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Project Aardvark. Presentation to the Board of Directors January 29, 2010. Table Of Contents. Executive Summary3 Aardvark Valuation5 Potential Acquisitions11 Process Recommendations16 Appendix19. Executive Summary. Executive Summary.

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Project Aardvark

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Project aardvark

Project Aardvark

Presentation to the Board of Directors

January 29, 2010

Table of contents

Table Of Contents

Executive Summary3

Aardvark Valuation5

Potential Acquisitions11

Process Recommendations16


Executive summary

Executive Summary

Executive summary1

Executive Summary

  • As of January 29, 2010, Aardvark’s share price and valuation are at all-time highs, having more than doubled since early 2009

  • As Aardvark’s stock price has soared in value, it has also generated over $35B in cash & cash-equivalents

  • As Aardvark’s cash balance grows, it is likely to face shareholder pressure to re-invest the cash in its business and to make significant acquisitions

  • Given Aardvark’s strong currency and cash balance, it could easily make several “tuck-in” acquisitions – or larger-scale acquisitions to acquire customers

  • Such a strategy would allow Aardvark to capture more of the smartphone, laptop, and desktop markets, and significantly improve its software offerings

  • Given Aardvark’s cash position, such acquisitions could be made with 100% cash – or in the case of a larger deal, stock could also be used

Aardvark valuation

Aardvark Valuation

Valuation summary

Valuation Summary

  • Aardvark’s current share price of $192.61 far exceeds the value implied by comparable public companies

  • Recent comparable transactions show higher implied valuation ranges due to flurry of consolidation and hardware M&A activity over 2009

  • Discounted Cash Flow Analysis under base-case assumptions shows implied valuation on-par with Aardvark’s current share price, implying that share price is justified

  • All valuation analysis is based on “base-case” financial projections in line with Wall Street analyst expectations

  • Given Aardvark’s cash balance and high valuation multiples vs. similar public companies, few competitors are well-positioned to make substantial acquisitions

Aardvark valuation summary

Aardvark Valuation Summary

Aardvark comparable public companies

Aardvark Comparable Public Companies

Aardvark precedent transactions

Aardvark Precedent Transactions

Aardvark discounted cash flow analysis

Aardvark Discounted Cash Flow Analysis

DCF Assumptions:

Discount Rate: 12.5%

Terminal EBITDA Multiple: 7.0 x

Model Uses “Base Case” Financial Projections

Mid-Year Convention Used For PV Of Cash Flows

Potential acquisitions

Potential Acquisitions

Potential acquisitions1

Potential Acquisitions

  • Given Aardvark’s large cash balance, it could make a wide variety of acquisitions – ranging from small “tuck-in” deals to acquire technology and IP to larger deals driven by customer or market share acquisition

  • Tier 1 Potential Acquisitions

    • “Tier 1” acquisition candidates are worth over $1 billion and would significantly boost Aardvark’s market share or result in substantial revenue or cost synergies

    • Leading candidates include ARM, for its chipset technology and integration with Aardvark’s existing products, and Research in Motion – to capture additional share in the corporate smartphone market

  • Tier 2 Potential Acquisitions

    • “Tier 2” acquisition candidates are worth less than $1 billion and would enhance Aardvark’s core technology and fill in gaps in existing products

    • Potential acquisitions include specialized chipset and semiconductor companies as well as Web 2.0, social media, and mobile software companies

Potential acquisition candidates

Potential Acquisition Candidates

Tier 1 Acquisition Candidates

Tier 2 Acquisition Candidates

Company profile arm

Company Profile: ARM

Management Team:

Warren EastCEO

Tudor BrownPresident

Graham BuddCOO

Mike MullerCTO

Tim ScoreCFO

John CornishEVP, Systems

Ian DrewEVP, Marketing

Antonio VianaEVP, Sales

ARM Holdings

Headquarters: Cambridge, UK



ARM Holdings is a supplier of semiconductor intellectual property and components of digital electronic products. It designs and licenses intellectual property rather than manufacturing and selling semiconductor chips, and it licenses its IP to a wide network of hardware, mobile, and networking companies. It also provides tools to optimize system-on-chip designs.

Key Partners:

Electronic Arts, LSI Logic, Microsoft, National Semiconductor, Nokia, NVIDIA, Rambus, Real Networks, Samsung, and Toshiba.

Financial Information:

Market Cap:$2.5B


2009 Revenue:$490M

2009 EPS:$7.85

2010E Revenue:$531M

2010E EPS:$10.97

  • Products:

  • Processors – ARM provides 32-bit embedded microprocessors based on a common architecture that delivers high-performance, power efficiency, and reduced system cost.

  • System IP – Serves as the connection between processors, memory, and peripherals to ensure optimum performance.

  • Multimedia –ARM provides graphics processors that enable embedded graphics, audio, and video applications.

  • Physical IP – Provides SoC integrated circuits and logic, embedded memory, and interface IP.

  • Tools – ARM subsidiaries provide compilers, debuggers, simulators, and other optimization tools for a wide variety of chip and processor families.

Company profile research in motion

Company Profile: Research In Motion

Management Team:

Research In Motion designs the BlackBerry smartphone and creates solutions for the worldwide mobile communications market, including a variety of software for the BlackBerry device. In addition to its line of BlackBerry devices, the company also provides enterprise server software to support businesses using the device.

Jim BalsillieCo-CEO

Mike LazaridisCo-CEO

Don MorrisonCOO

Robin BienfaitCIO

Brian BidulkaCFO

David YachCTO

Research In Motion

Headquarters:Waterloo, ON



Financial Information:

  • Products:

  • BlackBerry Pearl 3G – Provides Trackpad and dedicated media keys as well as SureType technology and 3G network support.

  • BlackBerry Bold – Provides extended battery life as well as GPS, Wi-Fi, and 3G network support.

  • BlackBerry Curve 8500 – Includes Trackpad and dedicated media keys, easy media sharing, and 2.0 MP camera.

  • BlackBerry Tour 9630 –Provides GPS, worldwide compatibility, and 3.2 MP camera.

  • BlackBerry Storm – Features Wi-Fi, SurePress technology, and 3G network support.

  • BlackBerry Curve 8900 – Features thin, lightweight design as well as GPS and Wi-Fi support and 3.2 MP camera.

Market Cap:$36B


2009 Revenue:$13B

2009 EPS:$3.70

2010E Revenue:$17B

2010E EPS:$5.03

Key Partners:

AT&T, Brightstar, Digital China, GPXS, Hewlett-Packard, IBM, Skype, Sprint, Tata Indicom, T-Mobile, Verizon, Virgin, and Vodafone,

Process recommendations

Process Recommendations

Key recommendations

Key Recommendations

  • We recommend engaging in targeted discussions with the Tier 1 acquisition candidates and assessing their receptiveness to M&A discussions

  • At the same time, Goldman Stanley will reach out to Tier 2 candidates and introduce Aardvark as a potential acquirer

  • M&A process with Tier 1 candidates will take significantly longer due to the scale of the companies, so we recommend conducting both processes simultaneously

  • Depending on responses from Tier 1 and Tier 2 candidates, Goldman Stanley and Aardvark may do additional research to determine other potential acquisitions and then approach them

Process recommendation

Process Recommendation




Aardvark projected income statement

Aardvark Projected Income Statement

Aardvark comparable public companies1

Aardvark Comparable Public Companies

Aardvark dcf analysis wacc calculation

Aardvark DCF Analysis – WACC Calculation

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