San Diego Venture Group; M&A Event Nov 2013; Capstone

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Investment Banking AdvisorsCapstone Partners



Investment Banking Advisors

Capstone PartnersInvestment Banking Advisors

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M&A Trends in Technology & Life Sciences

Prepared for San Diego Venture Group

November 2013


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Observations and Recommendations Tech & Telecom M&A Trends

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U.S. M&A Dollar Volume: Technology & Telecom

n  Tech & Telecom M&A reached nearly $160B in the U.S. in the last twelve months }  Recent upswing driven primarily by PE funds becoming more aggressive in tech (i.e, Dell)

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San Diego M&A Dollar Volume: Tech & Telecom

n  Banner Year for San Diego Tech & Telecom M&A with more than $10B in deals }  Public target M&A driven by 4 large deals ranging from $900M to $4.0B in size }  Private target M&A driven by 3 large deals ranging from $350M to $1.0B in size

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U.S. M&A Transaction Volume: Tech & Telecom

n  2,100-2,300 M&A transactions per annum in the U.S. in Tech & Telecom }  Internet & Software account for approximately 65% of the mix

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San Diego M&A Transaction Volume: Tech & Telecom

n  San Diego M&A transaction volume is typically 30-40 transactions per year }  San Diego mix slightly more Hardware oriented than national average (Qualcomm effect?)

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Median LTM Revenue Multiples: Internet & Software

n  Internet & Software median multiples have been expanding, reaching 3.9x for LTM }  25% of deals are being done at revenue multiples of 5.5x or higher

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Median Revenue Multiples by Segment: Hardware

n  Median Hardware multiples have remain conservative at 1.3x revenue }  Not surprising that Hardware segments are attracting far less capital

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Recent Premium Multiple Transactions: Tech & Telecom

n  Entrepreneurs all dream of these type of outcomes…..

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Premium Multiple Transaction Profiles: Tech & Telecom

Sorted by LTM Revenue Multiple Excludes deals with Target company revenue less than $2M

Ann. Date Buyer Target Segment Target Description Deal Value

LTM Revenue Multiple

Multiple on $

Invested

Premium to 1 Mo

Prior

2/11/13 Cloud & IT

Infrastructure

Provides storage virtualization capacity and performance management software for use in virtual server and desktop environments for businesses.

$185M 92.3x 8.3x NA

8/15/13 Cloud & IT

Infrastructure

Provides financial anti-fraud software and SaaS to businesses globally. Also provides anti-malware, endpoint integrity and mobile device security software.

$900M 25.7x 90.0x NA

1/23/13 Carrier Back

Office

Provides mobile network management software for wireless telecommunication operators worldwide. $475M 15.8x 55.9x NA

12/5/12 Mobile OS & Utility

Software

Provides enterprise mobile device management software and software-as-a-service (SaaS) for businesses. $327M 14.2x 5.1x NA

4/3/13 Wireless Network

Equipment

Provides 3G, LTE and WiFi base stations and related management software for wireless telecom service providers globally.

$310M 13.7x 3.8x NA

11/18/12 Cloud & IT

Infrastructure

A cloud-based wireless networking company, deploys wireless network infrastructures. $1.2B 12.0x 15.0x NA

6/27/13 Mobile / Local

Marketing

Provides marketing automation, social media marketing, mobile marketing, customer analytics and campaign management software to businesses globally.

$600M 10.3x 17.3x NA

12/20/12 Finance &

Administration

Provides on-demand revenue performance management and marketing automation software solutions for businesses. $957M 9.7x 26.7x NA

3/5/13 Vertical Market -

Healthcare

Provides web-based electronic health records management software for the healthcare sector. $235M 9.4x 3.9x NA

7/23/13 Cloud & IT

Infrastructure

Provides intelligent cybersecurity technologies worldwide.

$2.39B 8.9x NA 43.7%







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Recent Notable Transactions in San Diego: Tech & Telecom

Sorted by LTM Revenue Multiple Excludes deals with Target company revenue less than $2M

Ann. Date Buyer Target Target Description Deal Value LTM

Revenue Multiple

Multiple on $ Invested

Premium to 1 Mo

Prior

7/12/13

Provides prepaid digital wireless services under the Cricket brand name in the United States

$4.9B 1.3x NA 158.2%

10/17/12

Engages in the development of light sources for the manufacturers of photolithography tools in the semiconductor equipment industry

$2.7B 4.2x NA 44.8%

5/20/13

Provides Web, email, and data security solutions to protect an organization’s data and users $1.1B 2.7x NA 70.1%

