converting work into wealth

5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770

www.mergertech.com
Merger1ech Inte|||gence keport, Vo|. 2, Issue #1:
8|g Data Ana|yt|cs: Iue| for Lnterpr|se Software M&A

!"#$%& $( ())* +,)- (#& ./01 )+ 2$3$%$4/($)1 () 5667 () 2,&/(& +$3& &8/9:(&; )+ $1+),-/($)1< 0& 1)0 2,&/(&
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1he nexL 8lg 1hlng" has forever been Lhe Poly Crall ln Lechnology producL cycles. We marvel aL Lhe
clean lnLerface and usablllLy of Lhe lhone yeL gloss over how Lhe Apple newLon handheld flopped upon
lLs release ln Lhe early 1990s. 1he llne beLween mass adopLlon of a Lechnology - be lL consumer or
enLerprlse-cenLrlc - ls a flne one and caplLallzlng on Lhe needs of Lhe cusLomer aL a speclflc [uncLure ln
Llme can be Lhe dlfference beLween mass adopLlon and false hope.
Whlle Lhe monlker 8lg uaLa AnalyLlcs can be deflned sub[ecLlvely, ln essence, lL can be deflned as Lhe
collecLlon and dlssemlnaLlon of large volumes of daLa. ln Lurn, Lhe daLa can be scrubbed and, ldeally,
moneLlzed Lo develop deeper, more accuraLe lnslghLs lnLo cusLomer, buslness parLner and lnLernal
behavlors. ln a perfecL world, 8lg uaLa wlll be mosL useful Lo generaLe predlcLlve lnformaLlon, allowlng
enLerprlses Lo more effecLlvely address cusLomer needs and deslres.
lnLel has provlded Lhe mosL eloquenL deflnlLlon of 8lg uaLa, descrlbed as Lhe 1hree vs of 8lg uaLa.
8eferrlng Lo huge daLa seLs characLerlzed by larger volume (by orders of magnlLude) and greaLer varleLy
and complexlLy, generaLed aL a hlgher veloclLy Lhan an organlzaLlon has faced prevlously.
n|gher Va|uat|ons 1oday Create Need for Lx|t Strategy keassessment

WlLh Lhe rlse ln 8lg uaLa-cenLrlc and 8l soluLlons comlng Lo Lhe markeL, we anLlclpaLe boLh
lncumbenL and emerglng vendors belng acqulslLlve as Lhe markeL share land grab ls sLlll ln lLs
lnfancy. 1hls ls especlally Lrue for sofLware vendors ln Lhe space. Clven Lhe ~40 upward
bounce ln Lhe S& off AugusL 2011 lows, valuaLlons have lncreased for a ma[orlLy of Lech
companles. Powever, amld Lhe economlc uncerLalnLy emanaLlng ouL of Lurope LhroughouL
2012, M&A average LransacLlon slze decllned noLlceably as buyers preferred maklng smaller,
more opporLunlsLlc deals. 1he real quesLlon ls one of Llmlng, how you need Lo conslder Lhe
growLh of your buslness versus Lhe Lwo-year wlndow currenLly afforded. Cn Lhe whole, Lhe
markeL lndlcaLes LhaL valuaLlons are currenLly hlgh, and LhaL over Lhe nexL Lwo years Lhey wlll
begln Lo shrlnk. 8uyers wlll be more selecLlve and less wllllng Lo pay premlums for smaller
companles, Lhus now may be Lhe opporLune Llme Lo conslder a sale of your buslness. lacLorlng
ln Lhe currenL markeL dynamlcs, we expecL Lo see furLher acceleraLlon ln M&A acLlvlLy over Lhe
nexL 12-18 monLhs. Large-scale vendors are lncreaslngly focused on addlng boLh 8lg uaLa
capablllLles along wlLh LradlLlonal sofLware provlders wlLh a dlverse cusLomer base amld Lhe
shrlnklng valuaLlon envlronmenL and a more selecLlve prospecLlve buyer llsL.


converting work into wealth
5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770
www.mergertech.com
1he 1hree Vs of 8|g Data
Volume
VarleLy
VeloclLy

