EY-Q213 Global Technology M&a Report-Issue20

8/13/2019 EY-Q213 Global Technology M&a Report-Issue20

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Highlights

At $33.4 billion, aggregate value of all disclosed-value deals is essentially flat

year-over-year (YOY) and down 8% sequentially (due to one Q113 megadeal). Volume falls to 627 deals, down 14% YOY and 5% sequentially; its the lowest

level since 2010, when Q110 and Q210 both posted 628.

Private equity (PE) deal value soars 208% YOY to $13.9 billion; PE volumeincreases for the second consecutive quarter, up 10% YOY and 24% sequentially.

Corporate aggregate value falls 32% YOY to $19.5 billion, the lowest level (inother than a seasonally low first quarter) since 2008; corporate volume (570deals) hits its lowest level since 2009.

Cross-border (CB) deal volume and value continue to decline: value falls 63%YOY to $6.4 billion and volume declines 24% YOY to 195 deals.

Global technologyM&A updateAprilJune 2013

Issue 20

$40,000

$30,000

$20,000

$10,000

$0

$36,437m $33,391m$33,374m

Q113 Q213Q212

Total and average deal values for deals with disclosed value

Corporate PE

Average value (corporate and PE)

Totaldealvalue($m)

Averagedealvalue($m)

PE average deal value Corporate average deal value

$2,000

$1,500

$1,000

$500

$0

$265$202

$300

$174$249

$631

$104

$1,828

$309

Total number of all announced deals

Q113

Q213

Q212

Corporate PE

627570 57

661615 46

676 52 728

Source: EY analysis of The 451 Group

Research M&A KnowledgeBase, accessed

3 July 2013.

Note: all dollars are US$ unless otherwise

indicated.


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2

Second-quarter picture unfolds

Global technology M&A update: AprilJune 2013

A directional view of select Q213 deal-driving trends

0 4020 1208060 100

Number of deals noted

Averagedealvalue($m)

Smartmobility

Cloud/SaaS

Security

Big data

$500

$400

$300

$200

$100

$0

Socialnetworking

6% 21% 60%

$33,391m

13%

$7,053m

33 deals

$1,937m

86 deals

$19,989m

9 deals

$4,412m

6 deals

Q213


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3Global technology M&A update: April-June 2013

Given the deal-driving force of the five

transformative technology megatrends of

mobile-social-cloud, big data analytics and

accelerated technology adaptation, it might

seem surprising that global technology

M&A levels of activity arent higher. But,

there are a set of counterbalancing forces

holding down the expected levels of

activity. These include: chronic

macroeconomic and geopolitical

uncertainty, unresolved regulatory, fiscal

and tax issues and valuation gaps.

Collectively, these forces may be causing

M&A to reset to lower levels of activity

across all industries. That said, I expect the

strength of the five megatrends to prevail

in technology, resulting in slow, steady

M&A growth.

Joe Steger

Global Technology Industry

Transaction Advisory Services Leader

EY

Contents4 Rising PE, megatrends and their enablers

drive Q213 technology M&A

10 Look ahead

12 Top of mind: Technology transformations,headlines drive security consolidation

14 Regional snapshot: Americas

16 Regional snapshot: Asia-Pacific and Japan

18 Regional snapshot: Europe, Middle East

and Africa (EMEA)

21 Appendix of additional charts

22 Global technology corporate and PE

transactions scorecard by sector

23 Cross-border corporate and PE transactions

scorecard by sector

24 Global corporate and PE deals by acquiring country:cross-border and in-border

25 Cross-border deal value flow for technology deals

26 Source notes

27 Methodology


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4 Global technology M&A update: AprilJune 2013

EY has identified five long-term

megatrends that are generating

transformative innovation in

technology and leading to

technology-enabled innovation

in other industries. The five

megatrends are smart mobility,

cloud computing, social

networking, big data analytics

and accelerated technologyadaptation (technology

companies rapidly adapting to the

needs of specific industries and

other industries rapidly adapting

to the evolving possibilities that

technology enables).

Accelerated technology

adaptation challenges whether

certain companies are pure

technology companies or have

entered the industry they are

transforming. In addition, all five

megatrends are driving increased

information security requirements.

This report focuses on how these

megatrends influenced the

microcosm of global technology

M&A in Q213, as companies

competed for market share and

key technologies.

Our five megatrends

Rising PE, megatrends and their

enablers drive Q213 technology M&A

PE deal-making growth helped second-quarter global technology M&A values

improve considerably over the first quarter, returning to year-ago levels without

the benefit of the $24.4 billion Dell Inc. megadeal. Further, big-ticket deals

continued to demonstrate the strategic opportunities emerging from innovation

involving one or more of the five transformative megatrends weve followed for

several years (see sidebar at left). On the flip side:

Recent volume declines accelerated

Divestitures from corporate restructurings continued

Some companies weakened by the disruptive megatrends became deal targets

Megatrends, marketing and securitytechnologies drive big-ticket deals

On the positive side, innovation around

strategic technologies drove many top 10

deals for the quarter, especially around

mobile-social-cloud and big data analytics

technologies. Also in Q213, there was the

highest-value deal targeting advertising

and marketing technology since 2007,

and information security returned as a top

10 target for the first time since Q411.

These top 10 deal drivers were reflected

in dozens of smaller deals.

Enabling trends emerge

Among the hundreds of small and

undisclosed-value deals, we saw a few

megatrend-enabler categories emerging.

These included:

Deals targeting application programming

interfaces (APIs), technologies that ease

development of applications or integration

of data (or both), especially in cloud or

mobile environments

Several deals involved devops, acontraction of development and

operations describing a software

development method linked to lean start-

up methodology that aims to enable

greater frequency of new software

releases

A handful of deals targeted mobile

back-end as a service (MBaaS), following

MBaaS-related announcements from

cloud service providers

We explore all three megatrend enablerslater in this section, but well have to wait

and see how they evolve and if they can be

sustained over the long term.

Volume falls, remains out of syncwith NASDAQ

Deal volume declined to 627 deals, down

14% YOY and 5% sequentially from 661

deals in Q113 which was also down YOY,

by 12%. The decline is due entirely to a

decrease in corporate deal-making, which

fell 16% in Q213 (see Figure 3, page 7),

its third consecutive quarterly decline.

Meanwhile, PE deal volume increased for

the second consecutive quarter, by 10% YOY.

This also marks the second consecutive

quarter in which the long-term correlation

weve observed between the NASDAQ and

technology M&A deal volume was absent,

after diverging only once in the previous

five years. The loss of this correlation may

be perceived as partially attributable to

governmental quantitative easing programs

in the US, Europe, Japan and elsewhere,

which have buoyed equities markets but

not technology companies deal-making

confidence.

The main concern about declining M&A

volume at a time of so much technologyinnovation is that it suggests that buyers

and sellers remain apart on company

valuations. In fact, EY believes high

valuations (which drive down returns),

along with macroeconomic and geopolitical

uncertainty, are contributing to falling

volume in US deal-making for all industries,

leading to a possible fundamental reset of

the size of the M&A marketplace.1 Other

factors contributing to the volume reset

include slow global growth and unresolved

regulatory, fiscal and tax issues.


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5Global technology M&A update: AprilJune 2013

Figure 1: Global top 10 deals, April-June 2013 (corporate and PE)

Buyer Disclosedvalue ($m)

Deal typeMultiple

of EV/TTM

revenue

Multiple

of EV/TTM

EBITDA

Premiumoffered

Announced Status

Bain Capital/Golden Gate/GIC/Insight Venture Partners to

acquire BMC Software, Inc.

Fidelity National Financial, Inc. to acquire Lender Processing

Services, Inc.

Salesforce.com, Inc. acquired ExactTarget

IBM Corporation acquired SoftLayer Technologies, Inc.

Tsinghua Holdings Co. Ltd. to acquire Spreadtrum

Communications, Inc.

Yahoo! Inc. acquired Tumblr

Google Inc. acquired Waze Ltd

Thomas H. Lee Partners L.P. to acquire CompuCom

Systems, Inc.SAP AG acquired hybris AG

Vista Equity Partners acquired Websense, Inc.

