Introduction
Bruce Milne
Good day and thank you for joining us. I’m Bruce Milne, CEO of the Corum Group, your host for today. We have a jam-packed session. This is our largest mid-year report ever and I want to thank Timothy Goddard for his work on this and congratulate him on his recent promotion to Senior VP. We’re going to have a field report, a research report, and then look at the ten disruptive tech trends: Online exchanges, digital currency flow, connected health, omnichannel sales, IoT, enmeshed systems, AI enablement, positioning intelligence, sports and gaming, and data security. We’re covering a lot of ground, so we will run a few minutes over today.
As an introduction, we keep getting asked what about Brexit and the election, how will that effect things, should we be worried. We get enough stuff on the news channels and on the internet to worry about every day. The press tends to play up everything. Our view on Brexit… well let me first say that the election will make for great theater, it’ll be very entertaining between now and November. But regarding Brexit, I have a very interesting story that I think kind of says it all.
I have a friend who, on the 22nd of June in the evening made an offer for his dream home here in Seattle. Seattle is a white hot market with multiple bids, as you may be aware. He was able to get a pre-emptive bid on what his wife considered their perfect home. The next morning he woke up to the Brexit vote and panicked, and rescinded the offer. His wife was in tears. So he called me, said you’ve been all over the world, what do you think about this vote? I told him that the press has a way of overplaying things. They thought the world was falling apart a little while back with the Greeks, remember that? Then about this time last year the Chinese stock market was crashing, and the headlines were referencing 1929. Now it’s Brexit. So think about that. The press has a short memory, they often don’t know what they’re talking about, they tend to way overplay things, and this will be old news soon. He quickly went back and resubmitted the offer.
Things are good. We just had a record quarter here at Corum. I was at a car dealership over the weekend with my daughter and I couldn’t even get somebody to talk to me. I just booked to travel to Boston to do a merge briefing on Tuesday and a Selling Up Selling Out in New York on Thursday. Tough getting a flight. Tough getting a car! We’re doing well, folks. But, everything is cyclical. I always just have to look at this simple chart. I love it when it goes up, but when it goes down it is a very steep decline. The only thing I know is that the next move is not up. So be careful about timing in this market.
Now let’s get to our reports.
Field Report: Gurock Software acquired by Idera
First we’ll hear a field report on the sale of Gurock to Idera, Jon Scott in Amsterdam.
Jon Scott
We recently advised Berlin-based Gurock Software, the makers of the very popular Test Rail test management software suite to Idera Software. Idera is the Texas-based provider of database lifecycle management solutions and development solutions under the Embarcadero brand. They are owned by a big PE firm, TA Associates. Gurock compliments Idera’s capability in both areas and will continue as a standalone entity. Gurock was founded by brothers Dennis and Tobias Gurock, who ran the company in one of the most effective ways I’ve ever seen. They had a razor focus on customer service and heavily invested in Test Rail’s product development in their cloud infrastructure. The Gurock brothers had a handle on all the company’s key metrics and measurements, and one of the best revenue forecasting models I’ve come across.
Given their big SaaS business, they ran and measured the company literally on a dashboard with a very sophisticated model, and they were able to grow the company quickly at extremely high EBITDA margins. By combining with Idera, they can share a greater development resource opportunity and access to a world class sales and marketing machine. This is an example of a company that had a strong operating model and used it to their advantage in the M&A process.
Bruce Milne
Jon, congratulations to you and to the Gurock brothers. They represent a budding set of very successful global entrepreneurs in the Berlin space and we’ll see a lot more on that.
Corum Mid-Year Research Report: Cashing in on Internet software
Now let’s move on to our Corum Research Report with Elon Gasper, Amber Stoner, Aaron King, Yasmin Khodamoradi, and Thomas Wright.
One thing I want you to pay attention to is that you’ll see a lot of the big names are back in, big time, like IBM and Vista Equity, whom you may have seen with us on here as the co-sponsor of our annual report. But I want you to look at all the buyers out there that you don’t know about.
With that, let’s turn it over to Elon and his team.
