Electronics Software and Engineering Services Industry Update May 2014

Transcription

1 Electronics Software and Engineering Services Industry Update Mergers & Acquisitions Business Valuation Strategic Consulting

2 Industry News Industry News Apple is in talks to buy Beats Electronics, the high-end, audio headset manufacturer started by Dr. Dre and funded by the Carlyle Group, for $3.2 billion. The Federal Communications Commission is evaluating changes to rules on how to regulate broadband companies like Comcast and Verizon that deliver content on the Internet, in light of vocal concerns from net neutrality advocates. AT&T is in talks to buy DirecTV for $50 billion, allowing it to offer bundled service for TV, phone and Internet. Amazon continues to generate speculation that it has ambitions of developing expertise in the chip industry. Recently, Amazon s Web Services group has been reportedly hiring engineers with expertise in semiconductor design, which may help them develop technology for more efficient data centers. Technology employers Apple, Google, Adobe and Intel reached a tentative $324 million settlement in the class action lawsuit against them regarding anti-competitive agreements for hiring in-demand tech workers. The global semiconductor market posted record sales in 1Q 2014, reaching revenues of $78.5 billion, the industry s highest first quarter total, according to the Semiconductor Industry Association. Notable M&A Activity FireEye acquired npulse for $60 million AnySys acquired Spaceclaim for $85 million Cirrus Logic acquired Wolfson Electronics for $488 million Cadence Design agreed to acquire Jasper Design for $170 million Zebra Technologies agreed to acquire Motorola Solutions Enterprise Business for $3.5 billion Freescale acquired the Communications Processor Division of Mindspeed Microsoft acquired GreenButton, formerly known as InterGrid Capital Markets % Change 1 Week 4 Weeks YTD Semiconductors Index (0.0%) 1.5% 4.3% Defense Electronics Index 1.0% 6.0% 2.2% EDS and Contract Manufacturers Index (0.9%) 2.6% 8.8% Large Cap Software Index 0.0% 2.6% 3.6% Mid/Small Cap Software Index (7.0%) (10.0%) (10.1%) Electronics Equipment Index (0.8%) 7.6% 1.9% EDA & Semiconductor IP Index: (0.2%) (3.2%) (13.0%) S&P 500 (0.1%) 3.5% 1.6% Semiconductors Index: NasdaqGS:INTC, NasdaqGS:QCOM, NasdaqGS:TXN, NasdaqGS:BRCM, ENXTPA:STM Defense Electronics Index: NYSE:LMT, NYSE:BA, NYSE:RTN, NYSE:LLL, NYSE:CW EDS and Contract Manufacturers Index: NasdaqGS:FLEX, NYSE:JBL, TSX:CLS, SEHK:2038, NasdaqGS:SANM Large Cap Software Index: NasdaqGS:CA, NYSE:ORCL, NasdaqGS:ADSK, NasdaqGS:NTAP, NYSE:VMW Mid/Small Cap Software Index: NasdaqGM:GUID, NasdaqGM:BSQR, NYSE:SWI, NYSE:DATA Electronics Equipment Index: NasdaqGS:AAPL, NYSE:GE, NasdaqGS:CSCO, NYSE:SLB, NYSE:DHR EDA & Semiconductor IP Index: NasdaqGS:CEVA, NasdaqGS:SNPS, NasdaqGS:MENT, NasdaqGS:MENT, LSE:ARM Source: Public Filings; Industry Newswires and Capital IQ as of 5/9/14

