Go4Venture Advisers European Venture & Growth Equity Market Monthly Bulletin | November 2014 Technology / Media / Telecoms / Internet / Healthcare / Cleantech / Materials About Go4Venture Advisers Providing innovative, fast-growing companies and their investors with independent corporate finance advice to help them evaluate, develop and execute growth strategies www.go4venture.com Equity Capital Markets (ECM) Mergers & Acquisitions (M&A) Equity private placements Growth equity financings and secondaries Pre-IPO advisory Sellside Buyside / Buy and build Valuation services Visit www.go4venture.com/Bulletin to read past Bulletins Go4Venture Advisers LLP is authorised and regulated theofFinancial Conduct Authority Published by Go4Venture Research, the Equity Researchbyunit Go4Venture Advisers LLP (FCA) Go4Venture Advisers LLP is authorised and regulated by the Financial Conduct Authority (FCA) © Go4Venture Advisers 2014 November 2014 Contents This Month in Brief 2 Investments 1.1 - Headline Transaction Index (HTI) 5 1.2 - Large Transactions Summary 6 1.3 - Large Transactions Profiles 7 M&A Transactions 2.1 - M&A Activity Index 22 2.2 - Top 5 Global TMT M&A Transactions Summary 23 2.3 - Headline European VC & PE-Backed M&A Transactions Summary 24 2.4 - Headline European VC & PE-Backed M&A Transaction Profiles 25 List of Acronyms 31 About this Bulletin The Go4Venture Advisers’ European Venture & Growth Equity Market Monthly Bulletin provides a summary of corporate finance activity among emerging European TMT companies: Investments, i.e. Venture Capital (VC) and Private Equity (PE) financings, including growth equity, financing rounds with single secondaries components (recapitalisations); and M&A Transactions where the sellers are VC and PE-backed European companies, including all majority transactions with no new investment going into the business (e.g. acquisitions, Management Buyouts (MBOs) and other buyouts). Investment activity is measured using Go4Venture’s European Tech Headline Transaction Index (HTI), which is based on the number and value of transactions reported in professional publications. M&A activity is measured using data from a combination of external sources, primarily Capital IQ, with complementary reporting from 451 Group, PitchBook and VentureSource. Europe is defined as Western, Central and Eastern Europe, excluding Israel. For more details, please refer to the Methodology Note available on our website. Please note that no part of the Bulletin can be reproduced unless content is duly attributed to Go4Venture and the details of republishing are notified to g4vBulletin@go4venture.com. © Go4Venture Advisers 2014 Page 1 November 2014 This Month in Brief Dear Clients and Friends, Welcome to the latest edition of the Go4Venture Monthly European Venture & Growth Equity Market Bulletin, featuring our proprietary Headline Transaction Index (HTI) of investment activity, as well as a quick summary of VC & PE-backed TMT M&A exits of $50 million or more. Higher and Higher Merry Christmas everyone! In the world of growth equity and venture capital, November is typically a busy month as transactions are wrapped up ahead of the Christmas season. This year was no exception, with November ending up some 20% ahead of last year (by both volume and value), and year-to-date figures showing a near 40% value increase and some 20% volume contraction. M&A activity was equally sustained. Investments We are getting to a new phase where everybody understands these are frothy market conditions. Even The Economist took notice: when general business publications pick up the hint, this is as mainstream as it gets. In the ‘up-the-ante’ part of the cycle, we are starting to see silly rounds, for silly reasons, with silly numbers, and of course everybody jumping on the bandwagon: Silly numbers – Uber raised another $1.2bn, at a $40bn valuation, following the previous $1.2bn of six months ago which valued the company at half the price ($17bn). Doubling value in less than six months establishes a new (and, in our view, dubious) record. Remember that, at the time of the previous round, the small print revealed a preference guaranteeing new investors a 25% annual return – making the $17bn already rather meaningless. This time, Uber refused to disclose who the investors were (though it is known Baidu has since added to the round, and a special mention to Goldman Sachs for peddling a debt portion to its private clients), which is highly unusual and adds to its status as a “singular company”. All this in an atmosphere of adoration reminiscent of 1999, when one felt rather stupid to doubt the lasting value of the “New Economy” (it tanked a year later – even if, in the long run, it indeed changed the world as we knew it). © Go4Venture Advisers 2014 Page 2 November 2014 Silly reasons – another example of froth is Stripe’s latest $70mn financing (at double the valuation of January 2014) just to “err on the side of being really well-capitalised”. Of course, if a company and its shareholders can get away with capitalising senselessly, they should do it. But it still is not a great rationale from a capital efficiency standpoint: assuming a likely market correction, what will the exit be for the new investors other than an exit at a loss? Jumping on the bandwagon – again, in a movie we have already seen in the late 1990s, Deloitte announced a £25mn (€30mn) fund to finance its own employees’ startups in order to keep its young talented employees, who have been increasingly leaving the firm to start up their own businesses. What is different this time round, though, is that everybody knows about the impending market correction. However, common wisdom is that when the burst comes, whenever it happens (we say around mid-2015), it won’t be that bad. The rationale? Public markets are overvalued, but not by as much as in 2000 (tech is only on a 23x forward-looking P/E, rather than 100x). In private markets, valuations may be crazy but at least businesses are real, i.e. with actual revenues, profits and scale. And many (just like Uber) are marketplaces which are disrupting ‘brick-and-mortar’ competitors and are inherently more profitable, with wonderful digital scalability. And past purchases like Facebook buying Instagram for $1bn in 2012 now seem, with hindsight, not that expensive (Instagram has since passed 300mn users, is doubling every year and its (photo) ads sell for 20x that of its parent). The more this cycle to price absurdity continues, the less we are certain that the contraction will not be as dramatic as in 2001. Although the over-valuation doesn’t seem as bad as last time, and more contained to (certain parts of) tech, one of the drivers is excess liquidity in the economy driven by quantitative easing policies, suggesting that all markets are probably overpriced. And this is in the context of an awful macro environment, dramatic geopolitical conditions and general indebtedness. For a rehearsal of how dramatic market changes can be, we only have to look at the sudden fall in oil prices – in short, a market correction could easily turn into a rout encouraged by systemic weaknesses. And if we roll back five years (to 2008-09), we know that a 30-40% market correction feels like a trip to the abyss. On the plus side, the general optimism is spreading investment beyond just internet and latestage, which have been the two constants of the past five years, and is clearly bringing private equity funds into the realm of growth investing. If we look at November: Internet is of course very present, with niche e-commerce and fintech plays well represented (three each of our of fourteen Large HTI investments – defined as financings of £5mn / €7.5mn / $10mn or more), but we also see three medtech investments and a variety of transactions in enterprise software, telecom software and cleantech. Of the fourteen Large HTI investments, nearly half are led by pre-IPO or private equity investors, even if most are Series C or late-stage situations. It is difficult to predict whether these positive developments will survive a market adjustment. One of the reasons for optimism is that the root cause of the malaise is indebtedness. Only growth will allow value creation, which will hopefully create a lasting environment where growth stories (including venture) are seen as the way forward rather than an evil to avoid. © Go4Venture Advisers 2014 Page 3 November 2014 Exits November exits were of the ‘grown-up’ type, i.e. mostly for private equity or growth funds rather than VCs. As is common with private equity investors (which tend to be more opportunistic rather than sticking to a theme), the companies concerned represented a variety of business models and sectors – including ERP, testing software, content and tech-enabled services. In two cases (out of five), the buyer was a private equity fund intent on using their financial muscle to grow the businesses away from the scrutiny of public markets. Although still fairly rare, take-privates are becoming more common, as private equity players are prepared to offer a premium to take control of solid growth companies. Even if it is not the case here, increasingly (junior) public markets are used (and abused in some cases) to fund fairly early-stage companies thanks to the tax incentives offered (e.g. AIM tax rules in London). Expect to see the better small public companies get picked up by private equity funds more often, once these companies get stuck for one reason or another. The one venture exit was Definiens, a company started in 1994 with a long history of VC investment (initially from 3i and TVM Capital). Based on rather deep IP (from a Nobel Prize winning professor) around image recognition technology, the company found it difficult to find its market fit, initially pursuing both the medical diagnostic and satellite image analysis segments, before settling for the healthcare segment only. More recently, the company went one step further – rather than selling oncology picture analysis tools, it branched out into a more applicative use of its technology, providing a whole solution linking tissue sample analysis to patient outcomes. In the end, it was acquired by AstraZeneca, with the specific purpose of using its technology to improve the use of combination therapies based on a personalised healthcare approach. A classic tale of a platform technology which can only be monetised through one application expression. We will be back in January 2015 – wishing all our readers a Happy Festive Season! Enjoy the reading. Please direct any questions or comments to g4vBulletin@go4venture.com. If you do not wish to receive future HTI updates from us, please send an email with the title "unsubscribe" to g4vBulletin@go4venture.com. The Go4Venture Team Where to Meet the Go4Venture www.go4venture.com/contact Advisers Team in January 2015 – see January 5 - London, UK – Fig-2 Launch at the ICA, supported by Outset January 20 – London, UK – Oxford Capital Annual Drinks Reception For more details about the Headline Transactions Index (HTI), please visit our website. © Go4Venture Advisers 2014 Page 4 November 2014 1.1 Headline Transaction Index (HTI) Go4Venture HTI Index by Deal Value 2011 2012 2013 2014 Value of Transactions per Month (€mn) 1,000 900 Includes Rocket Internet (€768mn) 800 700 600 500 400 300 200 100 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Go4Venture Advisers HTI Database Go4Venture HTI Index by Cumulative Deal Value Cumulative Value of Transactions (€mn) 2011 2012 2013 2014 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2013 2014 Var. 115 154 34% Source: Go4Venture Advisers HTI Database November Large Transactions # €mn Other Transactions All Headline Transactions 2013 2014 Var. 6 14 133% 272 331 22% # 24 21 (13%) €mn 60 69 15% # 30 35 17% 332 400 20% 3 6 100% 239 215 (10%) €mn Of Which: Landmark Transactions Year-to-Date Large Transactions # €mn Other Transactions All Headline Transactions 2,745 4,248 55% # 317 203 (36%) €mn 847 651 (23%) # 432 357 (17%) 3,591 4,899 36% €mn Of Which: # €mn Landmark Transactions # €mn 33 51 55% 1,806 3,710 105% Definitions Large Transactions: > £5mn / €7.5mn / $10mn Other Transactions: < £5mn / €7.5mn / $10mn Landmark Transactions: subset of Large Transactions > €20mn / £13mn / $27mn © Go4Venture Advisers 2014 Page 5 November 2014 1.2 Large Transactions Summary (>£5mn / €7.5mn / $10mn) Ranked by Round Size (€mn, including estimates) in Descending Order, then Alphabetically Sector Round €mn Description Investors Powa Technologies (UK) www.powa.com Internet Services C 64.2 Provider of POS systems, mobile payments and ecommerce solutions Wellington Management 2 Prezi (Hungary / US) www.prezi.com Software C 45.7 Provider of SaaS presentation software Accel Partners, Spectrum Equity 3 Quanta Fluid Solutions (UK) www.quantafs.com Medtech B 35.3 Developer of a compact haemodialysis system for home and clinical self-care dialysis ALIAD Ventures, b-to-v Partners, IMI, NBGI Ventures, Seroba Kernal, Seventure Partners, Wellington Partners 4 Finsecur (France) www.finsecur.com Hardware Late Stage 25.0 Manufacturer of fire safety and fire detection products Bpifrance, Edmond de Rothschild Investment Partners 5 Meninvest (France) www.meninvest.com Internet Services C 23.2 E-tailer of mens’ apparel, shoes and accessories 123Venture, bpifrance, Idinvest Partners, Orkos Capital, Partech Ventures 6 Trustly (Sweden) www.trustly.com Internet Services B 23.0 Operator of a payments platform Bridgepoint Development Capital 7 LeanWorks (UK) www.yplanapp.com Software B 19.2 Developer of an app for event booking General Catalyst, Nokia Growth Partners, Octopus Investments, Wellington Partners 8 Finexkap (France) www.finexkap.com Internet Services A 18.2 Online invoice factoring for SMEs Finsight Ventures, GLI Finance 9 Fyndiq (Sweden) www.fyndiq.se Internet Services A 16.0 Operator of an online marketplace for retailers to sell excess inventory and slow-moving stock Industrifonden, Northzone 10 Intersec (France) www.intersec.com Software B 16.0 Developer of ‘big data’ software allowing MNOs to optimise their business, offer LBS and monitise user data CM-CIC Capital Innovation, Highland Capital Partners, Innovacom 11 Curetis (Germany) www.curetis.com Medtech B 14.5 Developer of molecular diagnostic technologies Aeris Capital, BioMed Partners, CD Venture, Forbion Capital, HBM Partners, Life Sciences Partners, Qiagen, Roche Venture Fund 12 Genomics (UK) www.genomicsltd.com Medtech B 13.0 A developer of computational and statistical methods to look for the genetic causes of disease Invesco Perpetual, IP Group, Lansdowne Partners, University of Oxford, Woodford Investment Management, Wylie Family Trust 13 i2O Water (UK) www.i2owater.com Cleantech C 10.1 Developer of technology to reduce leakage from water distribution pipes Naxos Capital, Nemadi Advisors, Ombu 14 Melijoe (France) www.melijoe.com Internet Services B 9.0 E-tailer of designer children’s apparel Gimv, CM-CIC Capital # Company 1 Source: Go4Venture Advisers HTI Database Key Bold indicates lead investor(s) © Go4Venture Advisers 2014 Page 6 November 2014 Powa Technologies UK | www.powa.com # Sector Round €mn Description Investors 1 Internet Services C 64.2 Provider of POS systems, mobile payments and e-commerce solutions Wellington Management Powa Technologies (UK), a provider of Point of Sale (POS) systems, mobile payments and e-commerce solutions, raised $80.0mn (€64.2mn) in a Series C round from Wellington Management. The money will be used to attract merchants to its e-commerce platform. We last saw Powa in August 2013 with a €57mn first institutional round from Wellington Management. The money was intended for the launch of the company’s smartphone purchasing and payments app PowaTag, as well as for the hire of just under 500 new employees. At the time, Powa said that it intended to IPO sometime in the next 12-18 months. Since that time, Powa has pursued a strategy of horizontal integration and now supplies a complete range of ecommerce and payments services. These include PowaTag (a smartphone app which allows consumers to make purchases by scanning