterprises, Incorporated 683 472 15.80 69.0% -20.1% 0.4x 4.8x 0.4x 4.4x 11.6x 11.4xTeleperformance 1,582 1,550 28.56 77.3% -24.3% 0.6x 3.6x 0.5x 4.1x 11.4x 8.9xTeleTech Holdings Inc. 912 833 16.10 71.9% -16.9% 0.7x 6.8x 0.7x 6.0x 12.2x 10.6xCRM and Voice Mean -17.1% 0.6x 4.8x 0.6x 4.8x 12.2x 11.0x
Financial and Transaction ProcessingAlliance Data Systems Corporation 6,303 12,923 125.96 98.8% 46.7% 3.8x 17.0x 3.7x 11.5x 17.2x 13.1xCSG International, Inc. 488 639 15.14 70.1% -24.1% 0.9x 2.6x 0.9x 3.9x 7.0x 13.3xDST Systems Inc. 2,326 3,409 54.23 91.3% 2.7% 1.9x 12.5x 1.7x 8.1x 13.6x 12.1xFiserv, Inc. 9,617 12,773 69.39 99.1% 10.6% 2.8x 10.1x 2.8x 8.7x 15.2x 12.1xGlobal P ayments Inc. 3,722 3,755 47.50 88.1% -2.9% 1.8x 8.0x 1.6x 7.2x 17.3x 13.0xTotal System Services, Inc. 4,357 4,320 23.07 99.3% 28.0% 2.3x 12.0x 2.4x 8.1x 20.2x 16.3xFinancial and Transaction Processing Mean 10.2% 2.2x 10.4x 2.2x 7.9x 15.1x 13.3x
HR and AdministrationAutomatic Data P rocessing, Inc. 27,075 25,756 55.19 96.7% 7.6% 2.5x 11.4x 2.3x 10.9x 21.9x 18.3xCapita P LC 7,129 9,780 11.71 94.5% -1.8% 2.1x 11.4x 1.9x 11.2x 16.0x 13.0xInsperity, Inc. 796 528 30.64 94.6% 0.9% 0.3x 7.3x 0.2x 5.7x 24.6x 16.3xIron Mountain Inc. 4,927 8,101 28.80 80.5% -7.8% 2.8x 8.4x 2.7x 8.8x 23.5x 18.6xP aychex, Inc. 11,235 10,732 30.99 91.9% -1.3% 4.7x 11.4x 4.6x 10.8x 21.9x 19.0xXchanging P LC 363 336 1.52 82.2% 18.7% 0.3x 2.5x 0.3x 2.7x 11.1x 9.1xHR and Administration Mean 2.7% 2.1x 8.7x 2.0x 8.3x 19.8x 15.7x
Offshore BPOExlservice Holdings, Inc. 862 777 27.44 95.1% 29.7% 1.9x 9.9x 1.7x 9.6x 20.5x 15.2xFirstsource Solutions Limited 81 374 0.19 46.8% -53.4% 0.9x 10.5x 0.8x 8.3x 3.0x 4.1xGenpact Ltd. 3,626 3,577 16.30 89.8% 12.6% 2.0x 11.2x 1.9x 10.9x 21.0x 16.7xWNS (Holdings) Ltd. 603 675 12.05 92.3% 14.2% 1.4x 8.4x 1.6x 9.1x NM NMOffshore BPO Mean 0.8% 1.6x 10.0x 1.5x 9.5x 14.8x 12.0x
Total BPO Mean 0.6% 1.7x 8.7x 1.7x 7.7x 15.9x 13.4x
Presented financial and transaction processing companies experienced an average share price gain of 10.2% in the past year. Mean forward revenue and EBITDA multiples are expected to be 2.2x and 7.9x respectively.
Presented offshore BPO companies experienced an average share price gain of 0.8% in the past year. Mean forward revenue and EBITDA multiples are expected to be 1.5x and 9.5x respectively.
