2017Technology&TelcoMid-SizedM&ATransactions- MarkOstryn

Australia H1- 2017

Sales of mid-sized businesses in Australia’s technology andtelecommunications sectors rose from 42 to 66 in the first half of calendar2017, compared to the same period in 2016. With an average transactionvalue of $25m, the total value of the 66 deals was estimated at $1.7b

Recapof2017Transactions

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2

37

57

5

9

2016

2017

H12017TECH/TELCOACQUISITIONS

Tech Telco

TransactionPartiesbyType

More than half of thetransactions involved apublic acquirer, acquiringa private company. Thismarks an increase inappetite for privateacquisitions. Overall, only35% of transactions over$1m were between twoprivate companies.

PrivateBuyer,PrivateSeller

35%

PrivateBuyer,PublicSeller

8%

PublicBuyer,PrivateSeller

51%

PublicBuyer,PublicSeller

6%

Whatisthemotivationbehindtheseacquisitions?

Product expansion was the rationale for23% of the acquisitions. Through thesedeals the companies hope to increasetheir product range thereby providing arange choice of solutions for their clients.

Geographic expansion was the rationalfor 20% of the acquisitions. Companiesuses these deals to enter a new marketas some sectors have high barriers toentry. Given that there was a low numberof international transactions, geographicexpansion was mainly oriented towardsgreater overall Australian coverage.

Product diversification rounded up thetop-three with 18%. Certain businesses,even in the tech space are at a maturephase limiting the opportunities fororganic growth. Therefore, throughacquisitions, businesses can achievediversification.

3

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AcquireCustomers

7%

AcquireIP18%

EconomiesofScale/

Rationalisation14%

GeographicExpansion

20%

ProductDiversification

18%

ProductExpansion

23%

AcquisitionMotivation

Whatisthebuyer/sellerlocation

profile?

Despitethelowerrelevanceofgeographyintechnologybasedbusinesses,77%ofacquirersalreadyhadoperationswithinAustralia.

8%oftotaltransactionswereAustralianbusinessesbuyingoverseas.

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Australia77%

USA

6% Other17%

BuyerLocation

Australia92%

USA

3%

Canada1%

Italy2%

UK

2%

SellerLocation

DeferredConsideration(EarnOuts)

Earnoutsareastoolusuallynegotiatedbyacquirerstoensurethatthetargetbusinessesperformanceismaintainedorimprovedthroughoutthetransitionphaseofownership.Thisistypicallyuptothreeyears.

Aminimumof20%ofthedealsdisclosedhadsomeformofearnoutorotherdeferredconsideration.Ourownresearchsuggeststhatanother30%morehadacertainproportionofdeferredconsiderationthatwasundisclosed.

Examplesofearnoutsin2017dealsincluded:

• 24timestheaveragemonthlynetgamingrevenueoverthe12monthsaftercompletionoftheacquisition.

• Performancebasedinsharesover3yearspostacquisition.

• Sharesescrowedfor2years.

CompletionDate

BuyerCompany

SellerCompany

3-Jan-17 HUB24(AndrewAlcock)

AgilityApplications

4-Jan-17 AssetowlLimited(PreviouslyknowasRegalpointResourcesLimited)

AssetOwlPtyLtd

09-Jan-17 ReckonHoldingsLimited;SharpFocusPacificLimited

360CapitalGroup

09-Jan-17 MNFGroupLimited ConferenceCallInternational

10-Jan-17 Plexsys InterfaceProducts

ImmersaView

16-Jan-17 OvertheWireHoldingsLimited

CellnetGroupLimited

18-Jan-17 HexagonMining(HefioSamora)

MiPlanSolutions

18-Jan-17 ServicenowAustraliaPtyLtd

DxContinuum

19-Jan-17 WentronicHoldingGmBH

ColesGroupLimited

30-Jan-17 AscenderGroup NGAHumanResources

02-Feb-17 Kaplan,Inc. RedMarkerPtyLtd

07-Feb-17 QMSMediaLimited IMPGPtyLtd

07-Feb-17 JainIrrigationSystemsLtd

ObservantPtyLtd.

07-Feb-17 Playtechplc Eyecon Pty.Ltd

10-Feb-17 WiseTech ACOInformatica

14-Feb-17 KateMorris(PrivateInvestor)

WoolworthsLimited

CompletionDate

BuyerCompany

SellerCompany

14-Feb-17 M&CSaatchiAgencyPtyLtd

BohemiaGroupPtyLtd

16-Feb-17 InaboxGroupLimited

BAICommunicationsLimited

16-Feb-17 MelbourneITLimited

OutwareSystemsPty.Ltd

22-Feb-17 MYOBTechnologyPtyLtd.

