Applied Technology & Digital Media Industry Update Q2 2017

Transcription

1 Applied Technology & Digital Media Industry Update Q2 2017

2 Q2 M&A TRANSACTION SUMMARY Q2 Deal Volume (1) Applied Technology & Digital Media M&A decreased slightly in Q following an increase in transaction activity in Q and Q For Q2 2017, IT Services was the most active M&A segment of the Applied Technology & Digital Media universe Networking Hardware Digital Media & 3 Marketing Services 6 Software as a Service 29 IT Services Q Q Q Q Q Application Software 151 Q total Applied Technology & Digital Media M&A transaction volume was 395, representing a 0.3% increase from Q Footnote: (1) Defined as U.S. or Canadian targets that fall within our core Applied Technology & Digital Media coverage sectors or transactions completed by companies in BlackArch s public company coverage universe 2

3 NOTABLE M&A TRANSACTIONS TPG Capital acquired a 51% stake in McAfee LLC from Intel Corporation for $3.1 billion on April 3, Veritas Capital Fund Management acquired Peraton Corporation from Harris Corporation for $690 million on April 28, This valuation represents a 0.7x revenue multiple. April 2017 McAfee LLC develops and delivers security solutions and services that protect systems, networks and mobile devices. April 2017 Peraton Corporation provides information technology and engineering managed services to government agencies. Equinix, Inc. acquired Verizon s Portfolio of 24 Data Center Sites from Verizon Communications Inc. for $3.6 billion on May 1, This valuation represents a ~13x adjusted EBITDA multiple. BC Partners and Medina Capital acquired Century Link Inc s Data Centers and Colocation Business from CenturyLink, Inc. for $2.3 billion on May 1, This valuation represents a 3.6x revenue multiple. 24 data centers May 2017 Verizon s 24 data center sites consist of 29 data center buildings across 15 metro areas. Data Center and Colocation Business May 2017 Century Link Inc s Data Centers and Colocation Business consist of 57 data centers and 700 employees. TPG AG TBG AG acquired Telvent DTN LLC from Schneider Electric for $900 million on June 1, This valuation represents a 4.2x revenue multiple. Finastra Group Holdings Limited acquired DH Corporation from 1832 Asset Management LP for $3.5 billion on June 13, This valuation represents a 14.6x EBITDA multiple. June 2017 Telvent DTN develops business management tools that enable companies and industry traders to manage their business through information solutions and market intelligence products. June 2017 DH Corporation provides payments, lending and financial solutions to banks, specialty lenders, credit unions, governments and corporations. 3

4 APPLIED TECHNOLOGY & DIGITAL MEDIA PERFORMANCE INDEX Public Company Trading Multiple Trend Analysis Y-o-Y Month Change (%) Y-o-Y Q-o-Q 25 Application Software Q-o-Q IT Services, Outsourcing & Training Digital Media & Marketing Services 5 Enterprise Software & Services 3-Month Change (%) Diversified Computer Hardware Software as a 0 Service Networking Hardware, Software & Services -5 Semiconductors and Equipment Y-o-Y Q-o-Q -10 Y-o-Y Q-o-Q Note: Size of each data point corresponds to the relative size of each sub-sector s trading multiple 4

5 PUBLIC COMPANY TRADING MULTIPLE SNAPSHOT As of June 30, 2017 Sub-sector Median TEV/EBITDA Multiple Application Software 20.8x Enterprise Software & Services 16.3x Software as a Service (1) 37.1x Digital Media & Marketing Services 15.9x IT Services, Outsourcing & Training 11.7x Diversified Computer Hardware 8.6x Networking Hardware, Software & Services 8.1x Semiconductors and Equipment 11.7x (1) The sub-sector s Median TEV/Sales for the same period was 7.2x 5