Elon Gasper
Thanks, Bruce. We begin with the public markets climbing out of their first half trough to hit more record highs this week, and though some indices lag, particularly international, most, including the NASDAQ, are up for the year now as this long bull market continues with a break to the upside. Even better for M&A, the enduring support of huge corporate cash stockpiles, private equity reserves and other factors were joined as more interest rates worldwide sank into negative territory for bonds making it yet easier for buyers to borrow. I know I keep saying this, echoing Bruce, but with trillions of dollars in parked and ready cash out there, tech execs of companies with exit potential should be taking advantage of these conditions to at least calibrate the market.
Our Corum Index counted about the same number of transactions as a year ago, with megadeals up 17%, and PE 30%, other metrics nominal except for an increase in proportion of start-ups among sellers as consolidations depleted other supply. Megadeals year to date include 6 others already this month, spanning all our 6 markets, from the largest Consumer gaming deal ever, to the volume leader, Horizontal, rising to ten deals in the first half, from just 4 in all of last year, with Internet taking the value crown, as PEs try to spend those trillions.
Topping the first half was a deal which brings together intelligent cloud and social networking at a stunning $26 billion! That’s what Microsoft paid for LinkedIn to refurbish its Office suite and boost its collaboration and messaging inventory, while bringing its Dynamics CRM ecosystem to the fore, but more on that later.
First, some three-year context for value across these markets, where sales multiples trends have knocked Infrastructure down amid waves of consolidation, as vertical markets, led by SaaS companies, took over the top spot and IT Services kept up its dramatic growth, nearly doubling to new highs -- stickiness and specialization a factor there, too. The EBITDA multiples race has been distinguished by the great rise in demand for profitable consumer models, and again by steady lift in IT Services.
Yasmin, who bought the most tech companies?
Top Buyers Leaderboard
Yasmin Khodamoradi
Our Top Buyers Leaderboard shows J2 Global held on to its number 1 position with 11 deals scored in the first half-year -- not counting 5 more announced this month -- replicating its 2015 streak. In addition to shoring up its cloud services division with conventional security and IT services providers, J2 shifted focus to its digital media segment with its infamous acquisition of Gawker Media, as well as other deals.
IBM came in second, with 10 deals in Q1 alone. Its latest purchase, Israel’s EZSource, aims to help application developers quickly upgrade mainframe code, adding to IBM’s API management solutions at a moment when Brexit and blockchain fever are driving talk of reboot opportunities in government and other big tech.
Microsoft and WPP shared the bronze with 8 deals, but don’t be surprised if Microsoft repeats last year’s first place in the end, given Satya Nadella’s strategy for inorganic growth through M&A, enabled by partnerships like this month’s IoT alliance with GE.
All these top buyers made acquisitions globally, and the North American market continues to flourish with over $18B spent on cross-border acquisitions.
Here in Seattle, Tableau purchased German relational database management SaaS provider HyPer for $16M.
On the sell-side, Korean electronics giant Samsung acquired Californian cloud services veteran Joyent to draw on its cloud infrastructure and application hosting capabilities to develop a leadership position within the mobile and IoT arenas.
And Kickstarter made its first acquisition, Drip, a service that lets music artists engage with fans through a monetization platform.
The artificial intelligence arms race made its way to Europe as Silicon Valley giants seek AI expertise abroad. London-based Magic Pony was picked up by Twitter for a reported $150M to enhance the video experience for their users globally. In Paris, the image recognition startup Moodstocks was bought by Google to bulk up its machine learning capabilities.
In Eastern Europe, adtech made waves as mobile-gambling advertiser Catena placed a $17M bet on Serbia’s AskGamblers, following its 2015 acquisition by Market Tech, Germany’s Glispa acquired Estonia’s MoneyTap, combining the market position and reach of Glispa with monetization techniques.
Thomas, take us further East?
Thomas Wright
Sure. In India, M&A activity is up 15% year over year. Booking services were the hottest ticket in the region -- while outsourcing acquisitions barely made it to the gate -- with 7 deals this year. However, after the flood of activity seen in the second half of last year, there may be a monsoon of deals yet to come.
China has seen an explosion of M&A activity, with 70% more deals year over year. As Chinese firms look to diversify their holdings and move their money to more stable markets that are free of currency controls, M&A has been flowing with it, with domestic deals outnumbered by acquisitions of U.S. companies.
Adtech was a key sector here, with China’s Mobvista paying $25M for US based NativeX in order to gain access to the global market, and Beijing based Spearhead paying $148M for Smaato and its mobile advertising exchange and SaaS services.
Gaming has dominated this deal flow, but Jim Perkins will address that more later on in the Webinar.
