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October 2011 GP Bullhound Market Update Tech Sector Offers Silver Lining to Eurozone Clouds
TECHNOLOGY COMPANIES FARED BETTER THAN THE OVERALL EQUITY MARKET
LTM TECHNOLOGY EQUITY INDICES PERFORMANCE
Source: Capital IQ, 30 September 2011 European Technology Index: Ericsson, SAP, ARM Holdings, Moneysupermarket.com, Nokia, United Internet, Logitech, ASOS US Technology Index: Microsoft, Google, Apple, Oracle, Amazon, eBay, Intel, IBM, Motorola
» Technology companies overall outperformed the wider market over the last year
» European main tech companies performed better than their US counterparties until the summer 2011 market crash
» Correction erased most of the gains accumulated during the year
» Superior growth prospects and operating performance for the “New kids on the block” reflected in the materially higher valuations assigned to them by the market
» While between Q2 09 and now established players valuations have remained flat, the “new kids” commanded increasingly higher multiples
Source : GP Bullhound, Capital IQ. European private targets only. As of 16 September 2011.
» Cleantech sector up 56% in Jan-Sep 2011 vs. full year 2010, driven by an increase in average transaction size (e.g. Grupo T-Solar $182m and Sorgent.e Holding $50m)
» Digital media sector attracting less capital in Jan-Sep 2011 vs. full year 2010, but more active with 173 transactions YTD
» Semiconductor sector considerably down, due to large transactions in 2010
» Software sector down 25% mainly driven by smaller transaction sizes
AVERAGE TRANSACTION SIZE
Cleantech Digital Media Semiconductor Software
$21m
$34m
$11m $10m
$16m
$8m $9m $10m
$21m
$6m$9m
$18m
$12m
$36m
$15m
$4m
$10m
$3m$6m $5m
2007 2008 2009 2010 2011 YTD
$2,597m $4,198m $2,006m $4,680m $2,044m Total TV:
10
EUROPEAN M&A QUARTERLY TREND
Source: Mergermarket. Mid-market transactions defined as in the €10m - €500m range. * As of 21 September 2011.
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
0
50
100
150
200
250
300
350
400
450
500
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Q311*
Overall Value Mid-market Value Overall Volume Mid-market Volume
Num
ber of Deals
Valu
e €b
n
11
$67m
$127m
$46m $51m
$206m
$67m
$103m
$135m
$45m$35m
$67m
$200m
$121m
$154m
$52m$37m
$78m$56m
$34m $41m
2007 2008 2009 2010 2011 YTD
PRIVATE TECH M&A SECTOR ACTIVITY
» Cleantech sector up considerably in Jan-Sep 2011 vs. full year 2010, mainly due to larger transactions
» Digital media sector down 12% vs. full year 2010 driven by lower transaction size
» Semiconductor sector down considerably driven by smaller acquisitions
» Software sector on track to beat 2010 numbers, with larger average transaction size
Cleantech Digital Media Semiconductor Software
TRANSACTION VALUE AND NUMBER
AVERAGE TRANSACTION SIZE
Source : GP Bullhound, Capital IQ. European private targets only. As of 16 September 2011.
