Corum Annual Report 2018


Bruce Milne


Today we're doing forecast 2018, Global Tech M&A Report. I'm Bruce Milne, CEO of the Corum Group, your sponsor. This is a record-setting broadcast in terms of attendance. We have a jam-packed agenda today, more than we've ever covered, including some field reports, we'll do a scorecard on 2017, how'd we end up, and 2018 predictions. The Top Ten Disruptive Tech Trends, there are a couple of changes. Then we'll have our Annual Research Report, and then our luminary panel, with Salesforce, Descartes, Singularity University, and IBM. Welcome.


Let me turn things over to our moderator, Timothy Goddard.


Timothy Goddard


Thank you, Bruce.


Deal Reports


As mentioned, we have a very full agenda, so we're going to dive right in with some reports on deals we recently closed here at Corum. Let's start with Rob Schram here at HQ.


Rob Schram - Lending Manager Field Report


I am pleased to announce that Corum client Lending Manager, a leading point-of-sale and website creator for lenders of all sizes, has been acquired by LoyaltyExpress, a provider of marketing automation and cloud-based CRM solutions for mortgage companies and banks.


Congratulations to founder Wayne Steagall and his team at Lending Manager, who developed integrations with over 75 CRM, loan origination, lead management, and point-of-sale systems. The integration of both companies' technologies will help automate lead flow and associated marketing for all aspects of the loan process, serving a baseline of 115 lenders with over 15,000 loan officers across all platforms.


Timothy Goddard


Thanks, Rob. Now across the Atlantic to Amsterdam, where Jon Scott, managing director of Corum Group International closed a pair of deals. Jon?


Jon Scott - Visual Components & Stabiplan Field Report


Thanks.  We had a very busy December at Corum in Europe with two completed transactions in the last 10 days of the year.


Our first client, Visual Components, based in Finland, develops software solutions for 3D simulation in factory planning. Visual was founded in 1999 by a team of Finnish-American simulation experts and were acquired by KUKA Robotics, a $3B German manufacturer of industrial robots. Visual Components’ simulation software capability will be added to the KUKA product portfolio as a vital component of the design the factory of the future. The entire Visual team moved over to KUKA in the transaction.


Our second client, Stabiplan, based in the Netherlands, develops 3D Computer Aided Design and Engineering (CAD/CAE) and Building Information Modeling (BIM) technology for the Mechanical, Electrical and Plumbing (MEP) industries in Europe. They were acquired by Trimble, a $3B US-based company with core technologies in positioning, modeling and data analytics. The addition of Stabiplan will complement Trimble’s existing products for the European MEP market.  The entire team of Stabiplan became part of Trimble in the transaction.  


Both Visual Components and Stabiplan are well-run companies with deep 3D technology expertise, as well as products that bring significant value to their customers.  These are both excellent examples where the products our clients developed are now part of a large worldwide company and now reach a significantly broader market than before.


Timothy Goddard


Thanks, Jon. Now back to HQ and Dan Bernstein.


Dan Bernstein - Infian Field Report


On the heels of Corum’s recent deals in the Electronic Medical Records space with HospiceSoft and e-MDs, I am excited to have led the acquisition of Infian by Quantitative Medical Systems. Backed by Constellation Software, the two companies have combined sources to innovate in the dialysis software market to the benefit of both patients and providers. Together, QMS and Infian are the biggest providers of Electronic Medical Record software for the End Stage Renal Disease market. I am excited to see what Infian will do next, backed by the top acquirer of 2017, Constellation Software. Congratulations to the founders of this closely held company headed into the next phase of growth.


Bruce Milne


And congratulations to you, Dan, and Jon and Rob and more importantly congratulations to our clients. An interesting note, Corum has a unique process called hiatus. We've learned over the years that sometimes when you go out it's not quite the right time, they're not ready to pay the amount that you want. So we have a process called hiatus where you go off the market, you improve, and then you go back on. Two of these companies were able to do that to get their optimal outcome.




Tim, how'd we do on predictions?


Timothy Goddard


Predictions, yes! It was quite the year to predict, and I think we did remarkably well given the troubles that frankly everyone else seemed to have understanding what was going to happen this year.


We did not hit all of them, just running down this list.


GE did not extend its shopping spree. We were not the only ones who missed this, basically the whole market did and they are suffering the consequences as a result.


Blockchain, speaking of crashes, I think the entire volatility of that market really scared people away on the finance side. We did see some interesting things start to happen outside of finance and we'll talk more about that in a little bit.


Sovereign funds cut out the middle man... a little bit. We saw that particularly with the $2.5B put into Uber from Saudi Arabia. It didn't move into M&A fully but we did see them start to cut out the middleman and we may see that more going forward.


Repatriation leading to multiple acquisitions of tech unicorns, those acquisitions didn't happen, because the repatriation just now kicked in, we'll see that going forward now and we'll get to that shortly.


Now, the ones that we hit very well:


The industrial sector did indeed follow GE and Siemens, despite what happened there. Our sale of Visual Components to KUKA Robotics is one example and then on a much larger scale, the United Technologies acquisition of Rockwell Collins is another one.


Major AI players making notable acquisitions in data security, we saw this across the board. Microsoft's acquisition of Hexadite was one good example this year.


Major tech firms moving into the connect car space; Intel's acquisition of Mobileye, again, the largest deal on that one, but there were a lot of other moves there that we'll talk about.


And then, finally, Amazon will make an unusual acquisition. I think we called this so well I will give us an 11 out of 10 on this one. The Whole Foods acquisition is about as unusual as you could guess and it is driving a lot of things and we will discuss that more later.


So let's see what we have on tap for the year ahead:


·         Again, we think Amazon will make a move. This time, into the healthcare space via M&A. We know they're moving towards healthcare, that's fairly public at this point, but we think there are going to be some key acquisition that happens around that.


·         Uber with a down round is going to drive some other valuations for unprofitable unicorns. We think we'll see a bit of a sorting there.


·         Chinese buyers returning to the market with major deals. This was down, there were currency controls put in, we think we're going to see that shift, maybe towards the end of the year.

·         Big name old-line companies make their first major tech acquisitions. We saw a lot of that last year, we think we're going to see a lot of it in the year to come, driven by things like the repatriation.

·         More chip wars surfacing. There have been two and we think there will be more and there will be M&A in response to that as there has been with so many other issues in the security space like this.

·         Meanwhile, blockchain, you'll see these applications start to demonstrate real value. And you're going to see M&A increase as it relates to that.

·         Going back to the sovereign funds, we think we'll see Arab money leading a major tech acquisition.

·         Finally, reparation, just not kicking in, will lead to multiple high-profile companies acquired at the mega megadeal level.