9/30/13

Provides member and event management, online marketing, transaction processing, HR management and CRM software and SaaS

$1.0B 2.1x NA 48.0%

9/5/13

Provides auto collision claims management and auto repair management and price estimating software and SaaS

$1.0B NA NA NA

8/23/13

Provides SaaS-based fleet management solutions for the transportation industry in North and Latin America

$800M NA NA NA

7/2/13

Provides self-service kiosks that purchase and recycle used mobile phones, tablets and MP3 players, offering cash in exchange to consumers in US $350M 11.9x 11.1x NA







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Most Active Tech & Telecom Buyers – Last 2 Years

# of Deals Notable Tech & Telecom Transactions Company Total Date Company Value Date Company Value

38

9/16/13 8/30/13 6/11/13 4/23/13

2/6/13

Bump Technologies WIMM Labs Waze wavii Channel Intelligence

$60M NA $966M $30M $125M

10/2/12 7/20/12

6/5/12 6/4/12 4/2/12

Viewdle Sparrow Quickoffice Meebo TxVia

$45M NA NA $100M NA

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9/19/13 8/15/13

7/9/13 6/4/13

8/27/12

Daeja Image Systems Trusteer CSL International SoftLayer Technologies Kenexa

NA $900M $20M $2.0B $1.4B

5/2/12 4/13/12 12/8/11

10/11/11 10/4/11

TeaLeaf Technology Varicent Software DemandTec Platform Computing Q1 Labs

$500M $172M $486M $300M $575M

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9/2/13 6/3/13

3/19/13 3/14/13

3/4/13

Nokia (Devices & Services BU) InCycle Software Netbreeze Pando Networks MetricsHub

$7.2B NA NA $11M NA

11/13/12 10/16/12

7/9/12 6/15/12

11/22/11

Azaleos StorSimple Perceptive Pixel Yammer VideoSurf

NA NA NA $1.2B $70M

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8/23/13 8/12/13 4/25/13

3/8/13 8/24/12

Midnox Mobile Technologies Parse Mixtent Threadsy

NA NA $85M NA NA

6/18/12 5/18/12 4/12/12

4/9/12 12/5/11

Face.com Karma Science Tagtile Instagram Gowalla

$60M $80M NA $1.0B NA

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8/2/13 7/3/13

6/25/13 5/20/13 3/25/13

RockMelt Xobni Hortonworks Tumblr Summly

NA NA $50M $1.1B $30M

5/2/13 3/25/13 3/20/13 2/12/13

10/25/12

Todoroo Summly Jybe Propeld Stamped

NA $30M NA NA $10M

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9/10/13 7/23/13 6/20/13 5/29/13

4/3/13

WhipTail Technologies Sourcefire Composite Software JouleX Ubiquisys

$415M $2.4B $180M $107M $310M

1/23/13 11/29/12 11/18/12 11/15/12

2/24/12

Intucell Cariden Technologies Meraki Cloupia Lightwire

$475M $141M $1.2B $125M $254M







13 WORLD CLASS WALL STREET EXPERTISE. BUILT FOR THE MIDDLE MARKET.TM


Observations and Recommendations Life Sciences M&A Trends







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U.S. M&A Dollar Volume: Life Sciences

n  Life Sciences M&A typically $50-80B per year in the U.S. }  2009 was on outlier due to Pfizer / Wyeth ($79.6B) and Merck / Schering-Plough ($51.4B)







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San Diego M&A Dollar Volume: Life Sciences

n  Banner Year in Life Sciences M&A in San Diego with $18B in transactions }  Public M&A driven by 2 very large transactions of $16.0B and $6.9B }  Private M&A was driven primarily by one $1.0B deal







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U.S. M&A Transaction Volume: Life Sciences

n  Life Sciences transaction volume typically 250 deals in the U.S. per annum }  Bio / Pharma accounts for approximately 80% of the transactions







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San Diego M&A Transaction Volume: Life Sciences

n  Life Sciences M&A transaction volume in San Diego typically 10-15 deals per year }  San Diego’s Life Sciences exits are dominated by Bio / Pharma







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Median LTM Revenue Multiples: Bio / Pharma

n  Median Revenue Multiple for Bio / Pharma typically ranges from 2.0-2.5x }  25% of deals are being done at revenue multiples of 3.8x or higher

n  Revenue multiples less relevant because many companies are acquired pre-revenue







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Recent Notable Transactions in San Diego: Life Sciences

