Australia H Technology & Telco Mid-Sized M&A Transactions - Mark Ostryn

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1 Australia H Technology & Telco Mid-Sized M&A Transactions - Mark Ostryn

2 2 Recap of 2017 Transactions Sales of mid-sized businesses in Australia s technology and telecommunications sectors rose from 42 to 66 in the first half of calendar 2017, compared to the same period in With an average transaction value of$25m, the total value ofthe 66 deals was estimated at $1.7b H TECH / TELCO ACQUISITIONS Tech Telco Transaction Parties by Type More than half of the transactions involved a public acquirer, acquiring a private company. This marks an increase in appetite for private acquisitions. Overall, only 35% of transactions over $1m were between two private companies. Public Buyer, Private Seller 51% Public Buyer, Public Seller 6% Private Buyer, Private Seller 35% Private Buyer, Public Seller 8% Level 3, 50 York St, Sydney NSW 2000 strategictransactions.com.au

3 3 What is the motivation behind these acquisitions? Product expansion was the rationale for 23% of the acquisitions. Through these deals the companies hope to increase their product range thereby providing a range choice ofsolutions for their clients. Geographic expansion was the rational for 20% of the acquisitions. Companies uses these deals to enter a new market as some sectors have high barriers to entry. Given that there was a low number of international transactions, geographic expansion was mainly oriented towards greater overall Australian coverage. Acquisition Motivation Product diversification rounded up the top-three with 18%. Certain businesses, even in the tech space are at a mature phase limiting the opportunities for organic growth. Therefore, through acquisitions, businesses can achieve diversification. Product Expansion 23% Product Diversification 18% Acquire Customers 7% Geographic Expansion 20% Acquire IP 18% Economies of Scale / Rationalisation 14% Level 3, 50 York St, Sydney NSW 2000 strategictransactions.com.au

4 4 What is the buyer/seller location profile? Despite the lower relevance of geography in technology based businesses, 77% of acquirers already had operations within Australia. 8% of total transactions were Australian businesses buying overseas. USA 6% Buyer Location Other 17% Australia 77% Seller Location UK 2% USA 3% Canada 1% Italy 2% Australia 92% Level 3, 50 York St, Sydney NSW 2000 strategictransactions.com.au

5 Deferred Consideration ( Earn Outs) Earn outs are as tool usually negotiated by acquirers to ensure that the target businesses performance is maintained or improved throughout the transition phase of ownership. This is typically up to three years. A minimum of 20% of the deals disclosed had some form of earn out or other deferred consideration. Our own research suggests that another 30% more had a certain proportion of deferred consideration that was undisclosed. Examples of earn outs in 2017 deals included: 24 times the average monthly net gaming revenue over the 12 months after completion of the acquisition. Performance based in shares over 3 years post acquisition. Shares escrowed for 2 years.

6 2017 Transactions Completion Date 3-Jan-17 4-Jan Jan-17 Buyer HUB24 (Andrew Alcock) Assetowl (Previously know as Regalpoint Resources ) Reckon Holdings ; Sharp Focus Pacific Seller Agility Applications AssetOwl 360 Capital Group 09-Jan-17 MNF Group Conference Call International 10-Jan Jan Jan Jan Jan-17 Plexsys Interface Products Over the Wire Holdings Hexagon Mining (Hefio Samora) Servicenow Australia Wentronic Holding GmBH ImmersaView Cellnet Group MiPlan Solutions DxContinuum Coles Group 30-Jan-17 Ascender Group NGA Human Resources 02-Feb-17 Kaplan, Inc. Red Marker Pty Ltd 07-Feb-17 QMS Media IMPG 07-Feb-17 Jain Irrigation Systems Ltd Observant Pty Ltd. 07-Feb-17 Playtech plc Eyecon Pty. Ltd 10-Feb-17 WiseTech ACO Informatica 14-Feb-17 Kate Morris (Private Investor) Woolworths Completion Date 14-Feb Feb Feb Feb Feb Feb-17 Buyer M&C Saatchi Agency Inabox Group Melbourne IT MYOB Technology Pty Ltd. AirTree Ventures Pty Blue Sky Private Equity Ltd Seller Bohemia Group BAI Communications Outware Systems Pty. Ltd Paycorp Payment Solutions Prospa Advance pty ltd Shopper Media Group Pty 27-Feb-17 Global Software, Globe Software Inc. pty ltd 28-Feb-17 LMGPS Ltd planet tel pty ltd 28-Feb-17 3-Mar-17 7-Mar Mar Mar-17 Altus Group Activistic (Nigel Lee) Inabox Group campaign monitor essdocs (Alexander Estate Master Plus Connect Logic Communications tagga ecertify Goulandris) 20-Mar-17 SEEK Swinburne University of Technology 27-Mar Mar-17 Cirrus Networks Ngage Technology group WIN Corporation Southern Cross Media

7 2017 Transactions (continued) Completion Buyer Seller Date 30-Mar-17 Mr. Hui Jie Lim Digmatic Group 31-Mar-17 Forum Group of Companies Pty Ltd Onesource Australia Holdings Pty 3-Apr-17 HRL Holdings Morrison Geotechnic 04-Apr-17 Superloop Subpartners 4-Apr-17 Dreamscape Net Logistics Networks (Mark Evans) 5-Apr-17 Autosports Freightways Group (Nick Pagent) 6-Apr-17 Superloop SubPartners (Bevan Slattery) 13-Apr-17 HRL Holdings (Steven Dabelstein) Octfolio WIN Corporation Pty Southern Cross 20-Apr-17 Ltd Media Group 1-May-17 Dentsu Aegis Accordant Pty Networks 01-May-17 A consortium led by Axiata Digital Services Sdn. Bhd. Unlockd Media 1-May-17 Melbourne IT WME Group 2-May-17 TopBetta (Todd Mad Bookie Pty Buckingham) Ltd 02-May May May-17 Superloop Service Stream Temenos Group AG Bevan Slattery (Private Investor) Techsafe Rubik Financial Completion Date Buyer Seller 7-May-17 Accenture (Brian The Monkeys Whipple) 11-May-17 Xped Jemsoft 22-May May May May May May May May May-17 1-Jun-17 Correct Solutions Digital pacific pty ltd Stargroup limited Programmed limited Novatti Group (Peter Cook) Madman Entertainment Pty. Ltd. MSL Solutions (Craig Kinross) Index Ventures; Sapphire Ventures, LLC; Felicis Ventures LLC; Blackbird Ventures Energy One (Shaun Ankers) Field Solutions Holdings Saturn Alliance Anchor Systems Indue Oneshift Prophecy (basis2 Utilities) SurfStitch Group Ray Pallister Pty Ltd Culture Amp Pty Ltd Creative Analytics BMS Network Solutions (Andrew Ro... 5-Jun-17 Ernst & Young Open Windows IDENTITY 9-Jun Jun-17 Advanced Solutions International Tricentis (Sandeep Johri) Internet Vision Technologies Flood IO 20-Jun-17 Deloitte Strut Digital 26-Jun-17 Eclipx Grays Ecommerce

8 About Strategic Transactions Strategic Transactions are committed to helping our clients transact the sale of their business or the acquisition of another business on the most favourable terms. Part of this commitment involves having an in depth understanding of transactions and trends in the Australian and Global M&A markets. We regularly produce updated transaction reports such as this. Strategic Transaction uses a 10 step transaction process ensure that the business for sale is fully prepared to maximise sale value and that negotiation with strategic buyers is ultimately successful.

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