Introduction

 

Timothy Goddard

 

Good day to you and welcome to Corum M&A monthly. My name is Timothy Goddard, I am SVP of marketing here at Corum, and I am very happy to bring you this mid-year report, looking at the six months past a little bit about what is to come.

 

We're going to start with a field report, an exciting deal just closed by a Corum client. Then we'll get into the meat of our report, the 2017 mid-year research report with deals, trends and valuation data from across all six sectors and 30 subsectors that we track. Then we're going to have an update on our Top Ten Disruptive Tech Trends. If you joined us on our annual report in January, we introduced this year's tech trends that we see driving deals and influencing how buyers are looking at deals and how sellers need to position themselves. We're going to go through those trends and look at what they have done so far and what they may be doing coming up. Finally we'll have Q&A. It is a packed agenda, so we'll get right to it.

 

First we'll hear from Allan Wilson, recently promoted to Senior VP in Austin. Allan, congratulations on both your promotion and this deal.

 

Field Report: Endeavor Commerce acquired by Vendavo

 

Allan Wilson

 

I am very happy to announce that Corum client Endeavor Commerce has been acquired by Vendavo, a Francisco Partners portfolio company. The transaction will result in the unification of the Endeavor Commerce Configure Price Quote solution with Vendavo's intelligent pricing. By integrating Vendavo's strategic price guidance and customer segmentation capabilities into Endeavor's CPQ suite, price optimization is seamless injected into the CPQ workflow and enterprise profitability is greatly enhanced.

 

In its April 2017 Magic Quadrant for digital commerce, Gartner Research predicts that by 2018, 40% of B2B digital commerce sites will use price optimization algorithms and configure price quote tools to dynamically calculate and deliver pricing. The combination of these powerful automated sales tools with big data analytics provides the platform that lays the ground for AI to be applied to further automate the effectiveness of the sales process and to greatly improve quote to cash.

 

This M&A transaction touches on several of the Top Ten Disruptive Tech Trends predicted by Corum, including Omnichannel Sales, Data Science Monetization, and Artificial Intelligence. We wish Endeavor Commerce the very best in their new home, and we will watch with great interest the further success of Vendavo.

 

Timothy Goddard

 

Indeed. Thank you, Allan. We will be talking more about those trends shortly.

 

Research Report: Accenture leading the way

 

But first I'd like to turn things over to our research team, led by Elon Gasper, with Amber Stoner, Yasmin Khodamoradi, and Amanda Tallman. Elon?

 

Elon Gasper

 

Thanks, Tim. We begin with the public markets, where major indices climbed to new highs in the first half, with the S&P Tech up over a quarter, and the NASDAQ and Dow up 14% and 8% respectively. Many overseas indices such as Japan’s Nikkei also logged new highs.

 

The current market cycle has been unusually long, repeatedly stoking fears that the aging bull is nearly done, then confounding pessimists with yet another burst of renewed vigor, bringing us nearer now to the longest run on record. Meanwhile the basic factors underpinning Tech M&A buyside demand continue, too, as strategic buyers’ huge corporate cash stockpiles and PEs’ reserves keep growing, etc. — it’s like the opposite of a perfect storm — so we continue to recommend to all tech leaders with opportunity to take advantage of this “perfect weather”, to get outside in the market, to at least calibrate your company’s value and learn more about the buyers’ needs. It may take longer, but Winter Is Coming.

 

Our Corum Index tracks the impact of this long era of high demand showing the M&A pool getting shallower with fewer available sellers; private equity share nearing historic highs as PEs compete successfully with strategics, forcing both kinds of buyers to look across borders and at older targets, despite their legacy architectures or incomplete transitions to SaaS and Cloud models, or whatever may have kept them off the market in normal times.

 

Supply issues challenged megadeals too, with far fewer than last year — and none in the Consumer sector. Let’s call out a few examples in our other five, starting with Horizontal — Yasmin?

 

Yasmin Khodamoradi

 

Clearlake-backed data management company Syncsort merged with its portfolio-mate Vision Solutions to get acquired by PE Centerbridge Partners for $1.3B in a move to optimize the combined entity’s proposition in the data integration and management segment.

 

Elon Gasper

 

Tackling a similar problem on the infrastructure side, HPE bought flash storage vendor Nimble, its first billion-dollar acquisition since being spun out in 2015.