6 COMPARABLE PUBLIC COMPANY ANALYSIS ($ in Millions Except Per Share Amounts) Market Data LTM Financial and Performance Data (1) Valuation Multiples Price 52-Week Equity EBITDA 3 Yr. Revenue TEV/LTM: Company 6/30/2017 High Low Value TEV (2) Revenue EBITDA Margin CAGR % Revenue EBITDA Software Application Software Adobe Systems Incorporated $ $ $94.06 $69,787 $66,744 $6,526 $2, % 16.7% 10.2x 31.2x Intuit Inc ,028 32,935 5,089 1, % 4.8% 6.5x 20.8x Autodesk, Inc ,220 21,900 2,005 (294) (14.7%) (4.4%) 10.9x NM Symantec Corporation ,183 21,113 4, % (13.7%) 4.9x 29.6x Dassault Systèmes SE ,774 20,688 3, % 14.5% 5.7x 22.6x Open Text Corporation ,324 10,495 2, % 12.1% 4.6x 16.6x Synopsys, Inc ,962 10,248 2, % 9.2% 4.0x 20.6x Ansys, Inc ,404 9,537 1, % 4.9% 9.2x 20.7x Cadence Design Systems, Inc ,364 9,510 1, % 7.5% 5.2x 23.3x Nuance Communications, Inc ,008 6,806 1, % 1.5% 3.4x 16.7x Tyler Technologies, Inc ,514 6, % 20.5% 8.1x 36.6x Teradata Corporation ,860 3,257 2, % (7.3%) 1.5x 13.0x Manhattan Associates, Inc ,337 3, % 9.8% 5.4x 16.0x Median 22.1% 7.5% 5.4x 20.8x Enterprise Software & Services Microsoft Corporation $68.93 $72.89 $50.39 $532,175 $496,594 $89,950 $30, % 1.2% 5.5x 16.3x SAP SE , ,476 26,428 6, % 10.9% 4.8x 19.2x Cerner Corporation ,964 21,982 4,827 1, % 18.0% 4.6x 16.3x Red Hat, Inc ,998 16,110 2, % 16.5% 6.4x 37.2x CA, Inc ,519 14,676 4,062 1, % (2.5%) 3.6x 11.8x Citrix Systems, Inc ,028 12,072 3, % 4.1% 3.5x 12.2x The Sage Group plc ,654 10,093 2, % 9.2% 4.7x 16.3x Pegasystems, Inc ,501 4, % 12.9% 5.4x NM Allscripts Healthcare Solutions, Inc ,315 3,979 1, % 6.5% 2.4x 24.9x MicroStrategy Incorporated ,194 1, % (4.5%) 3.1x 14.4x Quality Systems, Inc ,079 1, % 4.6% 2.0x 17.3x Median 24.9% 6.5% 4.6x 16.3x Software as a Service Salesforce.com, inc. $86.60 $91.99 $66.43 $61,677 $60,992 $8,863 $ % 26.2% 6.9x NM ServiceNow, Inc ,007 17,548 1,632 (32) (2.0%) 44.4% 10.8x NM The Ultimate Software Group, Inc ,243 6, % 23.4% 7.2x NM LogMeIn, Inc ,499 5, % 47.6% 8.5x 41.0x RealPage, Inc ,972 3, % 16.2% 5.0x 33.2x 2U, Inc ,231 2, (20) (8.4%) 35.4% 8.8x NM Cornerstone OnDemand, Inc ,031 1, (45) (10.2%) 26.1% 4.5x NM Median 5.1% 26.2% 7.2x 37.1x Sub-Sector Median 19.9x Footnotes: (1) LTM refers to the most recent twelve-month period for which data was available (2) Total enterprise value equals equity value plus minority interest, preferred stock and net debt; net debt equals total debt less cash and cash equivalents 6