Bruce Milne


Indeed, we're already seeing the repatriation start in a big way. Apple just announced they are repatriating $250B. It's interesting all the pundits said around $400B issued for all the tech companies total, but they're sitting on more than $1T, closer to $1.5T or $2T and we think there will be a massive repatriation, which we think will be the largest movement of capital in modern history and we think it will dramatically affect M&A as we talked about in our webcast last month on tech M&A under the new tax laws.


Top Ten Tech Trends


Now let's address our new trends. Let me introduce this by talking about the interesting history we have here. Ten years ago we started publishing our Top Ten Technology Trends. We worked with Gartner, Forrester, and a lot of other firms and the problem we found is there wasn't one good list of the trends you need to be thinking about. And why are these trends important? They need to be mapped to get the proper pricing and interest that you want from the buyers. It's not so much about the spreadsheets as it is a matter of filling gaps these buyers need. Corum has the largest database of software, IT and related companies in the world. We've done more transactions than anyone. We have lots of research out there and we are in daily contact with buyers on transactions. Last year there were over 2000 companies that bought at least one company and at least another 1100 in the hunt, and we're talking to them every day.


Our educational conferences are without peer. We do more conferences than everybody else combined, about 200 a year. These are live and online, like this one right now. But we're hearing from these brand new companies around the world on what they're doing, and we hear every day from the buyers what they want. So we said let's put this into a report, the top ten disruptive trends, so people who are going to market can recognize what they need to map themselves to in order to get maximum value.


So then, Tim, what are our top ten trends this year?


Timothy Goddard


In order, we have:


·         AI enablement

·         Composite commerce

·         IoT Software

·         Digital currency flow

·         Data science monetization

·         Focused IT services

·         Smart logistics

·         Connected health

·         Reg tech systems

·         Data security


We break these roughly into core and contour. Core being the basic technology and general trends that are driving things and then contour are the implications and applications of those markets.


So let's jump right in and look at AI enablement and hear from Ivan Ruzic in New York.


Ivan Ruzic - AI Enablement


Since 2012, over 250 AI-related companies have been acquired—over half in just the last two years.


Efficient independent learning, machine or human, employs a feedback loop to generate solutions and an evaluation of those solutions leading to better solutions the next time around. Control of any part of that feedback loop is a valuable resource to enable AI, making smarter systems and enabling the systems to function better. These are the two sides of the AI enablement trend.


Top buyers include many tech giants jockeying for position, spanning nearly all application areas. Microsoft paid $100M for AI cybersecurity specialist Hexadite. Salesforce acquired predictive analytics company Beyond Core for $110M and—by the way—22x revenue, while IBM acquired AlchemyAPI for its natural language processing and visual intelligence systems capabilities. Intel, Samsung, Cognex, Spotify, eBay, Progress and many others have been active acquirers in their own domains.


As the market evolves we expect AI adoption to expand to a wider range of companies, creating a window of opportunity for both innovators who have developed enabling technologies for AI, and early adopters, who have applied AI to better their particular fields of business.


Timothy Goddard


Thank you, Ivan. Ivan did an AI spotlight webcast recently that I hope you can catch. Reach out and I can get you the link to that.


Next, composite commerce and Jeff Riley.


Jeff Riley - Composite Commerce


The worlds of physical and virtual commerce have rapidly evolved in a disruptive and tumultuous dance since the beginning of the Internet. Traditional retailers, hospitality businesses, and consumer service providers have been forced to examine every aspect of how they reach, serve, and deliver goods and services to their customers, or perish at the hand of online competitors.


Amazon-Whole Foods crystallized the trend, and traditional players responded. In hard goods retail, Ace Hardware acquired ecommerce startup The Grommet, an innovative product launch platform for inventors and entrepreneurs. In hospitality, industry powerhouse AccorHotels acquired Travel Keys and VeryChic. And 2017 saw the largest e-commerce deal ever: PetSmart acquiring for $3.4B. Target, IKEA, Albertsons, Williams Sonoma, Office Depot and many others made tech moves as well.


Businesses are adopting, integrating, and acquiring technology throughout their operations. From martech and adtech technology to target new customers, to using AI and industry data to streamline manufacturing and distribution. The result is a top trend for Tech M&A that we are calling composite commerce: a mixture of many technologies brought together to enable companies to leverage the strength of both the virtual and physical worlds.


Timothy Goddard


Thanks, Jeff. Jeff will be going into this in more detail at the international retail tech conference later this month in a keynote speech.


Now, staying at HQ, Dan Bernstein again on IoT software.


Dan Bernstein - IoT Software


The Internet of Things has been hot for years, and enormous value remains to be unlocked. As a result, there has been a proliferation of hardware platforms, endpoint solutions, and service-oriented IoT firms, followed by significant deal flow for the software that makes it all work.


In the realm of self-driving cars, nuTonomy selling to Delphia Automotive for $400 Million shines a light on the Carnegie Mellon spinoff’s software chops in driverless car software. In the agricultural sector, Blue River Technology selling to John Deere for $305M shows that even the most traditional equipment manufacturers are feeling the pressure to innovate in IoT.


In a world of IoT generalists, a concentration within a particular vertical, with a protected IP-centric view will differentiate any player in this space. Most importantly, it is the software that connects the “thing” in question that is of most interest to acquirers. As hardware costs race to the bottom and platforms more often than not operate in open source environments, a cloud-based, analytics-rich Software as a Service capability is valued highest.


Timothy Goddard


Thank you, Dan. Now to Minneapolis and digital currency flow with Rob Griggs.


Rob Griggs - Digital Currency Flow


Buyers see major value in shaping and controlling the digital flow of currency, and last year it drove nearly $20B total in payments megadeals. Overall, about 20% of payment deals were platform acquisitions by PE, suggesting an appetite for bolt-ons going forward.


And across tech sectors, companies with a digital currency flow component to their technology stack—transaction processing, billing, etc.—tend to get much higher multiples.


Mobile payments in the US grew by 25% to over $134B last year, while China processed over nine trillion dollars! Credit card companies have been displaced in China, with mobile payment processors leveraging aggregated user, merchant and transaction data to create additional value. The contest is still ongoing in the rest of the world.


Meanwhile, the allure of blockchain technology drives volatility in cryptocurrency valuations, geopolitical acceptance or not by central banks is changing the landscape almost daily. The US Federal Reserve Board estimates that blockchain will reduce the costs of the trillions of dollars of daily transactions by 20-25%.


Why are companies aligned with this trend so valuable? As Willie Sutton explained when asked why he robbed banks—“That’s where the money is!”


Timothy Goddard


Speaking of money, let's go to Jim Perkins in Phoenix for data science monetization.