Source: lnLel

unforLunaLely, colncldlng wlLh Lhe exponenLlal growLh ln daLa generaLlon ls Lhe facL LhaL all of Lhls daLa
musL be effecLlvely assessed and uLlllzed. Pereln lles sofLware's sweeL spoL ln Lhe markeL. Clven luC's
recenL esLlmaLes LhaL machlne-generaLed daLa ls pro[ecLed Lo lncrease 13x by 2020, Lhe need Lo
efflclenLly collecL and dlssemlnaLe daLa wlll become an lncreaslngly lmperaLlve need wlLhln enLerprlses
and SM8s Lo effecLlvely leverage, and more lmporLanLly, moneLlze daLa.

1|me||ne of 8|g Data v. ke|evant Data

Source: SAS, Merger1ech

As daLa collecLlon and moneLlzaLlon comes Lo Lhe forefronL amongsL commerclal cllenLs, 8lg uaLa has
morphed lnLo a LransformaLlve producL dlfferenLlaLor. A growlng number of companles are dlscoverlng
Lhe compelllng buslness raLlonale for Lhe uLlllzaLlon of prevlously unwleldy amounL of dlsparaLe daLa. A
large number of enLlLles, however, lack Lhe capablllLy Lo effecLlvely uLlllze Lhese daLaseLs and are
learnlng LhaL Lhe mosL effecLlve meLhod of addlng Lhls capablllLy Lo Lhelr soluLlon seL ls vla M&A.
ln 2012, Lhe worldwlde sofLware markeL grew 3.6 reachlng a LoLal markeL slze of $3428. WlLhln Lhe
enLerprlse sofLware markeL, Lhere are fasLer growlng markeL segmenLs, such as uaLa Access, Analysls
and uellvery, CollaboraLlve AppllcaLlons, C8M AppllcaLlons, SecurlLy SofLware, and SysLem and neLwork



converting work into wealth
5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770
www.mergertech.com
ManagemenL SofLware. Lvery one of Lhese markeLs grew 6-7, nearly 2x Lhe raLe for enLerprlse
sofLware as a whole. 1hese growLh raLes should noL come as a surprlse glven lncreaslng adopLlon of
Cloud-relaLed appllcaLlons for sLorage requlremenLs. A 2013 Wlklbon survey lndlcaLes a 61 CAC8
Lhrough 2017 for Lhe LoLal 8lg uaLa markeL (sofLware, servlces, hardware), puLLlng Lhe space on pace for
$478 ln revenues.
ln addlLlon Lo pure-play 8lg uaLa vendors encroachlng on Lhe exlsLlng enLerprlse sofLware markeL, we
have wlLnessed a rlse of buslness lnLelllgence (8l) sofLware appllcaLlons, furLher blurrlng Lhe llnes
beLween analyLlcs and LradlLlonal enLerprlse sofLware. Clven Lhese growLh raLes, Lhe loglcal expecLaLlon
ls for nexL-generaLlon sofLware soluLlons Lo overshadow LradlLlonal enLerprlse sofLware soluLlons lnLo
Lhe near Lerm.
1hls assumpLlon, whlle llkely valld, ls shorL-slghLed and slmpllsLlc. 8lg uaLa sofLware revenues were
$2.28 ln 2012, accounLlng for only 20 of all 8lg uaLa revenues. Clven sofLware ls Lyplcally Lhe lasL of
Lhe Lhree arms of Lech (hardware, servlces, sofLware) Lo beneflL from a Lechnologlcal shlfL, we expecL
smaller, LradlLlonal enLerprlse sofLware vendors and lnLegraLors wlLh even mlnlmal exposure ln 8lg uaLa
Lo remaln aLLracLlve M&A candldaLes as large-scale 8lg uaLa-cenLrlc vendors look Lo make sLraLeglc
acqulslLlons Lo add Lo Lhelr cusLomer base and expand Lhelr offerlngs. Lven lf LradlLlonal sofLware
vendors are noL focuslng on 8lg uaLa analyLlcs wlLhln Lhelr producL sulLe, esLabllshed cusLomer bases
remaln of greaL value Lo acqulslLlve companles as Lhey seek Lo upsell analyLlcs soluLlons and l1
professlonals become lncreaslngly aware of Lhelr beneflLs.

