USA
Switzerland
Germany
France
United Kingdom
Canada
Sweden
Brazil
Gaming
Mergers & Acquisitions
Market Update
Tuesday, May 22, 2012
www.corumgroup.com
Introduction
Jim Perkins
Regional Director,
Digital Media Specialist
Corum Group Ltd.
Entertainment software entrepreneur Jim Perkins is directly responsible for publishing some of the industry’s
biggest franchises, including Unreal, Duke Nukem, Wolfenstein, Doom, Hunting Unlimited, and Driver. A wellknown senior executive with a 22-year track record of publishing such bestselling hits, he founded and grew two
highly successful software publishing companies (FormGen and ARUSH) from start-ups to multi-million dollar
enterprises.
Jim also launched Radar Group, the first Transmedia Incubation Company to monetize entertainment
franchises across all media, including film and television. His success and extensive experience in software
production, marketing and public relations, packaging, online and retail distribution and software M&A, uniquely
qualify him as an expert in building value and realizing wealth. Jim joined Corum Group, the world’s leading
software M&A firm, with a specific focus on educating and helping prospective sellers maximize the value of
their digital media companies.
Corum Group Presentation ■ 2
Industry Leadership
Corum Group Presentation ■ 3
Agenda
 Introductions
 Global Tech Market
 Gaming M&A
 Gambling in Gaming
 The Optimal Outcome
 Q&A
Corum Group Presentation ■ 4
The Corum Group
 M&A specialists since 1985 – only software/related tech
 Only work on sell-side, primarily with privately held firms
 Offices globally – 60% of transactions cross border
 Developed the “Optimal Outcome” M&A process
 Employs a team approach - fully offloads clients with 5 experts
 Senior negotiators are former CEOs – selling/results oriented
 Largest educator in the world – builds buyer relations
 Largest proprietary buyer database – provides client advantage
Corum Group Presentation ■ 5
Sold More Firms Than Anyone
Tific is a leading vendor in SaaSbased remote help support
systems.
PlumChoice: USA
Tific: Sweden
inubit AG is the technologically
leading provider for Business
Process Management (BPM)
software.
Bosch: Germany
Inubit: Germany
Instantiations is a leading
vendor in platform specific
development tools.
Edvantage Group’s SaaS-based
learning solutions are used by over
500,000 users across hundreds of
organizations to develop employee
skills and competencies.
Google: USA
Instantiations: USA
Lumesse: United Kingdom
Edvantage Group: Norway
Petrospec is a leader in
geopressure analysis and drilling
engineering SW for hydrocarbon
exploration and production.
Geoservices Group: France
Petrospec: USA
Cintellate works in the areas of
environment, health, safety (EHS)
and risk-related performance.
SAI Global: Australia
Cintellate: Australia
Corum Group Presentation ■ 6
Recent Corum Transactions
Satori Software is a leader in
address management tools with
focus on the postal delivery
space.
Neopost: France
Satori Software: USA
Apex Systems of Singapore is a
leader in the Asia-Pac region
for banking and insurance
solutions.
NTT Data: Japan
Apex Systems: Singapore
has acquired
360 is a recognized player in field
workforce management, with a
SaaS offering.
IFS: Sweden
360 Scheduling: UK
Altitude is a leading provider of
Telecommunication
Management Solutions to
businesses globally.
BBVA / iP: Spain
Altitude: Portugal
The ECM division of Beta Systems
is a recognized leader in output
management for the financial and
postal sectors.
The Nefsis videoconferencing
software and online service was
the first to use cloud computing in
the videoconferencing industry.
BancTec: USA
Beta Systems: Germany
Brother: Japan
Nefsis: USA
Corum Group Presentation ■ 7
Relevant Corum Transactions
Corum Group Presentation ■ 8
Software M&A Activity 2002-2012
Total Deal Volume vs. Total Deal Value
$457b
$432b
$373b
$301b
$226b
4029
4500
$150b
$200b
3640
4000
$83b
3500
$62b
3040
$220b
3696
3015
3008
$250b
3800
3212
3000
2500
2081
1921
2000
1508
1500
1000
500
0
2002
2003
2004
2005
2006
Deal Volume
2007
2008
2009
2010
2011
2012
Dollar Value
Corum Group Presentation ■ 9
10 Reasons Tech M&A Will Remain Strong
1. Extraordinary change – interrelated mega trends
2. Strategic buyers have record cash
3. Debt is at lowest cost ever
4. Private equity - over $500 billion available
5. New public foreign buyers (e.g. China, India)
Corum Group Presentation ■ 10
10 Reasons Tech M&A Will Remain Strong
6. Entrance of new non-tech buyers (e.g. Bosch)
7. Many large private buyers
8. American companies are cheap to foreign investors
9. Most US buyers cash is international (e.g. Skype)
10. Software rising in importance (e.g. HP, IBM)
Corum Group Presentation ■ 11
M&A is the Primary Source of Liquidity
In Dollar Volume (Billions) – All Industries
Corum Group Presentation ■ 12
M&A – Cash Is King
Company
Total Cash Reserves
2007
2012
Total Increase
Amount
Percent
Held Offshore
Amount
Percent
AAPL
$9
$98
$89
989%
$64
65%
MSFT
$6
$59
$53
883%
$50
85%
CSCO
$3
$42
$42
1050%
$41
89%
GOOG
$6
$45
$39
650%
$20
44%
ORCL
$6
$25
$25
417%
$21
68%
INTEL
$9
$15
$6
67%
$7
47%
EMC
$4
$9
$5
125%
$5
56%
All estimates in US$Billions
Corum Group Presentation ■ 13
Gartner Top 10 Strategic Technologies
1. Media tablets & beyond
 Expected iOS/Android will dominate the market with 80% of
tablets shipped by 2015
 Entering the post-PC era – Windows just one of a variety of
environments
2. Mobile-centric applications and interfaces
 More than 70 billion mobile app store downloads by 2014
 50% of tools optimized for app development in 2010 will be
acquired or disappear by 2014
3. Social and contextual user experience
 Context-aware computing uses information about end users or
objects environment to improve interaction
Corum Group Presentation ■ 14
Gartner Top 10 Strategic Technologies
4. Application stores and marketplace