QR codes, taking pictures of products or through single clicks on e-tailers’ electronic catalogues), PowaPOS (a tablet-based POS system with capacity to accept payments from striped, chip-and-PIN and smart cards) and PowaWeb (a SaaS platform for operating an online store, which includes Search Engine Optimisation (SEO) and digital marketing). The firm also collects purchase data, which enables it to provide analytics to its customers. The most recent development in this horizontal integration story was the acquisition of Hong Kong based mobile payments company MPayMe in June 2014, which gave Powa access to tens of millions of consumers worldwide. This all-share deal valued MPayMe at $75mn (a 2.5x revenue multiple). Over the past three years we have seen a number of e-commerce, mobile payments and POS platform investments. Examples include iZettle in May 2014 and Paymill in January 2013. There are also numerous examples of venturebacked companies in this space outside of Europe – such as Texan e-commerce platform company Bigcommerce, Canadian e-commerce platform provider Shopify, and West Coast POS and payments company Square. A number of blue-chip firms also compete in this space – Apple Pay, Google Wallet and PayPal. Powa is unusual in that it provides the complete range of services. This is partly a consequence of Powa’s ‘merchant first’ strategy. From the beginning, Powa focused on catering to the needs of merchants (particularly large, blue-chip merchants) rather than those of consumers. Although Powa makes its money through charging a commission on each sale made – the greater of either 10bps or ¢40 – the company’s approach is to increase transaction volume by attracting more merchants rather than more customers. Being able to act as a one-stop-shop significantly increases the attractiveness of Powa for merchants. For the same reason, we may expect to see an expansion in the customer analytics and ‘big data’ services that Powa can provide. To date, Powa has signed up 970 merchants and claims to be signing up around 150 a month. Existing clients include Adidas, Carrefour, Nicole Miller and Unilever. According to CEO Dan Wagner, the firm anticipates revenues of “hundreds of millions of dollars next year and into the billions within two more years”. Investors Thanks to the success of his previous ventures, Powa CEO Dan Wagner was able to finance his firm’s initial development out of his own pocket, from the company’s beginnings in 2007 until its first institutional round in August last year. As a result, Mr. Wagner still owns 70% of the company. This also explains the size of what is, technically, still only a Series B round. Powa was already relatively mature at the time of its first institutional investment. Including a previously undisclosed $21mn (€17mn) extension of its Series A round, this transaction brings total investment by Wellington Management (AUM €729bn) to about $177mn (€145mn). Whereas last year’s Series A round valued Powa at around $400mn (€327mn), Powa’s acquisition of MPayMe over the summer required 3% of the Powa’s stock and valued the firm at $2.5bn (€2.0bn). This acquisition, which demonstrates Powa’s belief in mobile shopping, will significantly increase its customer base with Pitney Bowes (which currently facilitates 80% of utility bills in the US and more than half in Europe) and expand its services to food and ticketing. This round is believed to value the company at around $2.7bn (€2.2bn). With continued support from Wellington, there is no particular urgency for Powa to list on a public market and Powa has now said that it envisions an IPO sometime in 2016. This is only the latest in a series of pre-IPO investments by hedge funds and fund managers, which traditionally invest in public companies post-IPO. Examples include BlackRock, Fidelity Investments and Tiger Global Management, which have backed companies such as Airbnb and Uber. © Go4Venture Advisers 2014 Page 7 November 2014 Prezi Hungary / US | www.prezi.com # Sector Round €mn Description Investors 2 Software C 45.7 Provider of SaaS presentation software Accel Partners, Spectrum Equity Prezi (Hungary / US), a provider of SaaS presentation software, raised $57.0mn (€45.7mn) in a Series C round led by Spectrum Equity with support from existing investor Accel Partners. The money will be used for marketing. It is now a quarter of a century since Microsoft released its now ubiquitous PowerPoint presentation software. The ‘multimedia content’ has become whizzier and the ability to use pre-prepared templates has spawned an entire cottage industry; but the latest version of PowerPoint would be entirely recognisable to Dennis Austin and Thomas Rudkin – the pair who created PowerPoint at their company Forethought before selling to Microsoft for $14mn (€11.4mn) in 1987. Despite this, until recently PowerPoint still held 95% of the market. The migration of enterprise software from the desktop to the cloud has produced new market entrants – both VC-backed firms like emaze (backed by FirstTime Venture Capital; €2.3mn raised to date) and SlideRocket (backed by Azure Capital Partners; €5.7mn raised to date), as well as offerings from major players such as Apple’s Keynote and Google’s Slides. Built for the web from the start, these products have a natural advantage when it comes to collaborating on presentations or enforcing version control. HTML5 has also made it easier for new products to achieve platform independence – working on tablets as well as PCs. Arguably, however, Microsoft has already taken presentations into the SaaS era with Office 365. New products have begun to chip away at PowerPoint’s market share, but Microsoft still has 90% of the market. Prezi aims to change this. Set up in 2008 by computer science academic Peter Halácsy and artist and designer Ádám Somlai-Fischer, Prezi was initially conceived as a service business creating presentations for clients using software that the two had developed. It wasn’t until they were joined by their third co-founder – Swedish serial entrepreneur Peter Arvai (whose previous experience included developing mobile newsreaders and hospital performance data aggregator Omvard) – that the firm reinvented itself as a much more scalable (and investable) SaaS business. Prezi distinguishes itself by ditching PowerPoint’s sequential slide model, in favour of a large canvas on which all content resides. Users can zoom in and out – alternating between the big picture and the detail. When Prezi first pitched this approach at The Next Web conference in Amsterdam in early summer 2009, it was largely ignored; at least until other startups started using Prezi for their pitches in what must be one of the most convincing demonstrations of market traction ever. Shortly afterwards Sunstone Capital provided a €1.5mn Series A round. Determined not to make the same mistake he made with his first two companies, Prezi’s CEO Arvai decided to open a US office to avoid being overtaken by an American competitor in this key market. Developers are not cheap in Budapest (salaries are relatively low but payroll taxes are high) but they are cheaper than in San Francisco. The company now employs 70 people on the West Coast, and 180 in Budapest. Prezi continues to show market traction, doubling its user base to 50mn over the last year and attracting 55,000 new users a day. Its software is used at IBM, Lufthansa and Salesforce. However, it still remains to be seen whether Prezi and its competitors are anything more than PowerPoint in a SaaS wrapper. So which, if any, of the new SaaS presentation software providers will steal Microsoft’s crown? Prezi shows promise. To date, the firm has grown entirely by word of mouth. In fact, not only has money not been spent on marketing but, despite its venture-backing, the firm has prided itself on living within its revenues – buying chairs one at a time when it first opened a US office and (reputedly) refusing to touch a penny of the $15mn (€12mn) it had previously raised. This means that at least a significant portion of its user base have decided that it is worth paying the monthly subscription necessary to keep their presentations private or, with the professional subscription, to use Prezi offline. Even though it is reputedly easier to use, Prezi does not yet have a completely unique feature such as SlideRocket’s embedded audience analytics which measure who viewed which slides. Investors Founded in 1994, transaction leader Spectrum Equity (€818mn (2014); AUM €3.8bn) is a growth equity investor operating from offices in Boston and San Francisco. The firm has always focused on the information industry and targets investments of between €20mn and €82mn. A number of the firm’s portfolio companies, most notably Ancestry.com, online learning company Lynda.com and SurveyMonkey also have subscription-based business models. Well known stage-agnostic technology investor Accel Partners (€388mn (2014); AUM €7.8bn) led Prezi’s $14mn (€11.4mn) Series B round in December 2011 – much earlier in the evolution of software from desktop to cloud. As SaaS and cloud-services form one of Accel’s four target sectors, the firm has significant expertise with this business model. Its previous well known investments in this area include BitTorrent, DocuSign, DropBox and Qlikview. © Go4Venture Advisers 2014 Page 8 November 2014 Quanta Fluid Solutions UK | www.quantafs.com # Sector Round €mn Description Investors 3 Medtech B 35.3 Developer of a compact haemodialysis system for home and clinical self-care dialysis ALIAD Ventures, b-to-v Partners, IMI, NBGI Ventures, Seroba Kernal, Seventure Partners, Wellington Partners Quanta Fluid Solutions (UK), developer of a compact haemodialysis system for home and clinical self-care dialysis, raised $44.0mn (€35.3mn) in a Series B round led by new investor ALIAD Ventures, with support from new investor Seventure Partners and existing investors b-to-v Partners, IMI, NBGI Ventures, Seroba Kernal and Wellington Partners. The money will be used to support the clinical introduction and commercial launch of the firm’s new device SC+. Fresnius Health Care Group estimates that of the approximately 2.5 million patients receiving regular dialysis treatment in 2013, about 89% were treated with haemodialysis (as opposed to peritoneal dialysis). The majority were treated in hospitals or specialised dialysis centres requiring them to attend clinics for four hours, three times a week. According to MarketsandMarkets, the global dialysis products and services market was worth $61.6bn (€49.4bn) in 2013 and is expected to reach $83.2bn (€66.7bn) by 2018 (a 6.2% CAGR). Quanta Fluid Solutions is targeting this market by launching a compact haemodialysis device called SC+ (standing for SelfCare+), suitable for home use and travels. The key feature of SC+ is its small size. This is achieved by replacing the in-built cleaning equipment of traditional dialysis machines with disposable cartridges, which along with other key components of the device are protected by 22 patent filings. The machine’s portability is complemented by a touch screen user interface to increase ease-of-use by patients. Home or primary care dialysis will enable patients to have more frequent and/or longer treatment sessions, which will improve clinical outcomes and provide them with greater control over their treatment. The company expects to get the CE mark approval from UK regulators by the end of this year, and will then supply the machine free-of-charge for trials at several NHS centres. After this soft launch in the UK, the company plans to have a more extensive launch in selected European markets. In parallel, it is seeking regulatory approval in the US, where it expects to have the necessary clearances by 2017. Investors Making its first appearance in our Bulletin, Quanta Fluid Solutions was spun out from British Engineering firm IMI in 2008. In 2009, it raised $15mn (€11mn) in Series A funding and this round brings total investment to just under $60mn (€50mn). In addition to the recent funding, there have been some major changes in the senior leadership of the company in the past 12 months. John Milad, ex-investment partner at NBGI Ventures who formerly served as a Non-Executive Director to Quanta for four years, was appointed as CEO in January 2014. In August 2014, the firm appointed a new CFO (Willem Baralt) to help with the transition to commercial operations. These management changes suggest that the organisation may be preparing for an IPO in the next few years. Indeed the CEO has hinted at this in a recent interview, where he mentioned that the firm would be looking for a cash injection in 12 to 18 months from the public markets to fund expansion beyond the UK. ALIAD Ventures is the VC arm of French engineering firm Air Liquide. The group works in collaboration with the organisation’s innovation lab / think tank (i-Lab), to identify and gain rapid preferred access to key technologies developed outside the group. ALIAD typically invests in the digital technologies, electronics, energy transition, healthcare, information technologies and natural resources management sectors. The other new investor is Francebased VC firm Seventure Partners (€134mn (2014); AUM €612mn), which typically invests in communication and information technologies, as well as life sciences companies. Among the existing investors, Wellington Partners (€70mn (2013); AUM €676mn) is a Germany-headquartered VC firm primarily investing in life sciences and technology companies. Wellington Partners also recently co-invested with another Quanta investor b-to-v Partners (€30.9mn (2012); AUM €57.3mn) (a Swiss VC firm) in Ayoxxa Biosystems, a developer of technology for conducting multiplex protein analysis, which we profiled in our July 2014 Bulletin. Part of the larger NBGI Private Equity group, NBGI Ventures (€71.4mn (2007); AUM €918mn) is a London-based VC firm focused on medical technology. Seroba Kernel (€78.6mn (2009); AUM €102mn) is a Dublin-based VC firm targeting life sciences companies in Ireland, the UK and Western Europe. A FTSE 100 listed company, IMI (LSE:IMI) has been going through a major restructuring process over the past decade, disposing of various non-core businesses. In October 2013, it sold its beverage dispensing and merchandising division to Berkshire Hathaway for $1.1bn (€807mn), to focus on its industrial flow-control products and systems business. © Go4Venture Advisers 2014 Page 9 November 2014 Finsecur France | www.finsecur.com # Sector Round €mn Description Investors 4 Hardware Late Stage 25.0 Manufacturer of fire safety and fire detection products bpifrance, Edmond de Rothschild Investment Partners Finsecur (France), a manufacturer of fire safety and fire detection products, raised €25.0mn in a Series A round led by Edmond de Rothschild Investment Partners with support from bpifrance. Since being founded in 1998, Finsecur has gradually pursued a policy of vertical integration. As a result, the firm can now supply the entire value chain for fire safety equipment – starting with the initial design and specification, through manufacture and installation and ending with ongoing maintenance. Since 2010, this integration has been supported by an M&A programme which has also expanded the firm’s product range. Finsecur bought smoke removal specialist SIM-Sécurité Incendie Montage in 2011, and installation and maintenance firms GSP Sphynx Protecvol and Guardian Alarm in 2013. This acquisition programme also helped jump start Finsecur’s international expansion, which started at roughly the same. Specifically, the firm bought British optical smoke detector manufacturer TheFireBeam in 2011 and Spanish fire alarm manufacturer Detnov in 2014. The firm was set up by researchers from the ESPCI (École Supérieure de Physique et de Chimie Industrielles de la ville de Paris), including ESPCI Honorary Scientific Director Jacques Lewiner, together with serial entrepreneur Christophe Bonazzi. Not only is ESPCI one of France’s foremost schools of engineering, but it also has a very good reputation for research – with former staff including Nobel laureates