$6,900 6 May Pending PE 3.2x 10.0x 3%

$2,900 28 May Pending Corporate 2.0x 11.5x 21%

$2,500 4 Jun Completed* Corporate 7.6x N/A 58%

$2,000 4 Jun Completed* Corporate N/A N/A N/A

$1,389 21 Jun Pending PE 1.8x N/A N/A

$1,100 20 May Completed Corporate N/A N/A N/A

$1,100 11 Jun Completed Corporate N/A N/A N/A

$1,100 8 Apr Pending PE 0.5x N/A N/A

$1,000 5 Jun Completed** Corporate N/A N/A N/A

$903 20 May Completed PE 2.5x 16.3x 70%

Aggregate value flat, average value up YOY

In terms of the values that were disclosed

in Q213, aggregate value essentially was

flat YOY, rounding to $33.4 billion in both

periods. At $249 million, average value

increased 18% YOY. But the better news

comes when we exclude one transaction

the $24.4 billion (still pending shareholder

approval) megadeal to take Dell private

from Q113 to better reflect that quarters

actual M&A landscape. Then the sequential

declines in the official charts change to

growth of 177% in aggregate value and

142% for average value.

Cross-border activity falls faster

than in-border

The added complexity and risk inherent inCB deals became apparent in the Q213

numbers. CB deal volume declined faster

than in-border (IB) deals in the quarter,

after falling at the same rate for the

previous three quarters (see Figure 13,

page 23). At 195 deals, Q213 CB deal

volume was down 24% YOY and 10%

sequentially, compared with 14% and 5%,

respectively, for all deals. And although

CB average value jumped 120% sequentially

to $143 million per deal, it did not reverse

the 18-month-long trend of its declining

average value relative to the all-deal average

value. CB average value was higher than

all-deals before Q312; since then, it has

been lower and the gap has widened each

quarter. In Q213, CB average value was

43% lower than all-deal average value.

PE skyrocketing

Though only half the size of last quarters

Dell deal, PE aggregate value of $13.9 billionwas higher in Q213 than in any previous

quarter (excluding Q113) since we began

these reports in 2008. PE average value of

$631 million in Q213 was topped only

Cloud/SaaS was so pervasive in Q213 that even deals not involving much cloud revenue were somehow ascribed to the cloud. Taking private BMCSoftware was motivated, in part, to enable BMC to move more aggressively toward cloud applications2 similar to the Dell announcement in Q113.3

Other top 10 deals focused directly on or touching on the cloud were Salesforce.com-ExactTarget, IBM-Softlayer, Google-Waze, Thomas H.Lee-CompuCom, Yahoo-Tumblr and SAP-hybris.

Top 10 deals with smart mobility aspects included: Tsinghua-Spreadtrum, Google-Waze, Thomas H. Lee-CompuCom and SAP-hybris. Social networktechnologies were part of the Google-Waze, Yahoo-Tumblr and Salesforce.com-ExactTarget deals. These companies use social and cloud technologiestogether to improve the effectiveness of email marketing (ExactTarget), content creation and discovery (Tumblr) and driving through traffic (Waze).

Rounding out the top 10 are Vista-Websense (a security software provider) and non-technology company Fidelity National Finances deal for LenderProcessing Services, a loan processing technology services provider that was part of Fidelity prior to 2006.

PE buyers purchased 49% of the total value of top 10 deals ($20.9 billion). A non-technology buyer (Fidelity) acquired another 14%.

*Completed July 2013; **Completed August 2013.

Note: announced deal values are often subject to change at the time of close, due to subsequent revisions to the terms of the deal.

Source: EY analysis of The 451 Group Research M&A KnowledgeBase, accessed 3 July 2013.


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6

The top 25 global technology companies* had a rare sequential decline in cash reserves during Q213. Their aggregate stockpile of cash and short- andlong-term investments fell 1% sequentially to $754 billion, from $765 billion in Q113. But the Q213 value rose 12% YOY from $673 billion in Q212. Thedecline came primarily from the next 15 companies, which fell 9% sequentially, while the top 10 rose 3%. Looking deeper, individual companies declinesappeared to be related to dividend payments (the second quarter is the traditional dividend payout season in Europe, for example), share buybacks andacquisitions. In fact, one company showed a steep decline from spending on a deal this year compared with the prior-year period, in which it had proceedsfrom selling a business unit. We still expect long-term growth in this metric.

*Top 25 companies identified are based on average ranking of market value and sales as of 31 December 2012.

Note: numbers in above chart differ from past published reports due to changes in the composition of the top 25 companies for 2013 and the date Capital IQ database was

accessed for this chart.

Source: EY analysis of Capital IQ data, accessed 29 July 2013.


$264

$396

$278

$368

$257

$349

$277

$332

$609b $606b

$646b $660b

$268

$405

$673b

$273

$421

$694b

8%

5%

2%

2%

2%

2%

4%

2%

3%

10%

0%

6%

5%

8%

7%

5%

7%

0%

Q211 Q311 Q411 Q112 Q212 Q312

4%

3%

4%

$274

$463

$737b

Q412 Q113

$283

$482

765b

Next 15

Top 10

Q213

$257

$497

$754b

3%

9%

1%

Figure 2: Aggregate cash, short- and long-term investments for the top 25 technology companies, Q211Q213 ($b)

once in the last five years ($726 million in

Q112). PEs strength appears to come from

a combination of factors: some technology

targets have been weakened by not keeping

up with innovation from the five

megatrends, enabling activist shareholders

to take positions in their stock; favorable

credit availability at low interest rates; and

the pursuit of value-creation opportunities

through operational improvements that

corporate buyers may not see or may

ignore in favor of deals that focus more

on strategic technology opportunities. PE

deal-making was most prevalent in the

software/SaaS, internet and IT services

sectors in Q213. PE volume also increased

YOY in those sectors, as well as in the CPE

sector (see Figure 12, page 22).

PE buyers acquired 42% of Q213 aggregate

value, which would have been unprecedented

except for the 70% share PE took in Q113

due to the Dell deal. For comparison, PEs

share of full-year 2012 aggregate value was

only 16%; it was 20% in 2011. In addition,

non-technology buyers acquired 12% of

Q213 aggregate value. So together, PE and

non-technology buyers acquired 54% of the

quarters disclosed value. There was just

one Q213 disclosed-value deal in which a

technology company purchased a non-

technology unit: Googles purchase for $1

(thats right, one US dollar) of the city of

Provo, Utahs fiber-optic network. PE buyers,

meanwhile, did 4 of the top 10 deals and a

non-technology buyer did a fifth.

In fact, the largest deal of Q213 was a

cloud-related PE opportunity: the $6.9 billion

Bain-led deal to take BMC Software private

(see Figure 1, page 5). The software

company had just $100 million in cloud

revenue for its fiscal year ended March 2013

and like Dell said privatization will allow

the company to move more aggressively

toward cloud applications and mobile devices.4

Of note, as enterprise technology customers

appear more ready to adopt cloud computing

than vendors are to offer it, some companies

Microsoft Corporation and Cisco Systems,

Inc., among them have begun lobbying

their reseller partners to move more

aggressively to the cloud.5,6

PE buyers acquired

42%of Q213 aggregatevalue.


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Deals announced Q212 Sequential % changeQ213

676 570 7% 16%

143 112 8% 22%

$28,868 $19,498 80% 32%

$202 $174 67% 14%

Q2 Q3 Q4 Q1 Q2

52 57 24% 10%

15 22 57% 47% $4,506 $13,893 46% 208%

$300 $631 65% 110%

Corporate and PE

Number of deals announced

Number of deals with disclosed values

Total value of deals with disclosed values ($m)

Average value of deals with disclosed values ($m)

728 627 5% 14%

158 134 14% 15%

$33,374 $33,391 8% 0%

$211 $249 19% 18%

PE


Number of deals with disclosed valuesTotal value of deals with disclosed values ($m)


Corporate





YOY % change

Figure 3: Global technology transactions scorecard, Q213

Aggregate value for PE deals

soars 208% YOY to

$13.9 billion.

In a different kind of PE cloud/SaaS

deal, Thomas H. Lee Partners acquired

CompuCom for $1.1 billion. CompuCom was

a traditional value-added reseller (VAR)

that transformed itself into a Cloud Builder

(a VAR that helps enterprises get the most

out of their cloud services) and was named

a cloud computing superstar earlier this

year by trade publication CRN.7 Exemplifying

a corporate cloud/SaaS deal aimed at

strategic growth, IBM spent $2 billion

buying SoftLayer Technologies, a cloud

infrastructure services provider, in order to

accelerate its own cloud-related revenue

growth (see Americas snapshot, page 14).

Social, marketing technology

as a serviceThree more top 10 deal targets ExactTarget,

Tumblr and Waze all deliver their

applications and services via the cloud.