Source: Capital IQ and company filings(1) Market Capitalization amounts are in millions, based on closing share prices as of March 31, 2012(2) Market Capitalization and Share Prices are based on foreign exchange listed securities and converted to $USD(3) Enterprise Value (EV) equals Market Capitalization plus Debt, Preferred Equity, and Minority Interest, minus Cash and Cash Equivalents(4) EBITDA equals Earnings before Interest, Taxes, Depreciation, and Amortization
25©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Public BPO and IT services company comparables (2)
Comparables for select commercial, government, European, and offshore IT services public companies are presented below, with mean forward revenue and EBITDA multiples of 1.3x and 7.2x.
Presented government IT services companies experienced an average share price gain of -9.7% in the past year. Mean forward revenue and EBITDA multiples are expected to be 0.6x and 6.1x respectively.
Presented commercial IT services companies experienced an average share price gain of -2.2% in the past year. Mean forward revenue and EBITDA multiples are expected to be 0.9x and 6.5x respectively.
Presented European IT services companies experienced an average share price gain of -16.3% in the past year. Mean forward revenue and EBITDA multiples are expected to be 0.5x and 5.2x respectively.
KPMG Corporate Finance LLC - BPO and IT services public comparables
Enterprise Value / Equity Value
CompanyMarket
Cap (1)
EnterpriseValue (3)
SharePrice (1,2)
% of 52-Wk High
ChgPct 1Yr
Cur QtrRev RR
Cur Qtr EBITDA(4) RR
2012E Revenue
2012E EBITDA(4)
2012E P/E
2013EP/E
IT Services
Commercial IT ServicesAccenture plc 41,567 36,526 64.50 97.9% 17.3% 1.3x 8.8x 1.3x 7.8x 19.1x 15.1xCGI Group, Inc. 5,746 6,642 22.28 91.5% 6.4% 1.6x 9.4x 1.5x 8.2x 14.7x 11.8xCIBER, Inc. 308 310 4.24 60.7% -36.7% 0.3x 11.0x 0.3x 7.6x 27.9x 13.8xComputer Sciences Corporation 4,643 6,524 29.94 58.2% -38.6% 0.4x NM 0.4x 3.2x 6.3x 8.8xDell Inc. 29,241 23,677 16.60 90.4% 14.4% 0.4x 5.8x 0.4x 4.2x 7.8x 7.4xHewlett-P ackard Company 47,120 70,361 23.83 57.0% -41.8% 0.6x 5.1x 0.6x 4.3x 4.9x 5.4xInternational Business Machines Corp. 241,755 261,200 208.65 99.8% 28.0% 2.2x 7.6x 2.4x 9.5x 15.6x 12.7xP erficient Inc. 376 366 12.01 93.8% 0.0% 1.4x 11.6x 1.2x 7.3x NM 16.2xSapient Corp. 1,746 1,539 12.45 76.6% 8.7% 1.5x 10.2x 1.3x 9.8x 19.8x 14.3xThe Hackett Group, Inc. 246 213 5.97 96.1% 55.5% 1.1x 9.6x 0.9x 7.5x 18.5x 11.9xUnisys Corporation 862 764 19.72 59.5% -36.8% 0.2x 1.4x 0.2x 1.6x 8.6x 6.1xCommercial IT Services Mean -2.2% 1.0x 8.1x 0.9x 6.5x 14.3x 11.2x
Government IT ServicesCACI International Inc. 1,650 2,225 62.29 93.7% 1.6% 0.6x 6.2x 0.5x 6.3x 14.5x 10.1xManTech International Corporation 1,271 1,356 34.46 74.5% -18.7% 0.5x 4.2x 0.4x 4.9x 9.4x 10.1xMAXIMUS, Inc. 1,372 1,183 40.67 86.9% 0.2% 1.2x 8.9x 1.2x 8.1x 18.7x 14.3xSAIC, Inc. 4,502 4,762 13.20 74.8% -22.0% 0.5x NM 0.4x 5.1x 9.5x 9.6xGovernment IT Services Mean -9.7% 0.7x 6.4x 0.6x 6.1x 13.0x 11.0x
European IT ServicesAtos S.A. 4,884 5,079 57.65 96.7% -1.8% 0.5x 4.3x 0.4x 4.2x 14.0x 9.7xCap Gemini S.A. 6,883 6,307 44.74 79.8% -23.0% 0.5x 4.7x 0.5x 5.1x 14.5x 12.3xLogica P LC 2,549 3,064 1.59 68.2% -24.2% 0.5x 8.9x 0.5x 6.1x 10.6x 8.3xEuropean IT Services Mean -16.3% 0.5x 5.9x 0.5x 5.2x 13.0x 10.1x