3 Announced M&A Transactions has acquired has acquired has acquired Completed Completed Completed May 6, 2014 May 1, 2014 April 29, 2014 Notes Notes Notes Seven months after its IPO, FireEye has made another security related acquisition with its deal for Virginiabased npulse. FireEye paid $60 million plus a $10 million earn-out on trailing revenue of $7 million. The deal follows FireEye s recent $1 billion acquisition of Mandiant. npulse offers network forensic capabilities that enable customers to capture, inspect and analyze traffic on the network. Ansys has acquired SpaceClaim, a leading provider of fast and intuitive 3-D modeling software for engineers, for $85 million in cash. SpaceClaim offers a 3-D modeling tool that can be utilized by any engineer during the product development process. This process, called "direct modeling," differs from traditional CAD software, which is used by a relatively small percentage of engineers. Cirrus Logic acquired Wolfson Microelectronics for $488 million. The deal should help minimize Cirrus' reliance on Apple and help both companies combat Qualcomm's growing position in the audio market. Apple consistently accounts for more than 80% of Cirrus' sales each quarter and nearly half of Wolfson's sales last year went to Samsung. Source: Public Filings; Industry Newswires and Capital IQ as of 5/9/14 2

4 Announced M&A Transactions to acquire to acquire has acquired Enterprise Group Communications Processor Division Announced Announced Completed April 21, 2014 April 15, 2014 May 13, 2014 Notes Notes Notes EDA leader Cadence Design has agreed to acquire Jasper Design Automation for $170 million. Jasper provides verification software, which finds bugs in silicon before the expensive fabrication process begins. The acquisition represents Cadence s 3 rd this year and 7 th deal in 24 months. Last year Jasper brought in $28 million in revenue, growing 25% each year. Zebra Technologies, a maker of asset-tracking technologies, has agreed to acquire Motorola Solutions Enterprise Group for $3.5 billion. Zebra will leverage cash on its balance sheet plus raise $3.25 billion in debt to fund the deal. Motorola s enterprise business brings in $2.5 billion in revenue, which will result in Zebra tripling its total revenue with the deal. Freescale Semiconductor has acquired the communications processor division of Mindspeed for an undisclosed sum. Through the acquisition, Freescale will inherit a range of multi-core embedded processors based on ARM cores that support high-end voice-over-ip (VoIP)-enabled gateways to SMB security systems to n. Macom bought Mindspeed last year, and has sold off other pieces of the company. Source: Public Filings; Industry Newswires and Capital IQ as of 5/9/14 3

5 Capital Markets: Overview 60.00% 50.00% 47.3% 40.00% 30.00% 20.00% 10.00% 0.00% % 22.7% 20.0% 20.0% 15.5% 14.1% -3.8% -6.2% % % S&P 500 Index Semiconductors Index Defense Electronics Index EDS and Contract Manufacturers Index Large Cap Software Index Mid/Small Cap Software Index Electronics Equipment Index EDA & Semiconductor IP Index % Change 1 Week 4 Weeks YTD Semiconductors Index (0.0%) 1.5% 4.3% Defense Electronics Index 1.0% 6.0% 2.2% EDS and Contract Manufacturers Index (0.9%) 2.6% 8.8% Large Cap Software Index 0.0% 2.6% 3.6% Mid/Small Cap Software Index (7.0%) (10.0%) (10.1%) Electronics Equipment Index (0.8%) 7.6% 1.9% EDA & Semiconductor IP Index: (0.2%) (3.2%) (13.0%) S&P 500 (0.1%) 3.5% 1.6% Source: Public Filings; Capital IQ as of 5/9/14 4