8|g Data kevenue by 1ype, 2012 (511.S8 1AM)

Source: Wlklbon, 2013
A number of enLerprlse sofLware vendors have rlsen Lo Lhe forefronL ln Lhe space Lo challenge Lhe sLaLus
quo lnhablLed by Lhe llkes of Cracle, MlcrosofL and SA. Splunk, Cpera SoluLlons, Cloudera, Cllk1ech
and 1ableau SofLware are among Lhe more promlnenL pure-play vendors llkely Lo recelve furLher M&A
conslderaLlon ln Lhe space over Lhe nexL 12-18 monLhs as daLa growLh raLes acceleraLe and Lhe need
develops for lnnovaLlve soluLlons Lo leverage dlsparaLe daLaseLs. AddlLlonally, we anLlclpaLe new
vendors comlng Lo Lhe forefronL as Lhey secure fundlng and exlL sLealLh mode, offerlng dlsrupLlve new
soluLlons Lo Lhe sLaLus quo and aLLracLlng lncumbenL vendors almlng Lo offer cusLomers wlLh Lhe laLesL
Lools Lo address daLa dlssemlnaLlon, compllaLlon and analysls.
Hardware
41%
Services
39%
Software
20%


converting work into wealth
5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770
www.mergertech.com

Lead|ng ub||c Comparab|es |n Data Ana|yt|cs]8|g Data

1he 2010-11 Llmeframe was characLerlzed by large hardware vendors belng opporLunlsLlc and bulldlng
ouL Lhelr sofLware producL lnfrasLrucLure Lo accommodaLe Lhe oncomlng need for daLa analyLlcs
soluLlons.












!"#$$%& (%$)*+ ,- .,$$,#-+ */0*12 +3%&* 1&,0*+4
1LV]kevenue 1LV]L8I1DA
Company 1|cker Share r|ce at S]13]13
of S2 Week
n|gh Market Va|ue
1ota| Lnterpr|se
Va|ue 2012 2013L
kev. 2-r
Growth 2012 2013L
Accelrys lnc. ACCL $8.48 5678 $473.6 $343.8 2.1x 2.0x 9878 28.9x 12.1x
AcLuaLe CorporaLlon 8l81 6.30 5:76 298.1 230.8 1.7 1.6 ;7< 9.7x 8.2x
uaLawaLch CorporaLlon uWCP 12.68 <87= 81.3 73.6 2.8 2.4 9>75 30.1x 13.8x
lnformaLlca CorporaLlon lnlA 34.94 :<7: 3,776.2 3,183.4 3.9 3.3 ;879 17.7x 13.0x
MlcroSLraLegy lnc. MS18 94.49 <675 1,067.8 737.6 1.2 1.3 ;879 14.8x 13.3x
egasysLems lnc. LCA 29.70 5:78 1,126.7 943.8 2.0 1.9 ;>7> 18.9x 10.9x
Cllk 1echnologles, lnc. CLlk 28.40 =:7; 2,471.4 2,236.7 3.8 4.7 9576 nM 38.3x
Splunk, lnc. SLk 44.23 =578 4,338.2 4,232.3 21.4 13.7 :>7> nM nM
1eradaLa CorporaLlon 1uC 33.88 <<76 8,804.0 8,222.0 3.1 2.9 ;?76 12.4x 10.2x
1l8CC SofLware lnc. 1l8x 20.61 <976 3,381.9 3,138.7 3.1 2.9 ;678 14.6x 11.1x
Mean 4.7 3.9 18.4 1S.0
Med|an 3.0 2.7 16.2 12.1
M|n 1.2 1.3 9.7 8.2
Max 21.4 1S.7 30.1 38.3
Source: CaplC


converting work into wealth
5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770
www.mergertech.com
recedent 1ransact|ons |n Ana|yt|cs Software, 2008 - 2013





converting work into wealth
5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770
www.mergertech.com
Cone are Lhe days where daLa analyLlc vendors were rewarded wlLh lofLy valuaLlons and markeL
premlums. 8ecenL LransacLlons polnL Lo more Luck-ln/sLraLeglc acqulslLlons as vendors seek addlLlonal
avenues Lo address more cusLomer-speclflc needs and provlde Lhe back-end supporL (read: sofLware) Lo
address volumlnous analyLlcal processes. valuaLlons ln Lhese more sLraLeglc acqulslLlons have, for Lhe
mosL parL, pulled back Lo Lhe 1-2x Lv/revenues range (from froLhy 3-10x levels ln 2010-11). Powever,
Lhere has been an acceleraLlon ln M&A acLlvlLy over Lhe lasL 18 monLhs relaLlve Lo 2008-11 Llmeframe
wlLh LoLal deal slze and Lhe number of LransacLlons lncreaslng slgnlflcanLly.
8|g Data Market kema|ns Underserved
As noLed ln Lhe below Lable, 8lg uaLa revenues as a percenLage of LoLal revenues represenL essenLlally a
roundlng error for a ma[orlLy of Lhe lndusLry LlLans. WlLh nearly 80 of all avallable 8lg uaLa belng
unsLrucLured and dlsparaLe, Lhe need for enLerprlse sofLware soluLlons Lo dlssemlnaLe Lhls daLa ls llkely
Lo acceleraLe lnLo Lhe near Lerm. We anLlclpaLe Lhe llkes of bellweLhers such as C8CL, MSl1, l8M
lncreaslng Lhelr markeL opporLunlLles by maklng sLraLeglc acqulslLlons of boLh emerglng vendors ln Lhe
daLa analyLlcs space as well as LradlLlonal enLerprlse sofLware vendors Lo garner markeL share and add
Lo Lhelr exLenslve cusLomer bases.

2012 Wor|dw|de 8|g Data kevenue by Vendor (5US m||||ons)

Vendor 8|g Data
kevenue
1ota|
kevenue
8|g Data kevenue
as of 1ota|
kevenue
8|g Data Software
kevenue
I8M $1,332 $103,930 1 33
n $664 $119,893 1 29
1eradata $433 $2,663 16 28
De|| $423 $39,878 1 0
Crac|e $413 $39,463 1 34
SA $368 $21,707 2 67
LMC $336 $23,370 1 36
C|sco Systems $214 $47,983 0 0
M|crosoft $196 $71,474 0 67
Source: Wlklbon, 2013
Clven Lhe ~40 upward bounce ln Lhe S& off AugusL 2011 lows, valuaLlons have lncreased for a
ma[orlLy of Lech companles. Amld Lhe economlc uncerLalnLy emanaLlng ouL of Lurope LhroughouL 2012
however, M&A average LransacLlon slze decllned noLlceably as buyers have preferred maklng smaller,
more opporLunlsLlc deals. lnLeresLlngly, of Lhe 2,277 Lechnology companles acqulred durlng 2012, 76
of Lhe acqulslLlons had noL ralsed funds vla lnsLlLuLlonal lnvesLmenL, be lL venLure caplLal or prlvaLe
equlLy. Whlle large deals (>$18) Lyplcally garner Lhe aLLenLlon of Lhe medla, Lhey represenLed less Lhan
3 of all prlvaLe Lech company acqulslLlons ln 2012. More Lhan 30 of deals are less Lhan $30M and
more Lhan 80 of Lhe acqulslLlons are less Lhan $200M.


converting work into wealth
5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770
www.mergertech.com
M&A: Average Dea| S|ze and 1ota| 1ransact|ons, 2011-present

Source: 431 8esearch, Merger1ech
1eradaLa, one of Lhe preemlnenL daLa analyLlc vendors ln Lhe space, serves as a represenLaLlve proxy for
Lhe performance of analyLlcs vendors ln Lhe space relaLlve Lo Lhe S& 300 ln Lhe fallouL afLer Lhe 2008
flnanclal crlsls. As evldenced, analyLlc sofLware vendors have, for Lhe mosL parL, ecllpsed Lhe
performance of Lhe broad-based markeL over Lhe prevlous flve years. Clven Lhese galns, and
subsequenL rlse ln valuaLlons amongsL boLh publlc and prlvaLe enLlLles ln Lhe space as well as
comparable secLors wlLhln Lechnology, valuaLlons appear Lo have plaLeaued and have been on Lhe
decllne over Lhe lasL year.
1eradata (1DC) erformance v. S& S00, May 2008 - May 2013

Source: ?ahoo

0
200
400
600
800
1,000
1,200
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13
(
$
,

i
n

m
i
l
l
i
o
n
s
)
Avg Deal Deal Volume


converting work into wealth
5858 Horton Street, Suite 101 Emeryville, CA 94608 925.380.2770
www.mergertech.com
Where Are Va|uat|ons neaded
ln Lhe wake of Lhe 2011-12 Luropean economlc crlsls, buyers, whlle selecLlve ln Lhelr LransacLlons (as
evldenced by Lhe decllne ln number of compleLed LransacLlons) have been lncreaslngly recepLlve Lo
M&A acLlvlLy, wlLh deal values and average deal slzes reLurnlng Lo pre-Luropean crlsls levels.
Amld Lhls markeL envlronmenL, we have seen Lhe premlum buyers are wllllng Lo pay for companles
conLlnue Lo conLracL over Lhe same Llme perlod. Cn a prlce-Lo-sales basls, valuaLlons of Lech companles
appear Lo have peaked ln 2010 and conLlnued Lhelr decllne Lhrough 1C13 aL an average of 1.9x (medlan
of Lop 30 largesL LransacLlons). We anLlclpaLe Lhls Lrend conLlnulng Lhrough year-end as recenL
LransacLlons have only exacerbaLed Lhe decllne ln valuaLlons. unlLed 8uslness Medla, CheckpolnL
SysLems, Slerra Wlreless, Parmonlc and 1elenav are among Lhe well-known Lech flrms LhaL have sold off
parLs of Lhelr buslness ln 2013 Lhrough dlvesLlLures valued aL less Lhan 1x Lralllng sales. Meanwhlle, Lhe
proposed managemenL-led buyouL of uell values Lhe C maker aL [usL 0.4x Lralllng sales.
Va|uat|on of S|gn|f|cant 1echno|ogy 1ransact|ons*

Source: 431 8esearch
*Medlan mulLlple ln 30 largesL acqulslLlons, by equlLy value, ln each of Lhe perlods.

Summary
lrom a Lechnologlcal perspecLlve, 8lg uaLa AnalyLlcs ls here for Lhe long-haul. WlLh Lhe rlse ln 8lg uaLa-
cenLrlc appllcaLlons along wlLh 8l soluLlons comlng Lo Lhe markeL, we anLlclpaLe boLh lncumbenL and
emerglng vendors belng acqulslLlve as Lhe markeL share land grab ls sLlll ln lLs lnfancy. 1hls ls especlally
Lrue for sofLware vendors ln Lhe space. 1he quesLlon really, ls one of Llmlng where you need Lo conslder
Lhe growLh of your buslness versus Lhe Lwo-year wlndow currenLly afforded. Cn Lhe whole, Lhe markeL
seems Lo lndlcaLe LhaL buyers are belng more selecLlve and less wllllng Lo pay premlums for smaller
companles, Lhus now may be Lhe opporLune Llme Lo conslder a sale of your buslness. lacLorlng ln Lhe
currenL markeL dynamlcs, we expecL Lo see furLher acceleraLlon ln M&A acLlvlLy over Lhe nexL 12-18
monLhs. Large-scale vendors are lncreaslngly focused on addlng boLh 8lg uaLa capablllLles along wlLh
LradlLlonal sofLware provlders wlLh a dlverse cusLomer base amld Lhe shrlnklng valuaLlon envlronmenL
and a more selecLlve prospecLlve buyer llsL.
Year EV/Sales
2007 3.8x
2008 2.4x
2009 2.6x
2010 3.4x
2011 3.2x
2012 2.9x
1Q13 1.9x