Introduction
Bruce Milne
Welcome to Global Tech M&A Monthly. This is our midyear report, with a special report on all 29 sectors. I’m your moderator, Bruce Milne and thank you for joining us. We have a packed agenda today, beginning with field reports on two recent transactions that point to how active the market is. Then we have a special guest we’ll talk about. Then we have an event spotlight; many events coming up that you’ll want to go to. Then we’ll get into our research report. Finally, we’ll close with our Top Ten Disruptive Tech Trends, a midyear update on what’s happening there.
Field Reports: Decade Software and QQ Solutions
Let’s start with some recent transactions. Ward, you’ve been busy!
Ward Carter
Yeah, Bruce, I’m very pleased to announce two deals we closed since our webinar in June. Corum client Decade Software is based in Fresno, CA, and was founded in 1986. Decade provides SaaS environmental health and safety software, and sells primarily into the state and county government space. The solutions focus on meeting the needs of inspectors, such as those monitoring restaurants, pools, water supplies, and other public and private facilities that are subject to health inspection and regulation.
Although Decade has customers across the US, their claim to fame is that 55 of the 58 counties in California are Decade customers, including all but the three smallest counties. It’s no small feat, given California’s market-leading emphasis on health and safety and environmental issues.
Decade was acquired by Accella Inc., also based in California, and a leader in civic solutions for governmental agencies of all sizes. Certainly the deal was highly strategic, and will allow Decade, as part of a larger organization, to expand its reach in a new market, that it could not reach as a smaller independent company. Congratulations to founder and CEO Kevin Delaney and his team at Decade.
The second closing was a client of Corum’s in South Florida, another SaaS solution, QQ Solutions. Owned and managed by the original founder since 1988, QQ is a leader in agency management software for the lower-to-middle market insurance agency marketplace. The acquirer, Bothell-based Vertafore, Inc., is a leader in agency management at the mid-size and larger enterprise level. The combination of the two provides a comprehensive set of solutions to address the entire market, from the smallest to the largest agencies.
With a staff of 65, QQ recently posted 70% growth year over year for its newest SaaS-based agency management systems, strong evidence of its highly competitive feature set. It’s interesting to note that Vertafore is within walking distance of Corum’s headquarters here in Bothell, WA, overtaking Microsoft as the closest buyer we’ve ever dealt with.
Back to you, Bruce.
Bruce Milne
Thanks, Ward. I loved the travel expenses on those buyer visits. So I know you’ll be with Kevin and some others who have sold this last year up in Langara, AK.
Guest Speaker: Mario Vassaux
Speaking of which, I have an old Langara fishing pal here, Mario Vassaux. Mario and I also fished the Baja and the interior of British Columbia. He also took me on the Colorado River. Mario’s also a member of our World Technology Counsel, an advisor and frequent speaker with Corum. Mario, welcome to our webcast today. Tell us what you’re doing, Mario.
Mario Vassaux
Thank you, Bruce. I’m still involved in gaming through mobile apps. I also have dealings in other technologies, including medical apps and devices and totally focused right now on developing opportunities in the Internet of Things.
Bruce Milne
Oh, great. That’s great. Speaking of Internet of Things, we look forward to maybe getting some comments from you later on, and we have a conference on the Internet of Things coming up. We have a lot of conferences coming up, as well, what’s really interesting is that we’re seeing record attendance in the summertime. That Berlin conference, wow. Mario, I know you’ve been to conferences, and also spoken at those. What’s your view of the benefit of attending one of these educational events.
Mario Vassaux
One of the things is that the better educated you are in the process, the less mistakes you’re going to make and the fewer regrets you’re going to have.
Bruce Milne
It’s a complex process, and there are lots of opportunities for mistakes and you don’t want to make a mistake in the most important transaction of your life. And you want to be well-educated, which means you need to know what’s happening in valuations; who’s buying?
So let’s move to our research report on all 29 sectors with Elon, Amber, Aaron, Yasmin, and joining us from Ukraine, Artem.