Salesforce.coms completed $2.5 billion

acquisition of email marketing services

provider ExactTarget (see Americas

snapshot, page 14) is the largest deal for a

marketing technology company since 2007,

when Google announced its $3.1 billion

acquisition of DoubleClick, Inc.8 Established

technology companies including IBM, Oracle

Corporation, Salesforce.com and SAP have

been acquiring marketing or e-commerce

technology companies, often cloud-based

and involving social media analytics,

customer analytics or both. They appear

to be following the money: some research

forecasts that chief marketing officers will

spend more on technology than chief

information officers by 2017.9 In Q213,

there were more than four dozen deals

targeting advertising and marketing

technology; their disclosed value (including

the ExactTarget deal) was nearly $4 billion.

Tumblr and Waze involve social networking.

Waze provides a GPS-based mobile applicationthat taps into a community of users to

enhance the accuracy of maps and provide

real-time updates about current conditions.

The US Federal Trade Commission (FTC) is

reviewing the $1.1 billion deal after it closed

(in June).10 Yahoos $1.1 billion deal for

Tumblr, a blog creation and hosting service,

brings it a young audience and the rapt

attention of fast-growing communities of

Scorecard attributes were precisely mixed in Q213 12 green arrows pointing up and 12 red arrows pointing down. The dual stories of the quarter werethe significant increase in PE activity and corporates decline, especially YOY. Not counting Q113 and the Dell megadeal, the $13.9 billion PE quarterlyaggregate value seen above is the largest in the five years we have collected this data.*

Corporate deal-making activity, however, has rarely been lower than seen above. Corporate quarterly aggregate value has not been below $19.5 billion inother than a first quarter (which typically has the lowest technology M&A activity of the year) in nearly five years, since Q308.* And corporate M&Avolume has not dipped lower than 570 deals since Q409.*

*Though based on two different data sources, we believe these comparisons are useful from a directional perspective. For a full explanation of our methodology, see page 27.



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PE and non-technology buyers

together accounted for

54%of Q213 aggregate

value.


PE and non-technology buyers together accounted for 54% of Q213 quarterly aggregate value, squeezing every other sector but one into net sellerpositions. PE buyers accounted for 47% of the CE value sold, 42% of the IT services value sold, 59% of the semiconductors value sold, 46% of thesoftware/SaaS value sold and negligible percentages (if any) of the remaining sectors. From the perspective of PE spending, though, 70% ($9.7 billion)was concentrated in software/SaaS. Similarly, non-technology buyers concentrated 90% of their deal value in software/SaaS, almost all of which (97%,or $3.7 billion) came in two deals: Fidelity Nationals $2.9 billion announced deal for Lender Processing Services and The NASDAQ OMX Group, Inc.s$750 million deal for BGC Partners eSpeed platform, which offers online and mobile electronic trading software.

The internet sector was the only other net buyer. Buyers are split spending 50-50 between their home sector and software/SaaS, mostly on the

strength of two deals each. Targeting internet companies were Yahoos $1.1 billion deal for Tumblr and Baidu Inc.s $400 million announced acquisitionof the online video business of PPStream Inc. Targeting software/SaaS were Googles $1.1 billion deal for Waze and real-estate website Trulia Inc.s$355 million announced acquisition of Market Leader Inc., which provides real-estate lead generation technology.

Note: percentages may not total 100 due to rounding.


Figure 4: Global technology transactions value flow by sector, Q213

users.11 Yahoo said Tumblr will continue

operating independently. Of note, Yahoo

was the most acquisitive company in our

Q213 M&A data, with eight deals (including

Tumblr). One was a free conference call

services provider and the other six involved

various kinds of mobile apps, including

travel comparison, photo editing, location-

aware videogames and research surveys.

None of them had a disclosed value.

E-commerce analytics and smart mobility

SAP completed its $1 billion deal for hybris,

a business-to-business (B2B) e-commerce

platform with analytics capability offered as

SaaS or on-premise software (see the

Europe, Middle East and Africa snapshot,

page 18). The hybris deal includes a mobileelement, and Waze, obviously, has a strong

smart mobility aspect, as do hundreds of

Q213 deals. But only 1 top 10 deal was

entirely focused on mobility: Chinese state-

owned Tsinghua Holdings $1.4 billion deal

for Spreadtrum Communications, a maker

of mobile-phone chips (see the Asia-Pacific

and Japan snapshot, page 16).

Security deals increase

Similarly, we saw a jump in information

security deals in Q213, with one making it

into the top 10 deals of the quarter: Vista

Equity Partners $903 million deal for

Websense, whose data leakage prevention

software filters web content and can block

access to websites. The current trend is to

integrate such capabilities into unified

security software that addresses multiple

threats to enterprise networks12 (see Top

of mind, page 12). The second-largest

disclosed-value deal was Intel Corporation

unit McAfees $389 million deal for Stonesoft,

a Finnish provider of next-generation firewalls

and intrusion detection and prevention

capabilities. Given the increasing security

threats from the moves to mobile devices(including the bring-your-own-device trend)

and the cloud, we noted nearly four dozen

security deals in Q213, or roughly 7% of

all deals, up from 3% in Q113 and 5% in

full-year 2012.

$35,000

$30,000

$25,000

$20,000

$15,000

$10,000

$5,000

$0

Dealvalue($m)

$13,893

$1,314

$2,966

$5,520

$4,189

$3,431

$1,240$838 CE 3%

CPE 4%

Internet 10%

IT services 9%

Semiconductors 4%

Software/SaaS 17%

Non-tech 12%

PE 42%

$33,391m

Buyer

$5,339

$2,392

$21,320

$1,726

$1,071$1,543

CE 3%CPE 5%

Internet 5%

IT services 16%

Semiconductors 7%

Software/SaaS 64%

$33,391m

Target

CE = Communications equipment

CPE = Computers, peripherals and electronics


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Notable divestitures

We noticed more corporate divestitures by technology companies in Q213 thanQ113, more than three dozen in all. There were deals motivated by corporate

restructurings to enable better focus on core competencies, such as two by

VMWare, Inc. (one for $30 million and one with no disclosed value). There were

also many deals that involved trends mentioned in this report and, therefore,

might represent more opportunistic attempts to capitalize on the value of non-core

assets. For example, Integrated Device Technology Inc. sold its enterprise flash

controller business to PMC-Sierra Inc. for $100 million, and Alcatel-Lucent, S.A.,

sold its ProgrammableWeb unit, which offers a searchable directory of APIs, to

start-up Mulesoft for no disclosed value. Similarly, Microsoft sold its Mediaroom

IPTV service delivery technology for network operators to Ericsson, and Samsung

sold its Liquavista electrowetting display technology, acquired in Q111, toAmazon.com, Inc.


Cross-border disclosed deal value

falls 63% YOY to

$6.4 billion.

APIs, MBaaS and devops

In Q213, deals involving APIs, MBaaS and

devops were small or had undisclosed values.

But their strategic nature is apparent by the

names of some buyers. And our data

provider, The 451 Group, reports that Q213

API activity could signal the opening round

for an API land grab by all IT vendors that

rely on integration to add value to their

respective offerings.13 Intel Corporation

acquired two API-related software/SaaS

companies in Q213, Mashery, Inc.

($180 million) and Aepona Ltd.

($120 million). CA Technologies Inc.

acquired API management software

company Layer 7 (no disclosed value).

MBaaS, meanwhile, provides developerswith mobile application development and

hosting capability as a service and is

typically accessed through APIs. Two very

different kinds of companies that provide

cloud-based services, Rackspace, Inc.

and Salesforce.com, announced MBaaS

offerings during Q213.14 Exemplifying the

handful of MBaaS-related deals in Q213 was

Facebook, Inc.s agreement to acquire Parse

for $85 million. The deal should enhance

Facebooks mobile commerce efforts by

providing the capability to offer an end-to-

end mobility platform that can integrate

third-party services and APIs, as well as go

that extra mile in helping developers build

mobile apps, according to The 451 Group.15

Exemplifying the devops trend, which

accelerates new software releases by

enhancing collaboration between an IT

departments developers and operations,

were undisclosed-value acquisitions by IBM,

Microsoft and CA Technologies.

Flash storage, 3D printing and small cells

Deal volume in computers, peripherals and

electronics (CPE) and communications

equipment (CE) was small, but interesting.

The top CPE deal by dollar-value was a

$403 million announced plan by Stratasys Ltd.,

a leading maker of industrial-level 3D

printers, to acquire Makerbot Industries LLC,

which has pioneered lower-cost 3D printers

(from $2,000 to $2,800 for one model).16

Also among CPEs top five deals were two inwhich the targets provide flash technology

for data center performance acceleration,

one by Western Digital Corporation

($340 million) and the other by Fusion-io,

Inc. ($119 million). In CE, the top deal

exemplified several we saw involving small-

cell technology: Ciscos acquisition of

Ubiquisys Ltd., a maker of small-cell radio

transmitters that improve mobile service by

sending and receiving data within a smaller

area than outdoor towers. Theyre used to

improve coverage in crowded areas such

as stadiums and rail stations, as well as

in homes.