Jim Perkins - Data Science Monetization


For many years, the primary purpose of data science for many companies has been efficiency: reducing costs, dropping unproductive business segments, and promoting top performers. But those companies that have taken data science to the next level have reaped the rewards of aggressively implementing data science to create new and more advanced avenues for monetization.


Asian gaming firms were the pioneers here, in order to optimize their free-to-play models, monitoring everything consumers did, liked, played and paid for.  Developers globally are extending this to services and applications of all kinds, analyzing customer behavior to ensure a more compelling—and more lucrative—customer experience.


From gaming, the next industry being disrupted here is advertising, with Oracle spending $600M on Moat for cross-platform ad analytics that don’t just cover impressions and views, but seconds of sight, sound and motion. Nielsen spent the year on a much-needed data overhaul, making multiple acquisitions in this space.


We’re also seeing this in the B2B world, with the rise of value-based pricing in particular. We sold Endeavor Commerce to Vendavo to drive intelligent pricing capabilities directly into the sales process. Companies that provide the tools for data science monetization, or that do a particularly good job of it with their own clients, continue to be highly sought after acquisition targets.


Timothy Goddard


Thank you, Jim. And now to London and Peter Prince on focused IT services.


Peter Prince - Focused IT Services


A disciplined focus has re-invigorated the IT services sector as a whole. Indeed, consulting firms offering specialized knowledge and experience are driving higher levels of demand and therefore higher valuations.  Focus on complex problems and intricate platforms require expertise in applications, maintenance and redevelopment of the tech stack. High values are put on deep domain knowledge and resulting long-term customer relationships.


Firms at the leading edge of disruptive or key trends, both of which underpin high-value verticals are attracting lots of attention around the globe.  In fact, this trend has helped drive public IT services sales to 1.5x sales through 2016. If you consider the some of the niche service waves such as ‘biomedicine’, Autodesk services, and localization, as well as firms focused key trends like AI, IoT and data security are underpinning the belief in specialized IT services are on the up!


Some examples of this trend could be The Advisory Board Company diversifying by selling its healthcare section to United Health’s Optum for $1.3B and its education-focused business to Vista Equity for $1.6B, seeking what the company’s CEO called ‘purity of industry.’


Timothy Goddard


Thank you, Peter. Now back to HQ and Rob Schram on smart logistics.


Rob Schram - Smart Logistics


Smart Logistics is driving a sea-change in Supply Chain Management, distribution logistics, and beyond.  Driven largely by the emergence of Composite Commerce, we’re witnessing a confluence of IoT, cloud platforms and predictive analytics, enabling end-to-end optimization of global distribution systems.


With an expanding array of IoT subsystems at the edge and impressive advances in analytics at the core, Smart Logistics promises sustainable value for optimized global cargo movement in sectors like automotive and transport, smart cities, industry and manufacturing, warehouse management and automation.


Some highlights on the deal front: Honeywell bought a 25% stake in Flux to capitalize on China's booming ecommerce market; Alibaba acquired Cainiao Smart Logistics Network for $807M; and Descartes acquired visual logistics & tracking SaaS Macropoint for over 8x revenue, $107M.


We’re also seeing significant fleet management activity, like ORBCOMM acquiring inthinc for $35M, Omnitracs acquiring Shaw Tracking, and many smart logistics deals are springing out of Consolidated Commerce like Walmart/Parcel and Target/Grand Junction & Ship.


In addition, we’re seeing high demand for firms that apply Smart Logistics principles outside of traditional SCM, such as medicine, natural resources, and manufacturing—which is where our Visual Components deal stands out, as well as construction sector, where another soon to be announced Corum deal is transacting.


Timothy Goddard


Thank you, Rob, looking forward to that. Now to Salt Lake City with Steve Jones on connected health.


Steve Jones - Connected Health


The emphasis on connected Healthcare IT is migrating from core systems interoperability to creating a more seamless patient experience. There are three major trends are driving this shift. First, patients are more educated and expect transparency in treatment as connected devices capture personal data to contribute to a holistic view of their care; second, an aging population is shifting the burden and cost of care to a more decentralized and distributed approach. And third, healthcare providers are fighting to retain patient relationships across this entire continuum of care which transcends a single provider or facility.


M&A activity in 2017 saw a direct response to these trends and we see even further momentum occurring in 2018. Patient engagement systems that go beyond surveys and enable patient interaction through digital media continue to be attractive deals as evidenced by the acquisition of Eliza by HMS Holdings for $170M and by the deal in which Clockwise.MD was acquired by DocuTAP.


In 2018 those additional targets will be companies who unleash medical big data from disparate systems enabling AI-driven platforms to provide predictive outcomes and preventative care.


Timothy Goddard


Thank you, Steve. Now to Dave Levine in Vancouver on regtech systems.


Dave Levine - Regtech Systems


Regtech is now mission-critical for banks, financial institutions and enterprise as compliance with regulations must be tackled with technology. Governments, enterprise and consumers must all grapple with significant regulatory volatility as we are seeing shifts like GDPR, Brexit and the tumultuous US political situation that is impacting taxation and health reform. These changes are driving M&A, across sectors.


On the data side, IBM acquired Agile 3 Solutions for 1$4M and the active PE Firm K1 acquired Actiance, a messaging data company. In Fintech, NASDAQ acquired Sybenetix for behavioral analytics and cognitive computing expertise. On the PE front, CIP Capital acquired three Fintech compliance firms to create a global regtech platform. Other niches with deals included trucking, insurance and even cannabis.


For the companies that are building solutions in this sector and have demonstrated scale, it is a good time to be thinking about M&A. The diversity of regulatory impact across jurisdictions and industries makes the acquisition of companies with point solutions and specific domain expertise a particularly important part of this ecosystem, with larger players actively looking to add the pieces needed to stay relevant.


Timothy Goddard


Thank you, Dave. Finally, all these trends lead to a lot of other things, which we will be touching on with Jon Scott and data security.


Jon Scott - Data Security


Major data breaches continued to grow in intensity, scale and impact in 2017. One of the biggest credit reporting agencies, Equifax, was hit with what was termed “the mother of all hacks,” exposing as many as 143 million consumer records. The pace is quickening in 2018 with revelations of basic chip design flaws and problems with patches. With the overall market growing to more than $1 trillion over the next five years, all this is making Data Security one of the hottest trends in tech M&A.


Today’s big security players can’t keep up with the pace of innovation without filling product gaps quickly by acquiring innovative technology and small teams. Buyers’ strategies vary: for instance, Symantec has been balancing its security portfolio by both buying and divesting of products. It sold its website and PKI business to DigiCert for $950 million, then used some of the proceeds to acquire two Israeli companies — Skycure, a mobile threat defense firm, and Fireglass, an enterprise security solutions provider. Going forward, we see companies leveraging AI for automated threat response and predictive threat intelligence as particularly attractive targets.