Corum Research Report: Infrastructure reigns supreme
Thanks, Bruce. We begin with the public markets, where indices continued to show tech stocks diverging: the S&P Tech up 8% and NASDAQ up 5%, leaving more general indices like the Dow behind as it booked a 1% loss for the first half.
Even the recent China sell-off broke this way, in markets there whose volatility dwarfed the rest, with the tech-heavier Shenzhen holding more of its gains for the year than the broader ones like the Shanghai.
Overall M&A activity remained strong, surging past one trillion dollars in the first half and continuing here as corporations can take advantage of low debt cost plus their record cash piles to invest in future growth. For tech M&A, add new buyers and disruptive tech trends to the strategic imperative to buy growth, that continues unabated.
How long will this perfect climate endure? As this Bull market nears promotion to second-longest, our view is, that the odds are we’ll get there next spring, but it seems increasingly unlikely we’ll break the ‘90s record; making this a superb window in which tech companies can seek liquidity with great advantage.
Our tech market sectors valuations mostly extended their trends. In sales multiples, the Vertical market broke above 4x, topping Infrastructure. Those two traded places in EBITDA ratios, too, though there the Horizontal market still holds the high ground, having climbed to 20x. Consumer EBITDA multiples add to the biggest positive difference, up 43% to 14 since last year’s pullback under 10. We’ll review each of these and delve into their components in more detail momentarily.
Our leaderboard of the top strategic buyers sees perennial top acquirer Google joined by J2 Global on the highest platform with 10 deals each; Microsoft took bronze for 8.
Behind them stand Accenture, at 7; then a plateau of companies tied with 6 deals each, including newcomer from India, Snapdeal, travel trendsetter Tripadvisor, and FoodPanda, part of the online takeaway group of highflyer Rocket Internet; we’ll have more on its ballistics later.
Cloud Services conglomerate J2 Global’s 10 purchases were all in the first quarter, across its main businesses of information management, storage, security, and others, with Corum client EmailDirect among them.
Private Equities saw a repeat top trio of retained positions, with Insight’s 21 deals more than double the leading strategic’s as PEs continue to expand their playmaker roles through portfolio proxy bolt-ons and roll-ups.
Returning to the list are SilverLake and Francisco, outlining a productive year and ousting some of the 2014 players.
How’d this half look on the map, Yasmin?
Yasmin Khodamoradi
On the M&A map, over half of all transactions continue to be initiated by North American buyers. Sell-side activity is high in Europe, while buyers are leading the Asian markets. Latin America and Africa remain fairly steady.
Among deals in the Americas, Recon Instruments, a Canadian wearable display producer, was purchased by Intel at a reported $175 million dollars, to help it fill the niche recently freed by the discontinued Google Glass project. Meanwhile, Panasonic picks up New York-based retail display technology startup MagicInk to enhance its digital signage business.
Stateside, there were a few deals involving electronic health record providers, with Athenahealth’s acquisition of RazorInsights and Marlin Equity’s purchase of Corum client e-MDs.
In Latin America, we saw two supply chain management companies get picked up in Brazil. Accenture’s purchase of Gapso will increase the analytical abilities of firms in the natural resources and agribusiness sector and Totvs’s acquisition of Neolog will add fleet management SaaS to their ERP and SCM solutions.
While M&A activity in Europe has grown from this time last year, its rate is relatively sluggish compared to gains in the Americas and Asia, most likely due to uncertainty in the Eurozone. Accordingly, we have seen a large proportion of European deals coming from Germany and the UK.
In the UK, beauty booking website Wahanda was picked up by diversifying Japanese staffing giant Recruit Holdings for $172M and 28x revenue in May. Just one month later, Wahanda paid several times that multiple for a similar online exchange, spending $38 million dollars for Treatwell Holdings, clearly seeing value in a rapid lockup of the European market.
German SimonsVoss Technologies, known for its digital locking systems, was acquired by Irish security firm Allegion for $235M. In the Nordics, Corum client Cabforce was acquired by ground transportation technology provider Cartrawler. Moving to the East, Bulgarian project management specialist Despark was picked up by UK consulting firm Paperhat Group.
