The power of television
Capital Markets Day – October 13, 2016
M&A
Dr. Ralf Schremper
| October 13, 2016 |
Key M&A achievements since summer 2015
New leading subscriptionbased asset in Dating
Expanded international
footprint of travel cluster
50%+1
99%
Expanded AdTech business
Games merger with gamigo
51%
80%
| October 13, 2016 |
Acquired leading online
comparison asset
Anchor asset
in Health & Wellbeing
80%
Lifestyle Commerce
Ecosystem expansion
92%
Awarded media
M&A deal of the year
merged
100%
80%
2
1
2 Limited number of
Efficient
and de-risked
use of capital
4
3
Excellent
execution
& integration
attractive/available
assets drive prices
Track record of
de-risked investments
Achievements
Challenges
Despite key challenges we deliver sustainable investment performance
Track record of
proprietary deal flow
and strict price discipline
Proven investment
track record of
team and diligent post
merger integration
Deliver sustainable investment performance
| October 13, 2016 |
3
1
2
3
4
Efficient and de-risked use of capital
We pursue a de-risked, two-fold investment approach
Cumulated # of
media equity
investments
2012
2013
2014
2015
Pro-forma as of
October 4, 2016
11
21
27
30
393)
508
4334)
Selected
minority media
investments
Volume of cash
investments
[in EUR m]
1)
1)
1)
27
Selected
majority cash
investments
57
122
2)
| October 13, 2016 |
1) Exited to third parties 2) Aeria Games merged into Gamigo AG with deconsolidation as of 30/06/2016 3) As of 04/10/2016. Some media investments
with minor cash contribution 4) incl. ParshipElite Group, Windstar, Stylight, 44Blue Note: M&A spend based on net purchase price and earn-out payments
as well as bond redemption (Etraveli) and loan redemption (Etraveli, ParshipElite Group, Windstar)
4
1
2
3
4
Efficient and de-risked use of capital
We primarily allocate our cash investments on synergistic value plays
Synergistic value plays
TV synergy driven value
investing
 Drive direct traffic for
growth and profitability
through TV synergies
 Capture share of wallet of
marketing spend
Operational synergies
 Generate additional
operational synergies,
esp. from leveraging
data
 Scale through
internationalization
Sales platforms
Strategic hedges
Strategic benefits
through e-commerce
Growth investments in
video, AdTech & content
 Support our media
clients with direct sales
distribution platforms
 Realize scale for global
business models (e.g.
MCN)
 Tap into sales promotion
budgets
 Leverage ad-relevant
technologies
Examples
assets
M&A cash allocation1)
| October 13, 2016 |
~70%
~10%
~20%
1) M&A spend for majority acquisitions 2012-04/10/2016 based on net purchase price and earn-out payments as well as bond redemption
(Etraveli) and loan redemption (Etraveli, ParshipElite Group, Windstar); excluding Games since not part of active portfolio (deconsolidated end
of Q2 2016)
5
1
2
3
4
Efficient and de-risked use of capital
We apply our general investment criteria across M&A projects
Qualitative Criteria
Attractive
market financials
 Structural growth market
 Attractive revenue and rec. EBITDA
margin potential
Robust
business model
 Asset-light business model
 Digital transformation potential
Strong
TV synergies
Financial KPI
IRR
>15%
FCF-Return
on Investment1)
>Group WACC2)
Rec. EBITDA
Positive rec. EBITDA
and/or high group
synergy potential
EPS
Accretion2)
 Highly TV responsive
 Additional ad sales potential
 Data synergies
Non-TV synergies/ecosystem
 Sales platforms for products of customers
 Omnichannel sales potential
Manageable risk
exposure
 Protected from tech disruption
 Entry barriers for global giants
| October 13, 2016 |
1) FCF-ROI calculated as proportional FCF (proportional to ownership share) divided by invested cash today (incl. IC loans and capital
increases). FCF exclude internal TV media expenses 2) Timing of achievement depending on deal type (e.g. synergistic value play vs. strategic