Yasmin Khodamoradi
Moving Down Under, where we just held a series of seven conferences, Australian companies remain in high demand with 93 acquisitions so far across a broad range of sectors
Australian payment processor Web Active received $50M from Atlanta’s Global Payments to allow its omnichannel solution traction in APAC.
Regional IT service provider Citadel Group also branched out into health – acquiring PJA Solutions, an e-Health data management service, for $34M and shelling out $12M for records management systems integrator Kapish.
Now to Latin America, where economic woes have taken their toll as deal count dropped by half. However this didn’t stop Cuba, a newcomer to the world stage, from entering the fray, as Cuban travel site Travelucion was purchased by Canadian holding company MPH Ventures.
Elsewhere on the map, Israel continues its tradition of innovation with many deals in sectors like security, marketing, enterprise and video, where Intel purchased Replay Technologies and its 3D video replay services for sports.
That wraps our world tour. How’s Horizontal doing, Amber?
Horizontal Software Valuation Metrics
Amber Stoner
Sales multiples in the Horizontal sector are up from previous highs reached in March while EBITDA multiples have dipped slightly following the spike in May. While the SCM and HR sectors lead horizontal in both sales and EBITDA multiples, valuation laggers marketing and adtech, and CRM are driving high valuation megadeals.
Cloud analytics filled in portfolio gaps in the first half. Marketo was snapped up by one of our top PE buyers, Vista Equity for $1.7B, following its $1.6B acquisition of Cvent. Salesforce entered the fray, spending nearly $3B for e-commerce SaaS vendor Demandware. Another top PE acquirer, Thoma Bravo, bought visual analytics provider QlikTech for $3B.
In SCM, Germany’s Dematic was picked up by industrial equipment manufacturer Kion Group for over $2B in an example of traditional companies’ ongoing demand for innovative tech.
Customer analytics companies were popular targets throughout the first half. Demand-forecasting provider Predictix was nabbed by ERP incumbent Infor for $125M to enhance Infor’s cloud enterprise applications suite. Israel’s sales intelligence startup Implisit was wrapped up by Salesforce to try to help its customers amplify their sales team's efficiency.
Ontario-based point-of-sale analytics company ToolBox Solutions was acquired by SPS Commerce for nearly $22M, which should expand its retail community, while another Canadian vendor, Pathful was snatched up by Mobify hoping to capitalize on Pathful’s expertise in customer behavior-based machine learning. And PersonaDrive was bought by McorpCX to strengthen its customer experience management platform.
Microsoft ventured beyond social networking and into the realm of conversational intelligence acquiring chatbot startup Wand Labs to support its Bing search engine. And in a deal targeting enterprise communication offerings, board meeting collaboration SaaS company Boardvantage was sold to NASDAQ for $200M, to enhance its collaboration capabilities.
Artificial intelligence made its way into M&A as well. Corum client Lingospot was bought by Piksel to augment its AI for video. Expertmaker was picked up by eBay trying to enrich its marketplace platform with machine learning. And AI-based computer vision provider Spikenet Technology was purchased by Brainchip.
And in AdTech, San Francisco’s URX was snapped up by Pinterest for its “deep linking technology” which connects mobile apps to each other and slots in relevant ads.
What’s happening in the Internet space?
Internet Software Valuation Metrics
Aaron King
After six months of falling sales multiples, the Internet sector stabilized over the first half of the year, maintaining an averaging of 3.7x revenue. EBITDA has also become less turbulent, exchanging the roller coaster ride of 2015 for a gentle, upward trajectory back towards the previous December highs.
In eCommerce, Florida-based online sports retailer Fanatics spent $17M on the England’s Kitbag in an attempt to break into the soccer market.
New York-based Gilt Groupe was acquired by Canadian department store Hudsons Bay for $250M to fold the luxury flash-sale site into its Saks Off 5th division.
Amongst Social Networks, Quora made its first acquisition: online political forum Parlio.
And online dating continues to be hot. Grindr, a leader in gay online dating, was acquired for $93M by Beijing Kunlun Technology, a Chinese video game developer. Stateside, San Francisco-based Skout was sold to Pennsylvania-based MeetMe for $55M or 2.3x revenue.