In Asia, the sale of HP’s share in Chinese data networker H3C to Beijing-based Unisplendour for $2.3B was covered in last month’s webinar.
Twitter made a play into India with its sole cross-border acquisition this year, missed-call tech firm ZipDial, allowing the social networking giant to expand its user base and deliver content to offline users.
Finally in Australia, digital advertising agency MATCH Media was picked up by serial acquirer, Publicis, who is always on the hunt for scale and expansion in the Asia-Pacific region.
Elon Gasper
Our Corum Index posted first half-year transactions above 2000; other metrics stayed consistent with positive trends, including the inversely correlated average life of target measurement, except the VCs seem to be focusing more on IPOs than on their traditional roles as intermediary growth players.
The first-half crop of megadeals grew to historic highs, both in volume and value, the latter nearly doubling year over year, and still being led by the Infrastructure market with the extremely high total value of more than $118B as the constant turbulence of disruptive innovation compelled top-level consolidation. Among our Top Ten Tech Trends, which we’ll be talking about after this report, Majority Mobilization, IoT Software, Data Security and others created needs for entirely new infrastructure and demand for network management and cloud solutions as well as the security solutions to protect them.
Almost one third—$37 billion—of the Infrastructure megadeals total value is for one transaction: enmeshed networking tech giant Broadcom’s acquisition by rival Avago, taking advantage of low interest rates with bank loans to put together the largest such deal in high-tech history.
Moving to review all 6 market sectors and their 29 components in detail now, we begin with the runaway megadeals winner, Infrastructure. Amber?
Infrastructure Software Valuation Metrics
Amber Stoner
Infrastructure multiples have fluctuated over the first half, but remain in line with where they were at the beginning of the year with increases in both the network management and security subsectors, mirroring the Infrastructure mega deals trends.
F-Secure increased its cybersecurity offerings with the acquisition of Danish vulnerability assessment software provider nSense for nearly $16.5M, a 1.9x revenue multiple.
PayPal fortified its online payment system, spending $60M for Israeli startup CyActive, which forecasts and prevents future cyber-attacks.
AVG Technologies teamed up with London-based VPN encryption SaaS provider, Privax in a deal worth $40M, which reflects the online security behemoth’s intention to protect the Internet privacy of its worldwide subscribers, on both desktop and mobile.
Cisco continued its strategy of buying companies where it already has a stake. The networking giant paid $635M for OpenDNS, which predicts and manages online malicious activities through connected devices, strengthening Cisco’s security business around IoT. It also picked up application-centric network virtualization software provider Embrane for an estimated $55M.
Finally, Solarwinds has already doubled its 2014 M&A activity, purchasing two companies in the first half. In January it bought cloud resource management SaaS company Librato for $40M and followed that in April with the acquisition of cloud-based log management SaaS provider Papertrail for $41M.
Aaron, what’s going on in the Consumer market?
Consumer Software Valuation Metrics
Aaron King
In the Consumer market, Sales and EBITDA multiples converged in March and have both been rising ever since, with EBITDA reaching historic highs of over 15x.
Within the subsectors, high valuations are capped by the Entertainment sector, driven by the success of streaming services such as Netflix and Youku Tudou to the highest EBITDA multiple among our 29 subsectors.
Google reached into the education segment with its acquisition of Launchpad Toys, supplementing its new kid-friendly versions of YouTube and Google Play with the company's free iOS edutainment apps. Elsewhere in consumer technology, Google picked up 3D virtual reality painting app Tilt Brush, one of a number of moves by tech giants into the VR space this year.
With a focus on free-to-play games and an aim to enhance its global presence, Sega invested in a quartet of game developers: Taiwan’s Aeur Media, Demiurge Studios from Boston, British Space Ape Games and San Francisco-based Ignited Artists. By engaging these game providers Sega intends to strengthen its position across the US and Europe, and shift away from console gaming to focus on digital and mobile.
