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in the technology sector on Mergers and Acquisitions (M&A).
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5. Ed Bryant
President & CEO at Sampford Advisors
President and CEO of Sampford Advisors, an M&A
advisory firm for Canadian technology companies
with offices in Ottawa andToronto.
20+ years of experience, including over 18 years in
investment banking with Deutsche Bank, Morgan
Stanley, and Sampford in Hong Kong, Singapore,
NewYork, and now Canada.
Raised in excess of $20 billion in equity and debt
capital and completed over $10 billion in M&A
transactions.
Meet the Presenter
6. 6
• Tech-focused mergers and acquisitions advisory
• Proudly Canadian
• Focused on medium-sized technology clients
• 40+ years of investment banking experience
‐ In major financial hubs of NewYork, London,Toronto, Hong Kong and Singapore
Sampford Advisors Overview
7. 7
Leading Mid-Market M&A Advisor to Canadian Tech Companies
Source: Capital IQ for all transactions below C$75m or with
undisclosed values, Finance Monthly Magazine, OBJ / Ottawa
Chamber of Commerce.
#1
M&A Advisor
2017
#1
M&A Advisor
2018 YTD
Deal Maker
of the Year
Finance Monthly
Best New
Business
OBJ
#1
M&A Advisor
2017
By number of transactions By $ volume By number of transactions
Canadian
Mid-Market
M&A Advisor of
the Year
Finance Monthly
2017 2018 2017
8. 8
Past & Current Clients
Completed Pending
8
Sales of
software
companies
7
2 Sales of telecom
services firms
Martello acquisition
of Savision B.V. for
C$11.9mm
QuickTapSurvey
sale to US Private
Equity
Sole Advisor –
Sell-Side
Martello merger
with Elfiq Networks
Sole Advisor –
Buy-Side
ConceptShare sale
to Deltek
Sole Advisor –
Sell-Side
Magor sale to
Harris Computer
Sole Advisor –
Sell-Side
WiLAN C$67.9mm
acquisition of IRD
Sole Advisor –
Buy-Side
Longitude
Licensing sale to
Vector Capital
Joint Advisor –
Sell-Side
US$200mm Debt
Restructuring
Sole Advisor to
Investment
Fund
$250bn+
Investment
Fund
Undisclosed
Technology Company
DataSplice sale to
Prometheus
Group
Sole Advisor –
Sell-Side
Sole Advisor –
Sell-Side
Solufy sale to
Prometheus
Group
Sole Advisor –
Buy-Side
10. 10
1.2x
1.6x
1.2x
1.8x
1.5x 1.4x
2.9x 3.0x 2.9x
2.7x
2.4x
2.9x
6.7x
6.0x
4.9x
4.1x
4.9x
6.0x
2013 2014 2015 2016 2017 2018 YTD
25th Percentile Median 75th Percentile
• Software / SaaS revenue multiples have been normalizing up until the most recentYTD period
• However, strategic transactions remain commonplace at significantly elevated multiples
Valuations Normalizing but StrategicTransactions Commonplace
Strategic to
Financial
“Gap”
10
Source: Capital IQ, all Canada and US software / SaaS M&A
transactions, 01/01/13 – 08/31/18
11. 11
• There’s a common notion that
smaller companies tend to trade at a
discount to their larger peers
• This is particularly evident in the
software / SaaS vertical, where we
see a sizable discount for smaller
companies with revenues at the lower
end of the spectrum
Size Is Increasingly Important…
2.2x
2.4x
2.5x
2.6x
3.1x
$1 - $10 $10 - $25 $25 - $50 $50 - $100 +$100
Source: Capital IQ, all Canada and US software / SaaS M&A
transactions, 01/01/10 – Present
Revenue (US$mm)
12. 12
1.8x
2.7x
2.8x
3.2x
4.3x
10% - 15% 15% - 20% 20% - 25% 25% - 30% 30% - 35%
• EBITDA margins are an important
financial metric for many buyers
when determining a target
company’s valuation, particularly
financial buyers
• This is particularly evident in the
software / SaaS vertical, where we
see a sizableTEV / revenue premium
placed on companies with EBITDA
margins above 15%
And So Are EBITDA Margins…
EBITDA Margin (%)
Source: Capital IQ, all Canada and US software / SaaS M&A
