0Acuity Advisors | Semiconductor Industry Market Review | Jan 2018

Acuity Market ReviewIIoT Industry – 2018

Confidential | March 2019

©Acuity Advisors LLP

1Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 1

50.0

100.0

150.0

200.0

Automotives Healthcare Industrials

Transportation Smart Buildings Smart City

Others S&P 500 Index

1

1.0x

1.2x

1.2x

2.4x

4.8x

2.2x

1.3x

1.0x

1.2x

1.4x

3.2x

3.5x

2.2x

1.5x

Introduction

Market Dynamics

IIoT Share Price by Sub-Sector (2017-2018, Rebased to 100)

Acuity Market Review: IIoT Industry – 2018

Sub-Sectors

IIoT Trading Comparables (2017-2018)

Median EV/Revenue

Median EV/EBITDA

Q3 2018 YoY Rev Growth

3%Automotive11.3x

14.9x

12.1x

26.7x

25.6x

17.6x

11.5x

19.8x

21.6x

11.3x

21.4x

22.0x

18.9x

13.7x

LTM Q3 2018 EBITDA Margin

▪ Over the last 24 months, IIoT industry

has underperformed in comparison

with the S&P 500 index. In 2018, listed

IIoT companies have seen an overall

decline in share prices, giving an

average return of -5.6% while the index

stood at 11.0%.

▪ The IIoT industry’s trading multiples

remain robust with EV/revenue

multiples of 1–4x and EV/EBITDA

multiples of 11–22x. IIoT companies in

smart cities, smart buildings,

Transportation and Healthcare are

trading at the higher end of the range.

▪ Performance across subsectors and by

individual companies has varied widely.

▪ Those with a continuing value story

(e.g. ORBCOMM) driven by organic

growth and M&A continued to see

strong share price momentum to the

point of the wider tech sector

downturn in Q4.

▪ Subscale businesses, those failing to

gain traction and those focused on a

predominately hardware driven model

saw weaker performance throughout

the year as some of the “buzz” around

the IoT sector was replaced with a

sharper focus from investors on

winners and potential losers in the

sector.

▪ Automotive, Healthcare and

Transportation all saw positive multiple

growth.

▪ The Industrial Internet of Things (IIoT) and the fourth industrial revolution (Industry 4.0) continue to dramaticallyimpact business and economic models globally across each and every sector.

▪ The global IIoT market was valued at $157.6bn in 2018 and is expected to grow at a CAGR of 8.06% to $232.15bnby 2023. Core trends in connectivity, the availability and power of cloud computing, visualisation and analytics,machine learning and AI – coupled with global financing and deployment of smart hardware – continue to driveinnovative use cases and digital disruption across cities, transport, manufacturing and beyond.

▪ 2018 saw record levels of M&A across the global IIoT sector as strategic corporates and investors looked to enter,and further establish, their technology propositions and investments in across the sector.

-19.5%

11.5%-5.1%-9.3%

-12.4%

7.2%

1Q 17 2Q 17 3Q 17 4Q 17 1Q 18 2Q 18 3Q 18 4Q 18

Industrials

Smart Buildings

Smart City

Transportation

Others

Healthcare 13%

6%

1%

8%

9%

8%

6%

4%

9%

4%

11%

8%

9%

-11.6%

11.0%

12 Months ended 30th Sept 1712 Months ended 30th Sept 18 Source: Capital IQ, Acuity Intelligence

2Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 2

$3.8bn

$5.1bn

Global Mid-Market1 M&A Deal Values by Sub-Sector (2017-2018)

Transactions Analysis

Source: Capital IQ, Company Websites, Acuity IntelligenceNote: 1Mid Market – Deals with transaction values up to $1.0b

2017

2018

Deal Volume ($USDmm)

Acuity Market Review: IIoT Industry – 2018

Global Mid-Market M&A Deal Volumes (2017-2018)

Top Mid-Market1 Deals (2018)

47%

32%

7%

14%

31%

42%

23%

4%

Date: 15/02/18Value: $50m

Acquired By

Date: 04/09/18Value: $300m

EV/Revenue: 10x

Acquired By

▪ Deal activity in the mid-market grew to record levels again in 2018, with global deal volumes over 80 ($5.1bn in

disclosed deal value), a volume increase of 32% on 2017. Activity continued across smart Transportation, Industrials

and platforms as technology acquisitions by larger tech and non-tech players, consolidation and Private Equity

investment drove activity: 70 different strategic buyers made acquisitions in 2018.