Health and beauty are expanding their niche in the Consumer sector. New York’s Weight Watchers International “lost” $6.7M and “gained” 2 new fitness services providers. Now users are able to get more motivation and results using 3 popular iOS applications from Hot5 and Weilos. Another NY company, Fitmob, complemented its fitness SaaS with Gymsurfing, which enables customers to get day passes to gyms around the US.
On to the Vertical space performance. Yasmin?
Vertical Software Valuation Metrics
Yasmin Khodamoradi
Vertical multiples have continued their trajectory of steady growth, with EBITDA multiples reaching 12 month highs, thanks to the healthcare, energy, and real estate subsectors. Financial and automotive verticals weren’t among those, but produced some of the more interesting deals this past quarter.
For example, gambling technology company Playtech made some big moves when it entered the forex trading market with its acquisition of TradeFX in April. With this purchase, Playtech will offer the TradeFX platform to its licensees and other gaming companies in the hopes of generating cost and revenue synergies as it enters new markets. Its $700M dollar purchase of Plus500 in May expanded its FX platform, and most recently, as a subsidiary TradeFX acquired AvaTrade, another online FX exchange, for $105M.
With this string of high profile acquisitions, Playtech’s diversification into currency trading represents one of the first waves of consolidation in an industry that has been negatively affected by the dropping of the Swiss Franc’s peg to the Euro.
Moving onto the automotive sector, in Germany, Continental AG scooped up embedded software solutions provider Elektrobit Automotive for $668M at 3.5x revenue and 27x EBITDA. As Europe’s second largest car parts and tire manufacturer, this acquisition will allow Continental to enhance their capabilities in the automated driving market.
In the dealer management space, Cox Automotive, which is better known for Kelley Blue Book and Autotrader.com, established its dealer solution vAuto as the clear market leader by acquiring competitor Dealertrack for $4 billion at a 4.7x revenue and 36x EBITDA multiple. The consolidation of their services will allow Cox to provide software to every department of a dealership, including DMS, CRM, and inventory management.
AutoStar, another dealer management solution, was acquired by DealerSocket last month. This announcement comes on the heels of AutoStar’s integration with DealerSocket’s CRM software, which expands their business with buy-here, pay-here auto dealers.
From cars to the traffic they cause: we’ve seen increased activity in European traffic monitoring technologies in the government vertical. In June, Swedish traffic surveillance company Sensys acquired Gatso, a Dutch provider of red light enforcement and license plate recognition software. This deal should make Sensys the largest supplier of traffic enforcement equipment in Europe. And just last week, Zenco and Cloud Amber, both from the UK, were acquired by Siemens and Idox respectively. As our world becomes more interconnected, we expect to see more M&A activity for smart city tech.
What is the update on IT Services, Artem?
IT Services Valuation Metrics
Artem Mamaiev
IT Services value multiples have steadily continued their historic growth in developed markets. Meanwhile, EBITDA multiples in emerging markets shot back up to December 2014 levels, breaking a pattern of mid-year pullbacks.
Internationally, firms with specialized skills in disruptive technologies saw significant deal flow. Swedish digital consulting firm Brightstep was purchased by Accenture, bolstering its e-commerce capabilities in Europe and the Nordics. Big Four auditor KPMG acquired British IT company Crimsonwing for about $28M, which enhanced their ecommerce capabilities and expertise in Microsoft Dynamics. In China, Shenzhen Comix Group acquired Hangzhou Maimiao Network Tech for over $55M at 13 times revenue, which provides software development services with a focus on customer analytics and online marketing at Alibaba.
In North America, consolidation in the e-discovery market continues, as Epiq Systems paid $134M at 3.5x revenue to acquire Kansas-based ediscovery managed services firm Iris Data. New York-based HayStackID bought an ediscovery firm Flex Discovery to expand its footprint in Chicago and Washington D.C. Another Big Four auditor, PWC, scooped up Canadian ediscovery and litigation support firm Platinum Legal Group.
How has the Horizontal sector done so far, Amber?
Horizontal Software Valuation Metrics
Amber Stoner
Overall, sales multiples in the Horizontal sector remain in line with the beginning of the year, although they are down slightly from a year ago while EBITDA multiples are at 12-month highs.
