Technology, the 4th Amendment and National Security by Doug Bailey

M&A Reality Check:Is Growth Through Acquisition A Real Possibility for Early and Mid-Stage Start-Ups?

Doug Bailey, Chief Strategy OfficerDigital Guardian

Topics We’ll Discuss

A Little About Me & Digital Guardian

Why Companies of All Sizes Should Consider M&A for Growth

Digital Guardian’s Acquisition Strategy

The 2016 M&A Market Outlook

Are Acquisitions Right for You? The Top 5 Questions

Guidelines for Successful M&A

About Me

Doug BaileyChief Strategy OfficerDigital Guardian

Primarily responsible for managing strategic alliances and corporate development, including spearheading merger & acquisition activities.

Named acting General Manager of Code Green Networks Business Unit and led their successful integration into Digital Guardian.

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About DIGITALGUARDIAN Founded 2003 as Verdasys

• Over 20 patents awarded

Global Presence• Office Locations: US, UK, Japan, India, Singapore

• 3 million agents deployed in +60 countries

Leader in Data-Centric Security • Integrated compliance, insider & external threat security

• Delivered on-premise or as a managed service

Next-Gen Data Protection• Windows, OSX, Linux, network, offline/online, cloud &

mobile

• Protects data independent of the threat or the system

• Encryption, application control, device control, forensics

2015 Highlights

40+% YOY Revenue Growth Raised $66M in Last Funding

Round (Dec/15) 100+ new customers in 2015

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Extending Data Protection to the Cloud and Mobile

Devices.(FALL 2014)

HAS ACQUIRED

Extending Data Protection to Fixed Function Devices.

(SUMMER 2015)

Adding Discovery, Network and Cloud DLP to our

Endpoint Data Protection Capabilities. (FALL 2015)

Is Growth Through Acquisition A Real Consideration for Start-Ups?

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The Market Appears Ripe for M&A?

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“An astounding three-quarters of corporate development executives (74%) forecast that the M&A valuation of private companies would tick lower in 2016, compared with last year.”

Quick Definition: Technology Tuck-in

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Technology Tuck-In (versus Strategic Acquisition)• The acquisition of a company made for the sole purpose of merging the

technology into the existing solution of the acquirer.

• Sometimes referred to as "bolt-on acquisitions.

• Often accelerates the developments of features and functions vs. building them organically.

Top 5 Questions That Are At The Heart Of Every Merger And Acquisition

❶ Does the transaction fit our company strategy?

❷ Are the cultures of the companies a fit?

❸ Do you know what you’re buying? What is the benefit of

combining the two entities?

❹ Can we integrate the businesses?

❺ Are we paying the right price?

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❶ Does the transaction fit your company strategy?

Perhaps a preliminary question is, “What is our company’s strategy?”

What is it that you do or will do in the future to create a sustainable competitive advantage?

At Digital Guardian we are all about DATA PROTECTION and: • Savant Protection extended our solution into new markets as it secured fixed

function devices (ICS systems and POS systems) moving us into retail, critical infrastructure, etc.

• Armor5 accelerated our ability to fill a gap in our mobile data protection capability.

• Code Green gave us new network level and cloud data protection capabilities.

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❷ Are the cultures of the companies a fit?

Cultures can make or break a deal.

A company’s culture prior to a deal may not be the

same after a deal.

Culture is a moving target, and the failure for

culture to align is a tremendous risk.

With technology tuck-in’s culture fit is much less of

a risk.

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❸ Do you know what you’re buying? (What is the benefit of combining the two entities?)

Every M&A seeks synergy.

• These “synergies” are highly sought after, but not always

achieved.

• This question is best answered in the due diligence process.

• We are often tempted to think that due diligence is a

compliance audit with a checklist of documents to review and

procedures to perform. That is far from the truth.

• The purpose of due diligence is to gather intelligence about

the target. The past is an imperfect forecast of the future.

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❹ Can You Integrate the Businesses?

Issues with integrating businesses kill mergers and

acquisitions.

Establishing a transition team with clear direction

and the authority to make decisions may lead to a

successful integration.

Once this is done, communicate regularly with all

members regarding goals and action items.

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❺ Are You Paying the Right Price?

This step is the one where the most time is spent.

Valuation, negotiation and the structuring the deal drive up time and

professional fees.

Sometimes these costs are necessary, but not at the expense of the

first four questions.

Remember that the buyer is paying for a market return based on

future results and inherent risk. The seller is seeking a “walkaway”

amount that allows other goals and objectives to be met.

Understand what the other side really wants and that this is not

always what they say they want.

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Industry Analysis/Pre

Due-Diligence

Target Identification

Due DiligenceFinal

NegotiationsBusiness

Integration

Successful M&A Process

How we did it at Digital Guardian…

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Thanks!Any questions?Doug Bailey, Chief Security Officer

dbailey@digitalguardian.com