10/28

10

The strong overall deal value

driven primarily by PE buyers

was encouraging in the secondquarter. I expect conditions such

as low interest rates, lack of

confidence among corporate

buyers, the need for some

technology companies to

improve shareholder returns and

PE firms dry powder to foster

ongoing PE deal strength.

Joe StegerGlobal Technology Industry


EY

We were half right and encouraged, even,

by the strength of big-ticket deals that

drove Q213 aggregate value high enough

to match last years second quarter. This

level is about as high as weve seen in the

last five years, aside from the second and

third quarters of 2011 (which each had

several megadeals).

But we were surprised by the 5% sequential

decline in global technology transaction

volume to a level that hasnt been lower

since 2009, especially in light of the five

technology megatrends that are driving

demand for related technologies and talent

to help companies compete more effectively.

That decline, along with the secondconsecutive quarterly failure of deal volume

trends to align with NASDAQ growth,

suggests to us that corporate technology

buyers may remain on the sidelines until

confidence and valuations improve.

Apparently, the quantitative easing that

some suggest is helping to drive increases

in the NASDAQ and seller expectations

around value cannot overcome corporate

buyers low confidence, which explains the

current and uncommon divergence between

the NASDAQ and technology M&A. The low

corporate buyer confidence that is

thwarting technology deal-making stems

from a number of factors, including:

ongoing macroeconomic and geopolitical

uncertainty, unresolved regulatory, fiscal

and tax issues and valuation gaps.

On a positive note, low interest rates, lack of

confidence among corporate buyers and the

dry powder PE firms are believed to have

on hand suggest ongoing PE technology

deal-making strength.

Given that PE strength, and our belief that

Q213 volume was too low to sustain, were

going to predict gradual growth in volume

and value for the rest of 2013 again. Ifwere right, technology may be running

counter to the overall M&A trend for all

industries, which we believe may be

undergoing a fundamental reset to a lower

level of long-term activity. We believe that

continuous innovation around the five

megatrends of smart mobility, cloud

computing, social networking, big data

analytics and accelerated technology

adaptation (see sidebar, page 4) is

happening too fast for corporate buyers

to sit still for too long.


Look ahead

In our Q113 report, we predicted gradual growth in technology deal M&A

volume and value on the strength of our April 2013 Technology Capital

Confidence Barometer(CCB) survey, which showed a significant increase

in confidence among technology executives.


11/28


Consider the following questions and how the answers may impact deal-making

over the next few quarters:

Will volume go up, down or stay flat?

And will it realign with the NASDAQ?

When will macroeconomic conditions

and their impact on buyer confidence and

valuations improve enough to reduce

the risk of doing really big, transformative

deals?

Will cloud/SaaS deal-making continue to

accelerate?

To what extent will we see more deals to

take private those technology companies

weakened by the cloud/SaaS model and

the other megatrends?

Will APIs, MBaaS and devops continue tobe major deal drivers?

Are we at the beginning of a long-term

increase in information security deals,

given technology trends and growing

public concern? Or, is the Q213 increase

an aberration?

Will non-technology companies, which

acquired 12% of aggregate value in Q213

compared with only 1% in Q113, continue

to be a significant presence, as they

continue to adapt to the technology

megatrends or become disrupted by them?

In the absence of an improvement in

global macroeconomic conditions, will CB

volume and value continue to decline?

Will advertising and marketing technology

continue to be a major deal target?

To what extent will activist shareholder

involvement remain a factor in driving

companies with depressed valuations toput themselves up for sale or divest

underperforming business units?

IPO activity appears to be increasing;

will this drive up valuation expectations

for technology M&A?

For many technology

segments, revenue from

traditional products is

falling faster than mobile-

social-cloud and big data

analytics are growing. To

reverse that trend, manycompanies will continue to

look to M&A strategically

as a way to catch up.

Joe Steger



EY


12/28


Top of mind

Technology transformations, headlinesdrive security consolidation

Jeff Liu

Senior Managing Director

and Leader US Technology

M&A Advisory

Ernst & Young Capital

Advisors LLC*

Tel: +1 408 947 5588

E-mail:[email protected]

This Top of mind article is even more top-of-mind than most, because many of

the trends behind it are seen nearly every day in headline news. Stories about

information security breaches and cyber espionage not only reflect the changes

being caused by transformations resulting from the five technology megatrends

(see sidebar, page 4), but also are a driver of enterprise security buyer behavior.

Consequently, information security market growth is more than 50% higher than

IT spending growth overall, and there has been a spike in consolidation among

information security vendors.

For further information, contact:

Mobile-social-cloud transforms security

As Figure 5 shows, increasing use of cloud

computing and mobile devices has

transformed enterprise IT environments in

ways that are significantly changing the

information security landscape. The entirely

closed and private enterprise network

has become an historical artifact. Replacing

it are borderless networks in which

confidential information, including

intellectual property (IP), is routinely

stored outside the perimeter of the

corporate network and transmitted to

mobile devices via open airwaves.

Exacerbating the issue is that the relatively

new capabilities described above are

empowering new behaviors, including

increased levels of inter-company collaboration

as an enabler of innovation across nearly

all industries.1 That collaboration means

corporate employees are sharing more

information than ever before across

company borders with partners in their

value networks.

In addition, the rise of bring your own

device (BYOD) and of social networking

(which encourages expanded participation

in, and reduced control over, corporate

communications) extend corporations

information borders even further.

New security challenges emerge

These technology-induced changes result in

corporate IT environments that are far more

powerful and far more difficult to secure.

And the same changes that are empowering

corporate innovation are challenging

corporate security. As it becomes easier for

employees to access information anywhere,

on any device and at any time, it becomes

easier for somebody to fraudulently access

that data, says Vishal Tayal, Senior Vice

President, US Technology Lead Advisory,

M&A, Ernst & Young Capital Advisors LLC.

At the same time, the nature of security

threats is evolving, in part because the

changes described above lead to additional

opportunities for exploitation. Not too many

years ago, the main threats were employees

unintentionally giving away information or a

password, or a hacker trying to gain attention.

Today, attacks have become more complex

and comprehensive, and are motivated by

political activism, or are for profit, says Jim

Reinhart, Managing Director, US TechnologyLead Advisory, M&A, Ernst & Young Capital

Advisors LLC. The rising numbers of security

breaches making headlines in the last year

or two are testament to all these changes.

For security vendors, an immediate benefit

is that the security products market will

grow at a compound annual growth rate

(CAGR) of 7.7% from 2012 to 2016,

accelerating from a 6.9% CAGR during the

previous four years.2 That compares with

overall IT spending growth of just 4.9% in2013.3

Jim Reinhart

Managing Director

US Technology Lead

Advisory, M&A


Advisors LLC

Tel: +1 415 894 4205

E-mail:[email protected]

Vishal Tayal

Senior Vice President

US Technology Lead

Advisory, M&A


Advisors LLC

Tel: +1 415 894 8767

E-mail: [email protected]

Fundamental changes to the

technology stack caused by the

five megatrends social-mobile-

cloud, big data and acceleratedtechnology adaptation are

adding new dimensions to

enterprise security. As their

networks become more

permeable, and protecting all

types of content becomes the

biggest challenge, companies

are focusing on securing the

data itself.

Jeff Liu

*Ernst & Young Capital Advisors LLC is a

broker-dealer registered with FINRA and an

affiliate of Ernst & Young LLP in the US.


13/28


Source: EY analysis, 2013.

Cloud/virtualization Redefines systems, file/storage,

security and endpoint Reorients business and sales models

Redistributes total cost of ownershipand vendor choke points

Mobility Revolutionizes communication

and collaboration (e.g., enterprisesocial media)

Creates new security and managementopportunities

Magnifies data and storage requirements

Borderless Increases threat vectors and magnifies

potential impact Requires holistic IT management

policies Favors integrated vendors or

solutions providers (i.e., VARs, XaaS)

Endpoints

Closed perimeter

Enterprises seek end-to-end

security solutions

Another impact for security vendors is that

corporate customers are reacting to the

greater complexity of modern information

security challenges by seeking single-source,

end-to-end solutions providers that can hide

the complexity and take on responsibility for

the overall solution. That, in turn, is driving

consolidation among providers of different

types of security solutions, as they seek to

achieve the product breadth and scale that

customers seek.

