M&A Market Spotlight December 2014

Automotive Technology

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Automotive Technology December 2014

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$13.7B

Total transaction value

2.1x

Median EV/S

13.3x

Median EV/EBITDA

Automotive Technology M&A activity November 2011-November 2014

M&A activity in both volume and value increased significantly

throughout the three year period of analysis in this report. The

number of transactions in November 2014 was up 60% on 2013,

similarly the disclosed transaction value was up 69%. The median

EV/S multiple throughout the entire period was 2.1x and the

EV/EBITDA was 13.3x.

2014 has also seen many automotive-technology targets achieve

high valuations for their companies:

In November, Solera Holdings, acquired UK-based CAP

Automotive for $464 million. The transaction netted the

seller a 17x EV/EBITDA multiple and 10x EV/S multiple.

In May, Bowmark Capital acquired UK-based Autodata for

$241 million in a deal estimated at be north of 14x EBITDA.

In addition to Solera’s recent purchase of CAP Automotive, the self-styled “industrial PE” purchased

11 other targets during the last 3 years. As the top acquirer in the auto-tech sector, Solera has not

being straying far from its core collision, valuation, and parts recycling roots. You can see from the

type of acquisitions made that Solera plans to be involved in the entire vehicle ownership lifecycle. We

would expect a move into the mechanical repair space at some time in the future.

The second most active buyer was DealerTrack, which is continuing its buy & build strategy with eight

transactions completed during the past three years focused on dealer-centric assets as they continue

an impressive track record of buying (and building) into the dealer space.

$2,237M

$4,385M

$7,413M

- $4,000,000.0K

- $2,000,000.0K

$0.0K

$2,000M

$4,000M

$6,000M

$8,000M

Nov 2011-12 Nov 2012-13 Nov 2013-14

0

20

40

60

80

100

120

Transaction Count

Disclosed Transaction Value

We at Hampleton have watched with interest over the past few years, the rise in both transaction volume and value in the automotive IT-related sector. While there was some justifiable nervousness in the sector several years ago as we all wondered which OEMs/suppliers would be left standing, the sector has recovered well and bank debt to support deals in the sector has come back strongly, creating a sharp uptick in valuations.

There is general agreement that this sector has been the source of some eye-watering valuations as of late. It’s not only new/advanced technology targets obtaining these high multiples, but also longstanding (read 40+ year old) firms that have brought new technology into a tired sector such as repair data that have attracted attention (e.g., Autodata).

There are several facets of the automotive technology sector, and we’ve consolidated this down to four sub-sectors and looked into recent deals and trends in developing this report. There are several facets of the automotive technology sector, and we’ve consolidated this down to four sub-sectors and looked into recent deals and trends in developing this report.

Automotive Technology December 2014

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Europe55%

North America40%

Rest of World5%

Europe35%

North America58%

Rest of World7%

Headquarter of Targets Headquarter of Acquirers purchasing

European Targets

The majority of acquirers of auto-tech targets were based in North America, 35% based in Europe and

7% in the rest of the world. Of the European transactions, 55% of targets were acquired regionally.

The two European countries with the most M&A activity in the automotive-tech space were the

United Kingdom and Germany, with 32 and 23 targets respectively.

Internet Commerce and Content26%

Enterprise Applications31%

Embedded Software Devices & Hardware22%

Fleet Management21%

Enterprise Solutions & Software : CRM Automation, Dealership Inventory Management, Dealership Management, HR, Inspection Software, Insurance Claims Management, Payment & Invoice Processing, Repair Estimation & Management, Tire POS & ERP Software

Internet Commerce and Content: Advertising, Auction Websites, Classifieds, Document Creation, Marketplaces, Quotation Websites, Reference Content, Rental Websites, Tire Retailers

Embedded Software Devices & Hardware: Equipment Sensors, Interface Software, Location Tracking, Parking Surveillance, Sensor Controllers & Systems, Vehicle Control Systems

Fleet Management – Fleet Management Systems, Fuel Supply Management, GPS Fleet Tracking, Logistics Management

Breakdown by Sub-Sector

We portion M&A activity in the auto-

tech sector into four sub-sectors. The

most active was Enterprise

Applications with 31% of the deals,

followed by Internet Commerce and

Content at 26%, Embedded Software

Devices & Hardware at 22%, and Fleet

Management with 21%.

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Enterprise Applications

$2.7 B

Total disclosed value of sub-sector

12.2x

Highest EV/S multiple paid for a target: Nuance Comms. acquisit ion of Tweddle Group for $80m

The total disclosed value of Enterprise Applications was

$2.7 billion with a median per transaction of $47 million.