 

Yasmin Khodamoradi

 

IT Services brought up Gartner, spending $2.5B for corporate performance tech specialist CEB to introduce their larger-size-customer offerings to the mid-tier market;

 

Elon Gasper

 

The Internet sector saw PetSmart acquire pet supplies retailer Chewy.com for $3.4B in the biggest ecommerce deal in history; given Amazon’s pending acquisition of Whole Foods, expect more “bricks & clicks” deals like this in response.

 

 

Yasmin Khodamoradi

 

And in Vertical, Intel spent over $15B for Israeli machine vision specialist MobileEye as it jockeys for position with rivals Nvidia and Qualcomm in the autonomous vehicle arms race.

 

Elon Gasper

 

Looking now at all six sectors over the last few years, we see sales ratios in their usual rankings now, led by Vertical, with all up except Infrastructure, which has Consumer quickly closing the gap with it by nearly doubling this year.

 

Ranked by EBITDA, Consumer is up a bit and has already passed Infrastructure, with Horizontal applications again edging out Vertical for top value there. The big story, though, is at the bottom of both charts: the steady rise of IT Services company values, driven in part by the Focused IT Services trend.  

 

Yasmin, any surprise who’s bought the most tech companies this year? 

 

Yasmin Khodamoradi

 

It’s Accenture now on top with 17 transactions in the first half, nearly as many as they did last year.

 

Elon Gasper

 

Not what I expected! We’ll unpack how Accenture did it later (spoiler alert: it involves those surging IT Services firms). We’ll also take a look at newcomer Airbnb.

 

Canada’s Constellation Software placed a distant second. A couple of smaller companies doing roll-ups made the list: HCM firm Asure and betting platform RakeTech.   

 

Amanda Tallman

 

Trimble outpaced competitor Hexagon with seven deals, including England-based 3D mapping system NM Group, which should extend Trimble’s energy suite with visualization services for the utilities industry.

 

And with 5 deals in the first half, Hexagon acquired CAD simulation and analysis software firm MSC Software for $834M at 3.6x sales in its biggest deal since 2010. In turn, MSC bought German virtual test drive startup VIRES to expand into autonomous driving technology.

 

Tech M&A geographies

 

Elon Gasper 

 

Time for our tour of tech M&A geography, starting with the North American market, which saw a couple sizeable payments deals in Canada as Vancouver-based TIO Networks was bought by Paypal for $233M at 3.7x revenue, adding bill-payment management to its formidable stack, and Cambridge Global Payments was bought by FleetCor for $675M, adding international payment capabilities to its Comdata business.

 

Amanda Tallman

 

Moving South to Detroit, CEC Controls, an industrial automation provider, was bought by Scotland’s John Wood Group for $59M, gaining a presence in the key automotive hub.

 

And Asian buyers went after disruptive tech like VRB, a VR dev studio and toolkit maker out of New York, which was purchased by Samsung for $5M to gain an edge in content production for the Gear VR.

 

And on the West Coast, Chinese search giant Baidu picked up chatbot startup Kitt.ai, to reinforce its AI efforts, showing that even small companies with innovative tech can attract big buyers internationally.

 

Elon Gasper

 

Similarly, European AI and VR-related companies continued to be popular. Examples  include Apple quietly buying SensoMotoric Instruments in Germany, a manufacturer of embedded eye tracking systems, presumably to enhance its long-awaited AR/VR product line; Italy’s MWPowerlab, a 3D & AR visualization developer for operator training and simulation, purchased by Schneider Electric; Prague-based  Semanta, an AI-enabled business analytics SaaS vendor, adopted by newly-public American data analytics firm Alteryx; and in the Nordics, 3D optimization engine developer Donya Labs was acquired by Microsoft to help power its “3D For Everyone” initiative, including improved VR/AR rendering.

 

Amanda Tallman

 

Moving East, Hong-Kong-based highly localized social media analytics SaaS Klarity was integrated into Meltwater Group’s core platform. Japanese enterprise mobility and IoT digital solutions provider Brilliant Service was bought by Cognizant. And in India, we saw international buyers pay hundreds of millions to position themselves as leaders in the mobile payments space.  Paytm spun off to Alibaba for a reported $200M, and Ebix acquired Mumbai-based ItzCash Card for $76M, plus a nearly $50M earnout.