7 COMPARABLE PUBLIC COMPANY ANALYSIS ($ in Millions Except Per Share Amounts) Market Data LTM Financial and Performance Data (1) Valuation Multiples Price 52-Week Equity EBITDA 3 Yr. Revenue TEV/LTM: Company 6/30/2017 High Low Value TEV (2) Revenue EBITDA Margin CAGR % Revenue EBITDA Technology Services Digital Media & Marketing Services Alphabet Inc. $ $ $ $635,840 $547,338 $99,275 $32, % 17.7% 5.5x 17.0x Facebook, Inc , ,261 33,173 18, % 49.1% 12.2x 22.4x Akamai Technologies, Inc ,611 8,411 2, % 11.1% 3.5x 12.3x Forrester Research, Inc % 2.6% 1.7x 14.9x Median 30.4% 14.4% 4.5x 15.9x IT Services, Outsourcing & Training Cognizant Technology Solutions Corp. $66.40 $68.18 $45.44 $39,109 $36,044 $14,131 $2, % 13.8% 2.6x 13.0x CGI Group Inc ,890 16,067 8,325 1, % 1.1% 1.9x 11.5x Syntel, Inc ,418 1, % 1.9% 1.9x 7.2x ManTech International Corporation ,606 1,514 1, % (6.0%) 0.9x 12.0x Median 18.2% 1.5% 1.9x 11.7x Sub-Sector Median 12.6x Hardware and Equipment Diversified Computer Hardware Apple Inc. $ $ $94.37 $750,897 $782,511 $220,457 $69, % 7.8% 3.5x 11.2x Samsung Electronics Co., Ltd. 2, , , , , ,721 50, % (1.8%) 1.2x 4.2x International Business Machines Corp , ,735 78,439 17, % (6.8%) 2.3x 10.3x HP Inc ,425 30,022 49,473 4, % (23.8%) 0.6x 7.0x Median 24.6% (4.3%) 1.7x 8.6x Networking Hardware, Software & Services Cisco Systems, Inc. $31.30 $34.60 $28.17 $156,502 $120,998 $48,510 $15, % 0.9% 2.5x 8.0x Juniper Networks, Inc ,653 9,803 5,201 1, % 2.3% 1.9x 8.1x F5 Networks, Inc ,221 7,206 2, % 7.7% 3.5x 11.5x Brocade Communications Systems ,171 5,423 2, % 2.7% 2.3x 15.0x NETGEAR, Inc ,399 1,038 1, % (2.0%) 0.8x 7.2x Median 23.2% 2.3% 2.3x 8.1x Semiconductors and Equipment Intel Corporation $33.74 $38.45 $32.38 $158,882 $167,571 $60,481 $23, % 4.6% 2.8x 7.1x QUALCOMM Incorporated ,584 83,529 22,571 7, % (4.9%) 3.7x 11.7x Texas Instruments Incorporated ,647 76,956 14,184 6, % 4.2% 5.4x 12.3x Applied Materials, Inc ,393 43,151 12,942 3, % 15.0% 3.3x 12.3x Micron Technology, Inc ,145 41,334 17,401 7, % 5.1% 2.4x 5.9x Lam Research Corporation ,814 19,630 8,014 2, % 20.3% 2.4x 8.8x Microchip Technology Incorporated ,705 19,353 3,581 1, % 21.5% 5.4x 15.4x KLA-Tencor Corporation ,345 14,597 3,480 1, % 5.9% 4.2x 10.9x Marvell Technology Group Ltd ,303 6,654 2, % (13.1%) 2.8x 15.3x Cypress Semiconductor Corporation ,497 5,578 2, % 41.4% 2.7x 31.1x Cabot Corporation ,338 4,255 2, % (10.4%) 1.6x 8.7x Cirrus Logic, Inc ,040 3,649 1, % 31.0% 2.3x 8.8x Silicon Laboratories Inc ,894 2, % 7.2% 3.6x 22.9x Median 27.7% 5.9% 2.8x 11.7x Sub-Sector Median 10.6x Footnotes: (1) LTM refers to the most recent twelve-month period for which data was available (2) Total enterprise value equals equity value plus minority interest, preferred stock and net debt; net debt equals total debt less cash and cash equivalents 7

8 APPLIED TECHNOLOGY & DIGITAL MEDIA COVERAGE TEAM Founder of BlackArch Partners and head of Applied Technology & Digital Media practice BlackArch Partners, Associate M&T Bank, Officer Kelly Katterhagen Managing Director Office: (704) Mobile: (704) BlackArchPartners.com Completed over 60 middle-market M&A transactions and multi-year advisory engagements President of IOA Corp. advised privately held businesses on equity maximization and liquidity planning Director at Bowles Hollowell Conner & Co. Officer at J.P. Morgan & Co. Jonathan O Connor Associate Office: (704) Mobile: (407) OConnor@ BlackArchPartners.com LifeNet International, Co-Founder CNL Financial Group M.B.A. from University of Virginia s Darden School of Business B.S. in Finance from Southeastern University M.B.A. from Harvard Business School and B.A. from Colgate University, magna cum laude JOHNNY CONKLIN Managing Director Office: (704) Mobile: (704) Conklin@BlackArchPartners.com CHRIS VINCENT Associate Office: (704) Mobile: (301) Vincent@BlackArchPartners.com JULIE NEVELEFF Analyst Office: (704) Mobile: (301) Neveleff@BlackArchPartners.com 8