The main types of security solutions that

customers seek to integrate are:4

1. Endpoint security: secures the endpointof a corporate network from attacks and

information leakage

2. Network security: protects corporate

networks from disruption by external

threats

3. Identity and access management (IAM):

identifies users and controls access to

information within a system

4. Security and vulnerability management

(SVM): enables organizations to

determine, interpret and improve

risk posture

5. Messaging security: protects email,

instant messaging and other

collaboration applications

6. Web security: protects against web

inbound (malware) and outbound

(leakage) threats

7. Other: emerging security functions

Q213 M&A sees related security

transaction spike

In Q213, we noticed a spike in security-

related transactions that exemplified the

drivers described above. For example, an

information security deal (Vista Equity

Partners-Websense, $903 million) made it

into the top 10 deals of the quarter (see

Figure 1, page 5) for the first time since

Q411, when a group led by Thoma Bravo

LLC took Blue Coat Systems, Inc., private.

The Websense deal had the highest premium

of any top 10 deal for which a premium was

available. Also of note, since going private,

Blue Coat has added to its security offering

via M&A; in Q213, it acquired Solera

Networks, Inc., a network forensics and

security analytics company and SSLappliance assets of Netronome Systems,

Inc., for network inspection, both for

undisclosed values.

The second-largest Q213 security deal saw

Intels McAfee unit add next-generation

firewalls and intrusion detection and

prevention capabilities via a $389 million

deal for Finland-based Stonesoft. Also in

Europe, Cassidian, a division of European

Aeronautic Defense and Space Company

N.V. (EADS), acquired unified threat

management systems and software provider

Arkoon Network Security, of France, for

$19 million. Cassidian is a worldwide leader

in global security solutions and systems.

Arkoon provides anti-malware, anti-virus,

endpoint, firewall, intrusion prevention

and data leakage prevention capabilities.

In all, we noted nearly four dozen security

deals in Q213, or roughly 7% of all deals,

up from 3% (less than two dozen) in Q113

and 5% in full-year 2012. Several involved

multiple acquisitions of point solutions by

one company.

Start strategy development early

Because of the fast-changing dynamics

of the security landscape, every security

vendor no matter how broad or narrow its

product line should already be thinking

about how to manage its organic product

development and transaction strategy to

match the pace of rapid change.

Questions to consider Are your security offerings

comprehensive i.e., do they cover

all seven types mentioned above?

Are your security offerings easily

integrated i.e., will they seamlessly

plug into most companies existing

IT infrastructure?

What are you doing to plan for the

incorporation of rapidly evolving

up-and-coming security requirements

(e.g., mobile device and application

management)?

Figure 5: Traditional enterprise environment and transformational themes

Data center


14/28


Regional snapshot: Americas

PE drives YOY value increase again

Americas aggregate value increased YOY in Q213 but volume

continued to decline at an even faster rate than the global average.

Companies innovating in cloud/SaaS, smart mobility, social networking,

and advertising and marketing technology continued to be major

deal targets.

Aggregate value rose 18% YOY to

$27.7 billion, while global aggregate value

was flat. Consequently, Americas share

of global aggregate value climbed to 83%,

compared with 78% for full-year 2012. Itdeclined 8% sequentially, however, due to

skew from the Dell deal in Q113. As in

Q113, the increase in Americas value was

entirely due to PE deals: PE aggregate value

leapt 237% YOY to $11.5 billion in Q213,

outweighing the 19% decrease in corporate

aggregate value to $16.2 billion.

Americas volume declined 19% YOY and

7% sequentially to 432 deals, compared

with global decreases of 14% YOY and 5%

sequentially. Americas volume was 74% of

global volume for full-year 2012 but has

declined to 71% in Q113 and 69% in Q213.

Again, the volume picture would have been

worse if not for PE volume growth, which

partially offset corporate volume declines

(see Figure 7, page 15).

The largest deal by dollar-value, both in the

Americas and globally, was the Bain-led deal

to take BMC Software private (see Figure 6,

page 15). Like Dell before it, BMC says it

needs to move more aggressively to the

cloud and believes that going private willenable it to do so.1

The other four of the top five Americas

deals were corporate transactions. Fidelity

National Financial agreed to pay $2.9 billion

for Lender Processing Services, a provider

of loan processing technologies with which

Fidelity is very familiar. In 2008, the target

spun out of Fidelity National Information

Services, Inc., which itself spun out of

Fidelity National Financial in 2006.2 The

acquisition restores the presence of FidelityNational Financial in technology services for

title insurance and mortgage servicing.

Salesforce.coms completed $2.5 billion

acquisition of ExactTarget highlighted the

continuing trend of enterprise software/SaaS

companies acquiring online and mobile

advertising and marketing technologies.ExactTarget provides primarily email, but

also social network and other digital

marketing services. The last such deal to

make it into the quarterly top 10 was Oracle

Corporations Q412 acquisition of Eloqua, Inc.,

for $956 million. We saw more than four

dozen such deals in Q213 (all much smaller

or with undisclosed values), roughly two-

thirds of which involved Americas buyers.

Behind this trend are increasing technology

budgets overseen by marketing executives

especially for cloud-based technologies.3

Accelerating cloud revenue growth was

the driver for IBMs $2 billion deal for

cloud infrastructure provider SoftLayer

Technologies. IBM plans to create a new

cloud services division that combines

SoftLayer with existing IBM cloud technology

to create a cloud platform that IBM will

market globally to enterprises and smaller

customers.4 Completing the top five

was Yahoos $1.1 billion deal to acquire

blogging-services site Tumblr.

Overall, Americas buyers accounted for

73% of global cloud/SaaS deal volume and

84% of disclosed value. In smart mobility,

Americas companies acquired 79% of global

deal volume and 98% of disclosed value;

in big data analytics, 73% of volume and

roughly half the disclosed value. Although

there were fewer health care IT deals in

Q213 than in recent quarters, there were

still roughly two dozen (with undisclosed

values), nearly 90% of which involved

Americas buyers.

Advertising and marketing are

becoming more effective

without being more bothersometo consumers by harnessing

the power of mobile-social-cloud

and big data analytics

technologies. Thats why M&A

activity around technologies that

enable them will continue

to increase.

Joe Steger


Transaction Advisory Services LeaderEY


15/28


Figure 6: Top five Americas deals, Q213 (corporate and PE)

Buyer Disclosed Announced Deal type Premium

value ($m) offered

Bain Capital/Golden Gate/GIC/Insight Venture Partners to acquire BMC Software, Inc. $6,900 6 May PE 3%

Fidelity National Financial, Inc. to acquire Lender Processing Services, Inc. $2,900 28 May Corporate 21%

Salesforce.com, Inc. acquired ExactTarget $2,500 4 Jun Corporate 58%

IBM Corporation acquired SoftLayer Technologies, Inc. $2,000 4 Jun Corporate N/A

Yahoo! Inc. acquired Tumblr $1,100 20 May Corporate N/A


Figure 7: Americas transactions scorecard, Q213

494 390 9% 21%

98 71 11% 28%

$19,951 $16,152 76% 19%

$204 $227 58% 11%

Q2 Q3 Q4 Q1 Q2

38 42 5% 11%

12 18 80% 50%

$3,420 $11,533 55% 237%

$285 $641 75% 125%

Corporate and PE





532 432 7% 19%

110 89 20% 19%

$23,372 $27,685 20% 18%

$212 $311 33% 47%

PE





Corporate





YOY % change


Americas aggregatePE deal value

increased

237%YOY in Q213.


16/28

Asia-Pacific and Japan

companies positioned

themselves in Q213 for further

growth by focusing on the smart

mobility megatrend, and by

acquiring valuable business

assets internationally.

Ben Kwan


Asia-Pacific

EY

16

APJ aggregate value climbed 31% YOY to

$3.3 billion, compared with an 18% YOY

rise in the Americas and a 68% decrease inEMEA. The APJ growth represented a 592%

sequential increase from the relatively low

Q113 aggregate value of $483 million.

Notably, four PE deals (three with disclosed

values), including two of the top five

transactions, contributed $2.3 billion (69%)

to Q213 aggregate value. APJ typically has

zero, one or two PE deals. The last time APJ

posted more PE disclosed value was in Q311,

when Innovation Network Corporation of

Japan acquired and combined the mobile

display units of Hitachi, Ltd., Sony Corporation

and Toshiba Corporation in a $2.6 billion deal.

In the previous quarter, the largest APJ deal

was just $220 million and no other transaction

exceeded $100 million in disclosed value;

in Q213, the largest deal was $1.4 billion

and there were six deals of $100 million

or more, together contributing $3.1 billion

(93%) of the aggregate value seen in

Figure 9 (page 17). APJ Q213 volume of

48 deals represented a decline of 16% YOY

and 8% sequentially, slightly more than the

global decreases of 14% and 5%, respectively.