 

Moving down under, Australian companies remained in demand, as analytics visualization company Space-Time Research was acquired by Japanese BI company WingArc1st to expand internationally and gain public sector expertise.

 

Elon Gasper

 

In Latin America, services firms proved popular, including Peruvian IT firm GMD, bought for $37M plus earnout by PE Advent International, to address what is called, “opportunity to build a  regional, integrated IT outsourcer in the Andean region;”

 

And Indian IT giant Wipro took its first plunge into the LatAm market, buying Brazilian services provider InfoSERVER, possibly setting the stage for more such transactions in what Wipro called a “strategic growth and investment region.”

 

Amanda Tallman

 

In the Middle East, demand for Israel’s world-renowned cybersecurity tech continued as Seculert, a machine learning threat detection firm, was bought by Radware for $10M at 5x revenue.

 

And finally, in the United Arab Emirates, a newcomer to the tech M&A scene, Mid-East ecommerce site Souq.com sold for a reported $850M to Amazon.

 

Elon Gasper

 

That wraps our world tour; next, we’ll look at valuations and notable deals in our 6 markets and 30 subsectors, starting with Horizontal.  Amber?

 

Horizontal Software Valuation Metrics

 

Amber Stoner

 

Sales multiples in Horizontal are up from this time last year while EBITDA is down from last month’s highs.

 

Most subsectors in Horizontal are up, with the exception of Marketing and Ad Tech which has remained stable and SCM which is down slightly from Q1.

 

Toronto-based media monitoring company Infomart was sold to Meltwater Group for $30M to boost its social media analytics stack. In another Canadian deal, WiFi marketing firm Turnstyle Analytics was acquired by Yelp for $20M to expand its customer loyalty inventory.

 

Buyers continue to shell out cash for the capability to reach customers across all screens and formats. Ad buying platform developer Adelphic was picked up by Time Inc. subsidiary Viant for $25M to enrich its people-based offerings. And AdTheorent, which builds mapping solutions for advertisers, was bought by H.I.G. Capital in its first platform acquisition of 2017.

 

Workforce management tech was targeted by strategic buyers, one of our top acquirers Asure Software among them. The Texas-based HCM player bolstered its offerings, snapping up payroll software provider iSystems for $55M and small business HR solutions provider Compass HRM for $6M along with three HR services deals.

 

Elsewhere in the HR space, consolidation continued with Atlanta-based human capital management provider ExcelPay being acquired by iSolved and employee training firm Vertex Solutions bought by TCC Software to expand its IT staffing capabilities.

 

Qlue, the creator of a conversational virtual agent, was landed by ServiceNow in an attempt to inject AI into its service desk conversations. ServiceNow also paid $15M for predictive models firm DxContinuum, which should help the intelligent automation leader train machines on better routing of customer service requests.

 

And Corum-client Digital Roots, which applies artificial intelligence to monitor social media, was sold to customer care automation provider Interactions to bolster its omnichannel assistant solutions.

 

Sales multiples in the vertical sector have climbed to historic highs after some ups and downs, with EBITDA breaking through recently. Valuations in the A/E/C and automotive sectors are taking the lead, but all sectors saw good deal flow as buyers continue to seek vertical market expertise.

 

The fleet management arena has been active through the first half-year, as larger companies strive to beat cost pressures by scaling up through M&A. For instance, Iowa-based telematics firm Innovative Software Engineering was bought by Trimble to upgrade its fleet safety solutions. Shaw Tracking was acquired by Omnitracs to solidify its presence in Canada. Other transactions include ABAX out of Norway, purchased by Bahrain’s Investcorp for $210M and FleetCor sub NexTraq, which sold to Michelin.

 

In the connected car space, Automatic Labs, a maker of adapters that provide vehicle tracking, diagnostics and fuel monitoring, was purchased by satellite radio company SiriusXM for $115M to further capitalize on data-driven services.

 

In the data collection space, Internet of Things data aggregation startup Teramatrix was scooped up by Globetouch to complement its suite of IoT and autonomous driving technologies

 

And in the manufacturing space, planning and scheduling software maker Prometheus Group utilized its financial infusion from Francisco Partners and inked two deals in the asset management space: Australian electronic permitting specialist Sage Technology and Corum client Pipeline Group, whose solutions for maintenance and operations in asset-intensive industries enable Prometheus to serve larger-scale facilities.