transactions, 01/01/10 – Present
13. 13
11.7x
15.1x
19.8x
15.1x
1.3x
1.6x
2.2x
2.7x
IT Services Technology Hardware & Equipment Semiconductors & Equipment Software & Internet
TEV / EBITDA TEV / Revenue
11.7x
15.1x
19.8x
15.1x
1.3x
1.6x
2.2x
2.7x
IT Services Technology Hardware & Equipment Semiconductors & Equipment Software & Internet
TEV / EBITDA TEV / Revenue
…And Sector You’re Operating In
Revenue and EBITDA M&A Multiples by Sub-Sector
Source: Capital IQ, all Canada and US software / SaaS M&A
transactions, 01/01/10 – Present
14. 14
How are Buyers Valuing by Stage
• Early Stage
‐ Revenue multiples
‐ Build vs Buy
• Mid Stage
‐ Revenue and EBITDA multiples
• Late Stage
‐ EBITDA, P/E, FCF multiples
15. 15
How are Buyers Valuing by Industry
• Software
‐ Revenue multiples (but need positive EBITDA)
• Hardware,Telco, Semi
‐ EBITDA multiples
• I.T Services
‐ EBITDA multiples
18. 18
M&A activity is exceptionally strong given several drivers:
M&ATrends – Key Activity Drivers
18
Lots of PE money
More selective VCs
6
High public valuations
7 Technology divergence
8
9
Low cost of debt
10
1 Strong US economy
2 Lower corporate taxes in US
3
Concerns over slowing growth
4
5
Repatriation tax changes
Growing corporate cash balances
19. 19
$81.4
$100.9 $101.1
$122.4
$63.6
1,391
1,619
1,569
1,480
1,487
2013 2014 2015 2016 2017 2018
Dollars Invested ($bn) # of Transactions
1,560
$165.1
Annualized as of 09/30/18
• 2018 is off to a strong start and is
expected to be one of the biggest
years in recent history
Software M&A Activity is Extremely Strong
19
Source: Capital IQ, all Canada and US software / SaaS M&A
transactions, 01/01/13 – 10/31/18
20. 20
When to Sell – What Buyers are looking for
• Early Stage
‐ Revenue Growth,Technology
‐ These deals much less common (with exceptions – AI)
• Mid Stage
‐ Continued Revenue Growth (but not as fast as early stage)
‐ Strong Gross margins, EBITDA positive
‐ Customer acquisition costs vs lifetime revenue
• Late Stage
‐ Strong EBITDA margins
‐ Some growth
‐ Customer relationships and established products (IP)
21. 21
When to Sell – Timing Considerations
• M&A Market
‐ Access to capital (interest rates), cash on balance sheets, relative equity valuations, macro trends
• Industry
‐ Other consolidation (last one at the dance), industry growth trends, competitive environment
• Company
‐ Assessment of stage in life cycle (growth, margins)
‐ Technology development vs competitors/industry
22. 22
How to Prep
• Financial Info
‐ Financials (review is fine), internal management reporting, financial projections, more detailed
financial data (by product/service, customer concentration), KPIs
• Strategy / Story
‐ Where next? Crafting the story
• Due diligence ready to go
• Meeting the right profile
‐ Long enough history showing the right profile (i.e. revenue growth, margins, product
development, etc.)
24. 24
Using Acquisitions to Supplement Growth
• Companies of all sizes increasingly doing this (e.g. Martello andWi-Lan)
• For bigger companies, has to have meaningful impact on financial metrics
• Mid and Small companies consolidating for revenue and expense synergies
• Takes a very long time (6-12+ months)
• Need capital as people rarely taking stock (some exceptions where it’s a true Merger of Equals)
25.
26. Please type your questions into the question pane on the GoToWebinar control panel.
27. SecureDocsVirtual Data Room Ed Bryant, Sampford Advisors
United States: 866 700 7975 ext. 1
International: 001 805 259 1269 ext. 1
info@securedocs.com
www.securedocs.com
Phone: +1 613 591 3441
ed.bryant@sampfordadvisors.com
www.sampfordadvisors.com
Contact Us
Thank you!