Understanding the Most Important – But Least Understood – Part of Every Tech M&A Process This webinar will cover: * Positioning: How positioning a company in a sector affects the valuation. * Macroeconomics: How the macroeconomic environment plays a role in valuation. * Wall Street Valuation Metrics: A review of the Wall Street methodologies. * Practical Tips: How to maximize the valuation of private tech companies on the sell side.

1. DEMYSTIFYING TECH M&A VALUE
Understanding the Most Important
–But Least Understood–
Part of Every Tech M&A Process
March 10, 2020

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• Webinar Logistics
• About Our Sponsor
• Speaker Introduction
• Audience Poll
• Presentation
• Q&A
AGENDA

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• The webinar will run from 11am-12pm PT
• Contribute questions via the Q&A box
in the Zoom control panel.
• We will address questions at the end of the webinar.
• The web panel discussion is being recorded,
and we will notify you via email when it becomes available.
• Copies of the slides will also be made available to all registrants.
• We welcome your feedback after the web panel
so we can improve others in the future!
LOGISTICS

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OUR SPEAKER, BEN BOISSEVAIN
BEN BOISSEVAIN
Founder & Managing Director,
Ascento Capital, LLC
ben@ascentocapital.com
646-286-4589
745 Fifth Avenue, Suite 500
NewYork, NY 10151
www.ascentocapital.com
https://www.linkedin.com/in/benboissevain/
• 30 years of cross border M&A experience and
senior level global connections in the technology sector
• Graduated from NYU Law School and
started his career at White & Case
• His legal training enables him to handle any aspect of
contractual negotiations in M&A and capital raising
• He garnered investment banking experience at
Erste Bank in Vienna and Barclays Bank in New York
• Regularly speaks on panels on the technology sector and
corporate finance and has appeared on TV at Fox News and
Bloomberg

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SHAREVAULT 4.1 HAS ARRIVED!

6. BRIEF POLL
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Please help us understand our audience
by taking this brief poll.

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I. INTRODUCTION This webinar will cover:
• Positioning: How positioning a company
in a sector affects the valuation.
• Macroeconomics: How the
macroeconomic environment plays a role
in valuation.
• Wall StreetValuation Metrics: A review
theWall Street methodologies.
• PracticalTips: How to maximize the
valuation of private tech companies on
the sell side.

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II. POSITIONING – CRITICALLY IMPORTANT – 1 OF 3
Adam Neumann,
the former CEO,
effectively
positioned
WeWork as an “on
demand”
technology
company.
To emphasize the
technology sector
positioning,
WeWork acquired
20 small tech
companies in
preparation for its
IPO, including
Euclid, an operator
of an analytics
platform.
When WeWork filed
its S-1,Wall Street
analysts did not buy
the tech sector and
instead placed
WeWork in the real
estate sector where
valuation multiples
are much lower.
WeWork’s valuation,
which was $47 billion in a
private round in January
2019, decreased
dramatically to $8 billion
in the Softbank bailout in
October 2019.
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II. POSITIONING – CRITICALLY IMPORTANT – 2 OF 3
WeWork founder Adam
Neumann received a
payout up to $1.7
billion under a bailout
deal that gave
SoftBank 80%
ownership of the
beleaguered startup
company.
In February 2020,
WeWork named
Sandeep Mathrani, a
senior executive at the
commercial real estate
company Brookfield
Properties, as its new
chief executive.
WeWork is now in the proper
sector, the real estate sector,
with a much lower valuation.
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II. POSITIONING – CRITICALLY IMPORTANT – 3 OF 3
• Ascento Capital recently advised a public
domestic wireless antenna company on
the acquisition of a private Scandinavian
sensor company.
• This acquisition changed the sector from
antenna companies to Internet ofThings
companies, which have a higher revenue
multiple.
• This repositioning by acquisition
improved the company’s valuation
significantly.
Take Aways:
 How you position a company
has a significant effect on
valuation.
 You can use acquisitions to
reposition a company.

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III. MACROECONOMICS – 1 OF 3
WHAT IS THE M&A ENVIRONMENT
WHEN YOU GO IN TO SELL?
• M&A is driven by supply and demand
like any other market.
• Selling in a robust, active M&A environment
will garner a much higher valuation.
• If there is the inevitable global recession or black swan
event like the corona virus that hits the market, then
there will be fewer buyers since companies will be
conserving cash and generally risk adverse.

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III. MACROECONOMICS – 2 OF 3
WHAT IS THE M&A ENVIRONMENT
WHEN YOU GO IN TO SELL?
• Venture capital and private equity firms will be
using their cash primarily to make sure their
current portfolio companies survive the downturn
and to invest as much in new opportunities.
• In a downturn, there will be many more sellers, since it will be more
challenging to raise capital and companies with a burn rate will have no
choice but to sell.
• A healthy company selling in this environment will be competing with
desperate companies running out of cash willing to sell for much lower
valuations in asset sales and acquihires.