 

In the education subsector, scholarship management provider AcademicWorks was purchased by Blackbaud for $50M, as the dominant software provider for non-profits fends off encroachment from PE-backed competitors.

 

Questar Assessment was acquired by Educational Testing Service for over $127M to improve its assessment capabilities in the higher education space.

 

Finally, faculty evaluation SaaS provider DATA180 was picked up by faculty workflow pioneer Interfolio to manage and share data more effectively.

 

Amanda, how did the consumer sector do?

 

Consumer Software Valuation Metrics

 

Amanda Tallman

 

Sales multiples in the consumer sector reached highs last seen in the summer of 2015, driven by the resurgent gaming sector riding disruptive trends and an unexpectedly strong console cycle.

 

This helped drive a number of non-gaming companies to make gaming acquisitions:

 

In China, chemicals producer Hunan Tianrun made its second gaming acquisition, picking up Muzhi, a mobile-based video game company, signaling a change in their business focus.

 

In another Chinese deal, mobile games developer, Play800 was purchased for $87 million, by smart city innovator, Hakim Unique, as it continues its diversification into new markets.

 

Across the globe, in France, another mobile gaming company, IsCool was bought up by book publisher Hachette for $8.6 million, their third gaming acquisition in the past two years.

 

In social gaming, IGT doubled its money on Double Down, selling it to DoubleU Games for $825 million at 10.5x EBITDA.

 

Israeli mobile casino games developer Luck Genome was acquired by Dutch game developer GamePoint for $12.5 million. This deal adds the Slots Craze Brand to its portfolio, providing a platform for more than sixty social casino games.

 

In the music space, Spotify went on a buying spree as it prepares to go public. In March it added Content Recommendation app, MightyTV, and audio detection and music discovery SaaS provider, Sonalytic. It later picked up French company Niland, an online music search and recommendation software.

 

How is the Infrastructure sector doing, Amber?

 

Infrastructure Software Valuation Metrics

 

Amber Stoner

 

Infrastructure sales valuations hit 12-month highs and EBITDA multiples are down from Q1 while remaining higher than this time last year. The Storage, ITSM and Security subsector multiples are all up from Q1 with Security recording an array of diverse deals in the identity access management segment.

 

DevOps identity provisioning player Conjur was snapped up by Israel’s CyberArk for $42M to improve its security offerings for cloud-native environments.

 

Delta ID, which develops iris recognition solutions, was bought by Sweden’s Fingerprint Cards for $106M to strengthen its positioning in the biometrics market, particularly in Asia.

 

In the UK, email authentication firm SecurEnvoy teamed up with Shearwater Group, in its first acquisition ever, for over $25M at 6x revenue to move into the identity and access management market.

 

Email security and anti-malware providers have been frequent acquisition targets in the first half of the year as well. Malware protection firm Invincea was purchased by Sophos for $100M to make use of Invincea’s patented deep learning tech as an access point to the US threat detection market.

 

And Israeli cloud app visibility provider Skyfence was bought out by Forcepoint from Imperva for $40M to enhance its data loss prevention portfolio.

 

Tech veterans have been spending to fill gaps in their mobile capabilities. Mobile app optimization startup Apteligent was scooped up by VMware for $30M at nearly 4x revenue to augment its previous acquisition of mobile apps analytics firm AirWatch.

 

Boston-based Kinvey, which enables app creation on any device, was picked up by app development specialist Progress Software for $49M to combine its front-end development technologies with Kinvey’s backend-as-a-service for building and deploying cognitive apps.

 

In the virtualization space, application layering pioneer Unidesk was acquired by Citrix for $65M at nearly 4x revenue to replace the existing AppDisk layering technology in its XenApp and XenDesktop products.

 

Finally, software-defined WAN startup Viptela was bought by Cisco for $610M, more than 24x sales, to help broaden its Intelligent WAN portfolio.

 

How has the Internet sector performed in the first half?

 

Internet Software Valuation Metrics

 

Amanda Tallman

 

Internet EBITDA multiples have rebounded since the beginning of the year, while sales multiples ticked upward across the board.

 

The Internet sector saw some big name companies change hands with consumer-recommendation website Angie’s List being bought by, internet conglomerate IAC for $505 million to merge with IAC’s  business, HomeAdvisor into a new public company called ANGI Homeservices.