Marie Curie and Pierre-Gilles de Gennes. Finsecur has maintained this emphasis on R&D throughout its history, dedicating roughly 10% of turnover to R&D and filing over 120 patents. Unusually for a manufacturer of hardware, the firm has also developed a range of complementary software. Most recently, Finsecur’s R&D programme has enabled it to develop radio-linked fire detection systems which are currently undergoing certification. The firm maintains offices in Belgium, Spain and the UK, and a factory in Nanterre West of Paris. The local government has been strongly supportive of the firm, particularly when it came to facilitating the relocation of SIM-Sécurité’s manufacturing to Nanterre. The firm markets its products through many different channels including specialised distributors, electricians, installers and civil engineering firms. Finsecur’s products are also white-labelled for OEMs. Selling both B2B and B2C, over the past decade Finsecur has achieved a revenue CAGR of around 26% and anticipates 2014 turnover in excess of €45mn. While the firm now aims to generate a third of its revenues from overseas, domestic growth is currently being driven by recent regulatory changes in France. Specifically, Finsecur is authorised to dismantle a particular type of fire sensor as mandated by a decree of November 2011. Also, as of March 2015, a new law (ALUR) will require all property owners to install autonomous smoke detectors and alarms ("DAAF"), a segment where Finsecur is active via its GSB LifeBox brand. Investors The transaction was led by Edmond de Rothschild Investment Partners (€317mn (2014); AUM €5.7bn) – the Parisbased private equity and VC arm of La Compagnie Financière Edmond de Rothschild Banque which was set up in 2002. Although it is both stage and sector agnostic, Edmond de Rothschild’s has a strong preference for Europe. In principle, the firm will consider almost any deal structure including venture capital, mezzanine and bridge finance, PIPEs and preIPO investment, public-to-private, as well as a variety of buyouts and buyins. Edmond de Rothschild’s has a very broad preferred ticket size – €1mn to €20mn for companies with revenues of €5mn to €300mn and enterprise values ranging from €10mn to €40mn. Its time horizon, however, is a conventional three to five years. While the firm will not take a controlling stake, it usually seeks a board position in its portfolio companies. As readers will remember, bpifrance (€327mn (2011); AUM €1.1bn) was formed in 2013 from a combination of existing French institutions – CDC Entreprises (the PE subsidiary of Caisse des Dépôts), the FSI (investing in fund-of-funds and direct investments), FSN-PME (backing startups) and OSEO (a state-backed bank which lends to SMEs). Also stage and sector agnostic, bpifrance invests only in French companies. It made this investment through its ETI 2020 fund. This is a €3bn fund set up late in 2013 to provide long-term support for medium-sized French companies seeking to grow and expand internationally. The fund invests in deals of not less than €10mn, but again will not take a controlling stake. © Go4Venture Advisers 2014 Page 10 November 2014 MenInvest France | www.meninvest.com # Sector Round €mn Description Investors 5 Internet Services C 23.2 E-tailer of mens’ apparel, shoes and accessories 123Venture, bpifrance, Idinvest Partners, Orkos Capital, Partech Ventures MenInvest (France), an e-tailer of male apparel, shoes and accessories operating under a number of brands including Menlook, raised $29.0mn (€23.2mn) in a Series C round led by Idinvest Partners with support from new investor bpifrance and existing investors 123Venture, Orkos Capital and Partech Ventures. The money will be used to accelerate international development, particularly in Asia and the US. Graduating at the end of the dot-com bubble, Menlook founder and CEO Marc Ménasé joined price comparison site Kelkoo in 2001 but left almost a year before it was sold to Yahoo! for $670mn (€547mn) in 2004. Whether or not he retained any stock or options after he left, back then valuations were just beginning to recover and this was serious money so M. Ménasé will have been aware of the potential of entrepreneurial activity to generate substantial wealth. By that time, however, Ménasé had already started his own firm – media agency AddviseMedia. Following a merger early in 2006, the firm changed its name to Nextedia and was sold to Lagardère Active in 2007 for an initial cash payment of €50mn with additional contingent earn-out payments of up to €50mn. Staying at Nextedia until its NYSEEuronext debut in 2009 gave Ménasé a ring-side seat to watch the development of fashion e-tailing as pioneered by (primarily French) firms such as Showroomprivée.com, Vente-Privée and Vestiaredecopines.com. When he set up Menlook late in 2009, from the statistics available to ad agencies Ménasé would have seen that not only was fashion e-tailing skewed towards women, but there was also latent demand from men. Under a number of online brands, Menlook operates as an e-tailer of apparel, shoes and accessories for men, and bolsters customer loyalty through a companion fashion blog – the Menlook Tribune. Launched in 2011, Menlook maximised what had been learnt from the evolution of fashion e-tailing for women. The firm operates private sales for members only, a discounted outlet store and – unlike some of the early sites catering to the female customer – has invested significantly in high-quality customer service from the beginning. The result is that, in 2014, the firm has had 400,000 paying customers spending an average of €210. These came from some 17mn visitors – a conversion rate of 2.4%. Menlook anticipates revenues of €30mn to €35mn this year and is targeting €100mn in 2017. In the last two years, Menlook has entered six new markets outside France – Germany, Holland, Italy, Singapore, Spain and the US. It generates over 60% of its revenues from abroad. The firm has also expanded its range and now sells more than 400 brands, including three own-label brands. Of course, to achieve such success and high conversion rates come at a cost. Not only does the firm have to invest in customer service (including a style hotline) but it also offers free worldwide shipping and 30-day returns. Going forwards, however, the firm intends to extend its current strategy rather than cut costs. Indeed, the firm plans a 20% increase in headcount over the next 18 months, has just launched a personal stylist service under the name ‘Georges’ and is about to open a premium marketplace. It remains to be seen whether the firm’s profits will be as successful as its turnover growth, but Menlook certainly has ambition and by 2017 wants to be “running the largest men’s store in the world.” Investors Menlook is positioning itself as ‘the first independent pure player in men's fashion in Europe’. It does, however, face competition from venture-backed firms such as Outfittery (which we covered at the start of the year) and a plethora of smaller firms such as enclothed and The Chapar. Similar non-European firms include Chinese Justyle (backed by Balderton), the more mature US-based Bonobos (which has raised almost $130mn (€106mn) since it was founded in 2007) and Trunk Club (which was acquired by Nordstrom in July 2014 for €286mn). E-tailing is highly capital intensive, and this deal will replenish Menlook’s balance sheet following the acquisition of British competitor Oki-Ni in May 2013 for an undisclosed sum. Oki-Ni now acts as the luxury window for Menlook. The two new investors in this round – Idinvest Partners (€443mn (2014); AUM €4.1bn) and bpifrance (€327mn (2011); AUM €1.1bn) (see Finsecur above) are well known. Less well known are existing investors 123Venture (€100mn (2012); AUM €654mn), Orkos Capital (€95.3mn (2007); AUM €113mn) and Partech Ventures (€106mn (2013); AUM €720mn). Both based in Paris, 123 and Orkos co-led Menlook’s Series B round in 2012. As a private equity firm specialising in communications and IT, Orkos has backed over 50 companies since it was set up in 2006. It is unusual in having raised the only (as far as we are aware) fund dedicated exclusively to robotics earlier this year. Based in Paris, Berlin and San Francisco, Partech is a growth equity investor targeting consumer internet and IT deals of up to $10mn (€8.1mn). Partech has expertise in this industry, having led a €10mn Series C round (see our November 2008 issue) for Brands4Friends which was sold to eBay for $200mn (€163mn) in December 2010. Set up in 2001, 123Venture manages a range of tax incentive funds, which include mezzanine, real estate and venture capital. 123Venture invested in Brands4Friends alongside Partech. © Go4Venture Advisers 2014 Page 11 November 2014 Trustly Sweden| www.trustly.com # Sector Round €mn Description Investors 6 Internet Services B 23.0 Operator of a payments platform Bridgepoint Development Capital Trustly (Sweden), operator of a payment services platform, raised €23.0mn in a Series B round from Bridgepoint Development Capital. The money will be used to support expansion into other European countries. Fintech investments have now been popular for some time. Even excluding deals related to Bitcoin, recent examples that we have covered in our Bulletin include Tradeshift and Zopa in February 2014, Azimo and WorldRemit in March, The Currency Cloud in April, iZettle in May, Ebury, Kreditech and TransferWise in June, Funding Circle in July, as well as Spotcap and Traxpay in October. The payment processing industry is of particular interest. According to Bridgepoint, it is expected to grow from €37bn today to €65bn by 2020 (at a 10% CAGR). This is largely due to structural growth as ecommerce accounts for an increasing proportion of all purchases. Founded in 2008, Trustly is a Payment Service Provider (PSP) which can facilitate B2B, C2B and P2P transactions. Rather than having to negotiate and integrate with the systems of every bank separately, merchants can sign a single agreement giving them access to all of the banks covered by Trustly. Currently, this includes just under 60 banks in eight European countries. This also reduces development costs as a single API gives access to all of these banks. With so many banks covered – in Denmark, Finland, Spain and Sweden, all of the major banks are connected to the firm’s system – Trustly can offer a bank-independent service. While initially licensed by the Swedish authorities, Trustly can expand anywhere else within the EU in line with the European Payment Services Directive. Each additional country that Trustly covers makes the firm’s services more attractive to merchants, as it greatly simplifies their cross-border payments and facilitates access to other European markets. Another issue that Trustly can help with is the increasing prevalence of mobile payments. With 18% of e-commerce transactions now made using tablets or smartphones, the fact that Trustly’s platform is not only adapted for mobile devices but also supports retina-scanning is a significant selling point. Owing to this popularity, Trustly has so far processed €2.1bn worth of payments for 67mn consumers. Currently, the firm is processing over seven million payments a year accounting for €1.1bn – a year-on-year growth in excess of 100%. Trustly has recently made two significant coups in terms of customers. In January, listed e-commerce giant Groupon (NASDAQ: GRPN) implemented Trustly for direct bank payments. While Trustly has won a number of awards – including Red Herring’s Top 100 Europe – perhaps the most significant endorsement of Trustly is PayPal Scandinavia entering into a strategic partnership with the company in June this year, to allow PayPal users to fund their accounts directly from their bank. While initially the agreement only covers Denmark and Sweden, it has obvious expansion potential. Investors Bridgepoint Development Capital (BDC) (€341mn (2009); AUM €11.5bn) is part of the Bridgepoint private equity group. BDC provides growth equity as well as financing buyouts, typically for businesses with enterprise values of between €20mn and €150mn. The firm’s preferred investment size is €10mn to €75mn per business. BDC’s sector remit is very broad and includes consumer and leisure businesses, financial services, healthcare, industrial businesses, media and technology companies as well as service businesses. Currently, however, the firm limits its operations to only part of Western Europe – France, the Nordic Region and the UK – although it plans to expand. The Bridgepoint private equity group as a whole operates from eight offices scattered across the EU. Since it was set up roughly a decade ago, BDC has taken part in over 50 transactions – many of which involved a significant component of cross-border execution. Recent exits include the sales of Hallmark Hotels to Topland and IT infrastructure services business Pulsant (which we covered in our June 2014 issue for its €250mn sale to Oak Hill Capital Partners). Although details of the Pulsant sale were not disclosed, BDC first backed Hallmark with a £9.4mn (€12.0mn) investment in 2007 and has said that this exit yielded a 2x return. © Go4Venture Advisers 2014 Page 12 November 2014 LeanWorks UK | www.yplanapp.com # Sector Round €mn Description 7 Software B 19.2 Developer of an app for event booking Investors General Catalyst, Nokia Growth Partners, Octopus Investments, Wellington Partners LeanWorks (trading as YPlan) (UK), developer of an event booking app, raised $24.0mn (€19.2mn) in a Series B round co-led by General Catalyst, Octopus Investments and Wellington Partners with support from new investor Nokia Growth Partners. The money will be used for development associated with a change in the company’s business model. Launched in 2012, YPlan is the developer of an app for the $80bn event market. Allowing people to book and pay for events with a few taps on their phone, and then use the same phone as an electronic ticket, means local events can be booked at the last minute. Event organisers can thus reduce their spending on box office staff as well as continue selling until the last minute (possibly at a discount) in order to reduce empty seats and increase profitability. Now operating in Las Vegas (since May), New York and (since February) San Francisco as well as London, YPlan says its app has had 1.5mn downloads but has not dicslosed how many of these became repeat users. The percentage growth figures in the press are almost meaningless without revenue numbers. All we know of these is that, for the year to December 2013, YPlan’s turnover was less than £5.6mn – the threshold for filing an abbreviated P&L at Companies House. But given the scope for rapid growth (and indeed contraction) in this industry, this isn’t very meaningful either. When we last saw YPlan for its €9mn previous round in June 2013, the firm operated a direct sales model where sales staff negotiated partnership deals with event organisers and took a commission on the tickets sold. Although it did not have to buy ticket inventory, neither did it charge organisers for listing events. This had the advantage that the range of events on the platform was curated; YPlan hoped to grow its user base by becoming known as a source of the best last minute entertainment options in any given city. Indeed, LastMinute.com co-founder Brent Hoberman was an early investor. Unfortunately, this is a costly way to generate inventory. Sales staff are expensive and a separate sales effort is needed for every city as users only go to events near them. Because it does not charge for listings, Yplan only recoups the cost of its sales effort if tickets are actually sold. The adverse cash flow impact is minimal because 90% of bookings are for events within seven days, but YPlan does assume a significant part of the risk of tickets not selling. To deal with this, YPlan plans to amend its business model by implementing a self-service portal for event organisers to list their events. This will enable YPlan to reduce operational costs by shedding sales staff – headcount has already been cut in New York. This not only makes