Source: Capital IQ and company filings(1) Market Capitalization amounts are in millions, based on closing share prices as of March 31, 2012(2) Market Capitalization and Share Prices are based on foreign exchange listed securities and converted to $USD(3) Enterprise Value (EV) equals Market Capitalization plus Debt, Preferred Equity, and Minority Interest, minus Cash and Cash Equivalents(4) EBITDA equals Earnings before Interest, Taxes, Depreciation, and Amortization
26©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Public BPO and IT services company comparables (3)
Source: Capital IQ and company filings
Presented offshore IT services companies experienced an average share price gain of -9.1% in the past year. Mean forward revenue and EBITDA multiples are expected to be 1.8x and 8.4x respectively.
2012E EV/EBITDA and 3-year revenue CAGR 2012E EV/EBITDA and 2012E EBITDA margin
Source: Capital IQ and company filings(1) Market Capitalization amounts are in millions, based on closing share prices as of March 31, 2012(2) Market Capitalization and Share Prices are based on foreign exchange listed securities and converted to $USD(3) Enterprise Value (EV) equals Market Capitalization plus Debt, Preferred Equity, and Minority Interest, minus Cash and Cash Equivalents(4) EBITDA equals Earnings before Interest, Taxes, Depreciation, and Amortization
KPMG Corporate Finance LLC - BPO and IT services public comparables
Enterprise Value / Equity Value
CompanyMarket
Cap (1)
EnterpriseValue (3)
SharePrice (1,2)
% of 52-Wk High
ChgPct 1Yr
Cur QtrRev RR
Cur Qtr EBITDA(4) RR
2012E Revenue
2012E EBITDA(4)
2012E P/E
2013EP/E
Offshore IT ServicesCognizant Technology Solutions Corporation 23,345 20,913 76.95 92.2% -5.5% 3.1x 15.3x 2.8x 13.6x 27.1x 18.9xHCL Technologies Ltd. 6,561 6,644 9.48 91.3% -11.4% 1.7x 9.6x 1.5x 8.2x 17.9x 12.8xHexaware Technologies Limited 679 588 2.30 93.6% 55.4% 1.8x 8.0x 1.6x 8.0x 14.9x 10.3xiGATE Corporation 952 1,876 16.76 85.6% -10.7% 1.8x 6.5x 1.6x 6.9x 18.5x 10.0xInfosys Ltd. 32,161 28,284 56.29 86.4% -22.5% 3.9x 11.7x 3.7x 11.9x 20.8x 17.1xInfotech Enterprises Limited 327 256 2.94 86.5% -18.6% 0.8x 4.1x 0.7x 4.3x 9.9x 8.4xKP IT Cummins Infosystems Ltd. 280 255 1.57 80.5% -16.6% 0.9x 6.9x 0.8x 5.1x 12.0x 8.8xMphasis Limited 1,669 1,298 7.94 82.8% -14.8% 1.2x 6.6x 1.2x 6.4x 10.1x 10.4xNIIT Technologies Limited 317 291 5.32 94.9% 28.5% 0.9x 5.0x 0.8x 4.5x 7.9x 7.1xP atni Computer Systems Limited 1,439 1,064 9.70 94.8% -9.4% 0.4x 2.5x 1.4x 7.9x 17.8x 13.1xRolta India Ltd. 297 642 1.84 60.3% -40.9% 1.8x 5.0x 1.6x 4.0x 4.0x 4.7xSatyam Computer Services Limited 1,854 1,406 1.58 85.1% 6.8% 1.1x 6.6x 1.0x 6.1x 20.1x 10.3xSyntel, Inc. 2,342 2,022 56.00 90.3% 7.2% 2.9x 7.4x 2.7x 11.7x 19.9x 14.9xTata Consultancy Services Limited 44,906 43,743 22.94 91.3% -13.5% 4.3x 13.5x 3.9x 13.8x 23.1x 18.4xTech Mahindra Limited 1,801 2,037 14.14 90.2% -6.8% 1.9x 11.7x 1.7x 10.0x 11.0x 10.4xVanceInfo Technologies Inc. 510 399 12.04 34.5% -61.7% 1.1x 13.8x 1.1x 7.9x 15.8x 10.3xWipro Ltd. 21,072 20,060 8.62 89.6% -19.6% 2.7x 14.2x 2.4x 12.1x 17.7x 16.4xOffshore IT Services Mean -9.1% 1.9x 8.7x 1.8x 8.4x 15.8x 11.9x