Timothy Goddard


Thank you to Jon and all of our contributors.


2018 Research Report


Now let's go to our research report, the meat of our session. I'm happy to introduce Elon Gasper, Amber Stoner, Yasmin Khodamoradi, Amanda Tallman, Patrick Cunningham, and Becky Hill.


Elon Gasper


Thanks, Tim. We begin with a look back at the public markets, where major averages around the world pressed on to new highs last year, plus more so far in 2018, led by US issues and their strong tech components. The 42% gain in the S&P Tech marked the steepest sprint yet in the long climb that’s created trillions of dollars of new wealth, as low interest rates, good earnings, and investor confidence in tech companies powered a bull market like no other since the dot-com bubble.


We continue to urge potential sellers to take advantage of this extraordinary window of opportunity to at least calibrate their companies’ value through an M&A process. And remember, you need runway time for tech M&A, which often takes nine months or more.


Our Corum Index of Tech M&A indicators showed a second year of supply-limited volume as buyers shopping with their record high cash stockpiles found the M&A shelves already picked over. In response the buyers, PEs especially, have combed through the increasingly-sidelined VC’s portfolios, reached across borders and extended their lifecycle range, responding to this historic seller’s market.


Our top acquirer leaderboard looks very different than last year’s, as Constellation Software, on top for the first time ever, more than doubled its take, to 32 acquisitions; we’ll unpack those in a moment. First, let’s call out some groups here.


Constellation and third place J2, last year’s winner, are traditional consolidators, rolling up small to mid-sized tech firms as a key strategy.


The largest cluster is a set of services titans, buying up both tech and talent to keep up with disruptive trends. Accenture led that pack, on the strength of a very active first half.


Most tech giants stepped back a bit, but Apple stepped forward, as did Alibaba, the first Chinese company to make the list, which is rounded out by Australian newcomer WiseTech riding the smart logistics trend, and Verisk Analytics building on its insurance base, both among the fastest risers. Among them, too, France-based consulting giant Atos touched trends mainly in payments and healthcare.


Many prior leaders downshifted, IBM and Salesforce taking time to work through significant integrations, Verizon and Intel each held back by their own challenges.


M&A tends to move in waves, by sector, technology and buyer.


Constellation, though, has kept pace with a very different, almost PE-like strategy, sprinkling specialized software solutions providers across its deep structure of subsidiaries, in sectors like Hospitality, Healthcare, Education and other verticals, with sizes ranging right down to the smallest company; showing us that, in the current M&A environment, size is not a barrier if the fit, the tech and team are a match.


In contrast to the strategics, the top PE buyers stayed remarkably stable, Vista retaining the top spot, with Insight and TA shifting from the top 5 to the top 3; We’ll unpack the rest in part two of our Annual Report, three weeks from today.


Now, what did last year’s megadeals look like, Yasmin?


Yasmin Khodamoradi


Last year’s megadeals didn’t quite hit the stratospheric numbers of 2016, but remained extremely high, with 49 deals totaling over 143 billion dollars, with Vertical and infrastructure leading again in volume and value.


We’ll call out some deals by sector, starting with Consumer, Patrick?


Patrick Cunningham


Talking Tom app developer Outfit7, out of Slovenia, sold for over $1B to Chinese chemical maker, Zhejiang Jinke - slipping in just as the Chinese currency controls were coming down.




PetSmart acquired for $3.4B in the biggest e-commerce deal in history.




Engineering services firm Aricent was bought for $2B, nearly 3x sales, by French tech consultancy Altran.




Four of the six horizontal megadeals were for payment tech, including TSYS acquiring Cayan for over $1B to move into retail.




Last month, French aerospace defense giant Thales paid $5.7B for Dutch security expert Gemalto, outbidding top acquirer Atos.




And in the active construction vertical, Oracle spent over $1B for project management and collaboration firm Aconex to fold it into its construction and engineering cloud, joining Textura.


Elon Gasper


Corum divides tech companies into 30 subsectors, grouped into 6 markets. How have their relative valuations fared the last few years, Amber?


Amber Stoner


Looking at a three-year span, sales multiples increased in nearly all sectors with Infrastructure moving above Horizontal for the first time since early 2016, and Consumer jumping up as well. Internet EBITDA multiples set themselves apart from the other sectors; in Q4 last year, Horizontal and Vertical nearly converged while Consumer caught up with Infrastructure and IT Services remained fairly steady over the course of the year.


Diving into our six markets, we’ll start with Horizontal where sales and EBITDA valuations remain remarkably steady from mid-year, up from where they were a year ago largely due to maturing cloud models in the space.


HR continues to lead the subsectors in metrics, with most others landing in the 4-5x sales range. The SCM subsector saw a slight dip in sales multiples as those companies face increasing pressure from the Smart Logistics trend.


Analytics companies were popular acquisition targets in 2017. Logi Analytics was acquired by Marlin Equity. Arimo, which applies deep learning to develop Internet of Things-focused products for commercial use, was picked up by Panasonic. And Thales spent $215M, over 7x revenue, for intelligent analytics company Guavus.


In the sales performance space, Corum client Endeavor Commerce, which develops a configure price quote platform, was snapped up by Francisco Partners-backed Vendavo. Xactly, specializing in sales compensation software, was taken private for over $560M by top PE acquirer Vista, which then bolted on territory performance data firm AlignStar.


And in customer engagement, another Corum client Digital Roots, which pioneered AI-based customer engagement via social media, was grabbed by Interactions to build on its omnichannel intelligent assistant solutions.


Smart Logistics, as mentioned, drove global activity in 2017. Startup Grand Junction, which manages local deliveries, was bought by Target to help it compete in the same-day delivery race.

Elsewhere in the logistics space, 10-4 Systems, which develops multimodal shipment visibility solutions, was acquired by Trimble. And Descartes, who will be joining us on our panel a little later, picked up two companies: logistics management SaaS provider PCSTrac for over $11M and load tracking and management SaaS company MacroPoint for nearly $110M.


In the HR sector, Intuit spent $340M for its partner Tsheets, which offers employee time tracking solutions, strengthening Tsheets’ integration with QuickBooks.


Employee skills and compliance training SaaS provider, Learning Seat, was picked up by Callidus Software for over $26M to expand its Litmos Learning Platform. And corporate learning specialist Navis Learning was acquired by BLR-owned Simplify Compliance.




Valuations in the Vertical market were up significantly, as industry specialists leveraged their deep domain expertise. Healthcare, A/E/C and automotive in particular showed sustained growth, as they successfully adopt innovations in mobility and machine learning.