Ann. Date Buyer Target Target Description Deal Value LTM

Revenue Multiple

Multiple on $ Invested

Premium to 1 Mo

Prior

2/28/13

Offers molecular and cell biology reagents, endpoint PCR and other benchtop instruments and consumables

$16B 4.1x NA 22.0%

6/17/13

Focuses on developing medicines for the treatment of hormonally-driven cancers, such as prostate and breast cancer

$1B NA 8.2x NA

7/30/13

Focuses on the discovery, development and commercialization of antibiotics for serious infections

$817M 52.8x NA 66.7%

3/6/13

Engages in cGMP manufacturing, analytical development, aseptic filling into vitals and syringes and protein delivery technology

$175M 3.3x 58.3x NA

1/7/13

Engages in the development and marketing of oncology drugs to target glycans

$144M NA NM NA

1/30/13

Engages in discovering and developing agricultural solutions through genomic technologies

$85M NA 3.5x NA

2/12/13

Produces organic pharmaceutical grade cannabis compounds and extracts

$35M NA NA NA

12/11/12

Engages in developing and commercializing prescription therapeutics to treat medical conditions

$25M 2.1x NA NA

5/9/13

Joint venture between Olympus and Cytori, manufactures future generation devices based on adipose-derived stem and regenerative cell processing systems $16M NA NA NA







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Most Active Life Sciences Buyers – Last 2 Years

# of Deals Notable Tech & Telecom Transactions Company Total Date Company Value Date Company Value

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3/28/13 3/20/13 9/24/12

9/3/12 6/15/12

Cosmo Pharmaceuticals Obagi Medical Products QLT, Visudyne Business Medicis Pharmaceutical OraPharma

NA $439M $133M $3.2B $441M

4/12/12 3/26/12 2/13/12

11/18/11

Pedinol Pharmacal ISTA Pharmaceuticals Eyetech Graceway Pharmaceuticals

$492M $22M $26M $1.3B

6 8/26/13 6/10/13 5/28/13

Amplimmune Pearl Therapeutics Omthera Pharmaceuticals

$500M $1.2B $511B

4/2/13 7/12/12 4/23/12

AlphaCore Pharma Link Medicine (Certain Assets) Ardea Biosciences

NA NA $1.3B

5 3/25/13

1/8/13 8/7/12

SARcode Bioscience Lotus Tissue Repair Insmed

$675M $324M $12M

4/12/12 3/15/12

Pervasis Therapeutics Ferrokin Biosciences

$172M $320M

5 5/7/13

11/6/12 10/4/12

Inviragen Envoy Therapeutics LigoCyte Pharmaceuticals

$250M $140M $60

4/11/12 12/20/11

URL Pharma Intellikine

$800M $310M

4 7/1/13 7/2/12

CoAxia ThermoGenesis (CryoSeal Fibrin Sealant System)

NA $2M

3/12/12 11/8/11

ZOLL Medical Asahi Kasei Pharma America

$2.2B NA

4 11/8/12 10/8/12

Vessix Vascular Rhythmia Medical

$425M $265M

9/19/12 3/8/12

BridgePoint Medical Cameron Health

$110M $1.4B

4 4/29/13 12/26/12

Nfocus Neuromedical CV Ingenuity

$96M $275M

7/2/12 11/21/11

MindFrame BARRX Medical

$78M $413M

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A Few Words of Friendly Advice

n  Study Strategic Landscape }  Competitive dynamics, partnerships, product holes of likely buyers, etc.

n  Get to Know Potential Buyers Early }  Familiarity = More Likely to Pay Premium

n  Determine What Potential Buyers Value }  Access to large market, revenue growth, customer list, technology / IP, etc.

n  Strategic Market Entry Platform or Tactical Tuck-In? }  Know which your company is and drive financing and exit timing accordingly

n  Recognize Your Exit Window Before it Closes }  First 2 acquisitions are done at a premium, then multiples typically wane

n  Separate Emotion from Valuation Expectations }  Understand market-driven valuation drivers and how they apply to your company

n  Surround Yourself with the A Team }  Do you want to be the most inexperienced player at the poker table?







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Contact Information

DAVID MICHAELS Managing Director, Head of Technology & Telecom Group Phone: (858) 926-5950 Email: [email protected]

TEAK MURPHY Vice President, Technology & Telecom Group Phone: (858) 345-2408 Email: [email protected]

Economy & Finance

San Diego Venture Group; M&A Event Nov 2013; Capstone