Total IT Services Mean -7.6% 1.4x 8.1x 1.3x 7.2x 14.8x 11.4x
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
-5% 5% 15% 25% 35% 45% 55%
EV / EBTI
DA
3-year Revenue CAGR
0.0x
2.0x
4.0x
6.0x
8.0x
10.0x
12.0x
14.0x
16.0x
5% 10% 15% 20% 25% 30% 35% 40% 45%
EV / EB
TID
A
2012E EBITDA Margin
27©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
156 166 173
30
58 53
148
90
151158
122
99
128
146
0
50
100
150
200
$0
$50
$100
$150
$200
$250
2005 2006 2007 2008 2009 2010 2011
De
al vo
lum
e
De
al v
alu
e ($
b)
Total Capital Invested Deal Count
Private equity technology focus
Global Private Equity Backed Software M&A Activity
2011 Global Private Equity Backed Software M&A Activity
In 2011, within the technology sector, software continued to be the most active acquisition area for private equity investment, followed by IT services
In 2011, within the technology sector, software was also the most active exit area for private equity divestitures, followed by communications & networking
Software55%
Communication & Networking
16%
Hardware7%
Semiconductors4%
Services18%
Software50%
Communication & Networking
20%
Hardware12%
Semiconductors2%
Services16%
Add-on36%
Buyout/ LBO35%
Growth/ Expansion
15%
Corporate Divestiture
6%
Other8%
Source: PitchBook
28©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
65%
45% 43%
20% 20%15%
7% 4%
0%
20%
40%
60%
80%
Cloud computing
Mobile applications (incl. mobile
devices)
Advanced data analytics
Social media/unified collaboration
Security Healthcare IT and
applications
Green computing
Other
% o
f res
po
nden
ts
69%
50%
31% 31%
12% 10% 7% 4% 1%0%
20%
40%
60%
80%
Access or new
technology and products
Product synergies
Access to employees with new skills and expertise
Access to new
geographic markets
Production cost
pressures
Labor cost pressures
Debt Pension and healthcare
cost pressures
Other
% o
f res
po
nden
ts
■ Strategic acquirers (made up of the S&P 500) are holding an additional $1.7t in investable cash
■ Financial investors have over $400 billion in available capital
■ Companies are unable to meet “wall street” growth expectations via organic initiatives, and are looking to acquire other companies
Technology deal drivers for 2012
Biggest revenue growth drivers in 2011-13Most important M&A drivers in 2011-12
■ In a recent KPMG Technology Company Survey, 68% of the interviewed executives expect to be involved in an M&A transaction in the next two years
Source: 2011 KPMG Technology Industry Business Climate Survey based on responses from 102 senior executives at U.S. technology companiesNote: Multiple responses allowed
Source: 2011 KPMG Technology Industry Business Climate Survey based on responses from 102 senior executives at U.S. technology companiesNote: Multiple responses allowed
Cash is king
Access to new technology and revenue streams
29©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Technology deal drivers for 2012 (2)
Significant PE focus
■ Outsourced services and software as a service companies have long term recurring revenues
■ The technology sector provides a relatively secure customer base and long term recurring cash flows
■ Recent transactions include:
■ Insight Venture Partners / Quest Software Inc. for $1.9 billion
