This presentation shares with you our approach to deal origination in the UK Technology Mid Market. Claim your Free Six Minute Strategist Six Minute Audit at http://jbdcolley.com
If you would like to discuss with me how we can assist your business, please email me at john.colley@iafcapital.com or call me on my UK cell phone +44 7813 672 612
I hope you enjoy the presentation.
4. Deal
Screening
and
Origina+on
is
complex...
• Sector
Exper+se
and
Understanding
-‐
Technology,
Telecoms
and
Media
• Clear
understanding
of
Sub
Sectors
and
their
cons+tuent
companies
• Companies
-‐
Public,
Private,
PE
Backed,
Subsidiaries
• Financial
Hurdles
and
Analysis
• Geography
-‐
Company
Loca+ons
• Business
Model
• Management
Team
Quality
• Other
Factors:
company
age,
owners
age,
Death/Divorce/Disease,
Management
Succession
• Deal
Types:
MBO,
MBI,
P2P,
2BO,
3BO,
Growth
• Need
for
a
Deal
and
Timing;
need
for
capital
• Process
-‐
Approach,
Discuss,
Meet,
Nego+ate,
Terms,
Close
5. Deal
Mo+va+on
is
important...
Strategy
Ability Ability
Sectors
Zone
of
Acquirors Intent Confluence Intent Targets
Scale
Money Money
Stage
6. Profile
of
an
Investee
Company
• Strong
IP
or
other
sustainable
advantage
• Addressing
a
large
poten+al
market
• Like
to
exhibit
upper
quar+le
growth
• Strong
management
with
shareholder
value
orienta+on
• High
Gross
Margins
>50%
• Product
service
is
“need
to
have”
with
clearly
differen+ated
market
posi+on
• Clear
routes
to
market
• Low
capital
intensity
• Geographical
loca+on
may
be
a
factor
• Financial:
Revenues,
Profits,
Growth,
Margins,
Cash
Genera+on,
Revenues
per
employee,
Return
on
Capital
Employed
7. Private
Equity
Deals
vary...
• Trade
Carve
Out
deals
(Acquisi+ons)
• Trade
Infill
Deals
(Divestments)
• Buy
and
Build
Placorms
• Secondary
(or
Ter+ary)
Deals
• Public
to
Private
Transac+ons
• Filling
the
IPO
Gap
• MBO/MBI
Founder
Exits
• Turnaround/Recapitalisa+on
• Growth
Investment
8. We
have
done
it
before...
• IAF
Capital
have
proven
deal
origina+on
capability
Financial Advisor to Financial Advisor to
CIBER Europe Limited CIBER Europe Limited
on its€66.3m acquisition of on its $41m acquisition of
Novasoft Group AG Ascent Technology Group
from 3i plc
Pall Mall Capital originated
the transaction
August 2004 May 2004
9. But
its
a
Compe++ve
Market
for
Buyout
Investors...
11. M&A
Ac+vity
con+nued
in
2012...
• M&A
in
the
European
Technology
Sector
was
consistent
with
the
level
of
ac+vity
in
2011
• There
were
234
PE
and
VC
exits
in
2012,
down
from
281
in
2011
• Financial
investors
accounted
for
14%
of
the
deals
done
in
2012
• In
the
UK
of
190
completed
buyouts,
79
were
in
the
range
of
£10-‐£100m,
of
which
18
were
in
the
TMT
sector
• There
were
37
UK
exits
in
2012
12. But
Deal
Origina+on
is
compe++ve...
• The
number
of
UK
listed
technology
companies
con+nued
to
decline
with
the
acquisi+ons
of
Aegis,
Misys,
Logica,
C&W,
Torex,
Psion,
Kewill,
Tikit,
Netbenefit,
SHL,
Maxima
and
Atlan+c
Global
• One
of
the
most
significant
developments
was
the
ac+vity
of
overseas
buyers
who
accounted
for
36%
of
all
deals
• The
key
focus
for
investors
in
2012
was
somware
companies
-‐
mainly
in
niche
ver+cals
such
as
warehouse
management
and
vo+ng
somware
• IT
Managed
services
accounted
for
19%
of
deals
but
the
sector
remains
very
fragmentedM&A
Ac+vity
con+nued
in
2012...
14. What
is
the
Outlook
for
2013?
