How do Technology Companies And Venture Capital Firms Around The World Maximize M&A Exit Value and Where Does Asia Compare
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This document discusses trends in global and Asian technology M&A activity and provides advice for companies considering an acquisition or exit. It notes that global M&A reached record levels in 2014, with tech deals making up 35% of the total. Recent mega-deals are highlighted, with acquisitions valued between $2.5-19 billion. The document advises that while most deals are small, companies can still generate high returns, and the best returns typically come from companies that have raised $2-10 million. It also provides tips for companies to optimize their chances of a successful acquisition or exit.
How do Technology Companies And Venture Capital Firms Around The World Maximize M&A Exit Value and Where Does Asia Compare
- 1. Maximizing M&A Exit Value Globally and Where Does Asia Compare Jacob Mullins CEO & Founder, Exitround
- 2. Global M&A is on FIRE 2014 • 33% increase to $599Bn, ’13 • Most active start since 2011 • TMT M&A highest share of Global M&A since 2006 • Technology, highest value on opening qtr by 55% increase, ‘13 *Source: Mergermarket M&A Trend Report: Q1 2014 (link)
- 3. $2,500,000,000 • 13 years old / 1 year public • $188M VC / $162M public • $400M revenue 2013 • Thin profitability margin • 6,000 customers, Fortune 500 ————————————— • Market leader • Strategic asset for growth • Customer base • Revenue • Horizontal platform expansion Sources: Bloomberg “ExactTarget Soars in Debut After Initial Public Offering” (link) Crunchbase: ExactTarget (link Inc. “Inside ExactTarget's Journey: From IPO to $2.5 Billion Acquisition” (link) Acq 2013 by Salesforce
- 4. $3,200,000,000 • 3.75 years old • 1.5 years product in market • $80M VC raised • $300M revenue (est.)* • ~300 employees —————————————— • Disruptive business • Top hardware team • Strong early traction in market • Owned mindshare Source: Business Insider “Nest, Google's New Thermostat Company, Is Generating A Stunning $300 Million In Annual Revenue” Acq 2014 by Google
- 5. $19,000,000,000 • 5 years old • $58M VC raised • 450M MAU / 315M DAU • 50B messages per day • 50 employees ———————————— • Tremendous engagement • Surpassing daily global SMS traffic • Potential threat to tech majors WhatsApp Source: TechCrunch “Facebook Buying WhatsApp For $19B, Will Keep The Messaging Service Independent" Acq 2014 by Facebook
- 6. Opportunity 10x Revenue Huge Disruption EngagementDominance $42 per MAU Insanely engaged 6.25x Revenue Industry leader
- 7. Overall Tech M&A Landscape • Mega-deals are < 1% by volume < 1% deals 88% deals *Source: Mergermarket M&A Trend Report: Q1 2014 **Source: Woodside Capital Partners “MASiV 2014: The M&A Silicon Valley Gathering Report” • 88% of all deals are below $100M Doesn’t mean you can’t make money, in fact…
- 8. Exitround: The Exit Curve • More money does not equal higher exit • Best return on capital: $2-3M & $5-10M raise • Consumer ROI: 9.1x average | 4.8x median • Enterprise ROI: 21.1x average | 7.5x median • Significant increase in value after year four *Source: Exitround “The Exit Curve: Exitround’s Report On Tech M&A” 2014; exitround.com/data exitround.com/data
- 9. M&A Reaching Stratospheric Heights • Coming out of global recession, M&A augments diminished R&D • Cash rich tech “major” acquirers • Non-tech corporations realize software is the future • Ease of starting company creates more point solution opps • Increase in seed + angel funding
- 10. Global Tech M&A 2013 • Software is 35% of total M&A activity • $188B Tech M&A, 65% up from ’12 • Internet, IT Services & Hardware are on the upswing ———————————————— 2014 • Tracking 41%+ higher YTD to ’13 • EY on 2014: “Tech M&A to be ‘strong’ at worst, ‘blockbuster’ at best” *Source: PricewaterhouseCoopers “US technology deal insights Analysis and trends in US technology M&A activity 2014” MarketWatch “U.S. stock market is starting to ride a tech M&A wave”(link) EY “Global technology M&A update, 2013 Year in Review”
- 11. Asia Tech M&A 2014 • Q1 M&A value $102B, 36%+ ’13 • TMT M&A up 53% from ’13 • Inbound M&A (from abroad) at highest levels • US Outbound M&A at highest levels ever, $169B YTD • Technology M&A 2x 2013 levels *Source: Mergermarket M&A Trend Report: Q1 2014 (link)
- 12. Today’s M&A Target Buyer Incentives • Put cash to use: $832B cash sitting w top 25-tech co’s • Internet marketshare growth slowing, grow top-line through horizontal exp • Mobile, the new frontier • The great Cloud migration ($59B ‘09 —> $149B ’14) ! Characteristics of targets • Disrupting status quo • Market leading in mindshare • Engaged users • Quick growth rate, not necessarily largest Source: MarketWatch “U.S. stock market is starting to ride a tech M&A wave”(link) Deloitte “Top 10 Issues for Technology M&A in 2014” (link)
- 13. Opportunity Engagement Dominance Large opportunity in Asian markets to expand • Market share • Mobile users & engagement • Shift to SaaS models in software Take advantage
- 14. Actionable Insights 1. Traits of successful M&A 2. Tips for successful M&A 3. What to expect
- 15. Fundraise or M&A ? Start early • 2.75 years average time sellers have known buyers • After fourth year, significant increase in M&A value • Partners, competitors, other (banker, Exitround) Find your champion • Identify internal business lead, beyond corp-dev • Get on “the list” • Build trust over time Traits of successful M&A Source: Exitround
- 16. Tips for successful M&A Prepare for speed • Corp docs ready to share • Employee IP assignments & contracts • Financing docs • Patents, IP • Key customer contracts • Up-to-date financials Front load conversations Time-box the opportunity
- 17. What to expect… You… Have a deck & story Shield your team Know your objectives from M&A See a long term mutual vision ! Them… Poke around, to many Term sheet, to few Intense diligence Integration
- 18. Optimize for success • M&A at all time highs • Technology needs increasing across industries & geographies • Be active, be prepared • Solve a problem • Opportunity • Engagement • Dominance