■ Vista Equity Partners / Misys plc for $2.0 billion
■ Providence Equity Partners LLC / Blackboard Inc. for $ 1.8 billion
Source: Capital IQ and PitchBookNote: *Enterprise software/BPO/IT Services index represents the respective companies in the preceding KPMG Corporate Finance public comparable companies slides
Other Drivers
■ Possible capital gains and ordinary dividend tax rate increases in 2013
■ Continued rise of subscription based pricing models, as well as freemium models within consumer markets
■ Growth of social media and new evolving business models that are challenging recently established companies (Facebook’s acquisition of Instagram)
■ Price/Earnings valuations are relatively reasonable
■ Enterprise software/ BPO/ IT Services Index*: 16.7x
■ Dow Jones: 14.5x
■ Nasdaq: 22.6x
30©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Rising optimism for technology M&A in 2012
Industry pundits and technology executives anticipate strong growth and M&A activity in 2012 with
cloud computing, mobile and big data continue being the top strategic priorities for key competitors
Industry research
2012 M&A deal volume anticipated to exceed 2011 volume
Potentially slower IT spending in first half of 2012 due to global growth slowdown and potential political changes
After a great 2011, increasing number of small businesses expected to flood the market in 2012
Increased interest in vertically focused solutions as customers demand out-of-the-box functionality
Market competitors
M&A to drive innovation and expansion into growth markets
Valuations and market conditions favor acquisitions and present a plethora of attractive opportunities
Cloud presence tops every list of strategic priorities; other priorities include mobile, virtualization, analytics, storage and security
Acceleration beyond virtualization as corporate customers want to spend less time on underlying infrastructure
Investment banks
Increasing cross-sector convergence between software, hardware and services
Established companies are worried about disruptive technologies and want to capture that growth through M&A than seeing that growth go to start-ups
Big data, mobile and cloud technologies will drive bold investments in 2012
Expanded focus on social media – larger, less agile companies looking to remain relevant
Market participants
Partner big-to-big and acquire big-to-small
Increasing focus on small and medium size business market in SaaS, data analytics and security
Emerging bundled products to handle multiple IT customer needs
Non-software companies looking to acquire software assets
Source: Industry news, industry research, company filings and earnings call/Q&A (www.seekingalpha.com)
M&A Market Landscape
Technology M&A Landscape
Deal Management
Questions
32©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
M&A continues to be on the radar of key Technology executives
“Cloud computing and desktops' shift to mobile devices will continue to be huge multiyear trends”
Drago Rajkovic, Head – Technology M&A, JPMorgan Chase & Co.; February 6, 2012
“I'm still committed to this string of pearls approach we have, where we buy exciting new companies. We have a lot to do around the opportunity around cloud, Big Data and trust.”