Deals related to smart mobility included the

$1.4 billion agreement by government-

owned Tsinghua Holdings of China to acquire

Spreadtrum Communications, which develops

chipsets used in mobile phones and other

devices. The deal is the largest global

semiconductor acquisition of 2013,

so far. Tsinghuas portfolio companies

make a variety of consumer and business

technology products. One of those

companies was responsible for the APJ

regions largest Q113 transaction, the

$220 million deal mentioned above. It wasa smart-mobility deal that targeted tablet

maker Ereben Information Technology.1

In another deal linked to smart mobility, PE

firms CITIC Capital of China and Singapores

Temasek Holdings agreed to buy AsiaInfo-

Linkage for $890 million. AsiaInfo-Linkage

provides customer-relationship management

(CRM), billing, analytics and other solutions

to telecom services providers in China.

Another top five deal focused on online

video, with Chinese internet search company

Baidu agreeing to pay $370 million to

acquire the video business of PPStream;

Baidu plans to merge the acquired business

with its existing online-video platform.2

In another top five deal, Funai Electric

Company Ltd. agreed to acquire inkjet-

printer technology and assets, including

patents, from Lexmark International, Inc., for

$100 million. The deal with Funai, which

has been manufacturing inkjet printers for

Lexmark since 1997, completes Lexmarks

exit from the inkjet printer business,allowing it to focus more on its software and

services, including content management.3

Rounding out the top five deals is a

$113 million deal in which the Australian

accounting software company, MYOB

Finance, acquired New Zealand-based

BankLink, whose process automation

software enables data transfer among

financial institutions, accounting practices

and small businesses.


Regional snapshot: Asia-Pacific* and Japan

PE deals drive value increase;

volume declinesMore PE activity than weve seen in Asia-Pacific and Japan (APJ) in

nearly two years helped APJ achieve the largest YOY aggregate value

percentage increase of any region in Q213, although volume declined

by more than the global average. Smart mobility and cloud/SaaS drove

many of the regions deals.

*Asia-Pacific includes India.


17/28



Figure 9: Asia-Pacific and Japan transactions scorecard, Q213

55 44 15% 20%

15 8 50% 47%

$2,551 $1,047 117%

59%

$170 $131 337% 23%

Q2 Q3 Q4 Q1 Q2

2 4 N/A 100%

0 3 N/A N/A

$0 $2,293 N/A N/A

$0 $764 N/A N/A

Corporate and PE





57 48 8% 16%

15 11 31% 27%

$2,551 $3,340 592% 31%

$170 $304 913% 79%

PE





Corporate



Total value of deals with disclosed values ($m)Average value of deals with disclosed values ($m)

YOY % change

Figure 8: Top five Asia-Pacific and Japan deals, Q213 (corporate and PE)


value ($m) offered

Tsinghua Holdings Co. Ltd. to acquire Spreadtrum Communications, Inc. $1,389 21 Jun PE N/A

CITIC Capital Holdings Limited/Temasek Holdings to acquire AsiaInfo-Linkage, Inc. $890 13 May PE 5%

Baidu, Inc. to acquire PPStream, Inc. $400 25 Apr Corporate N/A

MYOB Finance NZ Ltd. (a subsidiary of MYOB Holdings Pty Ltd.) acquired BankLink$113 14 May Corporate N/A

from Media Transfer Services Ltd.

Funai Electric Company Ltd. to acquire inkjet-printer technology and assets, including

$100 2 Apr Corporate N/Apatents, from Lexmark International, Inc.


PE contributes

69%($2.3 billion) of APJaggregate value.


18/28

EMEA buyers targeted growth

in Q213, whether through

technologies such as big data

analytics or advertising and

marketing, or by positioning

themselves for opportunities in

emerging markets.

Staffan Ekstrm

Transaction Advisory Services LeaderEMEIA

EY

18

Volume rose 6% YOY to 147 deals in EMEA,

compared with a global average decline of

14%. But aggregate value fell by 68% YOY to

$2.4 billion, compared with a global average

that was flat YOY. The size of the EMEA

decline was primarily because the year-agoquarter included the $4.5 billion SAP-Ariba

deal, without which aggregate value would

have fallen only 20%.

Sequentially, EMEA volume and value both

climbed, by 4% and 73%, respectively. This

sequential increase in value continued the

remarkable pattern of alternating up and

down quarters that we have observed for

more than two years. The most recent

12 months of that pattern are shown in

the micro plotline for total deal value in

Figure 11 (page 19).

Of note, the largest EMEA deal of Q213

SAP-hybris is somewhat similar to last

years SAP-Ariba deal (though smaller).

Ariba offered B2B e-commerce SaaS and

a B2B online collaboration network or

marketplace. Switzerland-based hybris

marketing technology is a different B2B

e-commerce platform, delivered as SaaS

or on-premise, with analytics capability

that SAP plans to integrate with its HANA

in-memory real-time analytics technologyto deliver detailed customer insights.1 Also

during Q2, SAP acquired KMS Software for

an undisclosed value; KMS is a SaaS

provider that helps businesses to manage

the process of on-boarding new employees.

The other four of the top five transactions

by EMEA purchasers targeted US companies.

Like SAP-hybris, IT services firm Accentures

completed $316 million acquisition of

Acquity Group also focused on marketing

technology. Acquity provides online marketingcampaign creation and management,

including social media marketing. Dassault

Systmes $205 million agreement to acquire

Apriso Corporation, a provider of software

that helps businesses manage global

manufacturing networks, was just one of

four Dassault Systmes deals in Q213 (and

the only one with a disclosed value). Apriso

expands Dassault Systmes beyond its 3D

design software into manufacturingsoftware. In all, the deals position Dassault

Systmes for continued growth, particularly

in its emerging market operations, such as

in China.2

Rounding out the top five deals were two

non-technology buyers of technology

companies. In security, Tyco International

acquired Exacq Technologies for

$150 million a deal that will add Exacqs

video-surveillance technology to Tycos

range of physical premises security

offerings. The last top five deal illustrated

the value of big-data analytics in life sciences,

where techniques, such as automated gene

sequencing, are generating vast amounts

of data faster than it can be analyzed.

Netherlands-based QIAGEN, a non-

technology provider of laboratory sample

and assay products, acquired Ingenuity,

which offers a knowledge base and analytics

tools that researchers can use to interpret

and analyze complex biological data.3

Despite these four deals, Americascompanies purchased far more value

from EMEA targets than EMEA did from the

Americas. Americas companies purchased

$2.8 billion (67%) of the $4.2 billion in CB

value sold by EMEA companies, representing

a 279% sequential increase over Q113 but

a 53% decline YOY. Q213 deals included

Googles $1.1 billion purchase of Waze

and Canada-based PE firm OMERS Capital

Partners $607 million deal to acquire Civica

plc, a UK specialist IT and business process

services provider to the public sector. EMEAvolume purchased by Americas companies

declined 39% YOY and 9% sequentially to

48 deals, with US companies buying 45 of

those deals.


Regional snapshot: Europe, Middle East and Africa (EMEA)

Volume climbs but total value falls

EMEA was the only region to increase deal volume in Q213, although value

fell by more than the global average. As also seen in the Americas, the big

deal drivers of mobile-social-cloud and big data analytics were joined here

by advertising and marketing technologies.


19/28



Figure 11: Europe, the Middle East and Africa transactions scorecard, Q213

127 136 0% 7%

30 33 38% 10%

$6,366 $2,300 99% 64%

$212 $70 46% 67%

Q2 Q3 Q4 Q1 Q2

12 11 83% 8%

3 1 75% 67%

$1,085 $67 69% 94%

$362 $67 24% 81%

Corporate and PE





139 147 4% 6%

33 34 21% 3%

$7,451 $2,367 73% 68%

$226 $70 43% 69%

PE





Corporate





YOY % change

Figure 10: Top five Europe, Middle East and Africa deals, Q213 (corporate and PE)


value ($m) offered

SAP AG acquired hybris AG $1,000 5 Jun Corporate N/A

Accenture plc acquired Acquity Group Ltd. $316 17 May Corporate 86%

Dassault Systmes S.A. acquired Apriso Corporation $205 29 May Corporate N/A

Tyco International Ltd. acquired Exacq Technologies, Inc. $150 19 Jun Corporate N/A

QIAGEN N.V. to acquire Ingenuity Systems, Inc. $105 29 Apr Corporate N/A


EMEA was the onlyregion to increase

deal volume,

by 6%YOY.