This sub-sector has been stable over the past few years

with 28 transactions completing in each of the last two

years.

One of the most notable transactions involved US-based

Cox Automotive when it acquired dealership CRM

provider, Xtime, in November 2014 for $325 million with

an 8.1x EV/S multiple. A number of transactions

involving dealership management CRM SaaS targets

completed in this sub-sector. In more than 90% of

transactions, the buyer and seller were North American.

Currently activity supporting North American dealers is

robust and it will be interesting to see how this will

impact the traditional dealer management systems

space. DMS is largely controlled by UCS owned

Reynolds&Reynolds and CDK Automotive (the $2billion

DMS giant formerly known as ADP Automotive), which

very recently spun itself out of the larger and more

HR/payroll focussed ADP Global.

France-based Dassault was the most acquisitive of

European firms. Dassault purchased three German

simulation and visualisation targets, the largest of which

was RealTime Technology AG. Munich-based Realtime

sold 84% of its shares for just under $205 million at a 2.0x

EV/S multiple and 13.3x EV/EBITDA.

Numerous transactions involving collision claims and

mechanical repair providers took place during the past

three years. We continue to see European assets in this

aftersales-focussed sector performing well, especially

those that continue to invest in new technology as they

become must-have targets for firms such as Solera. The

aftersales sector has become quite a safe haven for

investment, especially after the collapse of the auto

industry in 2008-2010, because these assets have some

anti-cyclical characteristics which makes them quite

attractive when times get tough (as consumers decide to

repair versus replace their vehicles).

Top Acquirers

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Internet Commerce and Content

90% Percentage increase of transactions from 2013 to 2014

4.4x

Highest EV/S paid for a target: Dealertrack acquisit ion of Dealer Dot Com for $987m

M&A activity in 2014 has been buoyant with nearly a

two-fold increase in transactions compared with last

year. The disclosed value of transactions was $4.7 billion

and the median was a high $70 million.

The two most notable transactions in this sub-sector

were previously mentioned Solera Holding’s acquisition

of CAP Automotive and Bowmark Capital’s acquisition of

Autodata. Content management assets as well as

transaction / payment processing were just a few of the

key deals in this sub-sector.

Internet Brands (IB) was the top acquirer of internet

commerce and content targets having made seven

acquisitions during the three year period, primarily in the

new and used vehicle sales website sector. IB’s most

recent acquisition was for High Gear Media, a six-year

old automotive publisher. The automotive category is a

highly competitive one in which IB is competing with a

consortium of large media brands like Cox Enterprises,

owner of AutoTrader and Kelly Blue Book, Hearst

Magazines, owner of Road & Track, and the consortium

behind Cars.com.

Another active buyer was IHS which made two

acquisitions in this sub-sector. In the second largest

transaction in the auto-tech industry, IHS purchased

online automotive reference content provider, R.L. Polk

& Co for $1.4 billion at a 3.5x EV/S multiple. Its second

acquisition was for a German content provider, BDW

Automotive GmbH for just $8 million. BDW will expand

IHS's capabilities in the automotive dealer and

aftermarket data and systems market. IHS’s recent

acquisitions show that targets at both the high and low

end of this sector are attractive to prolific acquirers in

the current market.

Top Acquirers

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Embedded Software Devices and Hardware

300% Percentage increase of transactions from 2013 to 2014

9.1x

Highest EV/S paid for a target: Verizon acquisition of Hughes Telematics for $612m

Top Acquirers

Embedded Software Devices & Hardware had the

highest growth of all the sub-sectors from 2013 to 2014,

with volume increasing by 300%. Several of the targets

included in this group develop software for embedded

ECUs. The growth in in-vehicle networking is largely

driven by the increasing demand for automobile

electronics and optical sensors. This has resulted in an

increase by several orders of magnitude in the number

of on-board ECUs. Advanced vehicles manufactured

today will have more than 80 complex ECU’s controlling

everything from lane departure optical sensors to hybrid

power units and energy recovery systems.

The fast-pace growth of M&A activity during the past

year within embedded software devices and hardware

can be attributed to the rise of the ‘connected-car’.

Providers are in the midst of strengthening their

offerings to capitalise on consumer and enterprise

demand. We expect this sector to remain very robust as

the race to release semi-autonomous vehicles (which

will be around, in our view, for a long time before fully

autonomous vehicles appear) is well underway. All

OEMs are working on this, most using proprietary

technology, so we expect new / start-up technology

providers to be snapped-up quickly in this sector by

either T1 providers (Conti, Bosch) or directly by OEMs.