▪ Our selected deals illustrate several key, different M&A trends: Rockwell Automation’s significant investment in

PTC illustrated the value PTC has created through their own IoT and M&A fueled transformation; Siemens foray

into “Digital Factories” with the acquisition of Mendix; Montagu’s investment in Wireless Logic (the third PE backed

buy-out of WL) demonstrates private equity’s continued appetite in backing attractive IoT growth models; Munich

RE’s strategic acquisition of relayr for a rumoured 10x revenues shows how traditional buyers are embracing and

valuing the transformational power of IoT platforms and Google’s acquisition of Xively highlighting how global tech

giants continue to build out their IoT stacks via strategic M&A.

Date: 01/08/18Value: $730m

EV/Revenue: 8x

Acquired By

Date: 27/06/18Value: $510.1m

EV/Revenue: 7.1xEV/EBITDA: 21.6x

Acquired By

Date: 11/06/2018Value: $1bn

EV/Revenue: 3.4xEV/EBITDA: 16.8x

Acquired By

11

18

14

8

19

21

24

18

1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18

Industrials Others Smart City Transportation/Automotive

3Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 3

Global M&A Mid Market1 Deal Volumes by Geography (2017)

Transactions Analysis (Cont.)

Source: Capital IQ, Company Websites, Acuity IntelligenceNote: 1Mid Market – Deals with transaction values up to $1.0bn

Acuity Market Review: IIoT Industry – 2018

▪ North America and Europe continue to dominate acquisition activity in 2018 with c80%+ of the total deals being

carried out in these two regions.

▪ The level of cross-border acquisitions, and cross-continent acquisitions, continues to grow as companies have

moved out of their home geographies to break into new markets (acquiring technology and market access). In

addition, we are starting to see some examples of companies in the West moving towards Asia whilst European

players continue to be acquired by larger Asian technology companies.

Europe AsiaNorth AmericaRoW

Headquarters of IIoT Targets

90% 10%

Headquarters of acquirers of North American Targets

40%60%

North America

Headquarters of acquirers of European Targets

42%58%

Europe

Headquarters of acquirers of Asian Targets

15%85%

Asia

9%82%

5%5%

25%

25%

50%

Headquarters of IIoT Targets

Headquarters of acquirers of North American Targets

North America

Headquarters of acquirers of European Targets

Europe

Headquarters of acquirers of Asian Targets

Asia

Global M&A Mid Market1 Deal Volumes by Geography (2018)

13%

87%

46%54%

37%

63%

72%

11%

17%

2%

85%

11%

2%

2%

14%

80%

4%

4Acuity Advisors | Semiconductor Industry Market Review | Jan 2018Acuity Advisors | IIoT Industry Market Review | March 2019 4

▪ Overall revenue multiples have been

materially impacted by a number of

“Platform” and software deals undertaken

at high multiples within our “Industrial” and

“Other” categories e.g. Relayr / Munich Re,

Medix / Siemens, Wireless Logic / Montagu

and a number of others.

▪ These standout platforms have traded for

between 7x to 10x revenues.

▪ Our view on the market norm is more 3x to

5x revenues for strong businesses, in part

driven by their growth/level of recurring

revenue and mix of SaaS to hardware

revenues.

▪ EBITDA multiples continue to vary

significantly by sub-sector and deal: in part

because many businesses have focused on

growth and revenue rather than margin.

▪ The data shows a wide range of low double

digit EBITDA multiples up to 20x+ with

valuation very much driven by sector and

company specifics.

Acuity Market Review: IIoT Industry – 2018

Valuation Analysis

Source: Capital IQ, Acuity Intelligence

About Acuity

IIoT Precedent Transactions (2017) –EV/Revenue Multiples

IIoT Precedent Transactions (2018) –EV/Revenue Multiples

IIoT Precedent Transactions (2017) –EV/EBITDA Multiples

IIoT Precedent Transactions (2018) –EV/EBITDA Multiples

Type: Divestment

Acquired by

▪ We know IIoT industry – that’s why we’re the trusted

M&A advisors for the industry. We are the most

active and successful European Mid-Market

Investment Bank specialising in the IIoT market

having completed more deals than any other firm.

▪ We are skilled at getting to the heart of every

technology business, understanding what will attract

buyers and investors NS building long-lasting client

relationships. We have an extensive network across

the global IIoT industry.

▪ We have an unrivalled understanding of the

industry’s complexities and personalities – our track

record and client feedback are compelling evidence

of that.

▪ We’re an international firm – our deals are cross-

border, from offices in London, Munich, Shanghai and

Silicon Valley – but we’re grounded in our approach.

We move quickly when it’s needed, and we’re around

for the long haul when patience is a virtue.

24 People4 Offices 10 IIoT Projects

CY16–18

5-Year Track

Record Type: Divestment

Acquired by

Type: Divestment

Acquired by

Type: Buy Side

Acquired by

Max

Median

Min

Max

Median

Min

Max

Median

Min

5Acuity Advisors | Semiconductor Industry Market Review | Jan 2018

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