6 Capital Markets: Stock Performance Last Four Weeks Last 52 Weeks Sanmina Corporation Curtiss-Wright Corporation Apple Inc. STMicroelectronics NV The Boeing Company Lockheed Martin Corporation Cadence Design Systems, Inc Celestica Inc. Oracle Corporation Flextronics International Ltd. General Electric Company Autodesk, Inc. S&P 500 Synopsys, Inc. Schlumberger Limited Cisco Systems, Inc. Texas Instruments Inc. QUALCOMM Incorporated Danaher Corp. Jabil Circuit Inc. Mentor Graphics Corp. Broadcom Corp. Raytheon Co. L-3 Communications Holdings Inc. Intel Corporation CA Technologies BSQUARE Corp. NetApp, Inc. VMware, Inc. ARM Holdings Guidance Software, Inc. SolarWinds, Inc. FIH Mobile Limited CEVA, Inc. (17.4%) (0.9%) (4.9%) (6.0%) (7.6%) (8.0%) (8.1%) (8.2%) 21.7% 15.3% 12.7% 8.4% 7.4% 7.4% 6.5% 5.4% 5.3% 4.8% 3.9% 3.7% 3.5% 3.4% 3.2% 2.5% 1.9% 1.9% 1.7% 1.7% 1.6% 1.4% 0.8% 0.8% 0.5% 0.0% (20%) (10%) 0% 10% 20% 30% 40% Curtiss-Wright Corporation Lockheed Martin Corporation Sanmina Corporation Raytheon Co. Celestica Inc. The Boeing Company L-3 Communications Holdings Inc. Flextronics International Ltd. Schlumberger Limited Apple Inc. Texas Instruments Inc. QUALCOMM Incorporated VMware, Inc. Oracle Corporation Danaher Corp. Autodesk, Inc. FIH Mobile Limited General Electric Company S&P 500 Mentor Graphics Corp. Cadence Design Systems, Inc Cisco Systems, Inc. CA Technologies BSQUARE Corp. Intel Corporation Synopsys, Inc. Guidance Software, Inc. STMicroelectronics NV NetApp, Inc. Jabil Circuit Inc. CEVA, Inc. ARM Holdings SolarWinds, Inc. Broadcom Corp. (3.4%) (5.4%) (9.1%) (10.4%) (17.4%) (18.7%) (18.8%) 62.0% 54.6% 51.2% 41.1% 39.1% 36.7% 32.4% 30.5% 29.3% 23.8% 23.0% 21.3% 20.6% 19.6% 17.9% 16.7% 15.4% 15.0% 12.7% 11.0% 9.1% 8.0% 7.9% 7.3% 5.3% 3.1% 95.5% (50%) (25%) 0% 25% 50% 75% 100% 125% 150% Semiconductors Index Defense Electronics Index EDS and Contract Manufacturers Index Large Cap Software Index Mid/Small Cap Software Index Electronics Equipment Index EDA & Semiconductor IP Index S&P 500 Index Source: Public Filings; Industry Newswires and Capital IQ as of 5/9/14 5

7 Capital Markets: Market Movers Top 3 Overperformers Company Market Close One Week Change Recent News $ % $ % $ % Curtiss Wright reported $0.72 earnings per share for the quarter, beating the analysts consensus estimate of $0.62 by $0.10, AR Network reports. The Company had revenue of $641 million for the quarter, compared to the consensus estimate of $ Cadence reported first quarter 2014 revenue of $379 million, compared to revenue of $354 million reported for the same period in The Company also reported $170 million acquisition of Jasper Design Automation. Oracle continues its fight in U.S. appeals court to reinstate a $1.3 billion jury ruling won by Oracle against SAP for copyright infringement. Top 3 Underperformers Company Market Close One Week Change Recent News $ % $ % $ % CEVA reported first quarter revenue was $13.7 million, an increase of 13% compared to $12.1 million in 1Q First quarter 2014 licensing and related revenue was $7.9 million, representing an increase of 57%. Big demand for Apple's iphone likely helped Foxconn Technology Group's main manufacturing arm increase net profits by 19.5% in this year's first quarter. Solarwinds reported 1 st quarter results including total revenue for the first quarter of $95.9 million, representing 32% year-overyear growth. Source: Public Filings; Capital IQ as of 5/9/14 6