 

Oregon based RetailMeNot, an online coupons website, was bought by direct marketing company Harland Clarke for $630 million, complementing Harland Clarke’s previous purchase of marketing services company, Valassis.

 

Job hunting website, CareerBuilder.com, was spun out by Tegna—formerly Gannett—to PE firm Apollo Global for $483 million.

 

The travel sector continued to see consolidation, with Airbnb acquiring 5 companies so far this year, rolling up both websites and tools around the globe.

 

In automotive internet deals, Chicago-based online car classifieds startup, Drivin, was picked up by Indiana-based KAR Auction Services, for $43 million, to bolster data analytics capabilities for its automotive remarketing solutions. Another auto classifieds website, Am.RU was bought by Russian internet company Mail.ru for $10 million to gain a stake in that growing market.

 

Mail.ru also spent $20 million to acquire the #2 player in Russian food delivery, ZakaZaka, for over 20x revenue, expanding its position in the hungry foodtech market, which saw some diverse acquirers as Electronic Payments bought MobileNosh out of Texas and Yelp gobbled up restaurant waitlist startup Nowait for $40 million.

 

IT Services Valuation Metrics

 

Elon Gasper

 

Finally, valuations for IT Services companies in both developed and emerging markets put in an upbeat performance throughout the first half. The developed markets’ climb was topped by emerging market multiples, as the sector continues to expand into a great variety of digital services, from its traditional core of enterprise helpdesks and staffing solutions, and with the emerging markets still commanding a stiff premium.

 

Across both subsectors, the ongoing M&A of vertical industry specialists continues to confirm the Focused IT Services trend, too, as breakout top acquirer Accenture’s many such moves painted an instructive picture of this market, how buyers view these companies and fit them into their plans. It rolled up a variety of IT Services specialists, including adding more muscle to strengthen its ServiceNow integration arm with London’s Focus Group Europe and Germany’s solid-serVision.

 

Several more digital marketing and design agencies including another German firm, SinnerSchrader, for which it paid $67M to fortify its Accenture Interactive division in the DACH area, and a couple of others in Australia and Belgium. In Boston, product design firm Altitude, to boost Accenture’s Connected Product Lifecycle Services; in New Jersey, e-commerce solutions provider Media Hive to ramp up its implementations in Salesforce Commerce Cloud. A handful of integrators and consulting companies to enhance its Salesforce practice and delve deeper fields like Texas-based LabAnswers’ research informatics and Genfour’s intelligent automation - slated to be the cornerstone of a new IA Center in the UK.

 

And finally, cybersecurity specialists such as Atlanta-based partner Endgame’s federal business, to join Accenture Federal Services division and help build out its proactive threat-hunting-as-a-service offerings for government customers.

 

A little dance lesson, showing how a buyer does the trendy Focused IT Services quickstep, to conclude our report at the half, with Accenture the surprise winner for top acquirer. It remains to be seen if it can keep up that pace—though it bought another one yesterday!—and what other unexpected hyperactive buyers may pop up in this second half.

 

Back to you, Tim.

 

Timothy Goddard

 

Thanks, Elon.

 

Top Ten Disruptive Tech Trends

 

Whoever does pop up in this second half, you can bet that they are driven by some variation of the Top Ten Trends that we are going to get to now. We're going to dive right in, starting with a return to Allan Wilson in Austin, TX with AI enablement.

 

Allan Wilson

 

Big data is the fuel that drives AI, because AI can apply learning logic to the data resulting in predictive intelligence.

 

In the first half of 2017 AI-enabled M&A transactions impacted many industry verticals:

 

·         In Social Media, Corum-client Digital Roots was acquired by Interactions.

·         In Legal, LexisNexis acquired Ravel Law.

·         In the Retail Market, Track acquired 360pi.

·         In Information Management, Meltwater Group acquired Wrapidity.

 

Meanwhile, Cisco spent $125M on a development platform, MindMeld, for conversational AI enablement. As another example, Accenture has a huge internal initiative training their consultants on how to advise clients on operational improvements through the adoption of AI, focusing on leveraging investment businesses have already made in the adoption of big data and analytics.

 

AI Enablement has the Corum number one disruptive technology initiative driving M&A for almost two years, and has now proceeded to the point of mania. How long can it go on? In general, the hotter the trend the faster it burns.

