ALLIED ADVISERS StartUpBridge | Allied Advisers May 2019 MEMBER FINRA, SIPC (BA SECURITIES) Confidential Confidential
Middle-Market M&A Is The Dominant Liquidity Route ALLIED ADVISERS Technology Sector Exits (Over Last 5 Years) 97% of the exits pertain to M&A type transactions, 3% the remaining 3% being IPO IPO Middle Market Deal Size (<$100M is ~90% of volume and, deals between $100-$200M is 3% of volume) M&A Entrepreneurs and Investors will benefit from proactive planning 97% M&A Analysis (Deals Sizes Over the Last 5 Years) – Middle Market (<$100M is 89.2% of exits) Deal Size ($MM) No. of Deals % of Deals Undisclosed Values* 9,721.0 74.5% < 50.0 1,589.0 12.2% 50.0 – 100.0 331.0 2.5% 100.0 – 200.0 381.0 2.9% Undisclosed – 200.0 12,022.0 92.1% 200.0 – 1000.0 661.0 5.1% > 1000.0 361.0 2.8% Total 13,044.0 100.0% Confidential 2 *All Undisclosed deal values are estimated to be below $100.0M
When To Bring In An Investment Banker? ALLIED ADVISERS Evaluating The Decision Of Raising Another Round Or Selling Advisory Services To Inbound On Assist In Finding Company The Best Opportunity Company top-line growth Investors Been In and margins continue to Company For A While And expand improving Looking For Liquidity valuations For LP / Company Is the team on-hand (or Peer Companies In readily available) the Space Getting Acquired / right one to scale it to Consolidation rapidly becoming an Unicorn / occurring IPO Growth Slowing, Margin Expansion slow; needs a lot of investment in sales which can be leveraged via an acquirer Confidential 3
How To Build Longer Term Relationships – SBI Can Help ALLIED ADVISERS Partnerships / Raise Visibility With Acquirers White Label Deals / Commercial Partnerships with Potential Acquirers § Get ARR revenue and access to customers and new markets § Allows both companies to make product stickier and reduce churn § Access to new customer list / new vertical which would take longer organically § If deal goes well, the partner could become a buyer § Help guide them through the “build vs. buy” math Engaging with Corporate Venture Groups § Provides visibility to Business Units within Acquirers § May come with a commercial partnership allowing revenue growth without sales investment § May prompt an inbound from them § Be cautious of giving the CVC Board Seats, Right of First Refusal / Notification (ROFR / ROFN), keeping your IP ownership and not allowing them to influence your product roadmap to meet their unique needs Networking with Product Groups / Business Units (CEO, GM, VP / Directors) § Outreach to them to describe your offering / value proposition to see how you could engage commercially. This also helps speed M&A discussions when your advisor reaches out to Corporate Development and someone internally can validate the technology / product offering Attending conferences / Keep Selling / Analyst Mentions § Provides customer leads and helps raise visibility in front of buyer universe § Beating your competition and winning clients is a good way to get on their radar § Get on your industry reports (Gartner, 451Group, TechCrunch) Confidential 4
Performs “Pre-M&A” Advisory Work ALLIED ADVISERS § While majority of transactions involve kicking off an M&A process right after Allied is engaged, a small number of Allied’s engagements are “advisory” in which Allied initially work with clients to build relationship and profile with buyers ahead of an M&A process which enhances exit valuation § While strategic buyers are active they are also risk averse and are willing to pay higher valuations for companies that they already know and are familiar with § It can take multiple meetings before potential buyers fully comprehend the value of a company and they are often more willing to meet when there is less pressure to make an M&A decision and they can evaluate companies in a thoughtful manner § Allied can work with Company to set up initial meetings with senior executives from likely buyers § The length of the “advisory period” can vary from a couple of months to longer based on the client’s interest and a variety of other factors § Company could potentially greatly benefit from this approach given there is flexibility in timing and Company wants to use this as an option § While Company is a leader in sector, Company might not be on the radar for some of the potential partners and it could take some time for these potential partners to truly comprehend the strategic value of Company’s team, products and technology § It is also possible that some of the companies that there might have been limited interactions with the key decision makers or the the strategy / M&A organizations § Engaging ahead of a formal sales process could help Company be proactive in generating an unsolicited inbound and appropriately responding in such an event Confidential 5
Its Never Too Early To Think Strategically ALLIED ADVISERS We can work with you as you evaluate these options Situational Analysis Business Highlights and Factors to Consider Competition / Owns Owns How Big is the Team Resources Risk from Large 30.0% 10.0% Market / Ability to Scale Players Situation A: $100.0 Situation B: $300.0 Million Exit Value Million Exit Value Exit at 10X ARR ($10M) Exit at 10x ARR ($30M) Which is better (Situation A or Situation B) Same economic outcome at $30M but for Situation B there is more execution risk but more cache in terms of exit value Business Model / Buyers Universe Shrinks at $300M Is it a feature or What is Stand-Alone Unit a product? Proprietary Economics ‹ $100.0M $300.0M ~90% of Tech Exits are below $100M Confidential 6
Creating Multiple Options ALLIED ADVISERS Allied professionals have extensive experience, driving significantly higher valuations, even when there is an existing party at the table and dealing with any issues which invariably come up Case Studies Company Description Image recognition software AI company focused on Publishers DevOps Software Company Situation Had strong relationship with the company for Received initial interest from one of its business Received unsolicited Interest from a Large over a decade but did not provide a Term Sheet partners Software company despite indicating desire to do so Value Extracted Contacted a number of additional publishers and In spite of a Rights of First Refusal agreement got other publishers interested. This resulted in (ROFR) that was already in place; was able to a Term Sheet valuation at ~2.0x received from Ran a process with other infrastructure players bring another party to the table and persuade others. Commercial Partner did not want to loose and got another company to make a bid the initial interested party to raise its offer twice access to the technology if it went to a over the course of the process competitor Outcome Value of the initial bid increased by 76% from Got Term Sheet at attractive terms (~2x) other initial offer. The other party came back in during Final offer represented a 70% increase prospects and made party willing to move Exclusivity and made a revised bid. We decided compared to its initial offer, and an improvement towards acquisition vs. continuing on to go with the existing party given the familiarity in many other deal terms commercial relationship and also were able to get major concession during the DA discussions Confidential 7
Allied Advisers ALLIED ADVISERS Why Allied Advisers Hands on senior attention. All buyer calls done by senior bankers – never outsourced to junior bankers We have been operators – engineering, management professional before becoming bankers Support team is former bulge bracket bankers with over a decade plus of work experience Worked at bulge and boutique banks and all types of deals (IPO, FO, Debt, VC Capital Raises, Buyside, Sell-Side – Private and Public) Larger firms focus on >$150M deals; less focus on middle-market growth deals Cross-border expertise – deals closed in Canada, Europe, Israel and several of clients have large or most of their workforce in India Principals grew up in India and familiar with the eco-system and cultural aspects Have partnerships with like minded individuals whom we bring into deals as appropriate § IT services deals – Partner with a former colleague – IIT, Chicago MBA, Goldman Sachs, boutique banks § Semi / communication deals – Partner with a former Deutsche Bank / Piper Jaffray banker on a related deal Confidential 8
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