Rise of enterprise app stores that can develop specific apps
Use a managed diversity system approach
5. The Internet of everything


Cameras, sensors, recognition etc. now all part of environment
Privacy issues a concern
6. Next-generation analytics


Mobile devices performing analytics themselves
Analytics to enable and track collaborative decision making
7. Big data


New techniques to handle extreme data
Enterprises just can’t store it all
Corum Group Presentation ■ 15
Gartner Top 10 Strategic Technologies
8. In-memory computing



Most devices will have persistent flash memory
New layer of memory hierarchy
A long-term, disruptive trend on par with Cloud computing
9. Extreme low-energy servers


Server technologies are going to change to handle big data
More smaller, slower, physical servers vs. fewer virtual ones
10. Cloud Computing


Next-gen battleground for Google, Amazon & others
Focus on hybrid private/public cloud apps & improving security
and governance
Corum Group Presentation ■ 16
Top Strategic Acquirers: 2011
33
21
13
13
12
11
11
10
9
9
9
8
8
8
8
8
7
Corum Group Presentation ■ 17
Games M&A History
Source: Digi-Capital
Corum Group Presentation ■ 18
Games Trends
 Acceleration of M&A − Slowing
of Gaming IPOs
 Franchise Blockbusters −
Max Payne, Bioshock, GTA
 Smartphone and Tablet
Gaming – highest global
growth
 Social Game monetization/
profitability shake out
 Voice Recognition emergence
Corum Group Presentation ■ 19
Games M&A
 2011 M&A – $3.4B - up 160%
 113 Transactions – up 88%
 Average Transaction - $30M – up 38%
 Social Games dominated
- 45% of M&A value
- will continue into 2012
 MMO M&A value – 30% of deals
 Social-mobile is next!
 Too late for the console giants?
Source: Digi-Capital
Corum Group Presentation ■ 20
Games M&A – Asia
 GREE (J) – OpenFeint, Funzio
Social Mobile - US
 WeMade (SK) – 3 recent acquisitions
Social Game Studios – SK
 NEXON (SK) - 4 recent acquisitions
Social Games Studios - SK
 NEOWIZ (SK)– very active in 2011
Online and Mobile Studios – J&SK
Corum Group Presentation ■ 21
Online Games Market
 Client MMO – Blizzard
 Social Casual Web – Tencent, Zynga
 Casual Mobile – Apple, Google
 Social Mobile – DeNA, Gree
 Browser MMO - Bigpoint
 Cloud Gaming – Onlive
What does it all mean?
Corum Group Presentation ■ 22
Games Consolidation Mania
 Competitive Consolidation
 Complimentary Consolidation
 Media – Disney, IGT, Viacom
 Asia – Tencent, Perfect World, Nexon
 Console – EA, T2, ZeniMax
 Online/Mobile – Zynga, Rovio, Unity
Corum Group Presentation ■ 23
Gambling and Games
 Worldwide Focus
 Legalized Gambling
 US, China
 Content Differentiation
 The Casino Floor vs. Online
 Mobile Gambling
 Customer Loyalty
Corum Group Presentation ■ 24
8 Required Stages in M&A Process
Preparation
1
2
Research
3
Closing
Negotiation
Contact
4
Discovery
5
6
Due Diligence
7
8
Integration
Corum Group Presentation ■ 25
Optimal Process – 8 Stages Will Yield
20 to 300
Global Buyer Candidates (depends on your size)
700 to 1,000
Communications of Various Kinds
10 to 30
Expressions of Interest