 

Timothy Goddard

 

Thanks, Allan.

 

Now to HQ and Rob Schram on IoT Software.

 

Rob Schram

 

Within the ever expanding IoT universe, hardware commoditization is now factored into deal pricing. However, IoT Solutions are in high demand, and the persistent value remains on the software side of the business.

 

Notable deals done during the 1st half of 2017 include a broad range of acquisitions in Data Collection, Security, Predictive Analytics, Device Management, Operating Systems, and Connectivity.

 

Device and asset-intensive vertical markets from Energy to Healthcare are also hotbeds of software IoT M&A. An excellent example is Corum’s recently announced sale of Pipeline Group to Francisco Partners-backed Prometheus Group, to gain a leading edge Enterprise Asset Management platform.

 

As the IoT “red-shift” continues, buyers remain eager for innovative IoT software, AI and Machine Learning solutions. The market is active and it’s an excellent time to consider your M&A options.

 

Timothy Goddard

 

Absolutely. We're going to stay at HQ now and hear from Dan on Visual Intelligence Systems.

 

Dan Bernstein

 

At the intersection of AI, visual analytics and big data, visual intelligence systems continues to drive deal flow across multiple sectors. No longer constrained by surveillance applications, visual intelligence systems is front and center in Amazon’s use of their visual technology as deployed in their test grocery store. We are sure to see this technology get real world use in Amazon’s latest acquisition of Whole Foods. Cross sell opportunities that take into consideration real world behaviors will revolutionize shopping forever. If you even stopped to look at the spinach in Whole Foods, Amazon Prime can offer you a salad spinner on sale. Moreover, visual intelligence is making forays into sectors like Industrial Automation, with the acquisition of Sentech by OMRON, Apple’s acquisition of eye tracking technology company SensoMotoric Instruments and visual-based railroad inspection system Beena Vision acquired by GPS positioning behemoth, Trimble. Is there any sector that will not be disrupted by this technology trend?

 

Timothy Goddard

I can't think of any. Now to Rob Griggs in Minneapolis on Digital Currency Flow.

 

Rob Griggs

 

Deal flow along the digital flows of currency has remained high, across every imaginable vertical. It has turned nonprofit tech into a hot sector, with first half deals more than doubling all of 2016, including $120M for JustGiving.com by Blackbaud. Even in sectors like education and government, deals are on pace to double last year.

 

Top acquirers are private equity and payment processors like Vantiv, which is on a buying spree: acquiring Moneris Solutions for $425 million last year, then Paymetric in April, and just announcing bid for Worldpay at nearly $10B.

 

And the specter of distributed ledger continues to loom, with the US Federal Reserve Board predicting that the technology could remove 25% of the cost of financial transactions.

 

It is a great time to be a company disrupting the flow of money!

 

Timothy Goddard

 

Thank you, Rob. Now to Phoenix and Jim Perkins on Data Science Monetization.

 

Jim Perkins

 

Data Science M&A activity has spread to analytics technology across sectors, applying the gaming analytics model to businesses for all sorts of applications, analyzing customer behavior to identify, exploit and optimize monetization opportunities.

 

Yelp bought Turnstyle Analytics, a WIFI marketing/analytics company for local SMBs, for $20M, and GE Digital bought Israeli start up Nurego for their web analytics and marketing automation solutions. Oracle bought Moat, an advertising analytics SaaS, for $600M, or 13x revenue. Advertising is a key battleground for this trend, as it’s the only method by which anyone can hope to break or otherwise manage around the Google/Facebook duopoly.

 

In games, IBID Group acquired Riverplay for analytics, marketing automation & transaction processing, and Activision’s King acquired Omniata, for a similar toolset.

 

Companies leveraging Data Science internally to drive growth and profitability are also in high demand. From an M&A perspective, the better the data is utilized for a stronger ROI, the more attractive and valuable a company.

 

Timothy Goddard

 

Thank you, Jim. Now to New York and Ivan Ruzic on Online Exchanges.

 

Ivan Ruzic

 

The most talked about acquisition this year has to be the purchase of Whole Foods for a staggering $13.7 billion, by the granddaddy of all online exchanges, Amazon. The market’s reaction was instantaneous; Amazon's shares rallied while those of its traditional brick and mortar competitors went into a tail spin.