$21,908m $36,469m $13,988m $7,220m $7,326m Total TV:
Consolidation of established online sectors, expansion into new product retail and evolution of business models driving exits
Flash Sales
New models
Mature models
Shop $112m
$200m
$318m
WESTERN EUROPEAN ECOMMERCE REVENUES
Source: eMarketer, Capital IQ, GP Bullhound Note: excludes financial services and event ticket sales
KEY TRANSACTIONS
Tailored eCommerce
$195m
$200m
Group Shopping Undisclosed
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$639m
$826m
$1,025m
$1,213m
$1,372m
$1,526m
2009 2010 2011 2012 2013 2014
ACQUISITION DRIVERS FUNDAMENTAL SHIFT IN WEB USAGE - SEARCH TO SOCIAL
Media / Entertainment
Video
Social Gaming
$550m
Music
Source: eMarketer, Capital IQ, GP Bullhound Note: excludes financial services and event ticket sales
Broad consumer base, new monetisation strategies and cross-platform opportunities – key drivers for M&A activity in the casual gaming space
GLOBAL SOCIAL GAMING REVENUES KEY TRANSACTIONS
$308m
$100m
$85m
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ACQUISITION DRIVERS MOBILE TO OVERTAKE DESKTOP BY 2014
mCommerce
Mobile
$240m
$41m $115m
$12bn
0.0
0.5
1.0
1.5
2.0
2.5
2007 2009 2011 2013 2015
Internet Users (bn)
Desktop Internet users Mobile Internet users
2008 2010 2012 2014
Source: Morgan Stanley Research, Capital IQ, GP Bullhound
Infrastructure for commercial mobile business models finally established
GLOBAL MOBILE AND DESKTOP INTERNET USERS KEY TRANSACTIONS
IPO $150m
Mobile Advertising $200m
Private Placement
Presenter
Presentation Notes
Future consolidation expected in mobile payments Landgrab / scale necessary to make model work mobile advertising (regional leaders will form – eg imimobile in Asia) Location based services – introduction of NFC
19 Source: Societe Generale, Capital IQ, GP Bullhound
ACQUISITION DRIVERS SCRAMBLE FOR FOOTHOLDS IN SECURITY AND CLOUD
COMPUTING
$10.3bn
$602m $200m
» Increased activity by incumbent players (e.g. Microsoft, HP) to enter new products / technologies in order to diversify from stagnating core business
» Focus on security software deals continue from last year, due to the increased awareness of security and privacy
» Financial software area also hot (e.g. Misys / Sophis, EFR Holdings / eFront, FIS / The Capital Markets Company…)
CLOUD SERVICES REVENUES KEY DRIVERS AND TRANSACTIONS
$60bn
$69bn
$78bn
$92bn
$119bn
$142bn
2009 2010 2011 2012 2013 2014
$9.0bn
Presenter
Presentation Notes
SaaS attracting intense attention from PE players given efficient cash cycle and visibility on revenues
20 Source: Capital IQ, Company Information as of 30 September 2011
» Number of high profile tech IPOs in late 2010 and H1 2011
› All companies managed to price the offers at the top or even above the price range and many upped the offering size and/or the price range shortly before IPO
› All companies, except for Pandora, registered a very strong performance on the first day of trading
› With the exception of Mail.ru and LinkedIn, valuations are below IPO levels
» High profile IPOs such as Groupon, Zynga, LivingSocial and Twitter now at risk of being postponed due to current market status
KEY STATISTICS OF RECENT IPOs
HIGH PROFILE IPOS IN H1 2011, BUT MIXED SENTIMENT IN THE SECOND HALF OF THE YEAR…
COMMENTS
KEY STATISTICS OF RUMOURED IPOs
Company IPO Date Exchange IPO Price IPO Range % of range IPO SizeIPO Day
Yandex N.V. Mail.ru Group Pandora Media, Inc. Demand Media, Inc. LinkedIn Corporation
Days from IPO
Share Price (rebased)
...LEADING TO STELLAR OR VERY POOR PERFORMANCE FOR SOME IPOS…
Source: Capital IQ, Company Information as of 30 September 2011
Share Price Performance (based on IPO price)
0 1 day after 1 week after 1 month after Since IPOYandex 55.4% 37.8% 23.2% (18.2%)Mail.ru 30.0% 29.8% 55.1% 5.6%Pandora 8.9% (8.7%) 20.4% (8.4%)Demand Media 33.2% 19.3% 33.2% (52.9%)LinkedIn 109.4% 112.1% 69.6% 76.9%Average 47.4% 38.1% 40.3% 0.6%Median 33.2% 29.8% 33.2% (8.4%)