20/28



21/28


Appendix of additional charts

22 Global technology corporate and PE transactionsscorecard by sector

23 Cross-border corporate and PE transactionsscorecard by sector

24 Global corporate and PE deals by acquiringcountry: cross-border and in-border

25 Cross-border deal value flow for technology deals


22/28


Figure 12: Global technology corporate and PE transactions scorecard by sector, Q213

Number of deals

Q212 Sequential% change

Q2 Q3 Q4 Q1 Q2 Q213 YOY %change

Average value ($m)



Corporate deals by sector (based on target sector)

CE

CPE

Internet

IT services

Semiconductors

Software/SaaS

Total

PE deals by sector (based on target sector)

CE

CPE

Internet

IT services

Semiconductors

Software/SaaS

Total

Total deals by sector

CECPE

Internet

IT services

Semiconductors

Software/SaaS

Total

39 12 50% 69%

29 38 10% 31%

143 77 14% 46%

150 146 15% 3%

31 26 86% 16%

284 271 1% 5%

676 570 7% 16%

$110 $167 N/A 52%

$380 $35 100% 91%

$291 $1 -86% 100%

$538 $558 138% 4%

$5 $701 1,302% 13,920%

$296 $1,080 2,104% 265%

$300 $631 65% 110%

$176 $114 51% 35%

$324 $101 53% 69%

$213 $191 516% 10%

$185 $135 25% 27%

$166 $124 46% 25%

$188 $223 313% 19%

$202 $174 67% 14%

$171 $134 43%

22%

$328 $96 96% 71%

$224 $144 397% 36%

$211 $198 4% 6%

$155 $239 42% 54%

$191 $350 548% 83%

$211 $249 19% 18%

4 4 N/A 0%

4 5 0% 25%

12 13 225% 8%

6 8 53% 33%

3 2 100% 33%

23 25 32% 9%

52 57 24% 10%

43 16 33%

63%

33 43 9% 30%

155 90 4% 42%

156 154 19% 1%

34 28 87% 18%

307 296 1% 4%

728 627 5% 14%



The left side of Figure 12, above, shows how the current three consecutive quarters of declining global technology M&A deal volume breaks down bysector. Transaction volume is down YOY by 14% overall, and fell in every sector except CPE. That is no big victory, however, since the Q212 numberbeing compared to (33 deals) is the lowest quarterly CPE volume in more than three years, since Q309.* Sequentially, just semiconductors and

software/SaaS managed to increase deal volume over the doldrums of Q113.

Average value results were much more encouraging, especially taking into account the Q113 skew from the Dell megadeal. The figure shows overallaverage value up 18% YOY but down 19% sequentially; excluding the Dell deal, the $249 million Q213 average value would represent a 142% increaseover Q113. The four sectors showing sequential increases each had one or more deals above $1 billion, while the two that declined (CE and CPE) didnot. There were five such deals in the software/SaaS sector, including the $6.9 billion deal to take BMC Software private. Consequently, software/SaaSwas the only sector to achieve its highest average of the last four quarters in Q213 in fact, at $350 million per deal, the Q213 average forsoftware/SaaS is at its highest in the five years we have collected this data.*


Note: average value based on deals with disclosed values.


Software/SaaS achieves highest quarterly average value; CPE is only sector to increase volume YOY


23/28




After falling at roughly the same rate as IB deals for three consecutive quarters, the decline in CB deal volume accelerated past IB in Q213. Of the101 deal YOY falloff in Q213 for all deals, 60 were CB deals and 41 were IB. Consequently, CB deals represented 31% of all-deal volume in Q213, downfrom 33% in each of the three preceding quarters and 35% in Q212. The 24% YOY and 10% sequential declines shown above compare with 14% and 5%,

respectively, for all deals (see Figure 3, page 7). Semiconductors was the only sector to buck the downward trend both YOY and sequentially. Fiftypercent of the semiconductor deals were CB in Q213, which is typical for the sector.

Sequentially, CB average value bounced back from the lowest quarterly average value ($65 million in Q113) weve seen in the five years weve collectedthis data*, increasing 120% to $143 million. But that was not enough to reverse the 1.5-year trend of CB average value falling faster than all-deal averagevalue. For the two years before Q312, CB average value was higher than all-deal; in Q312, it fell 9% below. The trend continues: CB average value was32% lower than all-deal average value in Q412, 37% lower in Q113 (not counting the Dell deal) and now 43% lower in Q213. Of note, the 41% YOYdecline shown in the chart above compares with an 18% YOY increase for all-deal average value (see Figure 3, page 7). We continue to believe thatmacroeconomic conditions are holding down CB deal volume and value more than IB due to the added complexity and risk inherent in CB transactions.


Note: average value based on deals with disclosed values.


Figure 13: CB corporate and PE transactions scorecard by sector, Q213

Number of CB deals



Average CB value ($m)



Total CB deals by sector

CECPE

Internet

IT services

Semiconductors

Software/SaaS

Total

PE CB deals by sector (based on target sector)

CE

CPE

Internet

IT services

Semiconductors

Software/SaaS

Total

$0 $0 N/A N/A

$0 $0 N/A N/A

$0 $0 100% N/A

$0 $662 183% N/A

$0 $0 100% N/A

$573 $607 767% 6%

$573 $635 452% 11%

Corporate CB deals by sector (based on target sector)

CE

CPE

Internet

IT services

Semiconductors

Software/SaaS

Total

17 6 50% 65%

12 14 22% 17%

45 19 39% 58%

50 41 5% 18%

12 14 75% 17%

106 91 1% 14%

242 185 8% 24%

1 0 N/A 100%

1 1 N/A 0%

3 3 200% 0%

2 2 75% 0%

0 0 100% N/A

6 4 33% 33%

13 10 38% 23%

18 6 50% 67% 13 15 17% 15%

48 22 31% 54%

52 43 9% 17%

12 14 56% 17%

112 95 3% 15%

255 195 10% 24%

$269 $132 238%

51%

$361 $101 461% 72%

$53 $100 488% 89%

$308 $144 9% 53%

$68 $113 79% 66%

$265 $158 222% 40%

$242 $143 120% 41%

$269 $132 238% 51%

$361 $101 461% 72%

$53 $100 426% 89%

$308 $70 44% 77%

$68 $113 51% 66%

$242 $139 216% 43%

$233 $120 126% 48%

CB volume and average value decline faster than in-border


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Figure 14: Global corporate and PE deals by acquiring country: CB and IB, Q213

Corporate deals Q213

Top countries Q212 deals Q2 Q3 Q4 Q1 Q2 Q213 deals % total deals No. IB deals 0% 50% 100% No. CB deals

US 451 355 62% 289 66

UK 45 52 9% 35 17

Canada 39 33 6% 15 18

Germany 11 16 3% 4 12

France 12 15 3% 8 7

India 16 15 3% 6 9

Sweden 11 12 2% 6 6

Netherlands 5 8 1% 1 7

Australia 4 7 1% 4 3

Ireland 7 7 1% 2 5

Japan 20 7 1% 0 7

Other 55 43 8% 15 28

Total 676 570 100% 385 185

PE deals Q213

Top countries Q212 deals Q2 Q3 Q4 Q1 Q2 Q213 deals % total deals No. IB deals 0% 50% 100% No. CB deals

US 35 37 65% 34 3

UK 7 8 14% 4 4

Canada 3 5 9% 4 1

China/Hong Kong 0 2 3% 2 0

Other 7 5* 9% 3 2

Total 52 57 100% 47 10

Corporate CB volume declines, but other countries partially offset US and UK falloff;

PE CB deals fall 38%

Corporate CB deal volume fell only 8% sequentially, to 185 deals in Q213 from 200 in Q113, despite a 20% falloff by the US and 19% by the UK. Amongthe countries that made up the difference by holding steady or increasing in corporate CB deals were Canada (55% of deals were CB), Germany (75%CB), India (60% CB), Sweden (50% CB), the Netherlands (88% CB), Australia (43% CB), Ireland (71% CB) and Japan, which did all seven of its dealsacross borders. Consequently, the US fell to 36% of corporate CB deals from 41% in Q113, while the UK fell to 9% from 11%. France, meanwhile, did7 corporate CB deals in Q213 after doing 15 in the previous quarter.

Although all-deal PE volume (CB + IB) rose 24% sequentially in Q213, PE CB volume fell to 10 deals from 16 (38%). In this case, the US declined tothree PE CB deals in Q213 from eight in Q113, and the other countries did not make up for the falloff. UK PE deal-makers, however, did increase to fourdeals in Q213 from just one in Q113. The 16 PE CB deals of Q113 were unusually high, given the recent trends for example, higher than in any 2012quarter.