In Healthcare, M&A remained active, with trends in patient engagement driving deal flow, as home care gains popularity and providers continue the shift to outcome-based care models. Last year saw many deals in this space with buyers ranging from well-known players like athenahealth and HMS, to smaller outfits like WebPT and other PE-backed firms. Most recently, Dutch personalized care company VitalHealth was bought by Philips to build on its international presence in the population health arena.


In the EMR space, Toronto-based Kroll Computer Systems was bought for $250M by TELUS Health.


And in one of the larger deals of the sector, Bain Capital-owned Navicure bolted on revenue cycle management provider ZirMed for an estimated $750M.


The energy subsector saw significant consolidation as sector leaders seek to solidify market share in the distributed energy space.


Smart meter company Aclara was snapped up for over $1B by utilities equipment maker Hubbell to move into the smart grid space.


Energy management giant Schneider Electric spent a reported $710M for British engineering software company Aveva, bolstering its industrial software arm.


And Boston-based energy intelligence company EnerNOC was taken private by Italian energy giant Enel for a quarter-billion, creating a global leader in demand response services.


Other deals in the demand response space included Belgium’s REstore, for over $80M by English energy supplier Centrica… and Comverge, which was acquired by smart metering giant Itron for $100M.


Itron also paid about a billion at 2x revenue for smart grid firm Silver Spring Networks.


In A/E/C, there were multiple acquisitions of Construction SaaS solutions as strategic buyers from Oracle to Caterpillar as well as top PEs sought to capitalize on the cloud and mobile technologies transforming the sector, particularly in areas like project management, workforce solutions, payroll, cost estimation, and bidding management.


In automotive, self-driving vehicle tech remained in demand, as TomTom kicked off the year with its acquisition of Berlin-based Autonomous to incorporate its map-based products into autonomous driving applications. Traditional automakers such as Ford and GM made significant investments in the space, while newcomer Siemens entered the race.


However, it was Intel’s blockbuster $15B acquisition of Mobileye that shook the sector, possibly prompting countermoves from rivals Nvidia and Qualcomm in the year ahead.




The volatile Consumer sector ended the year with a spike in valuations - particularly in sales metrics - driven almost entirely by gaming. Gaming acquirers tended to fall into three broad categories: Chinese, Western and casino tech companies.

As mentioned, Chinese currency controls slowed deals, however, some Chinese tech giants found ways to make inroads, including Tencent’s Supercell spending nearly $56M for London-based mobile studio Space Ape And Alibaba, after shunning gaming for years, acquiring Ejoy.


Western acquirers were more active, starting with Ubisoft making strides through its acquisition of both FreeStyleGames and Growtopia – continuing Ubisoft’s commitment to increasing player freedom and long-term engagement.


Respawn Entertainment, the creator of the blockbuster Titanfall franchise, was snapped up for $315M by Electronic Arts, to support Respawn’s ambitions to work on a Star Wars project and move into VR.


Casino equipment makers have been making big moves into the social gaming space. Along with its acquisition of Plarium for $500M, the casino gaming giant Aristocrat, also picked up Rumble Entertainment in September, and hooked Big Fish for nearly $1B for another consumer megadeal.

Half of Scientific Games’ acquisitions were for traditional games, acquiring social bingo startup Spicerack and developer NYX for over $600M.


In VR, Owlchemy Labs, known for games that closely mimic using real hands, was picked up by Google to complement its Daydream VR platform.


Open-source mapping platform Mapbox shifted efforts to augmented reality as it bought activity tracker Fitness AR to actualize its vision that, “AR is going to be bigger than the browser and bigger than mobile,” while Troubled Snap reached out for a potential AR lifeline with its acquisition of AR location startup Drop and its patented IP.

Home automation expert, Innovo, propelled its Internet of Things platform by grabbing four companies in the connectivity space, two of which were for consumer-facing tech: Knoton, specializing in do-it-all wearables, and Tazer Mobile, a developer of AI-based smart object recognition.


Closing out Consumer, ahead of its IPO, Spotify has gone on a buzzword shopping spree, signing deals in machine learning, blockchain and collaboration.


What happened in the Internet market, Amanda?


Amanda Tallman


Internet valuations largely held the gains made in the Q2 with some fluctuations. Traditional ecommerce players were under pressure thanks to the composite commerce trend, which also led to a flurry of M&A deals from traditional retailers like Albertsons, Ace Hardware and Ikea.


Building on its acquisition of Grand Junction, Target forked out $550M for Shipt, an online same-day grocery-delivery company, further beefing up its logistics operations.


And Home appliance giant Whirlpool acquired Intel-backed Yummly, a recipe search engine, as it continues to build out its smart and connected kitchen offerings.


The petcare space specifically saw a number of composite commerce deals. In addition to PetSmarts Chewy acquisition. Competitor, Petco made two deals of its own. And distributor, Phillips Pet Food & Supplies picked up online retailer PetFlow.


Private equity also showed interest in the space as Francisco Partners picked up Australian online retailer Pet Circle, and EQT portfolio company Musti, a Finnish pet store chain, expanded its online presence in Sweden, adding both Animail and, Vetzoo.


There was plenty of activity in the ticketing space, capped by private equity firm GTCRs acquisition of secondary marketplace Vivid Seats for an estimated $1.6 billion.


Corum client ZeroHero was sold to TicketMaster.


Etix added 3 companies to its stack while EventBrite and Alibaba both picked up 2 each.


And SeatGeek made its largest acquisition to date buying Israeli startup TopTix.


And finally, in the travel segment, global M&A remained strong and is expected to continue as companies, worldwide, both consolidate and diversify into the market.


Ecommerce company Ebix, diversified its operations with the acquisition of Indian online travel portal, And Denmark's Momondo was bought by Priceline for $550M to bolster its Kayak subsidiary in the Nordics.


Amber Stoner


Infrastructure multiples for both sales and EBITDA ended the year up from where they started, with a significant jump in Q4.


Subsectors increased across the board; Security retained the top spot in EBITDA metrics while staying near the top in sales. Deals in the space were particularly driven by top trends IoT Software and Data Security.


In the endpoint security area, Seattle-based disaster recovery firm Datacastle was bought by Carbonite to complement its acquisition of Code42. Malware protection company Invincea was acquired for $100M by Sophos for its neural-network technology.


And firewall and anti-virus software provider Barracuda was taken private by Thoma Bravo for $1.6B.


Identity and access management companies were sought after acquisition targets. In addition to Thales’ multi-billion dollar acquisition of Gemalto, adaptive authentication company SecureAuth was grabbed for $200M by K1 Investment to merge it with Core Security, a threat detection company under K1’s umbrella. DevOps identity provisioning player Conjur was bought by Israel’s CyberArk for $42M. And Google shored up its single sign-on capabilities across enterprise cloud applications by picking up identity management startup Bitium.


