U.S. Bancorp Piper Jaffray
Technology/Communications M&A Weekly
November 3, 2003
Technology/Communications Mergers & Acquisitions
David Jacquin - Managing Director, Group Head, 415-277-1505, djacquin@pjc.com
Jason Hutchinson - Managing Director, 415-277-1510, jhutchinson@pjc.com
Hugh Hoffman - Managing Director, 612-303-6319, hhoffman@pjc.com
Selected Technology M&A
M
Transactions
(A p p ro ximate valuatio ns , $ in millio ns )
Date
10/27/03
10/30/03
10/27/03
10/27/03
10/27/03
Target / Advisor
Connectivity Solutions (Avaya) / Citigroup
Expanets / Bear Stearns & Co.
On Technology / Lehman
Anyway.com
SCB Computer Technology
Acquirer / Advisor
CommScope / Wachovia Securities
Avaya / JP Morgan
Symantec(#) / Lehman Brothers
InterActiveCorp (# >)
CIBER
Trans.
Value
$337.9
$152.0
$101.1
$62.5
$52.5
Ent.
Value
$337.9
$152.0
$87.6
$62.5
$59.7
LTM
Sales
NA
NA
$34.2
NA
$86.6
EV / 1-Week
Sales Premium Coverage Universe
NA
NA Software Infrastructure
NA
NA Software Infrastructure
2.6x 16.3% Software Infrastructure
NA
NA Internet Media & Marketing
0.7x
7.5% Technology & Business Services
Comments
Provides structured cabling
Provides converged communications for mid-sized businesses
Develops network management software
Online travel agency
Provides information technology consulting services
Selected Communicationss M&A Transactions
(A p p ro ximate valuatio ns , $ in millio ns )
Date
Target / Advisor
11/03/03 GlobeSpanVirata (#) / Morgan Stanley
Acquirer / Advisor
Conexant Systems (# >)
Trans.
Value
$1,079.8
Ent.
Value
$931.2
LTM
Sales
$241.6
EV / 1-Week
Sales Premium Universe
3.9x 16.6% Enterprise Comp. & Storage, Semis
Comments
Provider of broadband communications solutions
M&A Spotlight Trransactions
10/30/03 — Avaya Inc. (NYSE:AV) a leading global provider of communications solutions and services for businesses,
announced an agreement with NorthWestern Corporation (NYSE:NOR) to acquire substantially all of the assets of Expanets,
the nation's largest provider of converged communications for mid-sized businesses and one of the largest resellers of Avaya's
products in the United States. The acquisition will allow Avaya to continue providing quality sales and service support for
Expanet's customers' and grow its small and mid-sized business.
Under terms of the agreement, Avaya will pay NorthWestern $152 million in cash, less certain working capital adjustments and
liabilities. The agreement is subject to customary closing conditions, including regulatory approvals, and is expected to close by
the end of the current fiscal quarter. Avaya purchased the Expanet's assets at an auction on October 29, 2003, conducted on behalf
of NorthWestern Corporation, Expanet's parent.
10/27/03 — Avaya Inc. agreed to sell its Connectivity Solutions business to CommScope, Inc. (NYSE: CTV), a leader in the
design and manufacture of high-performance broadband communication cables.
Under the terms of the agreement, Avaya will receive a purchase price of $263 million, subject to adjustment, consisting of
approximately $210 million of cash, a convertible note payable in the amount of $18 million, and CommScope common stock
having a current value of $34.9 million. Additionally, under the terms of the agreement, CommScope will assume up to $75 million
of certain specified liabilities primarily related to employee matters. The transaction is expected to close within 90 days except
with regard to certain international operations and is subject to customary conditions including regulatory and other approvals.
Avaya said Connectivity Solutions had fiscal 2003 sales of approximately $542 million and operating income of approximately $3
million. As part of the agreement, CommScope will assume Connectivity Solutions' leases and purchase its facilities, including its
factory in Omaha.
(Data p ro vid ed b y co mp any p res s releas es , eq uity res earch, and U.S . B anco rp Pip er Jaffray)
(Data p ro vid ed b y V entureS o urce)
Date
Target / Advisor
10/30/03 Sepro
10/29/03 Zairmail
Acquirer / Advisor
Openet
Launchpoint
11/
/3/03 — Conexant Systems, Inc. (Nasdaq: CNXT) and GlobespanVirata, Inc. (Nasdaq: GSPN) announced the signing
off a definitive agreement to combine the two companies in a strategic merger. The combined company will possess the
wo
orld’s most complete and most advanced portfolio of semiconductor solutions targeting the broadband digital home.
Under the terms of the merger agreement, which has been unanimously approved by the boards of directors of both
ompanies, GlobespanVirata shareholders will receive 1.198 shares of Conexant common stock for each share of
co
GllobespanVirata stock. Based on the fully diluted share counts for the two companies as of market close on Friday, October
31, 2003, current Conexant shareholders will own 62.75 percent and current GlobespanVirata shareholders will own 37.25
peercent of the combined company’s shares. The transaction is subject to customary closing conditions, including shareholder
an
nd regulatory approvals, and is expected to be completed in the first quarter of calendar 2004.
Armando Geday will serve as chief executive officer of the company and Matt Rhodes will be president. Dwight Decker
wiill assume the role of chairman. The board of directors of the combined company will have 12 members, with Conexant
deesignating seven directors, including Decker, and GlobespanVirata designating Geday and four others.
Based on the market values of the individual companies on October 31, 2003, the merged company would be valued at
pproximately $2.8 billion, and it would have an annual revenue run-rate of approximately $1.2 billion. The combined
ap
co
ompany will retain the Conexant name and its stock will continue to trade on the Nasdaq national market under the ticker
symbol “CNXT.” The merged company will employ approximately 2,400 people worldwide and will be headquartered in Red
Baank, New Jersey at GlobespanVirata’s current headquarters.
The VC Liquidiity Corner
Total
Trans.
Last
Caapital Raised
Value Post $ Val. Step-up to Date ROIC Universe
NA
$12.8
NA
$10.5
NA Software Infrastructure
NA
NA
NA
$12.1
NA Internet Media & Marketing
Venture Capitalist
Trinity Venture Capital
Timberline Venture Partners
M&A
M&A IPO/ IPO Split
5 55% / 45%
Last Week 6
Q1 2003
76
0 100% / 0%
Q2 2003
83
0 100% / 0%
Q3 2003 106
6 95% / 5%
Q4 2003
27
10 73% / 27%
YTD 2003 292
16 95% / 5%
U.S. Bancorp Piper Jaffray
Technology/Communications M&A Weekly
November 3, 2003
Technology/Communications Mergers & Acquisitions
David Jacquin - Managing Director, Group Head, 415-277-1505, djacquin@pjc.com
Jason Hutchinson - Managing Director, 415-277-1510, jhutchinson@pjc.com
Hugh Hoffman - Managing Director, 612-303-6319, hhoffman@pjc.com
Private Equity/LBO Analysis
Spread (LIBOR) For Leveraged Buyouts Senior Bank Loans (By Deal Size)
$70
350
250
200
277
251
1996
306
257
264
344
316
353
334
309
1998
1999
2000
2001
2002
$63.3
$55.4
$60
396
353
238
242
1997
294
363
($ in Billions)
400
300
Buyout Funds Raised
$ in Billions
450
LTM
6/30/03
$50
$34.5
$40
$30
$23.2
$18.4
$20
$10
$5.3
$6.0
1992
1993
$36.9
$34.5
$17.0
$11.7
$4.1
$0
Less than $100 Million
(Data Per U.S . B anco rp Pip er Jaffray)
$100 Million to $250 Million
1994
1995
1996
1997
1998
1999
2000
2001
2002
1H
2003
Key M&A Valuation Statistics
No te: M ultip les have b een chang ed to med ian values .
Technology Transactions
4 .0 x
2 .0 x
10 0 %
4 .0 x
80%
3 .0 x
1.8 x
2 .2 x
1.4 x
1.2 x
1.6 x
1.9 x
1.9 x
1.1x
1.0 x
60%
1.6 x
1.4 x
20%
0 .0 x
0%
Q1 0 1
Q2 0 1
Q3 0 1
Q4 0 1
Q1 0 2
Q2 0 2
10 0 %
75%
Q3 0 2
Q4 0 2
71%
Q1 0 3
70 %
Q2 0 3
1.3 x
1.3 x
1.0 x
1.3 x
1.2 x
Q3 0 2
Q4 0 2
Q1 0 3
40%
0%
Q3 0 1
Q4 0 1
Q1 0 2
22%
Q2 0 2
Q2 0 3
Q3 0 3
12 5
Venture Backed Tech/Comm M&A
46%
60%
20%
Q2 0 1
52 %
52 %
52 %
52 %
3 5%
10 0
75
50
2 5%
25
0%
(Data Per U.S . B anco rp Pip er Jaffray)
1.2 x
80%
2 .1x
0 .0 x
Q1 0 1
52 %
10 0 %
2 .3 x
2 .3 x
0 .7x
Q3 0 3
54 %
50 %
1.7x
2 .0 x
40%
1.0 x
Communications Transactions
2 .6 x
3 .0 x
0
Q1 0 1
Q2 0 1
Q3 0 1
Q4 0 1
Q1 0 2
Q2 0 2
Q3 0 2
Q4 0 2
Q1 0 3
Q2 0 3
Q3 0 3
Market Overview
Equity Capital Markets Activity:
There were 24 transactions completed in the equity capital markets last week raising a combined $4.1 billion. DealNasdaq
activity consisted of 5 IPOs, 14
follow-on offerings and 5 convertible transactions. Last week, 4 of the 5 IPOs priced within their filing range with 1DJIA
pricing above the range. In the
aftermarket, IPOs gained 15% on their first day and finished the week up 23% from offer price. Three of the 5 IPOsS&P
were500
for biotechnology issuers,
2000
each pricing at the bottom of the range. Follow-on activity consisted of 11 shelf takedowns and 3 conventional Russell
marketed
offerings. On average,
follow-ons traded down 5% in registration, but finished the week up 3% from offer price.
Broader Market Activity:
Brian Belski, U.S. Bancorp Piper Jaffray's Fundamental Market Strategist, made the following comments on the broader market:
- Own Growth: While performance continues to surprisingly favor value, we believe growth multiples remain more attractive.
- Increase Large-Cap Exposure, Small-Cap Net Outperformance Likely To Proceed: Small-cap relative performance continues to contract, even
though longer-term outperformance trends remain intact. Small-cap multiples trading at a premium relative to large-cap stocks (SPX)
- Unemployment Peak Is Becoming Increasingly Likely: We believe both near-term (weekly claims) and longer-term unemployment data (duration of
unemployment) is showing decided improvement
Close as of Weekly YTD LTM
10/31/03 % Change
% Chang
% Change
1,932
3.6 44.7 45.3
9,801
2.3 17.5 16.7
1,051
2.1 19.4 18.6
528
4.3 37.9 41.4
497
8.4 71.7 68.2
(0.1) 12.1 10.2
432
192
6.1 62.5 81.8
NASDAQ
DJIA
S&P 500
Russell 2000
Philadelphia Semiconductor Index
S&P Software Index
S&P Comm Equipment Index
12
25
10
00
7
75
5
50
225
0
12 /3 1/0 1 3 /0 4 /0 2 5/0 2 /0 2 7/0 2 /0 2
NASDAQ
Rus s ell 2 0 0 0
S&P Co mm Eq uip ment Ind ex
8 /3 0 /0 2
10 /3 0 /0 2 12 /3 1/0 2 3 /0 4 /0 3 5/0 2 /0 3
DJ IA
Philad elp hia Semico nd ucto r Ind ex
7/0 2 /0 3 9 /0 2 /0 3 10
10/3
/301/0
/ 3
S&P 50 0
S&P So ftware Ind ex
U.S. Bancorp Piper Jaffray
Technology/Communications M&A Weekly
November 3, 2003
Technology/Communications Mergers & Acquisitions
David Jacquin - Managing Director, Group Head, 415-277-1505, djacquin@pjc.com
Jason Hutchinson - Managing Director, 415-277-1510, jhutchinson@pjc.com
Hugh Hoffman - Managing Director, 612-303-6319, hhoffman@pjc.com
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