hedge) and financing mix, current median analyst estimate for WACC 8%
6
1
2
3
4
Efficient and de-risked use of capital
Acquired assets follow same fundamental investment logic
Rec. EBITDA margin
potential1) of 25-30%
possible through increasing
importance of branding
Rec. EBITDA margin
potential1) of 25-30%
possible (see peer group)
Rec. EBITDA margin
potential1) of 20-25%
possible through increasing
importance of branding
Rec. EBITDA
margin potential1) of 10-15%
possible through increasing
importance of branding
Asset-light lead-gen model
without inventory risk
Asset-light subscription model
with high customer lifetime value
Asset-light OTA model
without inventory risk
Asset-light business model
based on contract manufacturing
Highly TV responsive
proven for online comparison sites
Marketing cost internalization
Highly TV responsive
TV main marketing channel
Marketing cost internalization
Highly TV responsive
synergies within German-speaking
countries
Highly TV responsive
currently low brand awareness
among OTC peers
7Travel cluster and Preis24
with cross-selling synergies
Lifestyle Commerce assets
with cross-selling synergies
7Travel
with strong synergies
Commerce assets
with cross-selling synergies
Low/medium tech disruption risk
with strong in-house capabilities
Low tech disruption risk
since not a tech driven business
Low/medium tech disruption risk
but limited success of competitors
Low tech disruption risk
since not a tech driven business
| October 13, 2016 |
1) Entity rec. EBITDA
7
1
2
3
4
Efficient and de-risked use of capital
We mitigate risk through our transaction structures
Reasons for deferred p.p.
components/co-investments
Description
Incentivize founders & key
management
(“Skin-in-the-game”)
Investment success heavily depends on
substantial commitment/performance of
individuals
Reduce valuation risk
Earn-outs and put options to lock-in
valuation depending on performance or
critical milestones
Align interests with sellers
Risk mitigation through significant
co-investments of selling shareholders
Total deferred components as of H1 2016
| October 13, 2016 |
Examples
EUR 293m
8
1
2
3
4
Low number of attractive/available assets drive prices
Through multiple networks we identify attractive proprietary targets …
Industry data bases
Key proprietary deals in the past
P7S1 feeder & scouts
Investment community
M&A
 Private Equity Funds
 VC & Growth Funds
 Network of industry &
investment experts
 Banks
Fund investments
| October 13, 2016 |
9
1
2
3
4
Low number of attractive/available assets drive prices
… and leverage our minority portfolio as a feeder for strategic majorities
Cumulated # of
media equity
investments
2012
2013
2014
2015
Pro-forma as of
October 4, 2016
11
21
27
30
392)
Selected
minority media
investments
1)
1)
1)
From
minority
to
majority
16%
23%
75%
40%
51.1%
50.1%
22%
14%
| October 13, 2016 |
100%
47%
1) Exited to third parties 2) As of 04/10/2016. Some media investments with minor cash contribution
100%
10
1
2
3
4
Low number of attractive/available assets drive prices
Synergies result in short-term multiple reduction
Implied EV/rec. EBITDA acquisition multiple
Rec. EBITDA multiples illustrative examples
[illustrative indexed data, example]
10x
Transaction
10x
1 yr after transaction1)
Transaction
1 yr after transaction1)
12x
10x
Pro-forma EV/EBITDA
multiple at acquisition
Market share gains
through TV ad leverage
| October 13, 2016 |
Marketing cost synergies
Expected pro-forma
acquisition
EV/EBITDA multiple
Transaction
1) Estimate, EBITDA based on rec. external EBITDA excluding internal TV marketing cost
1 yr after transaction1)
Transaction
1 yr after transaction1)
11
1
2
3
4
Excellent execution & integration
Excellent transaction execution secures value creation
A
Experienced deal teams and
investment professionals
B
Complementary expertise
in deal teams
C
Comprehensive post closing integration process to ensure smooth integration and synergy realization