There were a number of deals in one of the highest valued subsectors, HR, including a couple of companies being taken private.
In February, Vector Capital acquired talent management SaaS company Saba Software for $268M. And Francisco Partners grabbed two HR companies in April: mobile workforce management software provider ClickSoftware for $438M, a 3.2x revenue multiple and HealthcareSource HR, a talent management SaaS company.
Other workforce management deals in the first half included Deltek picking up recruitment and workforce management SaaS provider HRsmart, LinkedIn acquiring recruiting and retention SaaS company Careerify, and Intuit buying contracted workforce management SaaS vendor Playbook HR. Next month Corum Chairman Ward Carter and I will be joining World Financial Symposiums on one of their Market Spotlight events focused on Workforce Management; we hope you can join us, for more information go to wfs.com.
Moving on to the ERP sector, Texas-based contract lifecycle management SaaS company Prodagio Software was purchased by Gimmal. And California-based contract lifecycle management company Selectica bought purchase-to-pay and contract management software provider, b-pack for $12.5M, a 2.8x revenue multiple.
And for the last of our six sectors, Internet, Elon?
Internet Software Valuation Metrics
Elon Gasper
Amid some high-profile high-value strategic activity in the raucous Internet space this half, standard value metrics showed little change with EBITDA multiples’ 5% drop offset by a rise of 3% for Sales, as markets shifted to advance the value of growth over profits.
The increase among the Internet segments was concentrated in ecommerce, where Q2 EBITDA ratios rose to second place among all our 29 subsectors, behind only Consumer Entertainment.
M&A activity amid the online booking services included moves by several major players, particularly in the continuing food fight among companies like Australian takeout market leader Menulog, which acquired competitor Eat Now in February. This combination dish was then gobbled up by the UK’s Just Eat Group in May, running up an impressive $682M check.
Apparently still hungry after its big May meal, Just Eat moved on to devour two Italian food delivery services, Clicca e Mangia and DeliveRex, in June. The combined company now serves over a million consumers from nearly 6,000 restaurants.
In Turkey Yemek Sepeti (Food Basket), was acquired by Delivery Hero for another half-billion dollar basket of money. This extends Delivery Hero’s entry into the Middle East via its takeover of Kuwait market leader Talabat.com. Japan’s Recruit Holdings, which we mentioned earlier as diversifying from staffing to beauty booking websites, went on to buy German restaurant booking site Quandoo for $222M, adding another 6,000 restaurants across 10 countries.
Another cook in this kitchen is Rocket Internet, Berlin’s public VC-like start-up factory, with a veritable banquet of diversification activity. Like Recruit, Rocket has acquired or invested in a wide range of internet companies, taking a 30% bite of Delivery Hero and swallowing top acquirer FoodPanda whole. Real estate, price comparison and cleaning service booking platforms were icing on Rocket’s internet cake. I’m sure we’ll be covering more on this aptly-named phenomenon soon, but for now that’s our halftime report on 2015 tech M&A. Back to you, Bruce.
Bruce Milne
Wow, that’s a lot, thank you to Elon and team. With the record cash with the PE guys, lots of new buyers out of Asia, and record valuations, those megadeals are really going to lead the way, I think.
Elon Gasper
Yes, they are.
Top Ten Disruptive Tech Trends - H1 update
Bruce Milne
Let’s move on to Corum’s Top Ten Disruptive Technology Trends. We break them into two sectors, Connect which is Majority Mobilization, Online Exchanges, Omnichannel Marketing, Digital Currency Flow, and IoT, and then Create, Enmeshed Systems, Digital Force Multipliers, Positioning Intelligence, Sports and Gaming, and Data Security.
Let’s move first to Majority Mobilization and Russ Riggins. Russ?
Russ Riggins
The preeminence of mobile is obvious today, but the impact of a world where the majority uses a connected device is just starting to be felt.
- For the first time, mobile devices outnumber people. This milestone underscores one crucial fact for entrepreneurs: as the number of mobile devices rises, so do their importance.
