Doug Bailey, (Chief Strategy Officer, Digital Guardian) at Vator Splash Spring May 2016

1. M&A Reality Check:
Is Growth Through Acquisition A Real Possibility
for Early and Mid-Stage Start-Ups?
Doug Bailey, Chief Strategy Officer
Digital Guardian

2. Topics We’ll Discuss
 A Little About Me & Digital Guardian
 Why Companies of All Sizes Should Consider M&A for Growth
 Digital Guardian’s Acquisition Strategy
 The 2016 M&A Market Outlook
 Are Acquisitions Right for You? The Top 5 Questions
 Guidelines for Successful M&A

3. About Me
Doug Bailey
Chief Strategy Officer
Digital Guardian
 Primarily responsible for managing
strategic alliances and corporate
development, including spearheading
merger & acquisition activities.
 Named acting General Manager of Code
Green Networks Business Unit and led their
successful integration into Digital
Guardian.
Confidential 3

4. About DIGITALGUARDIAN
 Founded 2003 as Verdasys
• Over 20 patents awarded
 Global Presence
• Office Locations: US, UK, Japan, India, Singapore
• 3 million agents deployed in +60 countries
 Leader in Data-Centric Security
• Integrated compliance, insider & external threat security
• Delivered on-premise or as a managed service
 Next-Gen Data Protection
• Windows, OSX, Linux, network, offline/online, cloud &
mobile
• Protects data independent of the threat or the system
• Encryption, application control, device control, forensics
2015 Highlights
 40+% YOY Revenue Growth
 Raised $66M in Last Funding
Round (Dec/15)
 100+ new customers in 2015

5. 5
Extending Data Protection to
the Cloud and Mobile
Devices.
(FALL 2014)
HAS ACQUIRED
Extending Data Protection to
Fixed Function Devices.
(SUMMER 2015)
Adding Discovery, Network
and Cloud DLP to our
Endpoint Data Protection Capabilities.
(FALL 2015)

6. Is Growth Through Acquisition
A Real Consideration for Start-Ups?
Confidential 6

7. The Market Appears Ripe for M&A?
7
“An astounding three-quarters of
corporate development executives
(74%) forecast that the M&A valuation
of private companies would tick lower
in 2016, compared with last year.”

8. Quick Definition: Technology Tuck-in
8
 Technology Tuck-In (versus Strategic Acquisition)
• The acquisition of a company made for the sole purpose of merging the
technology into the existing solution of the acquirer.
• Sometimes referred to as "bolt-on acquisitions.
• Often accelerates the developments of features and functions vs.
building them organically.

9. Top 5 Questions That Are At The Heart Of
Every Merger And Acquisition
❶ Does the transaction fit our company strategy?
❷ Are the cultures of the companies a fit?
❸ Do you know what you’re buying? What is the benefit of
combining the two entities?
❹ Can we integrate the businesses?
❺ Are we paying the right price?
Confidential 9

10. ❶ Does the transaction fit your company
strategy?
 Perhaps a preliminary question is, “What is our company’s
strategy?”
 What is it that you do or will do in the future to create a
sustainable competitive advantage?
 At Digital Guardian we are all about DATA PROTECTION and:
• Savant Protection extended our solution into new markets as it secured fixed
function devices (ICS systems and POS systems) moving us into retail, critical
infrastructure, etc.
• Armor5 accelerated our ability to fill a gap in our mobile data protection capability.
• Code Green gave us new network level and cloud data protection capabilities.
Confidential 10

11. ❷ Are the cultures of the companies a
fit?
 Cultures can make or break a deal.
 A company’s culture prior to a deal may not be the
same after a deal.
 Culture is a moving target, and the failure for
culture to align is a tremendous risk.
 With technology tuck-in’s culture fit is much less of
a risk.
Confidential 11

12. ❸ Do you know what you’re buying?
(What is the benefit of combining the two entities?)
Every M&A seeks synergy.
• These “synergies” are highly sought after, but not always
achieved.
• This question is best answered in the due diligence process.
• We are often tempted to think that due diligence is a
compliance audit with a checklist of documents to review and
procedures to perform. That is far from the truth.
• The purpose of due diligence is to gather intelligence about
the target. The past is an imperfect forecast of the future.
Confidential 12

13. ❹ Can You Integrate the Businesses?
 Issues with integrating businesses kill mergers and
acquisitions.
 Establishing a transition team with clear direction
and the authority to make decisions may lead to a
successful integration.
 Once this is done, communicate regularly with all
members regarding goals and action items.
Confidential 13

14. ❺ Are You Paying the Right Price?
 This step is the one where the most time is spent.
 Valuation, negotiation and the structuring the deal drive up time and
professional fees.
 Sometimes these costs are necessary, but not at the expense of the
first four questions.
 Remember that the buyer is paying for a market return based on
future results and inherent risk. The seller is seeking a “walkaway”
amount that allows other goals and objectives to be met.
 Understand what the other side really wants and that this is not
always what they say they want.
Confidential 14

15. Industry
Analysis/Pre
Due-Diligence
Target
Identification
Due Diligence
Final
Negotiations
Business
Integration
Successful M&A Process
 How we did it at Digital Guardian…
15

16. Thanks!
Any questions?
Doug Bailey, Chief Security Officer
dbailey@digitalguardian.com