| October 13, 2016 |
12
1
2
3
4
Sustainable investment performance
Our acquired assets show strong performance
Active majority portfolio1)
Online Price Comparison
AdTech
preis24
Virtual Minds
Verivox
Smartstream
Travel
Red Arrow
eTraveli
Kinetic
billiger-mietwagen.de
JAP
weg.de
CPL
Tropo
Endor
wetter.com
Left Right
MyDays
Karga Seven
Lifestyle Commerce
Half Yard
Flaconi
Dorsey
Amorelie
Other
moebel.de
Austria 9
MCN
MMP
CDS
DOSB
External revenue growth of
assets since acquisition2)
External rec. EBITDA increase of
assets since acquisition2)
~2.2x
+150%
~1.8x
+81%
Digit. Entertainment
LTM at entry
PutPat
| October 13, 2016 |
H1 2016 LTM
LTM at entry
H1 2016 LTM
1) For majority acquisitions (active) closed until H1 2016, i.e. excluding Games (deconsolidated end of Q2 2016) and excluding recent acquisitions of Parship Elite
Group, Windstar, Stylight, 44Blue. Excludes partially small Red Arrow transactions (e.g. Snowman, NERD) and internally transferred assets from EPIC to P7S1
(Valmano, Discavo) 2) Entry LTM figures partly based on local GAAP and management reports. LTM entry rec. EBITDAs include air-time cost. For companies without
monthly reporting prior to closing, figures based on full year of acquisition year; H1 2016 LTM rec. EBITDAs exclude airtime cost; rec. EBITDA partly entity based
13
1
2
3
4
Sustainable investment performance
We have a young portfolio that already delivers a solid FCF-ROI
Avg. years in
portfolio1)
Total M&A
related cash
invest2)
FCF-ROI3)
Ø 1.6
~940
>8%
EUR m
| October 13, 2016 |
1) Portfolio age based on volume weighted M&A related cash invest 2) For majority acquisitions (active) closed until H1 2016, i.e. excluding Games (deconsolidated
end of Q2 2016) and excluding recent acquisitions of Parship Elite Group, Windstar, Stylight, 44Blue. Excludes partially small Red Arrow transactions (e.g. Snowman,
NERD) and internally transferred assets from EPIC to P7S1 (Valmano, Discavo) 3) FCF-ROI calculated as proportional FCF 2016 estimate (proportional to ownership
share) divided by invested cash to date based on active portfolio (incl. IC loans and capital increases), excluding Games (deconsolidated end of Q2 2016). FCF as
external FCF excluding internal TV media expenses, as per 2016 estimates (Red Arrow entities/Smartstream FCF on entity basis)
14
1
2
3
4
Sustainable investment performance
Strong performance across segments, Digital Entertainment in
rapid scaling phase
FCF Return on Investment and revenue growth 20161) of acquired assets
FCF-ROI1)
buckets in %
>8.0 %
Red Arrow3)
Digital Ventures &
Commerce
0-8%
Digital
Entertainment
<0%
0-10%
10-20%
20-30%
>70%
Revenue growth buckets 2016E in %2)
Bubble size equals EUR 50m
cash investment
| October 13, 2016 |
1) FCF-ROI calculated as proportional FCF 2016 estimate (proportional to ownership share) divided by invested cash today (incl. IC loans and capital increases).
FCF as external FCF excluding internal TV media expenses, as per 2016 estimates (Red Arrow entities/Smartstream FCF on entity basis). For majority acquisitions
(active) closed until H1 2016, i.e. excluding Games (deconsolidated end of Q2 2016) and excluding recent acquisitions of Parship Elite Group, Windstar, Stylight,
44Blue. Excludes partially small Red Arrow transactions (e.g. Snowman, NERD) and internally transferred assets from EPIC to P7S1 (Valmano, Discavo) 2) 2016E
vs. 2015A 3) incl. Austria 9
15
We will continue our value creation focused M&A approach
We pursue a two-fold investment strategy combining media and cash investments
We use M&A to drive profitability and cash generation of P7S1
We pursue active portfolio management to maximize the value of our portfolio
We focus on businesses where TV unlocks significant growth
We maintain a strong balance sheet discipline across all M&A activities
We are able to build firepower organically
| October 13, 2016 |
16