Elsewhere, ticketing elbowed its way to the front of the line. Pandora’s Ticketfly acquired Canadian online retailer TicketBreak while Chicago-based Vivid Seats sold to one of the most active PEs, Vista Equity, and, more recently, Spanish ticket reseller Ticketbis was bought by eBay’s StubHub for an estimated $166M.
Vertical Software Valuation Metrics
Yasmin Khodamoradi
In the Vertical market, sales multiples have been recovering steadily since the end of 2015 while EBITDA multiples have shown more fluctuation. The Financial Services subsector has come out on top while Automotive, Government and Real Estate have stabilized.
The Automotive market has been a hot sector culminating in a $1+ billion ($1.2B) megadeal as Canadian automotive classifieds website TRADER was bought out from Apax Partners by Thoma Bravo.
We also saw the half billion purchase of Lytx, a driver video monitoring and behavior coaching systems vendor, by PE firm GTCR.
Telogis, a SaaS company which specializes in enterprise telematics and vehicle-tracking SaaS, was picked up by Verizon for $900M at 7x revenue as they continue to play catch-up to AT&T in the connected car space.
In real estate, Britain’s Property Software was acquired by real estate classifieds site Zoopla for over a hundred million dollars at about 5x revenue to build an end-to-end solution for brokers. Stateside we saw AssetEye, which provides real estate investment management SaaS for portfolio managers, be acquired by RealPage for almost $5M to serve a broader set of asset classes.
In the financial services sector, Broadridge acquired securities lending and borrowing software provider 4Sight in order to fortify their collateral management solutions and manage risk more effectively through automation.
In healthcare we saw many transactions in the pharmacy and prescription management space, for example e-prescription app developer iApp Creative integrated its product with DrFirst’s medical platform. Similarly, in Canada, Medago Technologies was bought by Petal Solutions and Texas-based Lagniappe Pharmacy Services was folded into Transaction Data Systems out of Florida. In a transaction that illustrates the Connected Healthcare trend ,Teladoc acquired Healthiest You for $150M at 15x revenue in order to boost customer engagement through physician finder services and prescription drug pricing information.
A surprising buyer in Energy & Environment appeared when smart thermostat and energy management SaaS Proliphix was dealt to property management and ERP SaaS company Yardi.
Moreover, Current, a GE Company, added Daintree Networks, which provides smart building energy controls and wireless thermostats, for a reported $77M to build upon Current’s Predix platform.
In the A/E/C sector, Germany’s CONJECT Holding, a construction project management SaaS provider, was sold to Australian collaboration SaaS provider Aconex for nearly $72M at 2.7x Rev to expand operations in Europe.
How’s Consumer doing, Aaron?
Consumer Software Valuation Metrics
Aaron King
Consumer multiples declined a bit this year, with EBITDA bouncing back in March to end a little higher. Starting with Gaming, the casual and core markets balance fairly well. In Gaming’s biggest-ever deal, Finland-based Supercell, developer of Clash of Clans, was grabbed by Tencent for $8.5B as the Chinese web giant aims to become a true global player with this highly lucrative mobile franchise. That megadeal happened just before mobile game publishers faced bureaucracy turmoil reaching China’s huge audience. The Chinese government issued regulations for pre-approval of every single mobile game, brushing through each for any eyebrow-raising content, particularly any hints at political or military topics, and only about one in twenty games currently meets the standard. Searching for possible ways to scale up, publishers will feel pressure to partner with local companies to get some flies through the screen, or consolidate via acquisitions of the Western gaming firms.
Turning west, this May, French gaming provider Gameloft sold 61% of its shares to Vivendi Universal for $250M. This deal was a big step in Vivendi’s expansion strategy, touching on three of Vivendi’s businesses -- gaming, music and pay TV -- and opened up access to Gameloft’s sister-company Ubisoft.
Gamigo completed its third 2016 deal last week, setting it up to handily outpace its acquisitions from last year. After picking up Aeria Games and Fiesta Online, Gamigo rounded out its portfolio with games operations management SaaS from Highdigit.
In a convenient segue between gaming and fitness, nearly ten million players took to the streets following last week’s blockbuster release of Pokemon Go. The floodgates are open for augmented reality games -- watch this space closely, because we expect other big properties to respond -- potentially through M&A.
Driven by the connected health trend that Dave will discuss later, the popular running app, RunKeeper, recently announced an agreement to be purchased by shoemaker Asics. The deal amount was $85M. And French provider of wearable health and activity trackers WyThings was acquired by Nokia for $190M.
Amber, how has Infrastructure fared so far?
Infrastructure Software Valuation Metrics
Amber Stoner
Overall Infrastructure valuations dropped slightly from highs in March, with EBITDA multiples staying roughly in line with Q1 numbers. Security and IT Services Management set the pace for the overall sector’s performance led by a handful of megadeals, including Dell selling its software division to Francisco Partners and the new PE arm of Elliott for over $2B.
In security, AVAST spent $1.3B for anti-virus software provider AVG just last week, and Blue Coat Systems, founded by former Corum client Joe Pruskowski, was sold to Symantec for $4.6B, nearly 8x revenue, to complement its on-premise products.
Cisco grabbed IoT SaaS provider Jasper for $1.4B to strengthen its hold on connected devices, and followed it up buying CASB vendor Cloudlock for $293M to utilize an API-based approach across its existing offerings. We expect more deals in the space as the use of outsourced cloud applications continues to grow.
Identity and access management attracted one of the top PE acquirers, Vista Equity, which nabbed Denver-based Ping Identity for $600M; the deal could lead to Ping making additional acquisitions in the digital identities arena. Authentication software specialist Device Authority was landed by London-based Cryptosoft to improve its data centric security.
Elsewhere in Infrastructure, ITSM provider LogicNow was acquired by SolarWinds for $500M to bolster its IT services suite. Virtualization and endpoint management company AppSense was bought by LANDesk for $115M to deliver better endpoint management solutions.
Finally, API management company 3Scale was picked up by Red Hat for an estimated $27M to amplify the API economy throughout its stack of products.
IT Services Software Valuation Metrics
Elon Gasper
In IT Services, KPIs and multiples differ between developed and emerging markets and merit their own analysis. Developed markets have seen notable growth in sales multiples, with the current ratio the highest in over a year. In Emerging Markets, decreasing ratios are the story, with sales multiples holding constant until a recent pullback, and EBITDA multiples still lower than second half of ‘15.
An arms race in acquisitions of CRM integrators saw buyers seemingly choosing randomly between Salesforce and Microsoft. However, when we cluster deals by the revenue of the acquirer, a clear pattern emerges, bigger buyers prefer Salesforce integrators, for instance, as services giants such as IBM, Accenture and India’s Mindtree all made Salesforce-related acquisitions.
As buyer revenue falls, acquisitions of Dynamics CRM integrators increase. This doesn’t mean the Dynamics ones are only for little buyers; large companies like Capita and Itelligence have all acquired a Dynamics integrator, too.
Finally, IBM alone showed no discrimination between the alternate platforms, purchasing Salesforce cloud integrator Bluewolf for $240M at 2.7x revenue and a UK Dynamics CRM SaaS integrator, Optevia.
Our analysis shows that bigger buyers, like IBM, are all arming with smaller SaaS implementation and consulting businesses in order to take a bigger share of the cloud.
And that’s our report at the half. Back to you, Bruce.
Bruce Milne
Thank you for that great report. A lot is happening.
I mentioned before that you should keep an eye on how many companies you’ve heard of before, and you realize there’s a lot of money coming out of PE, Vista, IBM, Cisco, people like that, but also a lot of companies that are not necessarily tech companies, such as GM buying. But a lot of firms you just don’t recognize. If you recognize less than half, you’re in the majority. A lot of times these things go as high as 70% with folks not recognizing buyers. This one was pretty good with lots of well-known companies in there, but the point is that lots of buyers out there you haven’t heard of.
Top Ten Technology Trends
Now let’s move on to our top ten technology trends, broken up into two groups, connect and create. We will have ten of our experts reporting in, beginning in New York with one of our newest members, Ivan
Online Exchanges
Ivan Ruzic
Earlier this year we talked about the increasing specialization that we are seeing in online exchanges and the potential for value creation that this disintermediation represents.
There’s no better example of this than Microsoft’s $26 billion dollar acquisition of LinkedIn, which has leveraged its hundreds of millions of users to become a premier online exchange for recruiting, with many more opportunities in the wings. In the B2B world, the exchange concept is driving innovation and deals in the procurement realm, something Accel-KKR is looking to leverage with their half-billion dollar acquisition of SciQuest. Companies of all sizes who are building communities of buyers and sellers have the opportunity to realize significant value in today’s M&A market.
Bruce Milne
Wonderful, thank you Ivan. Now to the Midwest and Rob Griggs on digital currency flow.
Digital Currency Flow
Rob Griggs
There is massive opportunity for banks, card issuers, and payments processors to deliver mobile payments to more global markets and a wider distribution of customers through acquiring payments technology vendors.
Banks are under threat by new entrants transforming the customer experience, and therefore commanding a higher market share of the total profits. Additionally, cross border payments inefficiencies remain, creating opportunities for new technology solutions.
The most wrenching period for the big banks is almost certainly yet to come. Radical change is coming. A recent Citi report states that fintechs have nabbed $9 billion in business so far, a small percentage of what banks bring in each year. But in just four years, the Citi analysts predict, fintech revenues will leap more than 10 times, exceeding $100 billion.
By 2023 fintech will account for 17% of consumer-banking services in North America, or $203 billion. The major disruptive trends in digital payments continues to expand and grow rapidly. The M&A market is very strong, and getting stronger! Now is the time to begin calibrating your company to the market dynamics and get onto the landscape of disruptor, rather than be disrupted.
Bruce Milne
Thank you. Now to Canada to hear from Dave Levine on connected health.
Connected Health
Dave Levine
The trend of Connected Health—connecting patients with their healthcare through devices, data and communication—continues to drive a strong market for investment and acquisitions. Forty-nine Healthcare IT companies exited or IPOd in Q1 of 2016 and thirty-three companies were acquired in the digital health space in Q2.
Notable acquisitions included Resmed’s $800M acquisition of Brightree health. Battery Ventures acquired Brightree eight years ago when their revenues were around $8M.
Also notable was Nokia’s acquisition of device maker Withings for $191M. This move by Nokia was to bolster Nokia’s digital health and internet of things arsenal.
One trend that we are seeing in connected health is the use of artificial intelligence. We’ve seen strong investment in this combined sector and believe that the space is ripe for acquisition as great technology companies are looking for intelligent ways to scale.
Bruce Milne
Great, thanks, Dave. Now, just from a record setting six-city tour down under, Dan Bernstein.
Omni-channel Sales
Dan Bernstein
The trend of Omnichannel sales got a major boost this year via megadeals, with Salesforce’s acquisition of Demandware for $2.8 Billion, bringing seamless ecommerce and sales integration into the CRM world. Microsoft is moving into that direction, with the acquisition of LinkedIn pushing downstream its ability to offer more targeted sales enablement in its own CRM system and beyond. If you can show immediate return on investment by leveraging personalization through an underserved but important channel (like Mobile, for example), you could be rewarded handsomely by the market.
Bruce Milne
Thank you, Dan. Now Rob Schram here at HQ.
IoT Software
Rob Schram
As underscored by the Predix & Azure partnership announced by GE & Microsoft this week, software surrounding the IoT continues to drive acquisition value and deal volume.
IoT software M&A has easily eclipsed 2015 records, with the first megadeal in February as Cisco acquired Jasper’s IoT management platform for $1.4B, and multiple acquisitions by others like IBM, Intel, KORE Telematics, PTC and others.
As IoT hardware moves toward commoditization, increased opportunities arise for software and platform providers that enable enterprise IoT transformation while simplifying business processes. The most desirable acquisition targets are those that fill niches created by IoT market evolution; with competencies in analytics, artificial intelligence, security, connectivity platforms and services.
Companies poised to take advantage of the expanding IoT ecosystem will be highly attractive acquisition candidates in 2016 and beyond.
Bruce Milne
Thanks, Rob. We’re going to see a lot more transaction in this space over the coming quarters.
And now to Atlanta and one of our newest members, Steve Hassett.
Enmeshed Systems
Steve Hassett
Complex systems of enmeshed hardware and software enable many other leading trends and new tech, including the IoT, autonomous vehicles, connected health and more. Software replaces hardware, and then vice versa across multiple cycles, and these cycles drive deals. A notable trend has been chipmakers acquiring software companies. Two deals in May exemplify this—in both cases, top chipmakers buying pioneers in the computer vision space, where deep hardware/software enmeshment is a must. ARM spent $350M on the UK’s Apical, while one week later Intel acquired Russia’s Itseez for similar technology. Companies successfully tackling similarly complex problems in this sector can expect to see interest from suitors like these.