Amanda Tallman


Elsewhere in security, digital governance firm Evidon was bought for an estimated $50M by digital experience management company Crownpeak to help it improve compliance with privacy laws throughout the digital supply chain.


Industry stalwarts also recharged their security inventories. Proofpoint shelled out $60M for Weblife Balance to make use of its browser-isolation tech to protect both corporate and personal emails. And Opera sold its VPN service SurfEasy for over $38M to Symantec.


Amber Stoner


Open source solutions saw a surge of interest from strategic buyers. French API design and testing firm Restlet was bought for over $10M by cloud integrator Talend for its data monetization capabilities.


Sweden’s Atollic, which develops open source, ARM-based tools for microcontrollers, was purchased for $7M by STMicroelectronics.


And Database-as-a-Service company Tesora was picked up by Israel’s Stratoscale.


In the enterprise mobility space, SkyGiraffe, which converts complex enterprise apps into consumer-like mobile experiences, was picked up by ServiceNow to embed into its Now Platform.


And in Germany, device management firm Cumulocity was acquired by Software AG to augment its Internet of Things portfolio and complement its acquisition of IoT analytics firm Zementis in 2016.


Becky, how did IT Services fare in 2017?


Becky Hill


IT Services in developed markets appear to have hit their ceiling in the midyear, with emerging markets now leveraging the focused IT Services trend where both strategic and financial buyers were active.


This helped increase overall deal volume in Latin America, including the services sector, where PE Firm Advent bought Peru-based BPO and IT Services company, GMD for $37M with earnout that could bring it up to $85M and over 8x revenue, and Accenture acquired Concrete Solutions to develop cloud-based mobile solutions and web applications.


In the government services area, Maryland-based software and system engineering consulting firm Praxis was bought for $235M by CSRA to extend its footprint in the intelligence community. And Harris Corporation spun-out its services division to Veritas Capital for $690M.


The CRM-based system integration space saw a number of deals from small and large acquirers. Capgemini picked up Chicago-based Salesforce commerce cloud champion Lyons Consulting, UK-based Salesforce consultancy Cdesisions was acquired by PwC, and Simplus, aspiring Salesforce digital currency flow specialist, bought two in the CRM services space: Basati and CRM Manager.


In the automotive industry, German EPOS was purchased for over $11M by Norway’s embedded solutions expert Data Respons to continue to expand its footprint in Germany, and Scotland’s Wood Group bought Detroit-based automotive engineering company CEC Controls for $59M.


Artificial Intelligence specialists were also in demand, with South Korea’s leading search engine, NAVER, making two purchases. Google snapped up India-based startup Halli Labs to upgrade its older domains team, and Microsoft bought NLP specialist Maluuba out of Canada.


Elon Gasper


And here’s the first 2018 megadeal: IT Services firm DST Systems being acquired by software provider SS&C, both in the financial space, the buyer gaining a captive outsourcer in line with our focused IT Services trend. We’ll cover that deal next month, in part 2 of our Annual report. Back to you, Tim...


Bruce Milne


Actually, it's interesting, DST, a core of their technology is something we sold them from the Chicago Stock Exchange. Great job on the report Elon and team. Tim?


Luminary Panel


Timothy Goddard


Thanks, Bruce. Now onto our luminary panel. Each year we like to gather some of the top thinkers and thought leaders from tech giants and Silicon Valley to discuss what CEOs like you should be thinking about in the year ahead. What are the trends and technology and other items that you need to be considering as you build your company towards a venturable exit or whatever else comes your way. Happy to have with us, again, Peter Coffee and Reese Jones who have been stalwarts on this panel. Henry Hu is joining us again from IBM this year. And new to the panel is Ed Gardner from Descartes. We're very happy to have each of you. I'm going to let each one of them speak briefly and then we'll go into Q&A. If you have questions for our panelists, enter them in the side window and we'll get to as many of them as we can.


Let's start with Peter Coffee.


Peter Coffee


It's great to be with you again because this is my annual chance to find out what I think about the year to come by being forced to say it in just two minutes, which is almost as hard as squeezing it into a haiku. Fortunately this year it is relatively easy because for once there is a single, unifying idea that informs every one of your own Top Ten Trends and is also key to what we are doing at Salesforce. In 2007 it was hugely disruptive to say we were starting an era of everything as a service. But this year I can look people in the eye and tell them they need to bet big on the next step, which is everything as a platform. I'm not saying this is the first time anyone has used this phrase, but I can guarantee you it represents a bigger and more wrenching change in the way people think about how a technology is designed and implemented and turned into a business model.


For example, what is much more important today is the connected planet that can feed knowledge back into the grid so that the intelligence is continually improved, but that requires seeing it as a platform that has value added by its users, not seeing an AI thing as a simple product. Commerce becomes a platform when the retail store becomes an extensible framework, not just an instance of a monolithic brand, when every restaurant starts to feel like a cross between a food court and a community center, not like just another identical burger stand. Currencies and logistics can become platforms; for example, when a Salesforce customer like Western Union elevates from just transmitting money to being a process partner for things like cross-border transactions. This era makes M&A much more interesting. Instead of the limited options of horizontal mergers for scale or vertical mergers for end control and differentiation, there are many new one-plus-one-plus-one equals ten opportunities for customer-centered thinking. It is not about the product being delivered, but the lifestyle moment being enabled or the community of complementary interests being created around a brand.


At Salesforce we are putting the prefix 'my' on everything; MySalesforce for customizable applications, MyEinstein for personalized AI, and if you want to win the next round of disruption, start thinking about how to offer your customers a 'my' proposition.


Timothy Goddard


Thank you, Peter.


Now to Ed Gardner from Descartes.


Ed Gardner


Thanks. I'm very happy to join the call today and share some insight in what I am seeing in the technology market right now, in particular at Descartes as it relates to logistics and supply chain technology, which is where we operate. For those of you that may not be familiar with us, we are a Canada-based logistics and supply chain technology firm and we are fully acquisitive. We have combined with 38 companies over the past 12 years and have deployed nearly $700M or so. We operate a network that we call the global logistics network and on that network, we connect trading partners around the world and help them access and share information to research and plan shipments and then execute and monitor those shipments in real time.


So for us, not surprisingly, the technology trends that we see as important for 2018 are those that touch the movement of goods and relate closely to logistics, data and content, really.