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III. MACROECONOMICS – 3 OF 3
WHAT IS THE M&A ENVIRONMENT
WHEN YOU GO IN TO SELL?
• Finally, private companies are valued
compared to public companies and their
trading multiples.
• If a black swan event hits, the trading
multiples can decrease dramatically.
• In 4 trading days of the corona virus
crisis, technology shares in the S&P 500
InformationTechnology Sector declined
10%.
Take Aways:
 Monitor the macroeconomic
environment closely.
 If a company expects to
increase revenues by 25% next
year, but the macroeconomic
environment is poor next year,
then the company could sell for
50% less.

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IV. WALL STREET VALUATION METRICS – 1 OF 3
A REVIEW OF WALL STREET VALUATION METHODOLOGIES
• There are
three main valuation
methodologies:
1. comparable company
analysis
2. precedent transaction
analysis and
3. discounted cash flow
analysis.
1. Comparable Company
Analysis (CCA):
• A process used to evaluate the value of a
company using the metrics of other
businesses of similar size in the same
industry.
• Comparable company analysis operates
under the assumption that similar
companies will have similar valuation
multiples, such as EV / revenue and
EV/EBITDA.

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IV. WALL STREET VALUATION METRICS - 2 OF 3
A REVIEW OF WALL STREET VALUATION METHODOLOGIES
2. Precedent Transaction Analysis:
• A valuation method in which the
price paid for similar companies
the past is considered an indicator
of a company's value.
• Precedent transaction analysis
creates an estimate of what a share
share of stock would be worth in
the case of an acquisition.
• Also known as "M&A comps.“
3. Discounted Cash Flow (DCF):
• A valuation method used to
estimate the value of an
investment based on its future
cash flows.
• DCF analysis finds the present
value of expected future cash
flows using a discount rate.
• A present value estimate is then
used to evaluate a potential
investment.

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IV. WALL STREET VALUATION METRICS – 3 OF 3
A REVIEW OF WALL STREET VALUATION METHODOLOGIES
• The selection of the appropriate “comps” is
critical since if you select companies that are
not similar, the valuation will be challenged
on the buy side.
• The number of comps is important as well
since the sample size should be large to be
meaningful.
• Finally, there are subtle differences, e.g.
European public companies generally trade at
lower valuations and private companies are
typically given a 20% liquidity discount.

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V. PRACTICAL TIPS - 1 OF 3
HOW TO MAXIMIZE THE VALUE OF PRIVATE TECH COMPANIES ON THE SELL SIDE
• The technology hype cycle
is an important
consideration in selling a
business.Valuations are
higher for early stage
businesses at the peak of
"inflated expectations". One
can also wait until the
"plateau of productivity",
but there are execution risks
to reach that stage.
• Consider selling your
company when your
competitors are selling: if
Microsoft buys your closest
competitor, then
competition just got more
intense and the number of
buyers for your company
just went down, changing
the M&A supply and
demand curve.

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V. PRACTICAL TIPS - 2 OF 3
HOW TO MAXIMIZE THE VALUE OF PRIVATE TECH COMPANIES ON THE SELL SIDE
• In early stage valuations,
the first 6 months of
revenue forecast should be
conservative since the
Board of Directors at the
buyer will inevitably ask if
the company is on track to
achieve its forecast.
• If the seller is 5% below its
revenue forecast, expect
the price to be cut by 10%.
• If the seller has aggressive
forecasts beyond the 6
months, this can convince
the buyer that that the
seller is confident that
aggressive growth is
possible.

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V. PRACTICAL TIPS - 3 OF 3
HOW TO MAXIMIZE THE VALUE OF PRIVATE TECH COMPANIES ON THE SELL SIDE
• Use a forward revenue multiple to
increase valuation: if it is July then
use the full calendar year revenue
estimate in the valuation with the
justification that the bookings for
the full calendar year are very
visible.
• It is important to establish the
valuation early in the
negotiating process. Do not
spend a lot of time
negotiating terms and
conditions if the valuation is
not locked down.
• If the parties are far apart on valuation, consider using an earnout to bridge the valuation gap.
See: Ascento Capital – “How to Structure Effective Earnouts”
https://www.linkedin.com/pulse/bois-capital-smart-ma-series-3-structuring-effective-ben-boissevain/

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VI. CONCLUSION
It is important to consider
the wider picture, such as
positioning a company in
the most appropriate
sector and selling in the
most favorable
macroeconomic
environment.
The classicWall Street
valuation methodologies,
comparable companies,
precedent transactions and
discounted cash flow
should be prepared in a
robust, professional and
defensible manner, since
they will be challenged on
the buy side.
Pay attention to the hype
cycle, when your
competitors are selling,
and use every tool to
your advantage, such as
forward revenue
multiples and earnouts.
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Q&A SESSION

22. THANK YOU FOR JOINING US!
PLEASE CONTACTUS WITH QUESTIONS:
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Ben Boissevain
Managing Director
Ascento Capital, LLC
646-286-4589
745 Fifth Avenue, Suite 500
New York, NY 10151
www.ascentocapital.com
ben@ascentocapital.com
https://www.linkedin.com/in/benboissevain/
ShareVault
www.sharevault.com
+1.408.717.4955
800.380.7652

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