- Google confirmed more mobile searches than desktop searches as of May 2015
- Wearables and mobile health and fitness continues to grow at an accelerated pace. For example, Fitbit founded in 2007 went public in May raising $100M and Underarmour has spent over a half-billion dollars on fitness apps
- Eighty-five percent of consumers believe their mobile devices are essential to daily life. Clearly, the mobile interface is crucial for consumers, and the savvy businesses that hope to connect with them increasingly choose to do so via smartphones and tablets.
Creating a mobile strategy for this new world involves more than building an app, but insures your in-person, mobile and traditional online experiences communicate a cohesive message that motivates customers to interact with your businesses.
Bruce Milne
Great, thanks, Russ. Now let’s move to Europe and hear about online exchanges from Dougan Milne.
Dougan Milne
Like the rest of the market, M&A in the variety of online exchanges has been incredibly strong in the first half of the year. Certainly, Expedia’s acquisitons of Orbitz and Travelocity did not go unnoticed. Without question, some of the most high-density consolidation we’ve ever seen in the online travel sector: a true head-to-head battle with Priceline.
Along those same lines, we saw Rakuten recently pick-up fellow Japanese company Voyagin, a local leader who has developed an online exchange for tour operators to sell their services to consumers. You can think of them as a very small version, a competitor even to Viator, owned by TripAdvisor.
Now, in January I mentioned the trend of online exchanges helping to close the gap between medical professionals (namely doctors), and the broad-base consumers. Since then, the launch of the Apple Watch has been hugely publicized, and while we are still uncertain of its success in terms of sales, we are certain of the wild growth and adoptions of the Apple Watch for health and fitness tracking. Dozens of new and updated apps have been specifically tailored for the Apple Watch platform, and recent developer releases of the Apple HealthKit & Apple ResearchKit are showing a huge commitment to help enable these technologies in a meaningful way.
Bruce Milne
Great stuff, thank you. Now onto Omnichannel Marketing, and Daniel Bernstein, who has just returned from a series of conferences in New Zealand, Australia, and Indonesia.
Dan Bernstein
From traditional email marketing focused on retailers, to more esoteric marketing adtech deals and technology pure plays, strategic buyers continue on an acquisition spree in the Omnichannel Marketing space, with NetSuite buying Bronto Software as a headline: a $200M deal. It’s NetSuite’s largest acquisition to date which, combines a marketing automation system with cloud-based omnichannel commerce.
Rakuten Marketing continues its acquisition spree, snatching up mobile marketing company and demand side platform, Deep Forest Media. Going forward, companies focused on providing a better and more data driven experience on mobile, retail and in emerging markets will be in high demand.
Bruce Milne
Thanks, Dan. Now to Stockholm and Mark Johnson for digital currency flow.
Mark Johnson
Hi, this is Mark and I’m following up on my presentation on the payments, or Digital Currency, space.
We continue seeing high activity in this industry since our deal late last year selling Paytrail to Nets in the Nordics. The latest major deal in Payments is Paypal’s announced acquisition of Xoom for almost a $1B, just ahead of its split from eBay.
Xoom, founded in 2001, lets people send money, pay bills and reload mobile phones from the United States to 37 countries. It is used widely by immigrants for remittance payments, or to send earnings to family members back home.
Acquiring Xoom allows PayPal to expand its services in overseas markets. Xoom has a particularly big presence in Mexico, the Philippines, China, and Brazil.
Xoom has been competing head to head with TransferWise, out of London, and originating from Estonia. TransferWise also decreases friction in payments across borders. Its growth is stronger than Xoom and is now one of Europe’s “unicorns”, valued at over a $1B.
We are looking forward to more consolidation across payments both in the US and in Europe. That’s all for me.
Bruce Milne
Thanks, Mark. Now for the last in the Connect sector, IoT software, and Jeff Brown in Texas.
Jeff Brown
M&A spending for IoT hit nearly $15B through May for $39 companies. That’s more than all of last year. In the industrial internet sector BP has hooked up with GE to connect 4,000 oil wells globally. Each well will produce half a million data points every 15 seconds for near-real-time analytics. That’s why PTC acquired ColdLight a predictive analytics company in May for $100M, a deal that builds on previous acquisitions of Axeda and Corum client Atego.