In looking at some of the trends that Corum identified, for me Composite Commerce is a really big one and will continue to be for some years. Consumer behavior has been evolving for years, driven largely by what many call the Amazon effect, they buy stuff and they want it now or at a specific time, whereas ten years ago they might have been okay with getting it in two or three days. That is a requirement puts a lot of pressure on the supply chain, to deliver the goods. For retailers and anyone selling goods in today's market, the price of the goods is only one component of the sale, more so than ever. Being able to fulfill that order is just as, or even more important for customer satisfaction.


So I think that technology companies that are at the intersection of Composite Commerce, particularly on the fulfillment side, are really well-positioned to grow and grab the attention of potential acquirers.


The next trend, I think in many ways related as well, would be Smart Logistics. In order to improve order fulfillment in today's world of ecommerce and increasingly demanding consumer expectation, companies absolutely have to have access to the right data at the right times. At Descartes, we use our global logistics to collect data in multiple formats from multiple parties and it is a big differentiator for us. Companies that can collect data from third parties and or from new or challenging data sources can provide real value to customers and in turn to potential acquirers.


Taking that a step further, the real leaders are not only finding new and interesting ways to collect data, but also tools to leverage that data and provide insights and context to match with the customers own data or interests. I think there is lots here to watch in the future.


Finally, I think another one related to data and content is around webtech systems and regulatory technology. These are becoming increasingly important in today's global trading landscape. From a logistics and supply chain perspective, global trade regulations are changing every day and they will continue to do so. By way of example of some big changes that can really impact one's supply chain more than they think, think about the complexities that both Brexit and potential changes in NAFTA will have for companies dealing goods internationally. The technology companies that can source data and content in a timely fashion and combine it with strong software to interpret rules and optimize decisions can really save their clients a lot of money and operate things much more efficiently.


Looking ahead, I think regulatory compliance will only continue to grow and companies that can focus on the marketing opportunity can do really well for themselves and for their customers.


Timothy Goddard


Thanks, Ed. Now to Reese Jones.


Reese Jones


Hi, this is Reese, thanks for having me back. I'm going to touch on three things I think are important.


The first being AI-first company strategies. The second being public robots. The third being crypto tokens in new companies.


The AI-first strategy is something Google has announced itself to have in the last year, which is prioritizing AI machine learning for all aspects of their products and services to accelerate their performance in adapting to what users want. An example that recently happened is that AI systems were able to be humans in reading comprehension this month, where two teams were able to demonstrate systems that could read large volumes of Wikipedia files and answer questions better than humans could. This is going to change the way computers are used to evaluate written thing.


The second being these voice ecosystems, where instead of voice being recognized by a device in your hand or a computer on your desk, you're talking now to the room or your house or your car and the AI and machine learning is being done in the cloud and evaluating what you like or don't like or instructing and it learns the model of you as you move from situation to situation home to car to work or so on. This is changing different kinds of applications, for example, zero-click ordering type projects at Amazon where a box is delivered to your house with things that you might likely want to order. You open it up and pick out the things that you do want and verbally say what you like about some things, what you don't about others, send it back, and each time a box is delivered, the choices of what is in it get more accurate and better for you.


The category of public robots are robots that co-mingle, autonomous cars, but also delivery robots, flying robots delivering packages, these kind of things are also heavily dependent upon machine learning and voice interface and are getting better and coming quickly and can be seen on the streets of San Francisco these days.


Then, finally, with crypto tokens, a San Francisco VC group realized that the smartest entrepreneurs are bringing them mostly crypto related or token deals. This is going to change how new companies are funded, and already have been, it's also going to change how companies are evaluated for acquisition where there is a mix of equity and token funding in the origining company.


Timothy Goddard


Thank you. Now to Henry Hu at IBM.


Henry Hu


Thank you, Tim. Similar to last year, your team has done an outstanding job in researching and presenting the trends and market happenings.


In my view these trends, plus the platform, as Peter mentioned, are all founded upon the coalescence and interplay among key technologies of this era: AI, IoT, blockchain and big data, built upon cloud infrastructure, digitized and delivered via mobile.


All ten technology trends can become relevant and valuable for technology companies, including your clients, depending on your space. But one particular trend might be hard, in the US, for small tech companies to make a big difference or monetize upon. Digital currency flow as a trend has a sub-trend, the cashless mobile payment space. Cashless mobile payment technology has existed for a while now. It actually took off and scaled in South Korea and Japan first, exploded in China, but not in the US yet. Well, for this technology to drive adoption and scale in the US you will require two changes almost simultaneously. First is changing consumer habits from using credit cards and cash into paying using mobile phone apps. Second, finding acceptance among mass merchants using new scanning methods.


To solve these two problems and generate network effect and momentum in the US, it is more about business and market department problems and less about technology problems that startups can innovate upon and monetize on.


A better trend to focus on would be blockchain, which I can talk about later.

Back to you, Tim.


Timothy Goddard


We're getting to the top of the hour, but we're going to keep going with questions for as long as our panelists are willing to stay and as long as we have questions coming in.


So let's turn that around, since we have already had a few questions come in on blockchain and you touched on that, Henry. Can you go into a little more depth? How are you seeing blockchain play out sort of in the year ahead?


Henry Hu


The blockchain technology is also called distributed ledger technology. It is the foundation behind Bitcoin and other cryptocurrencies. Bitcoin has sucked up all the air, but it's more speculative discussion, in my mind. Bitcoin is just one application of the blockchain technology in the financial services industry. Inside and beyond financial services, there are many other potential applications for blockchain. IBM's investor day in March 2017 bridges our industry platform SVP said that blockchain related market opportunities could be as large as $1T and $900B of it is in financial services, starting in areas like back office process automation, risk compliance, regulation tech, etc.


IBM is also piloting several innovative applications of blockchain outside financial services. A recent example, we founded a new joint venture with Maersk, one of the world's largest shipping companies, to implement a new blockchain solution, which will help manage and track the paper trail of millions of shipping containers across the world by digitizing the supply chain process.


Another example: food safety. Last year we first pondered with Wal-Mart piloting blockchain to trace pork production and distribution in China, then collaborated with one of China's largest retailers, to bring more and safer food supply to China. We are starting in the US as well.


We have more than 400 blockchain clients and more than 120 hyper ledger project alliance members now. We are looking to expand innovative blockchain applications in and beyond financial services. You are welcome to join our efforts and these can provide interesting opportunities for any company to pilot applications, innovate new processes, bring disruptions, and generate value for yourself and for your customers.


Back to you, Tim.


Timothy Goddard


Thank you.


Peter or Ed, I'd love to get your thoughts on the blockchain as well. Reese touched on it a bit already. Peter?