• The
IPO
market
is
likely
to
remain
quiet,
so
M&A
is
the
only
prac+cal
way
for
vendors
to
realise
their
equity
• Overseas
trade
acquirers
are
ac+vely
looking
for
deals
and
pay
compe++ve
prices
• Businesses
in
demand
need
to
be
well
run
and
scalable
• Some
UK
PLCs
have
raised
addi+onal
capital
• Mobile
Phones
overtake
PCs
for
web
access
in
2012;
Digital
Barriers,
Capita,
Quindell
• Mobile
apps
on
a
variety
of
architectures
Porcolio
and
Cupid • Personal
cloud
for
storage
• Enterprise
app
stores
Gartner
• Sectors
in
demand
are
likely
to
include:
e-‐ • Communica+on
of
intelligent
devices
commerce,
informa+on
management,
• Cloud
services
Top
FinTech,
cloud/managed
services,
niche
• Big
Data
-‐
informa+on
management
somware,
business
intelligence/analy+cs
and
• Analy+cs
and
simula+on
Predic+ons
• In
Memory
Compu+ng
IT
Security • Integrated
ecosystems
for
2013
• Internet
of
Things
16. Who
are
the
UK
Players...
• UK
Market
players
break
down
into
Six
Categories:
• Public
Companies Public
Companies
VC/PE
Funded
• VC/PE
Funded
Companies
• Private
Companies
• Subsidiaries Early
Stage
UK
Technology
Private
• Foreign
Owned/Compe+tors <£5m
Companies
• Early
Stage
=
<£5m
Revenues
Foreign
Owned Subsidiaries
Compe+tors
17. Who
are
the
Deal
Ecosystem
Players...
• US
Technology
Companies,
seeking
cross
border
deals
in
UK
-‐
Top
500
• European
Technology
Companies,
seeking
US
Technology
European
Technology
cross
border
deals
in
UK
-‐
Top
100 Companies
Companies
• VC/PE
Funds,
including
secondary
and
ter+ary
deals
-‐
Top
200
• Indian/Asian
Technology
Companies,
seeking
Do UK
Technology VC/PE
cross
border
deals
in
the
UK
-‐
Financially
strong
Nothing Companies Funds
but
limited
in
number
• UK
Domes+c
Technology
Companies,
seeking
to
consolidate
the
market;
any
exis+ng
market
UK
Domes+c Indian/Asian
players Technology Technology
• There
is
always
the
Do
Nothing
Scenario Companies Companies
18. Sector
Complexity
is
nothing
new...
• Adver+sing
• Energy
&
U+li+es
•
BioTech • Engineering
•
CleanTech •
•
FinTech
Banking
•
Consumer
Electronics/Devices
•
FinTech
Insurance
•
Consumer
Web
•
FinTech
Other
FS
Legal
&
Professional
Services
• •
eCommerce • Media
&
Marke+ng
IT
&
Business
Services
•
Educa+on • Other
PS
•
Somware •
Enterprise •
•
Other
Ver+cals
•
Games,
Video
and
•
PharmaTech
•
Hardware
&
Electronics Entertainment
•
PS
Educa+on
PS
Healthcare
•
Telecoms •
Legal • Retail
and
Hospitality
•
Mobile/Wireless • Telco
Somware
•
Digital
Media
&
Internet •
Network/Hos+ng • Travel
&
Transport
•
Consul+ng • Built
Environment
Somware
•
Communica+ons • Communica+on
&
CEM
• Data
&
Content
Management
•
Search • ERP
•
Security • Human
Capital
Management
•
Semiconductor • Logis+cs
and
WMS
•
Somware • Other
Business
Applica+ons
• Security
20. What
are
their
Op+ons?
•
IPO P2P IPO P2P
Strategic
Op+ons
are
limited
• IPO Buyout
Public
Companies
External
Growth
Funding
Buyout
VC/PE
Funded
External
Growth
Funding
• P2P
Acquisi+on Sale Acquisi+on Sale
• External
Growth
Funding
•
Public VC/PE
Sale IPO P2P
Companies Funded
IPO P2P
• Acquisi+on Buyout
Early
Stage
<£5m
External
Growth
Funding
Early
Stage
<£5m
UK
Somware
Companies
Private Buyout Private
External
Growth
Funding
• Buyout
Acquisi+on Sale
Foreign
Owned Subsidiaries Acquisi+on Sale
• But
Strategic
Op+ons
depend
on
Compe+tors
circumstances IPO P2P IPO P2P
Foreign External External
Buyout Owned Growth Buyout Subsidiaries Growth
Compe+tors Funding Funding
Acquisi+on Sale Acquisi+on Sale
21. Where
are
the
Deals
to
be
found?