On the consumer side, Amazon quietly bought 2lemetry in March to track and manage IP-enabled devices.
Connecting nearly 50 billion IoT devices creates major security concerns. So ARM acquired Offspark in Q1. Cisco is pushing security too. They acquired OpenDNS a company that provides threat protection for any device, anywhere, anytime.
That's a pretty strong first half!
Bruce Milne
Indeed it has. From our top five technologies in Connect, let’s move to Create and hear about Enmeshed Systems from John Simpson here at HQ.
John Simpson
As we predicted, M&A in the Enmeshed Systems space has been very active this year, and not only in the Internet of Things. For example, in January, Amazon paid a reported $350M for Israeli chipmaker Anapurna labs, whose chip-software combinations will move software more efficiently and save power in Amazon’s data centers.
And then there’s Oracle. Recently, Larry Ellison confirmed that the company plans to move more software functionality into silicone. For example, Oracle’s X5 engineered systems now include fault detection, advanced diagnostics and Oracle-optimized firmware to deliver extreme reliability.
Finally, last month Google acquired Lumedyne, whose enmeshed sensors include accelerometers, gyroscopes, and magentometers that could help make the Google driverless car a reality.
Bruce Milne
Thank you. Now let’s move to Rob Schram on Digital Force Multipliers.
Rob Schram
The effect of Digital Force Multipliers continues to gain momentum, enabling traditional firms to build powerful in-house platforms, or acquire companies that have created them, and produce proprietary systems that directly address customer needs.
Just a few recent examples:
· Taser acquired MediaSolv who leveraged this reach into law enforcement by adding evidenced management software and more.
· Michelin bought blackcircles.com, adding online tire fitting and booking service and an ecommerce site.
· Also two different wellness coaching companies that developed their own technologies to serve businesses were recently acquired. Accountable was acquired by national health risk assessment provider Hooper Homes and LiveHealthier was picked up by Centene, a service provider to government healthcare programs.
Digital Force Multipliers produce fast, dramatic growth and enable your company’s market force to be multiplied, sometimes exponentially. Your buyer universe will be multiplied as well.
Bruce Milne
Indeed, we’re seeing more buyers than ever. Now let’s move to Ward Carter on positioning technology. Ward?
Ward Carter
Lots of smart money is flowing into industries that are heavily tied to location intelligence. Look at the rapid emergence of self-guided vehicles and the huge investments being made by Google, Microsoft, Tesla, Ford, Mercedes, and others. Follow that with sky-high valuations for location-enabled technologies, such as the Uber transportation network that displaces the taxi. Word is that some of those same Uber vehicles are also being tested for package delivery for our friends at Amazon, the Seattle-based innovator that is also working to use sophisticated drones to deliver packages to our front doors.
Stay tuned as the pace of development, investment and related acquisitions continues to escalate.
Bruce Milne
Constantly changing. Now to one of my favorite areas, Jim Perkins, on Sports and Gaming.
Jim Perkins
The sports and gaming markets continue to rise in importance and to coalesce at the cutting edges of technology. Both video games and sports are increasingly making use of analytics, streaming, motion tracking, virtual reality, fantasy platforms and more. Video games are becoming increasingly spectator driven with the rise of eSports capturing even ESPN Magazine's attention for a cover story. Meanwhile, according to Microsoft's CEO Satya Nadella, sports is being fundamentally transformed by technology more than any other industry.
At the intersection of the two comes gambling, which is creating the most value in the space, so much so that one leader, Playtech, spent nearly $1B on two fintech companies this year. On the M&A front, mobile, online and free-to-play continue to dominate, as Asian buyers loom largest for western companies looking to go to market. Expect to see a big second half of the year, as the deals that didn't get done in the quiet first half of the year start closing.
Bruce Milne
We’re seeing a record number of deals in this sector in the queue. Thank you Jim.
Now, finally, to an area that is on all of our minds and Jon Scott on Data Security. Jon?