Peter Coffee


Having made a key point, of course, to say that blockchain is merely the best known special case of the much more general idea of distributed ledgers and again pointing out that the confusion of blockchain with Bitcoin is like thinking that Amazon is all about helping more people read books. Bitcoin is an application running on an interesting prototype of a distributed ledger model and the Maersk joint venture is certainly exemplary of the importance of this to changing our understanding of how we will deal with things like supply changes, IP, usage and so on. The key idea that now we can have cryptographically robust integrity of data broadly shared without anyone relying on a trusted central authority, who might either be 1: not entirely trustworthy or 2: not entirely reliable and just becomes a big target. This is going to take a lot of things that used to be expensive, scarce, dangerous and make them cheap, widely-abundant, and highly reliable. George Gilder, of course, said that every era is defined by its key abundance and its key scarcity and if the scarcity of the past era was trust in an abundance of computational and database power, maybe the next abundance is going to be trust, and I don't know what the scarcity is going to be. Someone famously said people who know what the future will look like are called futurists, people who know when are called billionaires. I am not yet a billionaire.


But the notion that trust could become an abundant and shared thing instead of a scarce and proprietary thing is quite transformative and a lot of business models will be hugely disrupted by that kind of a change and Salesforce and IBM are, of course, strategically partnering in a number of these areas and certainly the distributed ledger of transformation is going to be among those.


Timothy Goddard


Ed, the supply chain has been mentioned a number of times in reference to this. How are you feeling about it?


Ed Gardner


I agree with Peter, it will undoubtedly impact how the supply chain works. For us, we continue to investigate how and where it will first start emerging. The example with IBM and Maersk is obviously one. In other areas, the pharma supply chain, for instance, where chain of custody is very important when you're dealing with medical goods and so on, so we continue to stay close to it and are very interested to see what happens in the next 12 months because, as the others have said, it's not just about Bitcoin, it's a lot bigger.


Timothy Goddard


Definitely. Another question, and I'll leave this open for whoever wants to jump on it, any thoughts on the trend of edge computing, where a lot of the computing has to happen geographically close to the source of the data.


Peter Coffee


Edge computing is what makes IoT viable once it stops being a novelty and becomes the way that everything works, because if you have multiple tens of billions of devices every few seconds saying, “Nope, everything's fine. Everything is still fine. Nothing new.” Sorry, that is not sustainable. You need to push capability to identify what is unusual enough to report, far out to the edge of the network, so that the global network in the same way that your brain jerks a finger away from a hot object, and then tells you you're in pain, local processing that does the simple thing immediately and doesn't burden the central authority or global network with redundant mentions of nothing interesting is going to be key, so pushing a lot of power out toward the edge of the network to be updated with knowledge about what is worth telling everybody else about is going to be key to the sustainability of this going forward.


Timothy Goddard


That's great. Any thoughts from the other panelists?


Henry Hu


This is Henry again, so between 2016 and 2017 we announced a couple of partnerships with Cisco Global Collaboration to provide instant IoT inside the edge of the network. That is the edge networking that is a key trend that will enable IoT and better edge analytics then bring more value to the IoT users.


Timothy Goddard


Here's another question I'd like to send to Reese, pivoting off Peter's comment about trust. Where do you see that level of potential trust that can be built interacting with these questions of data security that are so top of mind these days, Reese?


Reese Jones


Trust is a really important thing in terms of security, knowing who you are interacting with and whether or not you can trust them. In terms of data security, the concept of our identity being secure and things being isolate is sort of confusing in that most information about most people is fully accessible on the dark web and different data hacks that have happened have made it very clear that whether or not it is the office of personnel management for the US or Equifax or whatnot, that our information and our identity and our passwords even are accessible to anyone who might want to intercede. This will be a problem of identity as well as trust and this is going to be a major area in the year ahead.


Timothy Goddard


Any other thoughts on that?


Peter Coffee


Right now we're in an unfortunate trough where we have models that centralize a lot of our data so that things like a breach of a credit reporting agency or a major employer get a lot of people's data and it is difficult to refresh and strengthen the security around that data and say, “Wait a minute, nope, change the credentials, whatever.” You don't fix that by going backwards, you fix that by going forward, so now for example, when I get an unusual transaction on any of my credit cards, I typically get a text within seconds, in fact I had an interesting experience recently where, because I did not immediately authorize the unusual transaction within about 15 seconds, it was denied and I had to come back in and call them and authorize it to move forward.


Tightening those feedback loops so that there is more opportunity on a moment by moment basis to say, “No, that is not authorized, block it,” that's how we move forward to fix the problem instead of wishing that we could go backward, which we cannot.


Timothy Goddard


Last question for the panel, and then I have one I would like to toss to Bruce. Any thoughts on where you see something like serious gaming or virtualization either in blockchain or in other technologies?


Peter Coffee


Well, it is transforming education. The use of game-ified modular badged and social competitive environments has been revolutionary for us at Salesforce with Trailhead, which we are now opening up on a white label basis in the so-called MyTrailhead thing. Higher education is clearly becoming ready to deal with the idea that is a life-long thing, that you will get the equivalent of several college degrees over a much longer working career period, which has much more rapid turnover of knowledge. And yes, the introduction of gaming, augmented reality and other technologies like this so that knowledge is delivered in the moment it is needed and in a way that is rapidly understood and better retained that traditional lecture and other content delivery tools is going to be a huge business in the private sector as well as in traditional educational institutions.


Timothy Goddard


Anyone else want to touch on this?


Henry Hu


Sure. So IBM has Watson education as well. Essentially we are trying to use the power of AI to bring education into the cognitive era. Basically, using Watson as the backbone processing engine and interacting with humans, we can enable more personalized learning experiences and allow the educators to gain insight into the learning style, preference, and aptitude of every student and the result would be a more holistic path for every learner through their lifelong journey of learning, that is what we are trying to enable in education as well.


Timothy Goddard


That's fantastic, thanks, Henry.


We are past time, thank you for sticking around.


One last question, there's been a lot of good discussion of things at a high level, but we've also had some questions come in, specifically asking what about the smaller companies? And Bruce I know this is something you have been thinking about a lot recently.


Bruce Milne


It's interesting, we see through our conferences around 6-8000 companies a year and we've been at this for 32 years and the only time that I can liken this market to is the dot-com era, because we are seeing that even the smallest companies are getting traction. We are currently in negotiation with Google on an acquihire. We just took a company to market that has a product in beta and they are selling that. That's something we would not have done even a couple of years ago. So we're seeing that even the smallest company, if they have good technology and good ideas, they are on the cutting edge and ahead of the pack, they're getting interest. I think Constellation being the leader this year says some things. One of them is that you are seeing activity in almost all markets that they are in, and also you are seeing a lot of smaller deals happen and I think this is going to be a record year for transactions, particularly for smaller, privately-held companies.


Timothy Goddard


Great. Thank you very much, Bruce.


Thanks so much to our panel and thank you to our audience. That will close us out.