5 to 15
NDAs
3 to 8
Qualified Parties
1 to 3+
Offers
Typically 6 contacts to
get to first discussion
29 contacts to get to
meaningful dialogue
Corum Group Presentation ■ 26
Tech M&A: Value Destroyers
Improperly handled M&A process problems:






Confidentiality issues externally
Internal confidentiality problems
Theft of technology
Loss of staff (non-solicitation)
Wear on management
Business drop-off due to lack of focus
Corum Group Presentation ■ 27
10 Biggest Deal Killers
1. Dealing with only one buyer
No leverage in negotiation
2. Misalignment
Shareholders & management & employees
3. Contact at wrong level, with the wrong person
Not knowing the buyer well enough
4. Improper research of potential buyers
“A,” “B,” financial, international, strategic
5. Not understanding the buyer’s process & models
Timeline, decision-makers
Corum Group Presentation ■ 28
10 Biggest Deal Killers
6. Unable to portray value properly
Credibility in valuation is imperative
7. Improper due diligence preparation
Affects credibility, prolongs process
8. Not qualifying buyer properly
Ability to pay, interest, etc.
9. Not orchestrating all buyers properly
This is the tough part!
10. Ego / Greed / Arrogance
You need experience during negotiations
Corum Group Presentation ■ 29
What is Optimal Outcome?






Valuation Maximization
Creating the Best Transaction Structure
Minimizing Personal Liability/Risk
Reducing Tax Liability and Holdbacks
Structuring Ideal Employment/Non-competes
Providing for Proper Integration
Corum Group Presentation ■ 30
The Benefits of a Professional Process





Model – The preparation process will help forge a better
business model for your firm
Research – Your strategic position will improve from the
research/positioning process
Market Feedback – Buyer contact will provide invaluable
data/insights to help improve your value
Relationships – Not everyone is a buyer, but you open
many doors which will yield business
Exit – The merger, asset sale or financial recapitalization
of your company
Corum Group Presentation ■ 31
10 Things to Look for in an M&A Advisor
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Are they centered on your industry – games/software
Is there focus - sellside transaction experience
Are they conflicted with buyers, consulting, opinions, etc.
Do they have senior staff involved - no juniors allowed!
Is there a team assigned; this is not a one-man effort
Are they international - the buyers are
Do they have proprietary industry research/contacts
Are they a respected group in their field
Do they have a detailed global search process
Is there a track record of success
www.corumgroup.com
Corum Group Presentation ■ 32
M&A Summary
 Games M&A – record activity and growth
 Social-Mobile M&A – next big thing!
 Competitive and Complimentary Consolidation
 Gambling in Games – worldwide phenomena
 Worldwide Buyers
 Professional Preparation is key to Optimal Outcome
Corum Group Presentation ■ 33
M&A Is About Changing Your Life
What’s your dream?
Corum Group Presentation ■ 34