PaycorpPaymentSolutionsPtyLtd

22-Feb-17 AirTreeVenturesPtyLimited

ProspaAdvanceptyltd

26-Feb-17 BlueSkyPrivateEquityLtd

ShopperMediaGroupPtyLimited

27-Feb-17 GlobalSoftware,Inc.

GlobeSoftwareptyltd

28-Feb-17 LMGPSLtd planettelptyltd

28-Feb-17 AltusGroupLimited

EstateMasterPtyLtd

3-Mar-17 Activistic(NigelLee)

PlusConnect

7-Mar-17 InaboxGroupLimited

LogicCommunicationsPtyLtd

15-Mar-17 campaignmonitor

tagga

17-Mar-17 essDOCS(AlexanderGoulandris)

eCertify

20-Mar-17 SEEKLimited SwinburneUniversityofTechnology

27-Mar-17 CirrusNetworks NgageTechnologygroup

28-Mar-17 WINCorporation

SouthernCrossMedia

2017Transactions

CompletionDate

BuyerCompany

SellerCompany

7-May-17 Accenture(BrianWhipple)

TheMonkeys

11-May-17 Xped Jemsoft

22-May-17 CorrectSolutions

SaturnAlliance

22-May-17Digitalpacificptyltd

AnchorSystemsPtyLtd

23-May-17Stargrouplimited Indue

24-May-17Programmedlimited Oneshift

26-May-17 NovattiGroup(PeterCook)

Prophecy(basis2Utilities)

29-May-17

MadmanEntertainmentPty.Ltd.

SurfStitchGroupLimited

30-May-17 MSLSolutions(CraigKinross)

RayPallisterPtyLtd

31-May-17

IndexVentures;SapphireVentures,LLC;Felicis VenturesLLC;BlackbirdVentures

CultureAmpPtyLtd

31-May-17 EnergyOne(ShaunAnkers)

CreativeAnalytics

1-Jun-17 FieldSolutionsHoldings(AndrewRo...

BMSNetworkSolutions

5-Jun-17 Ernst&Young OpenWindowsIDENTITY

9-Jun-17 AdvancedSolutionsInternational

InternetVisionTechnologies

16-Jun-17 Tricentis(SandeepJohri)

FloodIO

20-Jun-17 Deloitte StrutDigital

26-Jun-17 EclipxGraysEcommerce

2017Transactions(continued)

CompletionDate

BuyerCompany

SellerCompany

30-Mar-17 Mr.HuiJieLim DigmaticGroup

31-Mar-17 ForumGroupofCompaniesPtyLtd

OnesourceAustraliaHoldingsPtyLimited

3-Apr-17 HRLHoldings MorrisonGeotechnic

04-Apr-17 Superloop Subpartners4-Apr-17 Dreamscape

Networks(MarkEvans)

NetLogistics

5-Apr-17 AutosportsGroup(NickPagent)

Freightways

6-Apr-17 Superloop(BevanSlattery)

SubPartners

13-Apr-17 HRLHoldings(StevenDabelstein)

Octfolio

20-Apr-17

WINCorporationPtyLtd

SouthernCrossMediaGroup

1-May-17 DentsuAegisNetworks

AccordantPty

01-May-17

AconsortiumledbyAxiataDigitalServicesSdn.Bhd.

Unlockd MediaPtyLtd

1-May-17 MelbourneITLimited

WMEGroup

2-May-17 TopBetta(ToddBuckingham)

MadBookiePtyLtd

02-May-17SuperloopLimited

BevanSlattery(PrivateInvestor)

02-May-17ServiceStreamLimited Techsafe

03-May-17TemenosGroupAG

RubikFinancialLimited

AboutStrategicTransactions

StrategicTransactionsarecommittedtohelpingourclientstransactthesaleoftheirbusinessortheacquisitionofanotherbusinessonthemostfavourableterms.

PartofthiscommitmentinvolveshavinganindepthunderstandingoftransactionsandtrendsintheAustralianandGlobalM&Amarkets.Weregularlyproduceupdatedtransactionreportssuchasthis.

StrategicTransactionusesa10steptransactionprocessensurethatthebusinessforsaleisfullypreparedtomaximisesalevalueandthatnegotiationwithstrategicbuyersisultimatelysuccessful.