•
IPO P2P IPO P2P
Buyside
Deals
• Playing
to
our
strengths
in
deal
Buyout
Public
Companies
External
Growth
Funding
Buyout
VC/PE
Funded
External
Growth
Funding
origina+on
• Sell
Side
Deals Acquisi+on Sale Acquisi+on Sale
• Depth
of
market
knowledge
and
IPO P2P
Public
Companies
VC/PE
Funded
IPO P2P
interna+onal
grasp
of
compe+ng
companies
makes
this
an
aqrac+ve
Buyout
Early
Stage
External
Growth
Early
Stage
UK
Somware
Private Buyout Private
External
Growth
Companies
deal
area <£5m Funding <£5m Funding
•
Foreign
Deal
Areas
of
least
aqrac+on Acquisi+on Sale Owned
Compe+tors
Subsidiaries Acquisi+on Sale
• These
do
not
play
to
our
strengths
and
IPO P2P IPO P2P
are
to
be
avoided
Foreign External External
Buyout Owned Growth Buyout Subsidiaries Growth
Compe+tors Funding Funding
Acquisi+on Sale Acquisi+on Sale
22. And
Deep
Somware
Sector
Knowledge...
• Energy
&
U+li+es
• Engineering
Just
some
of
our
Databases... • FinTech
Banking
• FinTech
Insurance
• Electronic
Document
Management •
•
FinTech
Other
FS
• eServices
•
Legal
&
Professional
Services
Media
&
Marke+ng
• Internet
Infrastructure
Somware • Other
PS
• Legal
Sector • Other
Ver+cals
• Payments
Systems • PharmaTech
• PS
Educa+on
• EDI • PS
Healthcare
• Pensions
Administra+on • Retail
and
Hospitality
• Telco
Somware
• Accoun+ng • Travel
&
Transport
• Road
Traffic
Technology •
•
Built
Environment
Somware
• Supply
Chain
Management
•
Communica+on
&
CEM
Data
&
Content
Management
• Manufacturing • ERP
• Security • Human
Capital
Management
• Retail
Solu+ons • Logis+cs
and
WMS
• Other
Business
Applica+ons
• Security
26. Former
Regular
Army
Officer
25
Years
Investment
Banking
Experience
Strong
Deal
Originator
Over
$150
millon
in
Technology
Sector
Deals
since
2001
27. This
summary
memorandum
has
been
prepared
from
internally
developed
data,
informa+on
in
the
public
domain
and
other
sources
believed
to
be
reliable.
No
representa+on,
warranty
or
undertaking
(express
or
implied)
is
given
and
no
responsibility
is
accepted
by
IAF
Capital
Limited
(“IAFC”)
or
by
any
of
their
officers,
employees
or
agents
for
the
completeness
or
accuracy
of
any
informa+on
contained
in,
or
of
any
omissions
from,
this
summary
memorandum
or
any
supplementary
informa+on
made
available
to
any
interested
party
or
its
advisors,
and
any
liability
in
respect
of
such
informa+on
or
omissions
is
hereby
expressly
disclaimed.
This
summary
memorandum
does
not
cons+tute
an
offer,
invita+on
or
recommenda+on
to
buy,
sell,
subscribe
for
or
issue
any
securi+es
or
a
solicita+on
of
any
such
offer
or
invita+on
and
shall
not
form
the
basis
of
any
contract
with
IAFC.
Opinions
expressed
herein
are
subject
to
change
without
no+ce.
In
providing
this
summary
memorandum,
IAFC
does
not
undertake
any
obliga+on
to
provide
the
recipient
with
access
to
any
further
informa+on
or
to
correct
any
inaccuracies
or
omissions
which
may
become
apparent.
IAFC
and
their
officers,
employees
and
agents
may
own
or
have
posi+ons
in
securi+es
of
companies
or
issuers
men+oned
herein
and
may
also
provide
or
seek
to
provide
financial
advisory,
banking
and
other
services
for
any
such
companies
or
issuers.
With
respect
to
recipients
in
the
United
States,
this
Informa+on
Memorandum
is
being
distributed
solely
to
"accredited
investors"
within
the
meaning
of
the
rules
and
regula+ons
promulgated
under
the
Securi+es
Act
of
1933,
as
amended
(the
"Act").
The
Company's
stock
has
not
been
and
will
not
be
registered
under
the
Act,
or
any
applicable
state
or
foreign
securi+es
laws,
nor
has
the
United
States
Securi+es
and
Exchange
Commission
or
any
state
or
foreign
regulatory
authority
passed
upon
the
accuracy
or
adequacy
of
this
Informa+on
Memorandum
or
endorsed
the
merits
of
this
offering,
and
any
representa+on
to
the
contrary
is
unlawful.
The
Company's
stock
is
offered
pursuant
to
exemp+ons
provided
by
Sec+on
4(2)
of
the
Act
and
Regula+on
D
thereunder,
certain
state
securi+es
laws
and
certain
rules
and
regula+ons
promulgated
under
the
Act.
The
Company's
stock
may
not
be
transferred
in
the
absence
of
an
effec+ve
registra+on
statement
under
the
Act
and
any
applicable
state
or
foreign
securi+es
laws
or
an
opinion
of
counsel
acceptable
to
the
Company
and
its
counsel
that
such
registra+on
is
required.