the whole business much more scalable, but it will also make YPlan economically viable for smaller events such as pop-ups and niche comedy shows – a classic example of the ‘internet’ giving access to a long tail of potential new customers – a previously un-addressable market. Increasing both scalability and market size in one fell swoop is a pretty neat trick; but there is a cost. While New York overheads have fallen, headcount in London (about 50) remains the same as many of these are developers. Indeed, in the short term, there will be significant development costs – and also risk given the aggressive schedule the firm has talked about (with initial changes being ready for New Year’s Eve). At the same time as this so-called pivot, the firm intends to develop more social features such as real-time event reviews and friend co-ordination tools. The firm also has the option to go after two new revenue streams. It is already improving the analysis of its customer data in order to provide better recommendations based on location, purchase history and friends. Such data could be sold to third parties. The firm has also said it will consider syndication of events with, for example, travel portals. Investors Without performance figures, we cannot say whether this ‘pivot’ is an attempt to push a loss-making business into the black or a foresighted strategic move to increase margins, scalability and addressable market size. One might have a gut feeling that YPlan’s initial business model should be profitable, as Just-Eat (in many ways similar) turned a pre-IPO profit; however, YPlan has to sell to local businesses not just once, but on an ongoing basis. While described as a ‘pivot’ in the press, this is more of a course correction than the volte-face of a very young startup whose first idea has failed. Indeed, the fact that all of the professional investment firms we described in our coverage of the previous round (General Catalyst (€552mn (2013); AUM €2.5bn), Octopus Investments (€50.6mn (2013); AUM €6.1bn) and Wellington Partners (€113mn (2014); AUM €676mn)) have returned with a significantly larger commitment suggests that this really is a strategic move. Wellington has some experience in ‘local commerce’ through its backing of Hailo. Nokia Growth Partners (NGP) (€205mn (2013); AUM €572mn), funded solely by Nokia but operating independently, is a global growth equity investor specialising in mobile (or otherwise connected) businesses. ‘Local commerce’ is one of NGP’s five target sectors (the others are the connected car, connected enterprise, data analytics and mobile consumer). After selling its mobile phone business to Microsoft, the technologies on which YPlan depends – mapping, locationbased services and networks – constitute Nokia’s core business. Moreover, NGP’s global reach means it already has significant experience of investing in this area, having backed no less than eight local commerce companies so far. © Go4Venture Advisers 2014 Page 13 November 2014 Finexkap France | www.finexkap.com # Sector Round €mn Description Investors 8 Internet Services A 18.2 Online invoice factoring for SMEs Finsight Ventures, GLI Finance Finexkap (France), an online invoice factoring firm, raised $7.5mn in equity and $15mn in debt in a $22.5mn (€18.2mn) Series A round led by GLI Finance with support from Finsight Ventures. The equity will be used for marketing and recruitment. The debt will be used as working capital to buy invoices. The ‘secret sauce’ that distinguishes Finexkap from other startups providing credit to SMEs is securitisation. We discuss details below but the takeaway is that, unlike many P2P operations where investors have to choose which loans or debts to back, Finexkap does all the work and lets investors buy into the payments from a pool of debtors. Throughout Europe, traditional banks fail to underwrite good credit risks due to legacy IT systems, unreliable underwriting using criteria which are no longer relevant, poor credit scoring using only a fraction of the relevant data, and regulatory and capital constraints. To date, most fintech startups have focused on payments or long-term credit. Relatively little has been done for shortterm credit, which has traditionally been provided through invoice factoring. Currently, this often requires documentation of the credit history of both client and debtor. Even when available, this takes time to put together, which is no use for those trying to make payroll on a Friday afternoon. Finexkap’s co-founders (serial entrepreneurs Cedric Teissier and Arthur de Catheu, who both have private equity backgrounds) saw this first-hand when running their previous venture (online PE fund marketplace Palico), and set up Finexkap in 2012 to exploit this gap in the market. Like other fintech startups we have covered, Finexkap has developed its own proprietary credit-scoring algorithm using ‘big data’ sources of information, statistical analysis and some behavioural theory. This algorithm scores both the potential client and their debtor and estimates a likely default rate. As the application is made online, clients can factor their invoices in a matter of hours rather than weeks. Launched this month, initially the firm will concentrate purely on the French market, where cash flow problems stemming from unpaid invoices account for 25% of bankruptcies amongst SMEs. While only 3% of French SMEs use factoring (compared with 10% in the UK for example), at $800bn (€653bn) and growing at 15% annually, France is the second largest market for invoice receivables in Europe. It is dominated by 14 factoring companies – all of which are subsidiaries of the major banks – which together purchased over $270bn (€220bn) of invoices in 2013. In France, however, as in many other jurisdictions, the business of buying non-matured receivables is a regulated credit activity and requires a license from the French Financial Markets Authority ("AMF"). This provides a significant barrier to entry, but now that it has such a licence, Finexkap can operate throughout the European Economic Area. This does not mean that Finexkap is entirely without competition. British online factoring startups MarketInvoice and Platform Black already factored £190mn (€242mn) and £82mn (€104mn), respectively. Set up in 2011, VC-backed MarketInvoice has received £6.6mn (€8.4mn) of early-stage funding from Northzone and others. Weighted average default rates remain in the low single figures of basis points with net yields in excess of 10%, which is attractive with LIBOR still at historical lows. Both MarketInvoice and Platform Black act as P2P platforms auctioning off short-term corporate debt. To diversify their risk, investors are encouraged to put up enough money that they can buy multiple invoices. Investors The difference between Finexkap and its British competitors is reflected in the structure of the deal. This is where securitisation comes in. Unlike MarketInvoice and Platform Black, Finexkap has a wholly owned regulated subsidiary (Finexkap AM) which holds the invoices and receivables. The $7.5mn (€9.6mn) equity part of this deal went into Finexkap itself and will be used for marketing etc. The $15mn (€12mn) debt part went into Finexkap AM and will be used to buy invoices. What this means is that the cash flows coming in from the invoices can be pooled, repackaged and the receivables sold on to investors – a process known as securitisation. While this may be somewhat unfamiliar to the sort of private investors who buy loans on P2P platforms, it is familiar (financial) technology to institutional investors who have long had Asset Backed Securities (ABS) in their portfolios. © Go4Venture Advisers 2014 Page 14 November 2014 In the past, securitisation has been used to repackage and sell the cash flows of a wide variety of assets – Residential Mortgage Backed Securities (RMBS) are the best known, but commercial mortgages, loans and rent payments from pub chains are all common examples. Of course, after the sub-prime shenanigans of the mid-noughties the securitisation markets almost closed with issuance dropping by an order-of magnitude. One might think that investors would be nervous about ABS as an asset class, but those inside the industry are only too aware that the problem was not the securitisation technology but the way in which it was abused. In fact, not only are there signs of recovery but, highly unusually, the Bank of England joined forces with the European Central Bank to support this and suggest how to do it. As in any securitisation, the pooled cash flows are sold to investors as structured notes with varying coupons and degrees of risk. The first money to come in is allocated to the least risky notes (the senior notes) and attracts the lowest coupon. Thereafter, money is allocated to successive tranches of notes, which are increasingly risky but with progressively higher coupons. Finexkap has chosen a particularly simple structure. Roughly 80% of the expected cash flows are allocated to the senior notes with a floating-rate coupon of 200bps over Euribor. The remaining 20% is allocated to mezzanine notes at 750bps over Euribor. Additional credit support is available if necessary. Even with one month Euribor averaging around 0.1% this year, this gives a weighted average coupon in excess of 3% – not outrageous but one of only a few low-risk investments giving returns better than inflation – which averaged 0.55% in France this year. Investors could potentially get slightly higher returns on fixed-rate notes but by the time Finexkap ramps up, central banks are likely to be thinking about (finally) raising interest rates and Finexkap’s Floating-Rate Notes (FRNs) would be a good hedge. Of course it is still early days but this could be highly disruptive. As we have seen in Germany, it took a long time for banks to wake up to the threat from successful P2P lending platforms such as Auxmoney and Kreditech. However, institutional investors such as pension funds and insurers may find this sort of asset attractive – it is familiar technology but gives them access to a new type of short-term investment (French institutional investors invest on a three-month basis) that banks cannot provide. This would be game changing. Sensibly, Finexkap is not planning to rush into growth. It is vital to monitor the effectiveness of its platform’s algorithm. When the time comes, however, payment delays in France are now around 50 days and have been consistently decreasing for the last decade. Finexkap should therefore be able to cycle through half a dozen generations of invoices a year, meaning it would have securitised €90mn to €100mn. Effectively, the short payment delays give the firm a kind of operational gearing. Of course, if institutional investors really like this asset class we may see Finexkap again. For the moment, however, this transaction was led by AIM-listed GLI Finance Limited (AIM: GLIF), formerly known as the Greenwich Loan Income Fund Limited, which provided $4.1mn (€3.3mn) of the $7.5mn (€6.1mn) in equity giving it a 26% stake in the company. GLI is not a venture investor in any sense of the word; it originates loans for SMEs in the US and UK. Unlike the majority of the investors which feature in our Bulletin, GLI aims to produce a stable dividend yield for its shareholders while preserving the long-term net asset value. GLI normally invests in syndicated corporate loans issued by mid-market companies from a diverse range of sectors. This is a highly unusual transaction for the firm. GLI was supported by Finsight, a specialist fintech investor based in New York but with portfolio companies all over the world. Finsight’s partners include former COO and Board Member of LendingClub, John Donovan. To date, the firm has made 12 investments. The most high-profile of these is P2P lending pioneer Lending Club, which has just listed on the NYSE in a $5.4bn (€4.4bn) IPO. The fact that a number of other fintech companies are also nearing readiness for a public listing is a very positive sign for the sector as a whole. Notwithstanding the rosy market conditions and Finexkap’s structural advantage, there may be a very small cloud on the horizon. Because financial regulators will not allow banks to use their equity to buy growth, a trade sale might not be straightforward, leaving investors needing an IPO to exit. If the current VC bubble bursts before Finexkap has grown sufficiently for an IPO, and the public markets react in their usual irrational way by discounting the value of any VCbacked firm irrespective of its commercial soundness, investors may end up stuck with their investment. Of course, in the case of Finexkap, if the platform can grow organically it can provide a sufficient volume of receivables for a series of securitisations, and the business would be a self-sustaining money-printing machine whose profits would grow and shrink in line with the economic cycle. While this is not the sort of investment most VC firms seek, they might not object too much to owning such a thing if the rest of the VC landscape looks anything like 2002. © Go4Venture Advisers 2014 Page 15 November 2014 Fyndiq Sweden| www.fyndiq.se # Sector Round €mn Description Investors 9 Internet Services A 16.0 Operator of an online marketplace for retailers to sell excess inventory and slow-moving stock Industrifonden, Northzone Fyndiq (Sweden), developer and operator of an online marketplace which provides consumers with bargains by allowing retailers to offload excess inventory, raised SEK150.0mn (€16.0mn) in a Series A round led by Northzone with support from Industrifonden. The money will be used to enter the British, German and Polish markets. Major firms which overstock can afford to have outlet stores to offload their excess inventory at discount prices. Smaller retailers cannot afford to do this, are often stuck with any excess stock and have to write it off as a total loss. Set up in 2010 by no less than five co-founders, Fyndiq provides an online marketplace for smaller merchants to sell their overstocked, end-of-life or slow moving inventory. By selling through Fyndiq rather than their own platform, merchants can offload inventory at a discount without devaluing their own brand. Fyndiq does not charge a fee for listing items on its platform; it makes its money by charging a 5% commission on items sold. This attracts a wide range of products onto its platform and the firm has developed a reputation as a marketplace for bargains. This in turn attracts consumers, and thus lets small merchants reach many more potential customers. Fyndiq has said that it wants to be ‘an Amazon for bargain products’. However, Amazon already provides retailers with online shop-fronts and is also pushing its Warehouse Deals — where it sells open-box and damaged-packaging items at a discount. Fyndiq might argue that it is different to Amazon because it does not have to carry the cost of its own inventory, but there is also competition from eBay and Alibaba, both of which are expanding their marketplace services across international borders. One cannot argue with performance, however. Fyndiq has grown from just over 200,000 orders in 2012 to over 450,000 today, with turnover growing at over 120% from €6.2mn in 2012 to €13.8mn in 2013. Having broken even in November 2013, the firm expects revenues of around €27mn this year. There is a helpful infographic here. One possible reason Fyndiq might be attractive to merchants who only want to sell small amounts of overstock on an occasional basis is its fee structure. Amazon charges a lower commission on goods sold, but merchants pay $80 (€65) a month for using the platform. While eBay shops do not have to pay commission on their sales, they must pay not only a monthly fee, but also a fixed amount per listing. The same goes for Shopify’s fees. For this reason, it could be argued that Fyndiq’s European competition is indirect and may not limit its growth. There is some support for this argument from India’s Snapdeal. Snapdeal also makes its money just from commission with no listing or monthly fees. While both Amazon and eBay are active thoughout