 

Those competitors have no choice but to respond in kind, buying ecommerce and other technology companies to improve their own capabilities. Walmart, whose Jet.com acquisition has shown signs of eating into Amazon’s dominance, announced its own purchase of online clothing retailer Bonobos for $310M that same day. As of now, all retail companies are online exchanges, and will need to buy or build the tools to compete.

 

Regardless of sector, companies of all sizes who are building or facilitating communities of buyers and sellers have the opportunity to realize significant value in today’s M&A market.

 

Timothy Goddard

 

Thank you, Ivan. Now back to HQ again and Jeff Riley on Omnichannel Sales.

 

Jeff Riley

 

With access to virtually any product or service quickly, conveniently, and from any device or location, suppliers are under increasing pressure to optimize their rapidly expanding number of sales channels based on customer preference. Creative solutions are emerging to meet this need, based on three core building blocks: marketing automation, analytics, and CRM tools. Recent deals underscore this trend, with Insight Venture Partners acquiring Zyme, a channel data management cloud platform provider, and Marketo following the marketing-to-sales technology shift with their acquisition of sales productivity SaaS provider ToutApp.

 

Other players have launched tech-enabled channels through M&A, building out their own "omni" stack. Snapchat spent $200M on Placed, a location-based ad analytics provider connecting offline/online behavior. Coty cosmetics acquired Younique for $600M, which leverages social media users and influencers as a channel.

 

Whether to optimize existing sales channels or build out new ones, technology has always played a role in channel development and the market offers premium values for innovative technology providers who perform well in this space.

 

Timothy Goddard

 

That's right. Now to Dave Levine in Vancouver on Connected Health.

 

Dave Levine

 

Trend lines in connected health continue to show robust investment and M&A in the space in the first half of 2017, with continued demand for pharma technology, telehealth and related solutions that connect patients to their care more efficiently. 

 

Notable transaction for the first half of the year include McKesson’s $1.1 billion acquisition of covermymeds from Thoma Bravo. Covermymeds integration with the EHR was a driver in this transaction.

 

Teladoc picked up Best Doctors for $440M at a 4.8 times multiple and Castlight health acquired Jiff, a benefits management SaaS platform, for 19x revenue, a $134M dollar transaction.    

 

This strong activity creates opportunity for middle market connected health companies looking for ways to scale in consolidating and uncertain markets, which are subject to US politics and potential changes in the Affordable Care Act.

 

Timothy Goddard

 

Thank you, Dave. Now to Steve in Salt Lake City on Focused IT Services.

 

Steve Jones

 

The market interest remains strong for IT Services companies with well-defined vertical specialties. The first half of 2017 saw an uptick in valuation multiples.  Good examples include Healthcare security firm CynergisTek acquired by Auxilio for 1.8x and Rimini Street, who specializes in ERP, was acquired by GP Investments for 3.6x.

 

Another factor we’ve seen in the first half of the year is an emphasis on the quality of a company’s customer relationships. This is measured differently than a pure technology company and is centered on both the growth of the lifetime value of a customer as well as the increase in number of engagements that follow-on from the initial contract.

 

Timothy Goddard

 

Thank you, Steve. Finally to Amsterdam and Jon Scott on Data Secruity.

 

Jon Scott

 

Data security issues have continued to sky rocket in 2017. The other thing skyrocketing are the volume and valuations of M&A transactions in the sector.

 

A couple of the largest security multiples paid this this year are for AI-based premises security companies – HPE bought Niara, a security analytics vendor with a specific focus on the market segment known as User and Entity Behavior Analytics (UEBA). They paid for 27.5x revenues and Palo Alto Networks bought LightCyber, adding behavioral attack detection capabilities to its network security platform.

 

Security will never go out of style and enterprises will always need to stay one step ahead of the bad guys. And the big security vendors often miss being innovative and fill their product gaps with new technology from early stage companies. Already in 2017 to date there are as many anti-malware deals as there were in all of 2016, and more than two times as many email security deals. We are on pace to see 50% more data security deals overall by December.

 

Timothy Goddard

 

Thank you, Jon.

 

Thanks to everyone for sticking with us. We have gone a little over our time, so I'm afraid we won't have time for our live Q&A. But please continue to bring in your questions and we will follow up with you by email. We hope we will see you at one of our upcoming events. Thanks very much and we will go to our close.