The mobile network operators are also getting in on the

action with Vodafone’s 74% majority acquisition of Italy-

based, Cobra Automotive for $145 million in June

2014. Cobra provides security and telematics solutions

to the automotive and insurance industries and will

allow the British telecom to augment its connected-car

offerings.

The automotive sector is rapidly becoming a leading

vertical for M2M with many manufacturers paying

premiums for embedded software devices. In the US,

Verizon acquired Hughes Telematics for $612 million at

a 9.1x EV/S multiple. The deal gives Verizon a new source

of growth as it faces saturation in the U.S. market for

mobile phones and land lines. For more information on

telematics, please see our 2H2014 M&A Market

Spotlight on the Internet of Things at

www.hampletonpartners.com/report/internet-of-

things-ma.

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Fleet Management

$3.9 B Total disclosed value

25.7x

Highest EV/EBITDA paid for a target: Omnitracs acquisit ion of XRS Corp. for $178m

This sub-sector represents 21% of the transaction

volume in the auto-tech segment and had a disclosed

transaction value of $3.9 billion with a median of $49

million. M&A transaction volume increased by 40% over

the last year. With statistics such as “almost 60 percent

of new cars sold in Europe are company cars” it is

unsurprising that we are seeing growing levels of M&A

activity within the Fleet Management sub-sector.

(Automotive Fleet News, 2014)

GPS tracking software and systems targets accounted for

just under half of the transactions. One of the top

European acquirers, TomTom, made two regional

acquisitions in the GPS fleet management space, after

staying out of the M&A market for three years. TomTom

acquired Coordina, a provider of GPS tracking systems

and services to the transportation and construction

sectors. The acquisition is an attempt to strengthen

TomTom's fleet management offerings and enable its

expansion into the Spanish market. Its more recent

acquisition was for French fleet management software

provider DAMS Tracking. TomTom views France as one

of the largest addressable markets in Europe, with

around 6 million commercial vehicles in use. (Acquirer

press release, April 2014). As the number of TomTom

units stuck to windscreens decline due to embedded

SatNav systems, the Dutch company are looking to

remain relevant as a back-end solution provider to

OEMs.

Top Fleet Management acquirer, FleetCor, acquired two

European targets throughout the past three years. Its

most recent move was for UK-based Epyx, a fleet rental,

repair & disposal marketplace for ca. 11x EV/EBITDA.

The acquisition of Epyx is a slight departure from

FleetCor’s core fleet fueling business, moving beyond

fueling into fleet maintenance life cycle and costs

management.

Top Acquirers

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Auto-Tech M&A according to Hampleton

Acquirers to watch in the Auto-Tech segment

The automotive IT & Business Services sector is hot….for now. The number

and value of deals in this sector is continuing to grow despite the still-fragile

nature of key markets around the world. Opinions will differ whether this

rise is related to the stock market climb which has helped banks look more

favourably on this once scorned sector, or the inverse relationship to oil

prices (think oil price increases in 2008 which doomed the auto industry at

the time) or something else, but one thing we can all agree with is that

sooner or later, gravity will take hold. Timing is everything.

While a dramatic increase in on-board vehicle technology is partially driving

this rise, we also see an interest in highly scalable, robust, mid-to-high

growth assets with recurring revenue and long-term OE or T1 contracts.

We also see a sharp increase in aftersales-focused assets due to their anti-

cyclical traits.

If you’re reading this, there is a good chance you’re an interested seller or

buyer in this sector and if so, we would welcome a conversation with you

in the short-term as no one knows how long this sector will continue to

perform this way. As stated earlier….timing is everything.

David Riemenschneider Sector Principal

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In addition to our market spotlights, Hampleton produces semi-annual reports on M&A activity in

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Hampleton provides independent M&A and corporate finance advice to owners of Internet, IT Services and

Software companies. Our research reports aim to provide our clients with current analysis of the transactions,

trends and valuations within our focus areas.

Data Source: We have based our findings on data provided by industry recognised sources. Data and

information for this publication was collated from the 451 Research database (www.451research.com), a

division of The 451 Group. For more information on this or anything else related to our research, please email

the address provided below.

Disclaimer: This publication contains general information only and Hampleton Ltd, is not, by means of this

publication, rendering professional advice or services. Before making any decision or taking any action that may

affect your finances or your business, you should consult a qualified professional adviser. Hampleton Ltd shall

not be responsible for any loss whatsoever sustained by any person who relies on this publication.

©2014. For more information please contact Hampleton Ltd.

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