India, Snapdeal had 20mn registered users as far back as February 2013 and is now India’s largest online marketplace. Snapdeal has just raised $627mn (€549mn) from Japan’s Softbank, bringing its total investment to $1bn (€0.8bn) this year alone. Investors This being a Series A round, one might ask how Fyndiq got so far on just seed money. The answer is that it didn’t. Its seed funding – provided by former Scandinavian Airlines CEO and now super-Angel Jan Carlzon – came to €4mn. Readers may still think of transaction leader Northzone (€255mn (2014); AUM €532mn) as an early-stage technology investor focused on the Nordic countries. Indeed, despite its deals contributing actively to our proprietary Headline Transaction Index (HTI) ever since we started it in 2003, Northzone’s deals used to often be too small to feature in our Bulletin. However, Northzone now participates in larger growth equity deals and we have written up several of its recent transactions. Examples include Avito.ru in May 2012, Trustpilot back in January and iZettle earlier this year in May. The firm also hit the headlines back in April when it sold portfolio company Jasper Design Automation (which develops debugging and automated testing solutions) to Cadence (NASDAQ: CDNS) for $170mn (€139mn). Northzone first backed Jasper in 2004. This does not mean Northzone has stopped making early-stage investments. Recent small deals include €2mn for FishBrain (a social network for anglers) in July, €2mn for subscription-based concert invitation startup Jukely in October and €3mn for ad-supported ISP AllUnite. Jukely is a notable example of a European investor backing a US startup. Northzone was supported by Industrifonden (AUM €384mn) – a VC backed by the Swedish Government to help Swedish startups expand internationally. Naturally, Industrifonden prefers minority stakes and Fyndiq’s five co-founders remain the majority shareholders. Even if Amazon might not be a direct competitor, it remains a possible trade buyer. It has already made one high-profile acquisition of a ‘bargain basement e-tailer’ – in 2010 it bought Woot! for $110mn (€90mn). Since the acquisition, Woot!’s sales have grown c.20% per annum, according to TechCrunch. However, in this time, seven of its key employees (including its CEO, CFO and CTO) have left. This was attributed to both a downturn in the popularity of flash sales, leading the original team to want to try new things, as well as some integration pains such as switching over to Amazon’s fulfilment system (limiting the range of items that could be shipped for price reasons). © Go4Venture Advisers 2014 Page 16 November 2014 Intersec France | www.intersec.com # Sector Round €mn Description Investors 10 Software B 16.0 Developer of ‘big data’ software allowing MNOs to optimise their business, offer LBS and monetise user data CM-CIC Capital Innovation, Highland Capital Partners, Innovacom Intersec (France), a developer of software which allows Mobile Network Operators (MNOs) to realise the value of the data they can collect while running their networks, raised $20.0mn (€16.0mn) in a Series B round led by Highland Capital Partners with support from existing investors CM-CIC Capital Innovation and Innovacom. The money will be used to support global growth, particularly in the US with expansion of the firm’s US headquarters in New York. Founded in 2004, Intersec is the latest in a series of investments we have seen relating to ‘Big Data’. Although it started out producing monitoring and analysis products for network carriers, over the last five years the firm has transitioned to focus purely on software with concomitant revenue growth driven by the confluence of m-commerce and big data. Intersec now makes its money from four products for MNOs and Mobile Virtual Network Operators (MVNOs) who offer mobile services but do not own the network infrastructure): Iris™ – a platform which allows operators to offer subscribers timely promotional offers based on their specific usage patterns and interests (rather than on simple price cuts which are easy to copy) Igloo – a geolocator which can collect position data for an entire subscriber base in real-time, both passively (hence not overloading the network) and actively, thus enabling Location Based Services (LBS) Ignition – a fast and cost-effective messaging platform supporting all common network technologies and protocols – vital with mobile revenues going down and demand for data services (like messaging) going up Insighted – software which analyses data from numerous sources to help optimise customer offerings, spot unusual network activity and monetise user data through, for example, context-based advertising Intersec’s competitive advantages are largely technical. Its code base is primary C, which is not only faster rather than interpreted languages like Java, but compiles to more efficient object code than languages like C# hence improving performance. All development is in-house, but Intersec encourages third-party developers through an open API. Despite evolving from a telecoms business going back to 2004, the firm’s technical architecture does not depend on legacy software but instead uses modern tools such as noSQL databases, and the MapReduce design pattern and implementation for processing ‘Big Data’ in parallel on a server cluster. One benefit Intersec does derive from its history is that its software has been written with the needs of telecoms operators in mind from the start. This gives a more efficient result than porting big data solutions from elsewhere and adapting them. With offices in Abidjan on the Ivory Coast, Dubai, Johannesburg, Madrid, Sao Paolo and Singapore, as well as regional headquarters in Paris and New York, Intersec maintains a direct sales force. It also sells through a network of partners which include system integrators, OEMs and agents. Customers include Etisalat, MTS, Orange, SFR and Telefonica. Investors Led by global VC firm Highland Capital Partners (HCP) (€327mn (2013); AUM €2.4bn), this deal brings total investment in Intersec to €22mn. Founded in the 1980s, HCP has grown into a stage-agnostic technology investor investing throughout China, Europe and North America from its offices in Boston, Geneva, London, Palo Alto and Shanghai. Of the c. 230 companies that the firm has backed, the best known are Ask Jeeves, Lycos, MapQuest and VistaPrint. Investing in Europe as Highland Capital Partners Europe since 2007, recent HCP investments that we have covered include Prescription Eyewear in January 2013, NewVoiceMedia in February 2013, and Outfittery in February 2014. This is one of the first investments by HCP’s first independent European fund – a €250mn tech growth fund which the firm closed back in May. The fund targets internet, mobile and software businesses with revenues in the tens of millions, which are either profitable or soon will be. CM-CIC Capital Innovation is a Paris-based firm that backs French SMEs from seed stage all the way through to growth capital – much like HCP Europe. While nominally sector-agnostic, most of the firm’s two dozen portfolio companies are in e-commerce, hardware, internet services, software or telecoms. Fellow existing investor Innovacom (€32.3mn (2012); AUM €306mn) is also headquartered in Paris but maintains additional offices in Aix-en-Provence and Stockholm. Best known for backing Business Objects, Kelkoo and LastMinute.com, Innovacom seeks out technologies, products and services based on information and communication technologies. Usually preferring to get involved with a company at its first round of institutional investment, this is precisely what it did with Intersec, having led the €3mn Series A round in May 2011. © Go4Venture Advisers 2014 Page 17 November 2014 Curetis Germany | www.curetis.com # Sector Round €mn Description Investors 11 Medtech B 14.5 Developer of molecular diagnostic technologies Aeris Capital, BioMed Partners, CD Venture, Forbion Capital, HBM Partners, Life Sciences Partners, Qiagen, Roche Venture Fund Curetis (Germany), a developer of molecular diagnostics technologies, raised €14.5mn in a Series B extension from new investor Qiagen with support from existing investors Aeris Capital, BioMed Partners, CD Venture, Forbion Capital, HBM Partners, Life Sciences Partners and Roche Venture Fund. As readers may remember, Curetis has developed a molecular diagnostics platform which automates testing for infectious diseases. When we last saw Curetis in April 2013, the firm’s Unyvero™ system had been CE-marked in Europe, and the company raised €12.5mn to support a further clinical trial in the US in order to gain FDA approval for its Lower Respiratory Tract (LRT) infection diagnostic cartridge. The firm was on the point of expanding its distribution network beyond the DACH region to both the rest of Europe and the Middle East and North Africa region, as well as possibly Asia and Latin America. At least some of this was achieved. In January 2014, the firm signed an agreement with Laboratorios LETI for exclusive distribution rights in Portugal and Spain. The FDA study in the US is proceeding: in May 2014 Curetis appointed Professor R. Patel of the Mayo Clinic as Lead Principal Investigator for the firm’s LRT FDA trial, and at the same time, it announced that it had added six new sites to the trial, (bringing the total to nine). Aside from commercial progress with its first product, the firm announced that it had completed the development of a second diagnostic cartridge for its Unyvero platform in March this year. Known as the i60, this platform identifies 114 targets (91 pathogens and 23 resistance markers) common in eight clinical indications and after abdominal, orthopaedic and soft tissue trauma such as burns and soft tissue infections. Following a 750 cartridge evaluation study, this new cartridge was awarded CE-IVD status and launched commercially in May this year. Investors This round, which brings total investment in Curetis to just under €70mn, is an extension of the €12.5mn round led by HBM Partners just over eighteen months ago in April 2013. The only new investor in this round is Dutch supplier of assay and sample technologies Qiagen (NV:QGEN). The strategic value that Qiagen brings can be judged from the fact that not only did the existing investors agree to extend the round and contribute additional funds themselves on a pro rata basis, but they waited eighteen months to do so. Founded in Dusseldorf in 1984, Qiagen also started out in molecular biology and listed on both NASDAQ and the Deutsche Börse in 1996 and 1997, respectively. Polymerase chain reaction-related diagnostics have been part of the firm’s product range, which the company has expanded through a combination of in-house R&D and acquisitions. Many of these products are in the form of automated platforms, which makes Curetis’ Unyvero platform a natural fit. In 2009, Qiagen acquired DxS – a developer of molecular assays which gave the firm a market leading position in companion diagnostics (tests which help clinicians determine the right dose or treatment for a patient). The deal was structured as $95mn (€68mn) in cash with contingent payments of up to $35mn (€21mn). In 2012, when Qiagen had global sales of $1.3bn (€935mn), it restructured into two business areas – Life Sciences and Molecular Diagnostics. As well as acquisitions, Qiagen has also made a number of investments in firms similar to Curetis. Recent examples include $27mn (€19.5mn) invested in March 2014 in New York-based Exosome Diagnostics (a developer of blood-based molecular diagnostics for oncology) and an undisclosed amount for Drug Response Dx in January 2013 (a developer of biomarkers for measuring drug response). Qiagen’s internal R&D program, together with its range of acquisitions and investments, have made the firm’s product range very comprehensive. All existing investors participated in this extension. Aeris Capital (€42mn (2006); AUM €42mn) is the Switzerland-based healthcare-focused family office of SAP co-Founder Klaus Tschira. We last saw Aeris Capital in our Bulletin in August 2014, when it contributed to a €20mn late-stage round in mobile advertising firm Smaato. HBM Partners (€124mn (2005); AUM €615mn), which led the first tranche of this Series B investment in April 2013, is a Switzerland-based investment firm targeting development, growth and buyout transactions. Based in Germany, CD Venture is a stageagnostic biotech investor. Since it became independent of ABN AMRO in 2006, Dutch life sciences investor Forbion Capital Partners (€40.9mn (2011); AUM €643mn) has grown its portfolio to 28 biotech and life sciences companies, and has recently announced the first close of its FCF III fund at €92mn with a target of €150mn to €200mn. It was also part of the aforementioned investment in Exosome Diagnostics in March 2014. Based in the Netherlands, Life Sciences Partners (€88mn (2010); AUM €512mn) provides debt and stage-agnostic equity. © Go4Venture Advisers 2014 Page 18 November 2014 Genomics UK | www.genomicsltd.com # Sector Round €mn Description Investors 12 Medtech B 13.0 A developer of computational and statistical methods to look for the genetic causes of disease Invesco Perpetual, IP Group, Lansdowne Partners, University of Oxford, Woodford Investment Management, Wylie Family Trust Genomics (UK), a developer of computational and statistical methods to look for the genetic causes of disease, raised £10.3mn (€13.0mn) in a Series B round from new investors Invesco Perpetual, Lansdowne Partners and Woodford Investment Management with support from existing investors the IP Group and the University of Oxford. Genomics was spun out from the University of Oxford earlier this year, and is the first startup to come out of the University’s Wellcome Trust Centre for Human Genetics (WTCHG). The research of the WTCHG’s 450 scientists aims to discover how variations in our genetic make-up can cause either health problems or specific diseases. The company has built its research into an analytical platform that allows researchers to make maximal use of genetic sequencing data. Genetic sequencing is now cheap enough that personalised medicine is commercially viable. 23andMe will now ‘sequence your genome’ for less than $100 (€80). By analysing which genetic variations cause which conditions or diseases, it will be possible to tailor diagnostic and treatment methods. Ultimately, it should also be possible to develop drugs (based on nucleic acid polymers) to replace one genetic variation with another and thus fix the problem. Human DNA consists of only four simple molecules (nucleotides) denoted G, C, A and T. However, a single gene – which codifies either how to make one of the proteins that make up much of the body or whether another gene should be switched on (expressed) – consists of anywhere between a few thousand and a few million nucleotides. In humans, each of our 46 chromosomes (23 pairs) contains a length of DNA about six feet long with between 50 and 2,000 genes. Genetic sequencing can detect a difference in just one of a gene’s nucleotides – a Single Nucleotide Polymorphism (SNP) – but while SNPs account for roughly 90% of genetic variation, so far we only know a few SNPs which cause clearly definable clinical problems. Having the ‘wrong’ SNP typically only affects a single protein or biochemical pathway, and may not do you much harm. Moreover, many diseases involve simultaneous mutations in a number of genes. Finding new diagnostic tests requires a combination of sophisticated statistics and an understanding of population genetics, exactly the research background of the WTCHG and Genomics’ co-founders. Furthermore, the company’s analytical platform aims to provide an efficient way of applying computer power to the problem. Genomics will also face commercial challenges when monetising its platform. Not only is genetics poorly taught in medical schools, but there is a certain reticence on the part of healthcare players to pay for it. Commercial tests that are available – such as those from Assurex and Genomind which help choose the correct psychotropic, ADHD or pain medication – are often only available privately, which makes it hard to turn a profit. Until genetic testing gains acceptance amongst healthcare players, a better way to commercialise such research is to partner with drug companies. Finding genetic variations associated with particular clinical issues may suggest new drug targets. Moreover, selling superior genomic analysis to pharmaceutical companies as an aid to drug discovery is a much more reliable way of getting paid. Investors This round values Genomics at c. £25mn (€31mn). Neither the firm’s Series A round nor the size of grant funding from the UK’s Department of Health was disclosed, but total investment in Genomics is likely to be comparable with the WTCHG’s annual income from research grants: £20mn (€25mn) for 450 scientists or c. £44k (€55k) per researcher. In what must surely be the first example of vertical integration in personalised medicine, all of the new and existing investors in this round are also investors in DNA-sequencing company and fellow Oxford spin-out Oxford Nanopore (a frequent guest in our Bulletin). Holding company Invesco Perpetual (AUM €96.3bn) is a subsidiary of global investment manager Invesco (NYSE:IVZ) which invests in VC funds as well as directly. Fellow new investor Lansdowne Partners (AUM €6bn) is an Alternative Investment Manager based in London, whose venture investments generally involve biotech, finance or nanotech. The third new investor is Woodford Investment Management (AUM €10.3bn) – the new fund of renowned fund manager Neil Woodford, who spent 25 years at Invesco. When Woodford first appeared in our bulletin with a €10mn investment in July, we were surprised. However, not only has Woodford since backed other nearIPO companies such as Oxford Nanopore in August, but it has also made conventional venture investments such as PurpleBricks. The fund now stands at over £3bn despite only having been available to investors for four months. Existing investor the IP Group (LON:IPO), which backed Genomics first round alongside the University, specialises in the commercialisation of IP from 15 partner universities throughout the UK. AIM-listed since 2003, the firm has a portfolio of over 90 companies. As a final note, Genomics is chaired by serial entrepreneur David Norwood, a serial entrepreneur who was one of the original founders of Oxford Nanopore. © Go4Venture Advisers 2014 Page 19 November 2014 i2O Water UK | www.i2owater.com # Sector Round €mn Description Investors 13 Cleantech C 10.1 Developer of technology to reduce leakage from water distribution pipes Naxos Capital, Nemadi Advisors, Ombu i2O Water (UK), a developer of technology to reduce leakage from water distribution pipes, raised £8.0mn (€10.1mn) in a Series C round from new investor Ombu and existing investors Naxos Capital and Nemadi Advisors. The money will be used to expand the firm’s R&D facilities and increase technical support for its network of partners and resellers. Five years ago, McKinsey forecasted that global demand for water would reach 7tn cubic metres a year by 2030 – 40% more than is currently available. The global water shortage receives less press coverage than climate change: while Silicon Valley readers will certainly recall the West Coast drought, they might be surprised to learn that ‘grey and rainy’ Britain also has water problems. Readers elsewhere in Europe may be amused to learn that the British frequently have restrictions on using hosepipes to water their lawns even after significant rainfall. Various exotic schemes have been suggested to increase the global water supply, such as towing icebergs from the Antarctic to the Middle East for example. However, in some cities both globally and in the UK, 40-50% of water is lost through leakages. In the UK specifically, almost a quarter of national water supply is lost through leaky infrastructure that th has seen long-term underinvestment, especially since the privatisation of the water industry in the late 20 century. This leaves significant room for short-term supply improvement before turning to new water sources. These factors drove a team of British engineers to set up i2O in 2005 to develop ways of helping utility companies reduce leakage. Its key offering is a leakage management system that remotely optimises water pressure at various points along a water transport network. Water pressure is challenging for utilities to manage as it directly drives the rate of leakage when high, but will impact end-customer service quality if too low. Many networks are still controlled manually and the operational cost of optimising pressure by hand is prohibitive. i2O uses intelligent loggers and PRVs (Pressure Release Valves), coupled with patented pressure management software, to monitor and optimise network pressures based on demand patterns and the operating characteristics of the network. Average benefits seen by i2O’s customers are a 20% reduction in leakage, energy savings of 20%, a 40% reduction in burst frequency, an increase in the lifetime of pipes (of five or more years) and a significant reduction in operating expenses (thanks to the reduced engineering man-hours needed across the network to fix leaks). Based at the Southampton Science Park on the south coast of England, i2O employs 70 people at offices in Colombia, Malaysia and Spain. Distributed through a network of resellers and partners, i2O’s technology is now in use by 66 water companies in 22 countries in Europe, East Asia, Latin America, the Middle East and South Africa. Its 1.9bn installations save some 235mn litres of water a day – equivalent to the daily needs of Barcelona. In 2012, the company’s turnover was only £2.7mn (€3.4mn) but growing at c. 30% a year. Moreover, in September this year i2O signed a deal with US smartmeter company Itron (NASDAQ: ITRI), which will give it access to 8,000 potential customers in over 100 countries. This is the reason why i2O expects to need more commercial and technical support staff. While revenues from the firm’s SaaS-based network monitoring software currently account for only a quarter of the firm’s turnover, i2O expects that software revenues will overtake hardware sales within 3-4 years. Investors Bringing total investment in i2O to about €27mn, this deal is also part of a wider reorganisation of the firm’s capitalisation table (replacing preference shares with ordinary shares) and board (which now has five members instead of nine). Experienced technology executive Stephen Bold, former Director of Technology at Rolls Royce and Managing Director of Sharp Laboratories Europe, and previously a Non-Executive Director, now becomes Chairman. A key departure is one of the company’s three co-founders – Andy Philipps – who was previously a Non-Executive Director. The other two co-founders – Adam Kingdon and Andrew Burrows – remain CEO and CTO, respectively. Based in Luxembourg, Naxos Capital (AUM €300mn) is a growth equity investor that backs companies in a broad range of industries including cleantech, consumer, industrials, mining, renewable energy and wider technology. It prefers businesses headquartered in either Europe or North America, but is keen to support growth into the growing economies of Asia and South America. Priding itself on speed of deal execution, Naxos is an evergreen fund with no constraints on investment concentration or time horizon. New investor Ombu is an early-stage investor backing energy, water and other industrial companies. While it prefers transactions in the UK, it will invest elsewhere. Nemadi Advisors is a UK-based investment advisor for the National Electronic Manufacturer’s Association (NEMA). NEMA is a multinational trade organisation whose members include 3M and ABB and collectively sell more than €100bn worth of diversified electronics. Nemadi is managed by Nick Beart, who has a seat on i2O’s board. © Go4Venture Advisers 2014 Page 20 November 2014 Melijoe France | www.melijoe.com # Sector Round €mn 14 Internet Services B 9.0 Description Investors E-tailer of designer children’s apparel CM-CIC Capital, Gimv Melijoe (France), an e-tailer of designer children’s apparel, raised €9.0mn in a Series B round led by Gimv with support from CM-CIC Capital. The money will be used to expand the company’s product range and support international expansion. Via its website, Melijoe provides a range of designer apparel for children – it offers more than 7,000 different products from c. 120 brands. The company provides its website in six languages and also publishes an in-house fashion magazine. Its shipping service delivers anywhere in the world within 48 hours, and the company has received more than 100,000 orders since its launch in 2007. Furthermore, its site had c. 8mn unique users in 2014 and the firm had 2013 revenues of €14mn. Notably, more than half of these came from outside France and the firm intends to increase this to 75% in 2015. As an e-tailer of children’s apparel, Melijoe operates in a highly competitive space. Aside from manufacturers selling through their own websites and e-tailing behemoths such as Amazon, other alternatives include venture-backed firms such as Windeln.de (which featured in our February 2013 issue for its €15mn late-stage round). Melijoe differs from the above by targeting a clientele of cosmopolitan and fashion-savvy mothers with a high level of disposable income, who wear designer clothes and want the same for their children. The firm offers a range of children’s fashion inspired by adult runways from brands such as Cacharel, Fendi and Tartine et Chocolat. Direct competition comes from firms such as Childrens Worldwide Fashion (CWF) (which started as a conventional retailer and moved upscale in the mid-1990s). As well as department store concessions, CWF now sells under the Atelier de Courcelles brand (in both physical stores and online) and generates global revenues of €160mn. Competition also comes from stores such as Monshowroom.com (founded in 2006 but not venture-backed) which sell fashionable children’s wear alongside high-end adult fashion. Melijoe marks the third e-tailing investment in this issue of our Bulletin, and the second in fashion. As a mother of five, Melijoe’s co-founder and CEO (Nathalie Christen-Genty) has a deep understanding of the firm’s customers. Having worked in various internet-related jobs during the dot-com boom, she also has that badge of honour held by so many successful entrepreneurs – the failed startup (an online store she set up to sell cow-print interior design products). Investors One of Melijoe’s noteworthy competitors is Windeln.de. Following its acquisition of Swiss market-leader Kindertraum.ch at the end of 2013, Windeln.de is now strongly positioned within the e-tailer fashion space in the DACH region. Furthermore, following its €15mn Series C round in May 2014, the firm is now planning expansion into non-German speaking countries. Gimv (€163mn (2011); AUM €1.8bn) expanded from a Flemish venture firm in the 1990s to become a NYSE Euronext listed private equity and venture capital firm, investing across Benelux, the DACH countries and France. Having posted portfolio returns in excess of 20% in 2010 and 2011, in 2012 the firm restructured following a strategic review. The firm’s current strategy is to back companies across four key sectors – cleantech infrastructure, the consumer of 2020, healthcare, and technology which improves either sustainability or productivity for industry. The firm’s investment sweetspot is €3mn to €30mn (€0.5mn to €100mn in Belgium) in SMEs with enterprise values of up to €125mn. This deal continues Gimv’s recent focus on France (and specifically French clothing e-tailers). Recent deals include its participation in bespoke holiday provider Planetveo’s €15mn June 2013 round and its buyout (for an undisclosed sum) of a controlling stake in the Wolf Lingerie Group in January 2014. Notably, Gimv’s portfolio company Private Outlet (where Gimv participated in the company’s September 2010 €9mn Series B round) merged with BrandAlley in May 2014 as part of a €12mn refinancing (which created a firm with c. €150mn in revenues). Paris-based CM-CIC Capital (AUM €370mn), which led Melijoe’s €5mn Series A round, backs French SMEs at any stage from seed to growth capital. Launched in 1990, the firm seeks to invest in the e-commerce, hardware, internet services, software and telecoms sectors. © Go4Venture Advisers 2014 Page 21 November 2014 2.1 M&A Activity Index Disclosed Global TMT M&A Transactions European Deals 2014 (€mn) Global Deals 2014 (€mn) # of Global Deals 2014 600 35,000 500 30,000 25,000 400 20,000 300 15,000 200 10,000 100 5,000 0 Jan Feb (1) Deal Value per Month (€mn) # of Deals per Month European Deals 2013 (€mn) Global Deals 2013 (€mn) # of Global Deals 2013 0 Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Capital IQ; Go4Venture Advisers Analysis (1) Includes Dell acquisition by Silver Lake for €22.3bn (2013) and WhatsApp acquisition by Facebook for €13.9bn (2014) Disclosed European VC & PE-Backed TMT M&A Transactions (>£30mn / €35mn / $50mn) Value of Deals 2014 (€mn) # of Deals 2014 20 4,500 18 4,000 16 3,500 14 3,000 12 2,500 10 2,000 8 1,500 6 4 1,000 2 500 0 Jan Feb 0 Apr (1) Mar Deal Value per Month (€mn) # of Deals per Month Value of Deals 2013 (€mn) # of Deals 2013 May Jun Jul Aug Sep Oct Nov Dec Source: The 451 Group; Capital IQ; PitchBook; VentureSource (including transaction value estimates); Go4Venture Advisers Analysis (1) Includes ista International acquisition by CVC Capital Partners for €3.1bn (2013) Disclosed European VC & PE-Backed TMT M&A Transactions (2014) >£30mn / €35mn / $50mn Monthly Cumulative Number # Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 5 4 1 2 3 7 6 1 5 7 6 Value €mn 1,106 1,140 448 258 906 1,083 1,607 266 1,617 876 1,982 Median €mn 240 259 448 129 215 129 200 266 150 96 256 41 47 Number # 5 9 10 12 15 22 28 29 34 Value €mn 1,106 2,246 2,695 2,953 3,859 4,942 6,549 6,815 8,432 Median €mn 240 39 303 186 228 175 175 195 175 © Go4Venture Advisers 2014 Dec 9,308 11,290 151 163 Page 22 November 2014 2.2 Top 5 Global TMT M&A Transactions Summary Ranked by Price (€mn, including estimates) in descending order # Target Acquirer 1 Sapient (US NAS: SAPE) www.sapient.com Publicis Groupe (France XPAR: PUB) www.publicisgroupe.com Target Sector Price (€mn) Revenues (€mn) P/R Software 2,947 1,148 2.6x Sapient, provider of a range of online marketing creation and management software, will be acquired by advertising and public relations company Publicis Groupe. Publicis has stated that acquiring Sapient is “an integral part of its transformation” from traditional to digital advertising. It has further cited the company’s “unique combination of marketing, omni-channel commerce and consulting and its depth of technology” as key motivators. 2 STATS ChipPAC (Singapore SGX: S24) www.statchippac.com Jiangsu Changjiang Electronics Technology (China) www.cj-elec.com Semiconductor 1,433 1,258 1.1x STATS ChipPAC, a provider of semiconductor chip packaging and testing, will be acquired by semiconductor chip tester Jiangsu Changjiang Electronics Technology (JCET). According to WSJ, this deal is the largest Chinese acquisition in the semiconductor space since privat e equity firm Hua Capital Management’s $1.7bn (€1.4bn) August 2014 acquisition of OmniVision Technologies. A noteworthy seller is Temasek Holdings (Singapore’s state investment company), which owns an 84% stake in STATS ChipPAC. 3 Advanced Computer Software Group (UK AIM: ASW) www.advancedcomputer software.com Vista Equity Partners (US) www.vistaequitypartners.com Software 914 247 3.7x Advanced Computer Software Group, provider of a range of healthcare and ERP software will be acquired by Vista Equity Partners, a San Francisco-based private equity firm which focuses on investments in the software sector. Taking ACSG private will allow Vista to manage the company’s transition to cloud with more flexibility than if ACSG had been public. This is a trend that has been gathering momentum in the ERP space. With regard to its existing exposure to ERP, Vista acquired enterprise software providers CDC Software in April 2012 and Consona in August 2012 (which it subsequently merged in August 2012 to form Aptean). 4 Big Fish Games (US) www.bigfishgames.com Churchill Downs (US NASDAQ: CHDN) www.churchilldowns incorporated.com Software 672 1761 3.8x Big Fish Games, a provider of freemium mobile gaming applications, will be acquired by Churchill Downs, operator of Churchill Downs horse racing track in Louisville, Kentucky and its associated flagship race, The Kentucky Derby. As well as operating other horse racing tracks, Churchill also provides online horse betting services through www.twinspires.com. Churchill has stated that "the acquisition of Big Fish and our entry into the rapidly growing mobile and online games industry gives us new products, new customers, new geographies and new sizeable growth opportunities”. 5 Yayoi (Japan) www.yayoi-kk.co.jp ORIX (Japan TSE: 8591, NYSE: IX) www.orix.co.jp Software 554 91 6.1x Yayoi, an accounting software provider, will be acquired by ORIX, a provider of financial services such as insurance services, lease financing and lending. ORIX has stated that acquiring Yayoi will enable it to “roll-out services to a new customer base of small businesses which comprise more than 80% of businesses in Japan.” It will also expand its existing customer base beyond large corporations and small and medium-sized enterprises and into this segment. Source: The 451 Group; Capital IQ; PitchBook; Go4Venture Advisers Analysis Key P/R – Price / Last 12 Months Revenues 1 2012 Revenues © Go4Venture Advisers 2014 Page 23 November 2014 2.3 Headline European VC & PE-Backed M&A Transactions >£30mn / €35mn / $50mn Ranked by Price (€mn, including estimates) in descending order # Target Acquirer 1 Advanced Computer Software Group (UK AIM: ASW) www.advancedcomputers oftware.com Vista Equity Partners (US) www.vistaequitypartners.com Target Sector Price (€mn) Revenues (€mn) P/R Funding (€mn) P/F Software 914 247 3.7x 51 17.9x Internet Services 376 N/A N/A 210 1.8x Software 295 89 3.3x N/A N/A Noteworthy Sellers: NVM Private Equity, Octopus Investments 2 CAP Automotive (UK) business.cap.co.uk Solera Holding (US NYSE: SLH) www.solerainc.com Noteworthy Sellers: Montagu Private Equity 3 Vizrt (Norway OB:VIZ) www.vizrt.com Nordic Capital (Sweden) www.nordiccapital.com Noteworthy Sellers: Concord Ventures, Coral Group, Fidelity Investments, FSN Capital, Nordea Capital, ODIN Forvaltning, Star Ventures 4 Perten (Sweden) www.perten.com PerkinElmer (US NYSE: PKI) www.perkinelmer.com Hardware 214 24 8.9x N/A N/A Software 119 N/A N/A 40 3.0x Noteworthy Sellers: Valedo Partners 5 Definiens (Germany) www.definiens.com AstraZeneca (UK LSE: AZN) www.astrazeneca.com Noteworthy Sellers: Cipio Partners, Gilde Healthcare Partners, LBBW Venture Capital, TVM Capital, Wellington Ventures 6 CLS Communication (Switzerland) www.clscommunication.com Lionbridge Technologies (US NASDAQ: LIOX) www.lionbridge.com Software 62 75 0.8x N/A Noteworthy Sellers: Zurmont Madison Source: The 451 Group; Capital IQ; PitchBook; Go4Venture Advisers Analysis Key P/R – Price / Last 12 Months Revenues P/F – Price / Total Funding P/F > 1x indicates an investment where all investors have made a positive return on their investment P/F < 1x indicates poor returns for some, but early or late investor entrants may still show a positive return on investment © Go4Venture Advisers 2014 Page 24 N/A November 2014 # Target Acquirer 1 Advanced Computer Software Group (UK AIM: ASW) www.advancedcomputersoftware.com Vista Equity Partners (US) www.vistaequity partners.com Target Sector Price (€mn) Revenues (€mn) P/R Funding (€mn) P/F Software 914 247 3.7x 51 17.9x Advanced Computer Software Group (UK) (ACSG), a diversified enterprise software provider, will be acquired by Vista Equity Partners for €914mn. Noteworthy sellers include UK-based private equity and venture capital firms NVM Private Equity and Octopus Investments. Upon completion of this acquisition, Vista intends to de-list ACSG with immediate effect. Taking ACSG private will allow Vista to manage the company’s transition to cloud with more flexibility than if it remained public. This is a trend that has been gathering momentum in the ERP space with recent examples including UNIT4’s acquisition by Advent in November 2013 and Exact’s acquisition by Apax in October 2014. Target Founded in 2008 and headquartered in Portsmouth, UK, ACSG is a diversified enterprise software provider listed on the AIM. ACSG operates as three divisions: its Advanced Health & Care business (15% of revenues) provides patient management systems to the NHS and private healthcare companies; its Advanced Business Solutions business (67% of revenues) provides accounting and HR / document management software; and its Advanced 365 (18% of revenues) business provides outsourced application development, cloud computing and SaaS hosting. The company has primarily grown through acquisitions, completing 16 transactions in the last six years. Notably, this is not founder and CEO Vin Murria’s first buy-and-build play. Murria was previously CEO of Computer Software Group, which also grew via acquisitions (funded by backing from HgCapital) up until its merger with IRIS and subsequent £500mn (€630mn) sale to private equity firm Hellman & Friedman in June 2007. ACSG won Tech Company of the Year at the UK Tech Awards 2014. It currently has more than 20,000 clients and c. 2,000 employees across offices in the UK, India, Ireland and the US. It reported 2014 revenues of £203mn (€247mn; 68% year-on-year growth) and EBITDA of £45.3mn (€55mn; c. 22% margin). Acquirer Founded in 2000 and headquartered in San Francisco, US, Vista Equity Partners (€4.6bn (2014); AUM €10.9bn) is a private equity firm that invests in buyout transactions between $200mn (€161mn) and $3bn (€2.4bn). It primarily invests in software-focused and information services companies. Vista seeks to add value to its portfolio companies via its consulting arm, Vista Consulting Group, which focuses on implementing operational and process improvements. Vista currently oversees a portfolio of more than 30 companies, which employ more than 28,000 people worldwide. Notably (with regard to its ERP and healthcare exposure), it acquired ERP software providers CDC Software and Consona (which it subsequently merged to form Aptean) in 2012, and acts as financial sponsor to Vitera Healthcare Solutions. It operates solely from the US, with a team of 65 split across its offices in Austin, Chicago and San Francisco. Vista last featured in our September 2014 and August 2013 issues for its €3.6bn LBO of US network infrastructure and Business Intelligence (BI) software provider TIBCO, and its €601mn acquisition of US fleet management software provider Omnitracs, respectively. Noteworthy Sellers NVM Private Equity (€34mn (2009); AUM €367mn) is a UK-based private equity firm specialising in acquisition financing, growth equity and MBOs. The firm last featured in our December 2013 issue for its role as a seller in Alaric Systems’ €57mn sale to NCR. Founded in 1984, it typically invests between €2mn and €10mn in UK-based companies across all sectors. NVM invested in ACSG via its Venture Capital Trusts (VCT) Northern Venture Trust, Northern 2 VCT and Northern 3 VCT. Octopus Investments (€152mn (2014); AUM €5.9bn) is a sector-agnostic, UK-based venture capital firm. The firm last featured in our September 2013 issue for its participation in Calastone’s €13.5mn Series B round. It typically seeks to invest between £250k (€315k) and £5mn (€6.3mn) per company. Octopus invested in ACSG via its AIM-listed VCTs Octopus AIM VCT and Octopus AIM VCT 2 in July 2008. © Go4Venture Advisers 2014 Page 25 November 2014 # Target Acquirer 2 CAP Automotive (UK) business.cap.co.uk Solera Holding (US NYSE:SLH) www.solerainc.com Target Sector Price (€mn) Revenues (€mn) P/R Funding (€mn) P/F Internet Services 376 N/A N/A 210 1.8x CAP Automotive (UK), a provider of online vehicle valuation data and software, will be acquired by Solera Holding for $464mn (€376mn). The seller is UK-based Montagu Private Equity. This acquisition will allow US-based Solera to combine several recent acquisitions in the risk and asset management space into a single platform, with which it plans to expand throughout continental Europe. CAP’s portfolio of solutions will enhance Solera’s presence across the vehicle lifecycle, from purchase to sale to salvage. The acquisition is expected to be immediately Earnings Per Share (EPS) accretive. Target CAP, founded in 1979, is a Leeds, UK-based provider of various automobile valuation databases. The company has developed a variety of software tools and services that allow consumer and trade users to look up the estimated value of cars and fleets. These are based on both UK Ministry of Transport (MOT) data and proprietary data gathered from such sources as enterprise fleets, used car dealerships and rental agencies. For private individuals, CAP provides third party valuation data to car buyers and sellers, for free via its consumer portal, www.cap.co.uk. Information includes residual value (determined by make and manufacturing year), as well as running costs and other data. Users can get valuation estimates simply by entering the car’s license plate number and mileage. For the automotive industry, CAP provides benchmark data on valuations for individual vehicles and fleets, and was the first UK company to do so through an online real-time platform. Its current used car values form a benchmark for residual values in the leasing industry, while its new vehicle data system serves a broad variety of e-commerce, showrooms and asset management systems. CAP information is also used by vehicle marketing websites and car sales portals to increase their appeal to consumers (e.g. by suggesting that certain cars better maintain resale value). Acquirer Solera Holding is a US-based company comprising thirteen brands that provide software and services to the automotive claims processing industry. Founded in 1966 and headquartered in Texas, the company’s first offering was Audatex Reuter, the world’s first automated vehicle repair cost estimation software. Since then, it has grown to serve over 165k customers in more than 70 countries. Its primary customers are auto recyclers, collision repair facilities and servicing businesses, as well as insurance companies. Up until its $421mn (€310mn) IPO in 2007, Solera’s strategic focus had been almost entirely on the automotive claims industry (which at the time represented 94% of revenues), providing repair estimation and vehicle valuation services. By Q3 2014, other businesses including electronic titling (registration and documentation), financing, re-underwritings, servicing and vehicle history data had grown to represent 40% of revenues. This was primarily achieved through more than 30 acquisitions. Recently (as mentioned above), Solera has been acquiring risk and asset management solutions such as The Sherwood Group’s UK claims-related business, Auto Point and AutoSoft (for undisclosed amounts) in May 2014, April 2014 and January 2014, respectively. Montagu Private Equity got involved in May 2012 when it acquired CAP Automotive for £170mn (€210mn) in a MBO. Noteworthy Sellers Montagu Private Equity (€3bn (2011); AUM €5bn), the former buyout arm of HSBC, is a UK-based private equity firm that focuses on MBOs of middle-market companies. It typically invests in companies worth €100mn to €1bn, based in Northern Europe (with a focus on the France, Germany, the Nordic region and the UK) and Latin America. Since its founding in 1968, it has invested in over 400 companies. We last saw Montagu in July 2013 when it sold its stake in Host Europe, a provider of colocation and web application hosting services, to Cinven for €511mn (representing a 1.9x return). © Go4Venture Advisers 2014 Page 26 November 2014 # Target Acquirer 3 Vizrt (Norway OB:VIZ) www.vizrt.com Nordic Capital (Sweden) www.nordiccapital.com Target Sector Price (€mn) Revenues (€mn) P/R Funding (€mn) P/F Software 295 89 3.3x N/A N/A Vizrt (Norway), a provider of digital content production and management software, will be acquired by Nordic Capital for €295mn in cash. The sellers are investment firms Concord Ventures, Coral Group, Fidelity Investments, FSN Capital, Nordea Capital, ODIN Forvaltning and Star Ventures. Nordic Capital has no existing exposure to the digital content production industry. It has cited Vizrt as an innovator in its field, stating that the company’s technology has the ability to “shape the frontiers of broadcast graphics, video asset management and automation systems”. Upon completion of this acquisition, Nordic Capital intends to de-list Vizrt with immediate effect. Target Founded in 1997 and headquartered in Bergen, Norway, Vizrt provides a range of digital content production and management software for the broadcasting industry. Its offerings include: advertising management software, broadcast master control systems, live broadcast and recording systems, real-time sports analysis software, virtual sets and background creation, weather forecast production systems, and a further range of real-time 3D graphics software. The company has garnered significant traction and counts many of the world’s leading broadcasters as its customers, including The BBC, CBS, CCTV, CNN, Fox, ITN and Sky. The company currently has c. 600 employees across its offices in Africa, Asia, Europe, the Middle East and the US. Vizrt listed on the Oslo Stock Exchange, at a valuation of NOK567mn (€70mn), in May 2005. The company reported revenues of $122mn (€88.6mn; 5% year-on-year growth) and EBITDA of $24.7mn (€17.9mn; c. 20% margin) for its fiscal year ending December 2013. Acquirer Founded in 1989 and headquartered in Stockholm, Sweden, Nordic Capital (€3.8bn (2013); AUM €11.6bn) is a private equity firm that invests in buyouts of companies located in German-speaking countries and the Nordic region, across all sectors. It typically invests between €40mn and €3bn, and seeks to add value to its portfolio companies through international expansion, operational improvements and/or strategic repositioning. The firm has stated that c. 70% of its total value creation has stemmed from operational improvements. Nordic Capital operates in Europe with a team of 73 professionals across offices in Copenhagen, Frankfurt, Helsinki, Jersey, London, Luxembourg, Oslo and Stockholm. It manages a portfolio of c. 25 companies. The firm last featured in our June 2013 issue for its €173mn sale of Denmark-based IT software and services provider EG to Denmark-based private equity firm Axcel Management. Noteworthy Sellers Vizrt’s backers come from three regions: Israel, the Nordics and the US. Concord Ventures (€186mn (2000); AUM €203mn) is an Israel-based venture capital firm specialising in early-stage investments either within Israel or in companies with founders of Israeli origin, in the hardware, medtech, semiconductor, software and telecommunications sectors. Fellow Israeli investor Star Ventures (€536mn (2003); AUM €757mn) is a venture capital firm which primarily invests in the IT sector. Founded in 1992, it also has offices in Germany and the US. FSN Capital (€610mn (2013); AUM €1.1bn) is a Norway-based private equity firm which invests between €50mn and €250mn in companies operating in the Nordic region. It specialises in buyout transactions and is active across all sectors. Nordea Capital (AUM €60mn) is the Finnish Nordea financial services group’s special investment arm. Nordea has a market cap of c. €42bn and total assets of c. €670bn. ODIN Forvaltning is a Norway-based asset manager. Coral Group (€378mn (2007); AUM €401mn) is a US-based venture capital firm which invests in technology companies across all stages. It last featured in our January 2014 Bulletin for its participation in Spanish WiFi hardware provider Fon’s €10.3mn late-stage round. US-based Fidelity Investments (AUM €320bn) last featured in our November 2012 issue for its participation in Spotify’s €78mn late-stage round. More recently of note, Fidelity was lead investor in taxi-hire app Uber’s $1.2bn (€1bn) late-stage round in June 2014 (which valued the four-year-old company at $17bn (€13bn)). © Go4Venture Advisers 2014 Page 27 November 2014 # Target Acquirer 4 Perten (Sweden) www.perten.com PerkinElmer (US NYSE:PKI) www.perkinelmer.com Target Sector Price (€mn) Revenues (€mn) P/R Funding (€mn) P/F Hardware 214 24 8.9x N/A N/A Perten (Sweden), a developer of lab and factory technology for the food business, will be acquired by PerkinElmer for €214mn. The seller is Valedo Partners (a Sweden-based private equity firm). Acquiring Perten will allow PerkinElmer to further expand into the global food testing market, and access longer-term opportunities in China and other emerging markets Target Sweden-based Perten is a long-time developer of testing and quality control technology for the food business. Its offering is focused on the feed, flour, grain and processed food segments, and is used by farmers, food manufacturers and scientists to ensure quality and safety. Founded in 1962 by Swedish cereal chemist Harald Perten, the company was built around automating the testing of grain using the Falling Number Method. This gauges the viscosity of a heated flour-water slurry sample by measuring the time (or Falling Number) that an object takes to fall through it. Knowing the viscosity of the sample allows the tester to determine the levels of alpha-amylase within it, and consequently determine the level of sprouting (hence spoilage) within a sample of grain. Growing organically for c. 50 years, the company has since built a portfolio of technologies for the food industry, offering factory, field and lab-based testing equipment such as food texture analysers, Near InfraRed (NIR) spectrometers for in-line measurement and moisture analysers. In September 2010, the company was acquired from the Perten family by Swedish investor Valedo Partners in a management buyout (for an undisclosed valuation), at which point it reported revenue of SEK 250mn (€24mn). Since then, it has acquired TexVol instruments, a Swedish food technology company offering volume measurers, but has otherwise grown organically, more than doubling revenues to c. €50mn. Acquirer PerkinElmer is a US-based conglomerate providing diagnostic, imaging and medical devices. Formed through a series of mergers between biotechnology, optical design and other technology companies (including the electro optics division of GE and Lumen Technologies) throughout the 20th century, it serves the aerospace, agriculture, chemicals, cleantech, life sciences and semiconductors industries. Among its leading products are Amorphous Silicon (a-Si) Flat Panel X-ray Detectors (FPDs), used primarily for medicine and veterinary sciences, as well as industrial testing. Its lab instruments range from various spectroscopy solutions to digital pathology systems. PerkinElmer has grown steadily in the years since the financial crisis, reporting $2.1bn (€1.7bn) revenues in 2013, a 2.4% increase from 2012. Like many large technology companies, the firm has been quite active in M&A, acquiring 15 companies in the last five years. Perten is PerkinElmer’s third largest acquisition in this period, behind the €410mn purchase of Caliper Life Sciences (a US lab equipment provider) in November 2011 and the €160mn purchase of CambridgeSoft (a US healthcare informatics provider) in March 2011. Noteworthy Sellers Appearing for the first time in our Bulletin, Swedish private equity firm Valedo Partners (€235mn (2011); AUM €329mn) is a sector-agnostic (with the exception of avoiding the property, tobacco and weapons industries) investor based in Stockholm. Focusing on the Nordics, Valedo will not invest in startups or unprofitable companies, preferring growth-stage investments in companies with sales of between SEK100mn (€11mn) and SEK500mn (€54mn). Among its better known investments is Joe & the Juice, a Denmark-based coffee chain with presence in the Nordics and the UK. © Go4Venture Advisers 2014 Page 28 November 2014 # Target Acquirer 5 Definiens (Germany) www.definiens.com AstraZeneca (UK LSE:AZN) www.astrazeneca.com Target Sector Price (€mn) Revenues (€mn) P/R Funding (€mn) P/F Software 119 N/A N/A 40 3.0x Definiens (Germany), a provider of image analysis software for use in digital pathology and clinical applications, will be acquired by AstraZeneca for $150mn (€119mn). The sellers are private equity firms Cipio Partners, Gilde Healthcare Partners, LBBW Venture Capital, TVM Capital and Wellington Ventures. This acquisition, which is AstraZeneca’s second deal in a week following its partnership with Johnson & Johnson and Pharmacyclics (which will involve trials of its drugs together with a blood cancer medicine jointly developed by the US companies), will strengthen its position in cancer drugs and particularly immune-oncology, by accelerating its cancer research through the identification of “biomarkers” that will help it match treatments to the genetic profiles of individual patients. Target Founded in 1994 by Professor Gerd Binnig (who won the 1986 Nobel Prize in physics for helping develop electron microscopy, and was one of the original developers of Object-Based Image Analysis (OBIA)), Definiens is a Germany-based provider of image analysis software for use in digital pathology and clinical applications. Definiens has developed an OBIA-based Cognition ® Network Technology (so called as it mimics, through artificial intelligence, how the human brain is thought to process images). As well as licensing OBIA software, Definiens offers consulting, outsourced analysis and training. The company employs 76 staff across its offices in Germany and the US. Definiens recently raised €15mn in a late-stage round led by new investor Wellington Partners and existing investor Gilde Healthcare, with support from existing investors Cipio Partners and TVM Capital, which features in our June 2014 Bulletin. Acquirer Founded in 1999 through the merger of pharmaceutical groups Sweden-based Astra and UK-based Zeneca, AstraZeneca provides biological and pharmaceutical products globally. The company, which is involved in the entire pharmaceutical value chain from discovery, early and latestage development through to manufacturing and distribution, primarily operates in three area of healthcare: Cardiovascular and Metabolic Disease (CVMD), Oncology, and Respiratory, Inflammation and Autoimmunity (RIA). It is also active in the Infection, Neuroscience and Gastrointestinal (ING) disease area. AstraZeneca employs c.51,500 staff globally, of which 35% are in Europe, 33% in Asia Pacific and 22% in North America. It reached revenues of €19.4bn in 2013 (-8% year-on-year) and EBITDA of €6.2bn (c. 32% margin) for the same time period. Noteworthy Sellers Gilde Healthcare (€150mn (2013); AUM €450mn) invests in therapeutic and medtech companies on both sides of the Atlantic. It also invests in healthcare services companies, but only in the Benelux region and Germany. For diagnostics and medical technology, the firm will invest up to €15mn in revenue-generating companies, with a preference for milestone-driven follow-on funding as part of a syndicate. LBBW Venture Capital is a Germany-based venture capital firm which invests across all stages (from seed to pre-IPO) in companies in the industrial technologies, life sciences, software and telecom sectors, based in Austria, Germany and Switzerland. TVM Capital (€157mn (2012); AUM €950mn), which backed Definiens as far back as 2000, was originally both a healthcare and technology investor, so at the time was backing not just potential medical applications but also the firm’s nascent earth sciences business. Cipio Partners (€137mn (2011); AUM €300mn) is a Germany and Luxembourg-based secondary fund which typically invests between €2mn and €6mn in cleantech, medtech and TMT businesses based in Europe, Israel and the US, with over €10mn in revenues. Wellington Partners (AUM €850mn) is a Germany and UK-based life sciences and technology venture firm. In life sciences, it invests in early-stage therapeutic companies, and diagnostics and medtech companies at all stages. Interestingly, for technology investments, one of the areas targeted by the firm is digital media and software, which gave it an unusual combination of in-house expertise directly relevant to Definiens. © Go4Venture Advisers 2014 Page 29 November 2014 # Target Acquirer 6 CLS Communication (Switzerland) www.clscommunication.com Lionbridge Technologies (US NASDAQ: LIOX) www.lionbridge.com Target Sector Price (€mn) Revenues (€mn) P/R Funding (€mn) P/F Software 62 75 0.8x N/A N/A CLS Communication (Switzerland), provider of a range of technology-enabled language translation services, will be acquired by Lionbridge Technologies for $77mn (€62mn). The seller is Swiss private equity firm Zurmont Madison. LionBridge’s CEO (Rory Cowan) has specifically cited CLS’ “highly complementary geographic reach and vertical market expertise” as motivators. Cowan further stated that “this business combination positions Lionbridge as the clear market leader in global translation and content solutions worldwide". Adding CLS, which is strong in the financial services and life sciences segments, will also allow Lionbridge to diversify and decrease its reliance on the technology industry. Target Founded in 1997, CLS Communication provides a range of language translation services. The firm offers writing, editing and translation services for more than 50 languages (which according to CLS includes all the major Asian, European and Middle Eastern languages). Specifically, CLS offers these services for items such as annual reports, financial reporting and IFRS, marketing documentation, technical documentation and website content. CLS’ translation services combine a range of technology - such as CLS translation memories (storage and automatic recognition of previously translated texts) and CLS project hub (a web-based collaboration platform for document drafting and real-time translation) - with its c.250 in-house translators and network of more than 2,400 external partners. The company also operates a terminology department which helps clients set up their own corporate dictionaries and organise their linguistic assets. In addition, CLS provides an automated machine translation web-service which translates e-mails and other simple texts in seconds. The company primarily provides its services to companies within the financial services, legal, life sciences, insurance, telecommunications and utilities sectors. Headquartered in Zurich, Switzerland, CLS has operations in 10 other countries (including China, France, Germany, Hong Kong, Singapore, Spain, the UK and the US) and had 2014 revenues of €75mn. Acquirer Founded in 1996, Lionbridge Technologies is a provider of application testing, content development and translation products and services. The company’s application testing services include crowdsourced-based mobile device, app and website testing. Its content management services include engineering services, product documentation and training support. Finally, its translation services are focused on translating professional material (such as company annual reports, product documentation and websites). Lionbridge provides these services to offer clients its stated deliverables of “global brand consistency, local relevancy and technical usability”. The company currently offers its services to more than 800 companies. Headquartered in Massachusetts, US, the company has an additional 37 offices in countries including Brazil, Canada, China, Germany, Italy, India, Netherlands, Singapore, Spain, Thailand and the UK. In May 2013, US market research company Common Sense Advisory named Lionbridge the “#1 Language Service Provider (LSP) in the world”. With c. 5,000 employees, the company has a market capitalisation of $361mn (€293mn) and reported LTM revenues of $498mn (€404mn; 1.8% year-on-year growth) and EBITDA of $28.7mn (€23mn; c. 6% margin), as of November 2014. Noteworthy Sellers CLS Communication was acquired by Zurmont Madison in a LBO transaction in July 2009. This transaction, which aimed to enable CLS to achieve further internationalisation mainly via buy-and-build acquisitions, led to three acquisitions in Canada, Germany and Scandinavia. Zurmont Madison (€207mn (2012)) is a Switzerland-based private equity firm, which primarily invests in the construction industry services, consumer and industrial goods, logistics and services sectors, in companies based in Austria, Germany and Switzerland. It typically invests in the scenarios of change in shareholder structure, corporate succession, growth financing, MBO or MBI and spin-off, in companies with revenues between CHF30mn (€25mn) and CHF200mn (€166mn). The company states that it will not invest in startup or venture projects. © Go4Venture Advisers 2014 Page 30 November 2014 List of Acronyms Financial Terms k used as abbreviation for 1,000 (for example, €1k means €1,000) mn million bn billion AUM Asset Under Management CEO Chief Executive Officer EBIT Earnings before interest and tax EBITDA Earnings before interest, tax, depreciation and amortisation ECM Equity Capital Markets FINMA Financial Market Supervisory Authority IPO Initial Public Offering JV Joint Venture LBO Leverage Buyout LLP Limited Liability Partnership M&A Merger and Acquisition PLC Public Limited Company SME Small-Medium Enterprise VC Venture Capital Business / Technical Terms ABS Asset Backed Securities API Application Programming Interface B2B Business-to-Business B2C Business-to-Consumer BI Business Intelligence C2B Consumer-to-Business CAGR Compound Annual Growth Rate CE Conformité Européenne CE-IVD Conformité Européenne-In Vitro Diagnostics EPS Earnings Per Share ERP Enterprise Resource Planning FPD Flat Panel X-ray Detectors © Go4Venture Advisers 2014 Page 31 November 2014 FRN Floating Rate Note ISP Internet Service Provider IT Information Technology LBS Location Based Services MBI Management Buy In MBO Management Buy Out MNO Mobile Network Operator MVNO Mobile Virtual Network Operator NIR Near InfraRed OBIA Object-Based Image Analysis OEM Original Equipment Manufacturer P2P Peer-to-Peer PIPE Private Investment in Public Equity POS Point-of-Sale PSP Payment Services Provider QR Quick Response Code R&D Research and Development RMBS Residential Mortgage Backed Securities SaaS Software-as-a-Service SEO Search Engine Optimisation VCT Venture Capital Trust © Go4Venture Advisers 2014 Page 32 November 2014 Go4Venture Advisers LLP 48 Charles Street +44 (0)20 7529 5400 Berkeley Square g4vbulletin@go4venture.com London W1J 5EN This report was published on December 23, 2014 Disclaimer This report has been prepared and issued by Go4Venture Advisers LLP who are authorised and regulated by the Financial Conduct Authority. All information used in the publication of this report, has been compiled from publicly available sources that are believed to be reliable, however no representation, warranty, or undertaking, express or limited is given as to the accuracy or completeness of the information or opinions contained in this report. Opinions contained in this report represent those of Go4Venture Advisers LLP at the time of publication. This research is non-objective. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment. Furthermore, as the information contained in this document is strictly confidential it may not be reproduced or further distributed. The value of investments and any income generated may go down as well as up. Past performance is not necessarily a guide to future performance. Investors may not get back the amount invested. This publication is not intended to be relied upon in making any specific investment or other decisions. Appropriate independent advice should be obtained before making any such decision. This report has been compiled by Jean-Michel Deligny, Managing Director – for and on behalf of Go4Venture Advisers. Copyright: 2014 Go4Venture Advisers. All rights reserved. Registered address: 10 Wellington Street, Cambridge, CB1 1HW Incorporation number OC336611 Authorised and Regulated by the Financial Conduct Authority © Go4Venture Advisers 2014 Page 33