8 Company Liquidity Estimates by Subsector ($ millions) Large Cap Software Index 3x LTM EBITDA $4,698.0 $49,482.0 $1,279.5 $2,915.7 $4,479.0 Less LT Debt 1, , ,500.0 Plus Cash 2, , , , ,788.0 Dry Powder $5,762.0 $42,121.0 $2,386.1 $4,073.2 $5,767.0 Mid/Small Cap Software Index 3x LTM EBITDA -$35.6 -$5.7 $409.4 $46.7 Less LT Debt Plus Cash Dry Powder ($14.4) $7.8 $577.7 $663.2 Electronics Equipment Index 3x LTM EBITDA $173,385.0 $85,149.8 $38,940.0 $37,131.0 $12,707.4 Less LT Debt 16, , , , ,487.0 Plus Cash 18, , , , ,346.5 Dry Powder $175,372.0 ($283,450.3) $27,122.0 $28,394.0 $12,566.9 Source: Public Filings; Capital IQ as of 5/9/14 7

9 Company Liquidity Estimates by Subsector ($ millions) Semiconductors Index 3x LTM EBITDA $61,902.0 $25,932.0 $13,326.0 $3,858.0 $2,451.0 Less LT Debt 13, , , ,133.0 Plus Cash 4, , , , ,744.0 Dry Powder $53,220.0 $32,257.0 $9,239.0 $4,717.0 $3,062.0 EDA & Semiconductor IP Index 3x LTM EBITDA $18.8 $1,077.5 $875.9 $717.1 $1,497.3 Less LT Debt Plus Cash Dry Powder $47.0 $1,873.0 $1,079.6 $776.5 $1,549.4 Source: Public Filings; Capital IQ as of 5/9/14 8

10 Company Liquidity Estimates by Subsector ($ millions) EDS and Contract Manufacturers Index 3x LTM EBITDA $3,140.9 $3,108.4 $620.1 $36.5 $844.1 Less LT Debt 2, , Plus Cash 1, , Dry Powder $2,632.1 $1,947.3 $1,109.3 $2,022.8 $584.4 Defense Electronics Index 3x LTM EBITDA $16,875.0 $24,639.0 $10,245.0 $4,494.0 $1,132.9 Less LT Debt 6, , , , ,009.1 Plus Cash 3, , , Dry Powder $13,987.0 $22,646.0 $8,546.0 $1,078.0 $251.8 Source: Public Filings; Capital IQ as of 5/9/14 9

11 McLean Group Introduction Founded in 1997, The McLean Group is a national, middle market investment bank with deep expertise in a variety of industry verticals. Headquartered in McLean, VA, The McLean Group is among the largest independent middle market investment banks in the region. Our core advisory services include: Mergers & Acquisitions The McLean Group uses its considerable experience and expertise in a wide range of industries to guide its clients through each stage of the M&A process and ultimately identify the most probable and suitable candidates to complete transactions under the most favorable terms. Business Valuation & Litigation Support As a core competency and complement to its M&A business, The McLean Group provides business valuation services, including intangible asset and financial security valuations for a variety of transactions, financial reporting and tax purposes. In addition, the McLean Group has the experience and credentials necessary to support litigation proceedings, including quantifying economic damages and valuing a minority interest in a business. Capital Formation The McLean Group arranges private equity, venture capital, senior debt and subordinated debt to support clients expansions, mergers & acquisitions (M&A), refinancings, recapitalizations, leveraged buyouts, and other shareholder liquidity objectives. Market Intelligence By leveraging superior competitive analysis, The McLean Group provides business executives with comprehensive market intelligence studies incorporating the requisite market insights and analytical expertise to reduce risk and uncertainty in M&A and strategic decision-making. McLean Securities, a wholly-owned affiliate of The McLean Group, is a registered broker/dealer with the Financial Industry Regulatory Authority (FINRA) and a Member, Securities Investor Protection Corporation (SIPC). 10

12 Recent Technology Advisory Experience M&A 11

13 Recent Technology Advisory Experience Valuation Services 12

14 Technology & Telecommunications Team Team Members Joe Golden Principal Brent Lorenz Vice President Vippy Bhambra Director Kathleen Crow Managing Director , ext. 128 Stephen Findlay Managing Director Tom Swanson Managing Director Shari Overstreet Managing Director The McLean Group 7900 Westpark Drive, Suite A320 McLean, VA Main: Fax: