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UBS Technology M&A: Discussion of Current Industry Trends
UBS Technology M&A: Discussion of Current Industry Trends
March 2005
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Table of Contents
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SECTION 1
1,500
1,411
1,328
1,250 1,219
1,045
Vo lume up 41% in 2004
1,000 vs. 2003
($ in billion)
750
608
530 529
500
433
407
296
250
154
110 116
97
0
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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No. of Deals
350
$311 2,000
Deal Value (US$ Billions)
300
No. of Deals
65 233
250 1,500
200
148 1,000
$143
150 $124
25 $103
24
100 $85
60 22
157 36 $65 $64 500
26 15
50 98 19 17
58 58 65 65
46 47
0 0
1997 1998 1999 2000 2001 2002 2003 2004
Note: Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q3 2003
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500 120
394 60% 102.6
371 399 370 (1% )
400 325 352 345 100
281 $64.2
300 80 $64.9
200 60
100 40
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2002 2003 2004
2003 2004
Note:
1 Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q2 2003
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3,000 350
309 2,648
300
2,500
250
No . o f Anno unce d M&A De als
235
2,000 1,862
No . o f IPOs File d
1,705
200
1,508
1,500 1,409
1,318 1,329
150
1,133
124
1,000 100
100
60
500
50
23 19 21
0 0
1997 1998 1999 2000 2001 2002 2003 2004
M&A IPO
Source: Securities Data Corporation and UBS Equity Capital Markets Group
Note: Oracle/PeopleSoft included as 2004 M&A transaction, original hostile offer was first launched in Q3 2003
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SECTION 2
Criticalmassandfinancialstrength
Customerlev
erage
A
chieve
Scale Increaseddistributionandsalessupport
Mark
et positionconsolidation
Leapfrogcompetition
Newmark
et entry—product orgeography
Expand
Capturenewcustomerbases
P
r oduct
Buyv
s. mak
e—timetomark
et
O
ffering
Engineeringtalent and/ormanagement acquisition
Off-incomestatement R
&D
Fillproduct gaps
O ffer
Capitalizeoninstalledbase
C
om plete
Acceleratetimetomark
et
Solution trengthenchannelpartnerships
S
Offerone-stopshop
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M&A Considerations
A number of factors to consider in pursuing any M&A transaction
Compellingstrategicrationale
Business
R
ationale Createorconsolidatemarket leadershipposition
ssentialnewtechnologies, m
E arketsorproducts
ransactionm
T ultiplescomparedtopubliccomparablesandprecedent transactions
Impact oncombinedcompanyrevenueandearningsgrowthtrajectories
F
inancial
C
onsiderations ffect onm
E argins
evenueandcost synergies
R
PSaccretion/ dilution
E
im
T etoclosure
E
xecution Anti-trust / regulatory
Risk ight contract term
T s
Integrationstrategy
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Process Considerations
Public Offering Versus Sale
PROS: PROS:
Primary shareholders retain voting control and existing Reduces or eliminates execution risks of the current business plan
management continues to execute the strategic vision of the as well as future capital market uncertainties
business
M&A valuation includes control premium
Proceeds from an IPO can be used to increase scale through
Can offer a more immediate path to liquidity for current
acquisitions or fuel organic growth
shareholders
Shareholders can participate in potential upside should the
Avoids the costs associated with being a public company
business continue to execute and market conditions remain
favorable Partnering increases opportunity to cross-sell and up-sell through
larger distribution platform and gain rapid critical mass to better
CONS
compete
The organization must take on the costs associated with public
CONS:
filing and compliance requirements while managing greater
scrutiny by investors Primary shareholders relinquish voting control and new
management executes the strategic vision of the company
An IPO lock-up prevents current shareholders from achieving
immediate liquidity Cash transactions eliminate the upside participation in the pro
forma company
There is a high degree of uncertainty in future capital market
conditions Integration and execution risk of combined business
There is the potential for a downside in valuation should the
business lose traction
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Benefits Costs
Intended to restore investor confidence in U.S. public markets Increased cost of being public, especially small cap companies
Drives greater consistency and transparency in reported filings Entails significant allocation of resources
Increased executive accountability over financial reporting Not meeting SOX deadline requirements or announcing inadequacies
in significant controls can have negative effect on stock price
Increased spending at the CFO and CTO level to meet compliance
criteria – UTStarcom
– Chordiant Software
– Interpublic Group
Advisory Services Vs. IT Spending Mix for SOX Compliance Anticipated Technology Spending to Support SOX Compliance
4,000
Security 61%
3,500
3,000 Storage 52%
($ millions)
2,500
2,000 Process Control 40%
1,500
Record Management 39%
1,000
500 Business Intelligence 36%
0
ERP 30%
2003 2004 2005 2006 2007
Advisory Services IT Spending
0% 10% 20% 30% 40% 50% 60% 70%
Source: Gartner 2004 estimates Source: Forrester Research survey of 454 technology decision-makers
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Weeks
Activity Action 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17
Organizational meetings
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SECTION 3
UBS Overview
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“ “
UBS is a banking giant but, a Wall Street powerhouse? Oh Yes. UBS has achieved what once seemed impossible for any European
investment bank: it has broken into the front rank in the US market,
This is a house… that’s grown out of its regional shell to assume
source of roughly half the global investment banking fee pool. In
premier proportions in world finance. But it’s the push into the
the 12 months ending in April 2004, it doubled its share in
rarified realm of Investment Banking that sets UBS apart.
”
announced US M&A deals.
”
WORLD’S BEST INVESTMENT BANK
“BIG KID ON THE BLOCK”
EUROMONEY 2004
FORBES
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UBS—A Leading M&A Advisor with Rapid Improvement in Market [yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.ppt
Share
Notes: Data represents all M&A deals worldwide greater than $100 million in transaction value. Full credit given to acquiror and target advisor(s). Excludes withdrawn deals, equity carveouts, exchange
offers, and open market repurchases
1 Market share based on number of transactions. Market shares do not sum to 100% due to multiple advisors on each transaction (e.g., target advisor and acquiror advisor)
UBS has positioned itself as one of the leading M&A advisors worldwide and has unprecedented momentum,
capturing more market share than any other bank since 2002
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Strong technology-focused M&A presence Financial Adviso r Rank Value ($mm) No . o f De als
with deep industry knowledge and company Goldman Sachs & Co 1 7,168.2 17
relationships Morgan Stanley 2 6,025.4 22
Credit Suisse First Boston 3 5,187.3 15
Experienced in a wide range of advisory UBS 4 4,476.8 11
assignments JP Morgan 5 4,375.4 14
– Buyer advisory Banc of America Securities LLC 6 2,148.2 5
– Seller advisory Citigroup 7 2,114.1 12
– Cross-border transactions Jefferies & Co 8 2,093.0 21
– Merger of equals Lehman Brothers 9 1,560.4 9
– Shareholder value protection Rothschild 10 1,492.6 3
– Leveraged transactions Source: SDC
Fe bruary 2005 Fe bruary 2005 No ve mbe r 2004 July 2004 May 2004
US$415 million US$850 million US$137million US$170 million US$663 million
Sale to eBay Sale of Selected DynCorp Sale to Cisco Systems Sale to FindWhat.com Acquisition of NPTest
Units to Veritas Capital
May 2004 March 2004 January 2004 January 2004 No ve mbe r 2003
US$380 million US$463 million US$601 million US$467 million US$295 million
Sale to Serena Software Sale to SafeNet Sale to Manpower Financial Restructuring Sale to NetScreen
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Contact Information
www.ubs.com
This presentation has been prepared by UBS Securities LLC (“UBS”) for the exclusive use of recipient (together with its subsidiaries and affiliates, the “company”) using information provided by the company and other publicly available information. UBS has not independently
UBS Investment Bank is a business group of UBS AG verified the information contained herein, nor does UBS make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this presentation. Any estimates or projections as to events that may occur in the
future (including projections of revenue, expense, net income and stock performance) are based upon the best judgment of UBS from the information provided by the company and other publicly available information as of the date of this presentation. There is no guarantee that any
UBS Securities LLC is a subsidiary of UBS AG of these estimates or projections will be achieved. Actual results will vary from the projections and such variations may be material. Nothing contained herein is, or shall be relied upon as, a promise or representation as to the past or future. UBS expressly disclaims any and all
liability relating or resulting from the use of this presentation.
This presentation has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The company should not construe the contents of this presentation as legal, tax, accounting or
investment advice or a recommendation. The company should consult its own counsel, tax and financial advisors as to legal and related matters concerning any transaction described herein. This presentation does not purport to be all-inclusive or to contain all of the information
which the company may require. No investment, divestment or other financial decisions or actions should be based solely on the information in this presentation.
This presentation has been prepared on a confidential basis solely for the use and benefit of the company; provided that the company and any of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and
tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to the company relating to such tax treatment and tax structure. Distribution of this presentation to any person other than the company and those persons retained
to advise the company is unauthorized. This material must not be copied, reproduced, distributed or passed to others at any time without the prior written consent of UBS. 19