Bruce Milne
Thank you, Steve. Now to the Southwest to hear from Alan Wilson.
Artificial Intelligence
Alan Wilson
When we think of artificial intelligence, IBM’s Watson immediately comes to mind. The continued development of hyperfast processing platforms like Watson will accelerate the development of cognitive applications that will change the way we live. This is a huge opportunity for entrepreneurs and a large percentage of the M&A activity in the software industry in the future will be cognitive applications. Apple brought Siri into our lives and now Amazon Alexa and Echo are taking this to another level. That annoying alarm every morning will be replaced by “Good morning, Bill. What would you like to do today?”
Bruce Milne
I like that. You know, I ask my Alexa every morning to tell me a joke. They’re not that funny, but she’s always got one.
Now to our most active market and Peri Pierone.
Positioning Intelligence
Peri Pierone
Thank you Bruce.
Positioning intelligence is increasingly familiar to all of us given the GPS capabilities resident in our smartphones and vehicles. Intelligence from location services enable marketeers to engage consumers in a highly contextual manner based on their location. There are thousands of proximity marketing opportunities. A mobile banking customer for example receives promotional information about auto loans triggered in real time as he or she happens to be on a car dealer’s lot. In terms of M&A this year, ShopAdvisor, a leader in retail proximity marketing, acquired Retailigence, a provider of in-store product data and location services for facilitating a shopper’s path-to-purchase in brick-and-mortar stores. This transaction underscore’s the theme of precision Corum has been highlighting on this topic. We don’t have enough time today Bruce, but in addition to proximity marketing, drones and autonomous vehicles are active in this category as well. Back to you.
Bruce Milne
Thanks, Peri, great report.
And now to one of the hottest markets of all, where you see a lot of megadeals, Sports and Gaming, with Jim Perkins.
Sports & Gaming
Jim Perkins
Gaming is dominated by China, a $24B market with more mobile gamers than the US population. Cash-rich Chinese companies facing a consolidated market are looking west for growth opportunities, frequently through M&A.
Cross-border transactions dot the recent landscape, some unusual. Leyou Technologies, a Chinese chicken meat supplier, acquired London’s Splash Damage and came back for a second bite of our Client, Digital Extremes. Meanwhile, in the largest ever gaming acquisition, Tencent acquired Clash of Clans maker Supercell for $8.5B, at 3.7x revenue.
With new Chinese government regulations requiring government preapproval of apps and games to be expect even more cross-border M&A. With slowing domestic growth and this new regulatory environment, Chinese companies will look westward with greater urgency.
And while sports tech M&A isn’t being driven by Chinese giants, we are seeing notable dealflow, particularly in fantasy sports, betting, ticketing and online video. Watch for spotlight webcasts on both these sectors later this year.
Bruce Milne
Thanks, Jim. Jim will be on a special broadcast in the next couple of months with some landmark transactions he has been working on.
Which gets to one of the questions we just received, but which we may not have time to get to, but Jim will get back to you on your question about gaming and the Chinese market.
Now, number ten, data security with Jon Scott.
Data Security
Jon Scott
Data breaches have continued to affect nearly all consumers, many governments, and large enterprises. In response, the major security providers, Symantec, MacAfee and Palo Alto Networks founded the Cyber Threat Alliance to coordinate these defense efforts. Antimalware is the most active security sector today with respect to software M&A. There has been a re-emergence of traditional security players into a space that has most recently been nominated by generalists like Cisco and Fireeye. The Symantec Blue Coat combination and now the Avast AVG megadeals are the obvious indicators here. This re-emergence is good for sellers because implies that Symantec and Avast will likely be more active in security M&A overall.
Bruce Milne
Great stuff, and we’re going to see a lot more happening here. Blue Coat was founded by Joe Priscowski, whose company we sold and he invited me to be one of the founding investors. It sold for $4.6B. Thank you, Joe!
That ends our Corum top ten analysis. We have a number of questions but unfortunately we’re running over time, so to Dana and the rest of you, the presentation will be online shortly after the broadcast. We had a couple of other questions, we have specialists, we have three research centers around the world and a 500-person advisory board, the World Technology Counsel. We will run your questions by them and get back to you.
Unfortunately we’re out of time. Look at the upcoming conferences we’re offering, we’re seeing record activity, there are events around the world coming up, and we look forward to see you there.
Thank you for attending.