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SO IN SUMMARY, IT COULD GO EITHER WAY
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TABLE OF CONTENTS
1 GENERAL ECONOMIC ENVIRONMENT
2 M&A AND IPO MARKET
3 DIGITAL MEDIA TRENDS
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WINNER TAKES IT ALL: EUROPEAN SOCIAL NETWORKS
Source: ComScore
Facebook 24% of total
Facebook 69% of total
EUROPEAN UNIQUE MONTHLY VISITORS (000’S)
25
TOP 25 GLOBAL MEDIA GROUPS
8 EUROPEAN AMONG THE TOP 25 GLOBAL MEDIA GROUPS
Source: Fortune
44.2
34.3
25.3
25.1
25.0
24.2
18.2
14.8
13.4
13.3
11.5
11.4
9.8
8.0
7.4
7.3
7.1
6.8
6.6
6.3
5.2
5.2
4.7
4.1
3.3
Tim
e W
arne
r
Wal
t Dis
ney
New
s Co
rpor
atio
n
Vive
ndi
Com
cast
Cor
p
Berte
lsm
ann
Laga
rder
e
Dire
cTV
Dai N
ippo
n Pr
intin
g
Topp
an P
rintin
g
Viac
om
Om
nico
m
Echo
star
Gan
nett
WPP
Libe
rty M
edia
Clea
r Cha
nnel
Reed
Els
evie
r
Thom
son
Reut
ers
McG
raw
Hill
BSky
B
Pear
son
Med
iase
t
Trib
une
NY T
imes
Revenues ($bn)
Europe North America Asia
15 North-American groups, 64% of revenues 8 European groups, 28% of revenues 2 Asian groups, 8% of revenues
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SIGNIFICANT OPPORTUNITY FOR VALUE CREATION IN EUROPEAN ONLINE ADVERTISING
TOP 10 DIGITAL COMPANY MARKET CAPS - US VS. EUROPE ONLINE ADVERTISING - US VS. EUROPE
(1) Including online gambling (2) Excluding online gambling (3) Includes Google, Amazon, eBay, Yahoo!, Priceline, Expedia, Netflix, WebMD, Monster and Vista Print (4) Includes Unibet, bwin, PaddPower, Playtech, PartyGaming, Rightmove, SeLoger, ASOS, Meetic, MoneySupermarket (5) Incluides Rightmove, SeLoger, ASKOS, Meetic, MoneySupermarket, HiMedia, Xing, Adenclassifieds, Aufeminin, Zooplus
6,103
1,355
25,411
20,381
US Europe US Europe
2000 2010 ($m)
Europe 22% of
US
Europe 80% of
US 305,882
11,862 3,308
US Europe Europe
Europe 4% of
US
Europe 1 % of US
($m)
(3)
(4) (5)
(1) (2)
Whereas European Online Advertising now represents 80% of the US market, market caps of top 10 listed online European companies are only worth 4% of US relative market caps
27
STRONG RELATIONSHIP BETWEEN VALUATION AND GROWTH
Source: ComScore, Company Info, Capital IQ
EV/EBITDA 2012E VS. EBITDA GROWTH
There is still a very strong correlation between valuations and growth rates. This reflects the importance of timing when looking to exit your company
aufemininXINGWebMD
The KnotMaximiles
The Knot
Expedia
Orbitz
PricelineTravelzoo
Ctrip.com
MakeMyTrip
Wotif.com
NielsenGartner
GfK
YouGov
Brainjuicer
Google
Yahoo!
IAC
Amazon.com
eBay
R² = 0.8260x
5x
10x
15x
20x
25x
30x
35x
(10%) 0% 10% 20% 30% 40% 50% 60% 70% 80%
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STILL EARLY DAYS IN THE INTERNET CYCLE
Source: Ben Horowitz (The Economist, June 2011)
» According to Ben Horowitz, co-founder and general partner at Andreessen Horowitz we are not in a technology bubble
» Ben believes that major technology cycles generally last 25 years, with the "bulk of the purchases" happening the last 5-10 years as late adopters sign on
» Using this as a frame of reference he says we are "poised to hit the major adoption wave for the Internet technology platform over the next 8 years“
» The charts on the right show examples of the last two major computing cycles (before the internet). This indicates that we are still awaiting the major adoption wave for the internet technology platform
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Stockholm Birger Jarlsgatan 5 111 45 Stockholm +46 (0) 8 5450 7414
San Francisco One Maritime Plaza, Suite 1620 San Francisco, CA 94111 +1 (415) 986 0191
Background Co-founder of GP Bullhound M&A at Barclays Capital MA in Marketing and LLB in Law at
Southampton University
London 52 Jermyn Street London, SW1Y 6LX +44 (0) 20 7101 7560
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