Jon Scott
All of Corum’s Top Ten Tech Trends create more productive and collaborative work environments for much freer flow of data but this is creating huge risks for information breaches. In my January report I told you that 75% of enterprises’ information security budgets are expected to be allocated to rapid detection of threats. And nothing is changing this.
In 2015 high profile cyber security attacks are continuing including the recent Federal Government Office of Personnel Management breach that reportedly covered every existing and retired federal worker. And this breach was discovered during a vendor demonstration requested by the OPM. This is creating huge opportunities in M&A for emerging and mature data security companies.
A couple of recent M&A highlight include Cisco’s $635M acquisition of OpenDNS, a premises network security provider and Hewlett-Packard’s acquisition of Voltage Security, a data encryption and transaction security SaaS provider for $175M or 5x revenues.
Bruce Milne
Breathtaking activity in this sector, too. So there you have Corum’s Top Ten Disruptive Technology Trends.
Q&A
We have a few questions. First off, to answer one of your questions, yes this will be online shortly, thanks for your comment on a great webinar.
One of the questions was on IoT, and I’ll turn that over to Mario. “Where do you see specific opportunities if I want to put my next dollar into IoT? If I want to invest my next dollar there, where should I put it?’
Mario Vassaux
I would suggest putting it into the health services and medical fields. I think that’s a new area and it’s not as crowded a space as the home.
Bruce Milne
Lots of money there; one of our largest transactions this year was in e-MDS, I totally agree.
There’s another question that came up about Greece and China, will this derail all this, and the answer is absolutely not. Greece is not a factor, frankly. It’s localized, and granted it affects the Euro, and you get to read about it every day in the headlines and flip-flops and whatever, but it’s not relevant to the tech industry and what we’re doing in deals.
China is a little bit more concerning, but the reality is that the Chinese market, what’s happened in the run-up and the run-down and all the drama there, we’ve seen that many, many times. I was listening to Squawk Alley this morning, and it was very interesting hearing the old guard and the new guard debate this. The old guard said we’ve seen this before. Don’t worry about it. The new guard is saying the sky is going to fall. We saw this in Vancouver and Toronto with Nouveau Marché, we’ve seen this where you have young companies that are almost worth trading there. But what it really points to is that there is a vast pool of investment; pent up demand to buy in the most populous country in the world. That’s good. Along with record investments in the PE area and increasing valuations, what it really underscores to me though is the overall issue here, which is that of global growth. Those topics get all the attention, but try to book a flight or get a hotel. I’m trying to get on a flight to Plovdev right now to go see the world championships in rowing, I’m sorry, but I’ve got to stop in like five places, there just aren’t flights. And don’t get me going about hotels.
The point is, even in the most remote parts of the world, we’re growing. Right now, we’re under 3%, the Morgan-Stanley is the one I like the most, they said we’re moving to 4% growth. Four percent growth globally folks is a lot of growth. That’s going to mean a lot to you. There are going to be a lot of transactions, but watch out for inflation. Personal advice, interest rates are very low now, take advantage of them, refinance everything you can refinance.
With that little bit, do we have any other questions here?
Ward Carter
Bruce, I see a question here regarding the HR tech space. The question is what do you see regarding valuations here in the near future?
This is an area we’ve had a lot of activity in, we’ve done a number of deals, and we’re going to highlight this in our WFS spotlight series next month, so that’s something I’d invite you to tune in on. But I’d say in general the HR space is one of those areas that has probably enjoyed some of the strongest valuations during the past few years, given the dominance of SaaS and the SaaS model in the HR space. As we’ve seen from the valuation data the Amber presented earlier, there are a lot of transactions in this space, all at very high valuations, and a number of market leaders like Workday that are enjoying multi-billion-dollar valuations, so I’d say continued strength moving forward.
Bruce Milne
Great. Thanks, Ward.
There are a number of other specific questions about market sectors and companies, but we’re over our time. We will get back to you individually with expert commentary on those, and this whole report will be available online shortly.
Thank you for joining us, and we’ll take you to our close.