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The Key M&A Market Driver: CEO Confidence

The Key M&A Market Driver: CEO Confidence. Source: Vistage CEO Survey, responses from 1,601 U.S. CEOs, surveyed between December 9 and December 18, 2013. Global Tech Acquisitions. In Dollar Volume (Billions). Source: Capital IQ.

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The Key M&A Market Driver: CEO Confidence

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  1. The Key M&A Market Driver: CEO Confidence Source: Vistage CEO Survey, responses from 1,601 U.S. CEOs, surveyed between December 9 and December 18, 2013

  2. Global Tech Acquisitions In Dollar Volume (Billions) Source: Capital IQ

  3. Global Software and Internet Acquisition Activity – Last Ten Years Source: Capital IQ

  4. Top-25 Acquirers in Software – Announced Acquisitions, Last Five Years 100+ Source: Capital IQ

  5. Breakdown of Software-Internet Transactions by Transaction size – Last five years Source: Capital IQ

  6. Valuations in M&A – Avg. Multiples of Revenue Source: Capital IQ

  7. Thoughts on What’s Going On Around Us • Perspective - Five Years Ago – January, 2009: MySpace was bigger than Facebook and generated $490M revenue Nokia and RIM were the #1 and #2 smartphone manufacturers: 59% market share • Web access was 85% from PC’s Tablets were a “failed market” - Newton (And in the general economy, we were on the precipice of the next Great Depression)

  8. So What’s Happened in Five Years?

  9. A Watershed Moment … • High-growth marketplaces 2.0 - Uber, Etsy, AirBnB, etc • High-growth social mobile apps - Snapchat, Foursquare, Tinder, Yelp, etc • New finance platforms – Square, Bitcoin, Lending Club, etc • New content platforms – Spotify, Hulu, Netflix, etc • And others – health, travel, cloud storage, etc • Companies that are unable to innovate their way into these new markets • must acquire, or they risk being marginalized, commoditized, or being made obsolete.

  10. Selected Financial Information (All $ in billions except Twitter)

  11. Google

  12. Google

  13. Google

  14. Google

  15. Google

  16. Google • Google’s challenges: • How do you continue to innovate at such a large scale? • What do you do with all that cash? • Search as it exists today may not look the same in 5 years • Google’s opportunity: • Contextual search and advertising • Google play (payments) • Still the most important acquirer in the land - $48B cash; $1B EBITDA monthly; investing across industries, geographies and stages • 18 announced acquisitions in 2013; most notable was Waze; Eight robotics acquisitions • Strategic growth areas for Google: • Search and Display advertising • YouTube, Android, and Chrome • New businesses to drive adoption and innovation - Social, Commerce, and Enterprise

  17. Yahoo • Comeback acquirer of the year – 28 acquisitions in 15 months • Marissa & Jackie Reses reinventing the company largely through acquisition • Buying stock, talent and technology - investing in Yahoo’s core strength – content • Tumblr – big bet, jury is still out. • $1.8B cash to do more now; remaining 24% stake in Alibaba may bring $20B later • What they need: • Big bets to move the needle now, and great integration • Speculative, emerging growth bets to to build the company’s future • More talent acquisitions to bring more good people into the company • Potential big buys: Pinterest, Foursquare, Zynga, Hulu, Millenial Media, something clever and unexpected in the content space?

  18. Facebook • $7B revenues TTM, $2B EBITDA, $9B Cash + Short Term Investments • Solved the mobile problem – half of revenue now coming from mobile advertising; great personal information; ideally situated for contextual search • 2013: Seven announced acquisitions; four of which were mobile-related • Strategic Need: • Address fragmenting mind share caused by new mobile social networks like Snapchat, Pinterest, Nextdoor • Diversify beyond their core social product • Targets: Yelp, Opentable, Pandora or Spotify, Blackberry, Yahoo!

  19. Twitter • Public offering put $1.8B on Twitter’s balance sheet • Key strategic priorities: • Increase user engagement and growth; revenue growth • Engagement with the TV industry • One of the most active and acquirers in 2013: 9 Acquisitions • Acquisition Opportunities: • More mobile / mobile ad-tech acquisitions • More entertainment acquisitions • Build a Yahoo!-like eco-system • Partner with another large content company

  20. The Next Five Years

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