Joe Tucci, CEO, EMC; January 24, 2012
“Our focus on key growth initiatives and investments in innovation are enabling us to expand into new markets, and capitalize on trends like analytics and cloud. I do think the acquisition play is a good one, and I do think the market’s in a more reasonable position”
Mark Loughridge, CFO, IBM; January 19, 2012
“As we look into 2012, there are 3 significant market forces shaping our plan. First, the mobility imperative; second, the enterprise cloud evolution; and third, the cloud service build-out”
Mark Templeton, CEO, Citrix Systems; January 25, 2012
Industry pundits and technology executives expect strong growth and M&A activity in 2012 with
cloud computing, mobile and big data continue being the top strategic priorities for key competitors
“2012 has a perfect storm of trends in disruptive technologies, tax changes, industry consolidation, new buyers and record cash reserves held by major technology companies, all of which will make it the best year since the dot com era for M&A”
Bruce Milne, CEO, Corum; February 2012
“We continue to invest in our technology leadership, including in the areas of cloud computing, virtualization and software-as-a-service”
BMC 2011 Annual Report; May 2011
“Software would be the one area that I think there maybe some assets that are ready to move in 2012, and we would want to be there”
Meg Whitman, CEO, HP; November 21, 2011
“This year’s technology deal volume could be bigger than last year’s and 2007’s. Convergence between hardware, software and services will continue to add products to the same sales chains.”
Chet Bozdog, Global Head – Technology Investment Banking, BoA; February 6, 2012
“We definitely see opportunity in the SMB market. As you know, we created a new group focused on this segment. We are driving a number of new initiatives. We continue to gain traction with our long-term growth initiatives in the areas of cloud, computing, mobile and virtualization”
Enrique Salem, CEO, Symantec; January 25, 2012
“We feel ready to accelerate our innovation, capacity and speed, and go for leadership in five categories; applications, analytics, mobile, database technology, and cloud”
Jim Hagemann Snabe, co-CEO, SAP; January 25, 2012
“Volume last year was much higher than in 2010, and we expect this year to be the same or slightly larger”
Jon Woodruff, Co-Head – Technology Investment Banking, Goldman Sachs; February 6, 2012
“Now with our staff executing well, we expect to be more active with acquisitions in the quarters and years to come, selectively adding to our portfolio with a focus on our 5 foundational priorities - core networking, data center cloud, video, collaboration and business architectures”
John Chambers, CEO, Cisco Systems; February 8, 2012
Source: Industry news, industry research, company filings and earnings call/Q&A (www.seekingalpha.com)
33©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
Selling your business to a large U.S. technology buyer
Enhance your profile in the US market
■ Engage with the analyst community (Forrester, Gartner, IDC etc)
■ Participate in trade shows / industry conventions
■ Produce thought leadership pieces, and build your market presence
Enter into partnerships (if appropriate)
■ This is the best way for a mid market company to get on the radar of a large technology buyer
■ Build compatible platforms, but don’t be too narrow in your focus (i.e. don’t be beholden to one platform)
Engage in early (and frequent) discussions
■ Engage early with large technology companies on non-M&A dialogue
■ Discuss potential cross-servicing of common clients – be helpful
■ Build internal support for your business and make sure you have many “mentors” at the potential acquirer – at the highest possible levels
©2012 KPMG Corporate Finance LLC, a Delaware limited liability company, is a member of FINRA and SIPC and is registered as a broker-dealer with the SEC. KPMG Corporate Finance LLC is also registered as a municipal advisor with the SEC and MSRB. KPMG Corporate Finance LLC is a subsidiary of KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.
The KPMG name, logo and ‘cutting through complexity’ are registered trademarks or trademarks of KPMG International Cooperative (KPMG International).
Thank you
©COPYRIGHT 2012. FIRMEX. ALL RIGHTS RESERVED
Questions & Answers
©COPYRIGHT 2012. FIRMEX. ALL RIGHTS RESERVED
Thank YouJoin us for our May webinar:
Harvesting Intangible AssetsWhether you call it "harvesting intangible assets" or "intellectual property
management," organizations must make the most of everything they have to
offer if they want to remain competitive. Yet, the majority of companies are
oblivious to the wealth of revenue-producing opportunities hiding just below
the strategic surface. Author Andrew J. Sherman shares insights and
expertise gleaned from his work with some of the world's leading companies
who have capitalized on intellectual assets such as patents, trademarks,
customer information, software codes, databases, business models, home-
grown processes, and employee expertise.
Featuring Andrew J. Sherman, author and partner at Jones Day.
www.Firmex.com/company/events
Recommended