*Additional countries with one PE deal in Q213: Finland, Germany, Latvia, Singapore and South Korea.



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Figure 15: CB deal value flow for technology deals (disclosed value), Q213 versus Q113

Q213 Q113 CB value acquired$3.2b

CB value sold$3.2b

0%

20%

40%

60%

80%

100%

Other 15%

Asia-Pacific 30%

Europe33%

US11%

Europe30%

Canada 21%

US41%

Japan 1%

Asia-Pacific 1%

Other 1%

Canada 10%

India 3%Japan 4%

CB value acquired$6.4b

CB value sold$6.4b

0%

20%

40%

60%

80%

100%

Other 17%

Asia-Pacific 12%

Europe47%

US

18%

Europe32%

Canada 10%

US51%

Japan 5%

Japan 3%

India 2%

Canada 2%

Total CB value doubles but remains below historical level; Europe and Asia-Pacific are

biggest sellers for second consecutive quarter

At $6.4 billion, CB aggregate value bounced back from a 5-year low of $3.2 billion in Q113 but fell 63% YOY and remained 20% below the lowest 2012quarter ($8 billion in Q412). CB value was just 19% of global all-deal aggregate value, compared with 41% for full-year 2012.

For the first time in two years, the US and Europe did not switch positions as net buyer and seller. The US was a net buyer in Q113 and Europe a netseller; in Q213, the US increased the margin by which it was a net buyer, while Europe increased its margin as a net seller.

The largest CB deal by dollar value was Googles $1.1 billion acquisition of Israels Waze, representing 98% of the value sold by countries in theOther category.

European companies were the largest buyers of European CB deals in Q213, acquiring 41% ($1.3 billion) of the European CB value sold. Seventy-eight percent of that inter-European value came in one deal: the $1 billion SAP-hybris deal, which was the second-largest CB transaction of Q213.

The US acquired 35% ($1.1 billion) of European value sold in nine deals, the largest of which was McAfees $389 million announced deal forFinnish cybersecurity company Stonesoft.

Canadian companies acquired 21% ($640 million) of European CB value. Most of the Canadian value was in one PE transaction: OMERS CapitalPartners $607 million deal for UK-based Civica, a UK specialist IT and business process services provider to the public sector.

Rounding out the buyers of European value was Indias Tata Consultancy Services $97 million deal for Alti SA, a French systems integrator alsooperating in Belgium and Switzerland.

Europe buyers purchased $815 million (70%) of the US value sold in five deals, the largest of which was Accenture-Acquity at $316 million (seeEMEA snapshot, page 18).

US companies bought all of the $784 million CB value sold by Asia-Pacific in five separate transactions.Note: percentages may not total 100 due to rounding.



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Source notes


Rising PE, megatrends and their enablers drive Q213technology M&A

1 US Deal Flow to Remain Stagnant for Remainder of

2013, EY press release, 8 July 2013.

2 BMC deal aims for the cloud; Private investors offer

$6.9 billion with goal of developing technology,

The Houston Chronicle, 7 May 2013, via Factiva,

2013 Dow Jones & Company, Inc.

3 Global technology M&A update: JanuaryMarch 2013,

EY, 2013 EYGM Limited.




2013 Dow Jones & Company, Inc.5 Microsoft To Partners: We Need You To Migrate

To The Cloud, CRN, 12 July 2013, via Factiva,


6 Top 10 Things To Know About Ciscos Push To The

Cloud, CRN, 10 June 2013, accessed via CRN.com.

7 How 10 VARs Became Cloud Computing Superstars,

CRN, 8 February 2013, accessed via CRN.com.

8 Salesforce.com Acquires ExactTarget,

Entertainment Close-up, 18 July 2013, via Factiva,


9 The Morning Download: CIOs Must Step Up Their

Game, The CIO Report, 21 December 2012,

via Factiva, 2013 Dow Jones & Company, Inc.

10 Report: FTC reviewing Googles acquisition of Waze,

SNL Kagan Media & Communications Report,25 June 2013, via Factiva, 2013 Dow Jones

& Company, Inc.

11 Yahoo Deal to Buy Tumblr Shows Power Shift,

Dow Jones Top North American Equities Stories,

20 May 2013, via Factiva, 2013 Dow Jones

& Company, Inc.

12 Vista Equity Partners to Buy Websense, The Wall

Street Journal Online, 20 May 2013, via Factiva,


13 451 M&A KnowledgeBase Daily, 451 Research LLC,

24 April 2013, 2000-2013 451 Research LLC.

14 Cloud vendors add MBaaS and mobile app

development tools for the enterprise, 451 Research

LLC, 15 April 2013, 2000-2013 451 Research LLC.

15 Facebook bets on MBaaS as it buys Parse for mobile

apps, 451 Research LLC, 26 April 2013,

2000-2013 451 Research LLC.

16 3-D Printing Leader Stratasys to Buy Makerbot,

The Wall Street Journal Online, 19 June 2013,


Top of mind: Technology transformations, headlines

drive security consolidation

1 Worldwide IT Security Products 2012-2016

Forecast and 2011 Vendor Shares: Comprehensive

Security Product Review, IDC, November 2012,

2012 IDC.

2 IDC Analyst Connection: Secure, Compliant

Collaboration in the Cloud, IDC, March 2012,

2012 IDC.

3 IDC Lowers Expectations for IT Spending as

Sequester and Global Economic Uncertainty Take a

Bite Out of Business Confidence, IDC Press Release,

14 May 2013, 2013 IDC.

4 Worldwide IT Security Products 2012-2016

Forecast and 2011 Vendor Shares: Comprehensive

Security Product Review, IDC, November 2012,

2012 IDC.

Regional snapshot: Americas





2 Fidelity National Agrees to Buy Lender Processing

for $2.9 Billion, Dow Jones Top North American

Equities Stories, 28 May 2013, via Factiva, 2013

Dow Jones & Company, Inc.

3 Salesforce.com Acquires ExactTarget,

Entertainment Close-up, 18 July 2013, via Factiva,


4 IBM To Acquire SoftLayer To Accelerate Adoption Of

Cloud Computing In The Enterprise, Dow Jones News

Service, 4 June 2013, via Factiva, 2013 Dow

Jones & Company, Inc.

Regional snapshot: Asia-Pacific and Japan

1 Global technology M&A update: January-March 2013,

EY, 2013 EYGM Limited.

2 Baidu Acquires Online Video Business of PPS for US

$370 Million to Create Chinas Largest Online Video

Platform, Investment Weekly News, 25 May 2013,


3 Funai takes over Lexmark inkjet business,

BusinessWorld, 9 May 2013, via Factiva, 2013

Dow Jones & Company, Inc.

Regional snapshot: Europe, Middle East and Africa

1 SAP to Acquire hybris to Deliver Next-Generation

Customer Experience, ENP Newswire, 6 June 2013,via Factiva, 2013 Dow Jones & Company, Inc.

2 451 M&A KnowledgeBase Daily, 451 Research LLC,

25 April 2013, 2000-2013 451 Research LLC.

3 Qiagen Acquires Ingenuity Systems for $105 Million,

GlobalData Financial Deals Tracker, 30 April 2013,



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27

Global technology M&A update: April

June 2013 is based on EYs analysis of

The 451 Group M&A KnowledgeBase data

for 2012 and 2013. Deal activity and

valuations may fluctuate slightly based on

the date the database is accessed.

Technology company M&A data was pulled

from The 451 Group M&A KnowledgeBase

based on the databases own classification

taxonomy, and deals were then aligned

to the following sectors: CE, CPE,

semiconductors, software/SaaS,

IT services and internet companies.

Alignment was based on the sector of

the target company.

The data includes M&A transactions

between two technology companies,

technology companies acquiring non-

technology companies, as well as

non-technology companies acquiring

technology companies.

Joint ventures were not included.

Corporate M&A activity data was analyzed

based on the sector classification of the

target company. Prior to 2012, we

reported based on the classification of the

acquiring company; the change enables

a clearer picture of the technologies being

focused on for acquisition.

Equity investments that involved less than

a 50% stake were not included in the data.

PE M&A activity includes both full and

partial stake transactions in excess of 50%

and was analyzed based on acquisitions

by firms classified as private equity,

sovereign wealth funds, investment

holding companies, alternative investment

management groups, certain commercial

banks, investment banks, venture capital

and other similar entities.

Unsolicited technology deal values were

not included in the dataset, unless the

proposed bid was accepted and the deal

closed based on data available at the time

of analysis.

The value and status of all deals

highlighted in this report are as of

30 June 2013, unless otherwise

no

Documents

EY-Q213 Global Technology M&a Report-Issue20