This document provides an overview and analysis of technology markets and mergers and acquisitions from the perspective of Morgan Stanley's Head of Global Technology Investment Banking. Some key points: 1) Large cap tech companies like Netflix, Amazon, Facebook, Alphabet and Apple have driven significant gains in the stock market and now comprise around 35% of the S&P 500's market cap. 2) While IPO volumes have lagged, recent technology IPO returns have been strong on average. Companies that achieved scale, growth, profitability and had a strong business model at IPO performed best. 3) M&A activity, while down from recent highs, remains an important driver of inorganic growth.

1. Internal Audit, Risk, Business & Technology Consulting
Protiviti Perspective provided by Nikhil K., New Delhi
WELCOME
Insights of the IPO:
Expert Panel & Networking Event
September 26, 2017

2. State of the Technology Markets
Drew Guevara || Head of Global Technology Investment Banking
Email: Andrew.Guevara@morganstanley.com
Phone: +1 650 234-5608
September 2017
1

3. 2
• Entering 8th Year of Economic Expansion
• Equity markets near all time high
• Corporate leverage at 20-year high
• Corporate margins at high levels
• Rising interest rates
• Geopolitical and U.S. political uncertainties
Should We Be Worried?

4. • GDP growth is accelerating globally, especially in Europe & Japan
• Benign inflation
• M&A, while strong in tech, is modest overall despite rising
confidence / low cost of capital
• Low volatility / low correlation between stocks = stockpicker’s
market
• Rising rates have coincided with year-to-date fund inflows (mutual
funds + ETF) into equities
• Valuations are elevated but not excessive
3
Not Really, Not Yet

5. 4
artificial intelligence
autonomous driving
deep learning
big data
software as a service
quantum computing
machine learning
virtual reality
augmented reality
Secular Themes Driving Growth

6. 5
Large Cap Tech Continues to Drive Outperformance
Netflix, Amazon, Facebook, Alphabet, and Apple Have Accounted for ~35%
of S&P 500’s Increase in Market Cap Since 2015
Market Cap Increases Across
Large Cap Tech:
$57bn $326bn $284bn $290bn $193bn
Note
1. “Media Index” references a Morgan Stanley proprietary Custom Basket <MSXXMDIA Index>; the top five constituents by relative weighting are: Liberty Broadband Corporation, Time Inc., Twenty-First
Century Fox, AMC Networks, Comcast Corporation
2. Performance as of 09/12/2017
(1)
265%
217%
121%
77%
55%
19%
0%
0%
50%
100%
150%
200%
250%
300%
Netflix Amazon Facebook Alphabet Apple S&P 500 Media Index

7. 6
With Software Disruptors Also Outperforming
2013-2017 YTD Returns
Note
1. “Classic Tech Index” references a Morgan Stanley proprietary Custom Basket <MSXXOTCH Index>; the top five constituents by relative weighting are: Oracle, Symantec, Accenture, Cisco, Intel
2. Performance as of 09/12/2017
(1)
283%
180%
132%
101%
96%
0%
50%
100%
150%
200%
250%
300%
ServiceNow Palo Alto
Networks
Splunk Workday Classic Tech
Index

8. Note
1. As of 09/12/2017
2. IPOs include U.S. listed offerings over $30MM
7
However IPO Volumes Continue to Lag
$5.3Bn
$11.3Bn
$7.6Bn
$10.8Bn
$21.3Bn
$8.7Bn
$36.3Bn
$5.9Bn
$3.4Bn
$6.0Bn
46 Deals
44 Deals 43 Deals 42 Deals
50 Deals
23 Deals
17 Deals
13 Deals
2010 2011 2012 2013 2014 2015 2016 2017
IPO Large IPO

9. Despite Attractive IPO Returns
Average IPO Returns by Period (1)(2)
Ranges Shown Reflect 25th to 75th Percentile for the Relevant Period
Median
# IPOs: 13
Note
1. As of 09/08/2017; includes U.S. listed offerings over $30MM
2. Return values reflect price performance between offer and December 31 of the IPO issuance year for each IPO
3. Source Dealogic
8
17
4%
(13%)
63 %
62%
23 %
21 %
(40)
(20)
0
20
40
60
80
2016 2017

10. Note
1. As of 09/12/2017
2. IPOs include U.S. listed offerings over $30MM
9
With Software and Internet Driving New Issue Volumes
Software
Internet
Hardware
Semiconductors
8 Deals: 27%
4 Deals: 13%
2 Deals: 7%
2016-2017 YTD Technology IPO Subsector Breakdown
16 Deals: 53%

11. (37.1)
(50.9)
(17.7)
(54.1)
(43.3)
(123.8)
(135.3)
(31.3)
15.6
22.1
27.8 30.6
52.9
15.6 14.1 10.7
2010 2011 2012 2013 2014 2015 2016 2017
M&A Equity Mean Net Outflows Median Net Outflows
10.1(21.5) (28.7) (23.5) 9.6 (108.1) (121.2) (20.5)
Tech M&A Volumes vs. Tech IPO + Follow-On Volumes
$Bn
M&A Volume Has Reduced the Investible Opportunity
Note
1. Issuance volumes include Facebook’s $16Bn IPO
2. Issuance volumes include Alibaba’s $25Bn IPO
3. As of 09/12/2017
10
Net Capital
Returned ($Bn)
IncreaseinPublicly
TradedFreeFloat
CashReturnedto
PublicInvestors
$250Bn in Net
Outflow from
2015-2017YTD
(1)
(2)

12. Leading to a Shrinking Universe of Stocks
11
Number of US Stocks (1980-2017)
1. Breadth Shrinking: In 1997, there were 7,355 U.S. stocks; today, there are fewer than 3,600
2. The Big Getting Bigger: Megacap stocks comprise ~70% of total US stock market value today
3. Sector Skew: Tech’s (21%) weighting in the Wilshire 5000 Total Market Index is equal to that of Materials
(3%) + Real Estate (4%) + Utilities (3%) + Telecom (2%) + Consumer Staples (9%)
1
2
3
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
1980
1981
1983
1985
1986
1988
1990
1991
1993
1995
1996
1998
2000
2001
2003
2005
2006
2008
2010
2011
2013
2015
2016

13. Very Few Companies with Scale and Growth
12
Total Tech Universe: 324 companies
CY18E/17E
Revenue Growth Above 30%
and
Market Cap Between
$1Bn and $10Bn
CY18E/17E
Revenue Growth Between
20 - 30%
and
Market Cap
Between
$1Bn and $10Bn
265 Remaining Public Tech Companies
18 Companies
6% of total universe
41 Companies
13% of total universe
Only
Provide Both Significant Size and
Outsized Growth
Provide Both
Significant Size
and Growth
Only

14. Key Success Factors at IPO
13
Revenue Scale
1
Revenue Growth
2
Profitability
3
Business Model
4
Greater than $150MM LTM revenue
Greater than 40% year-over-year quarterly
revenue growth
Better than (20%) operating margin
Ranked based on predictability, visibility,
and maturity of the business model
We Ranked 278 Tech Companies That Went Public Since 2010

15. Technology IPOs Ranked By 4 Key Criteria
14
Note
1. As of 09/12/2017; all numbers are median
F/O: % change between offer price and filing mid-range
T+90 / T+365: % change between stock price 90 / 365 days post IPO and offer price
O/C: % change between current price and offer price
Revenue Scale, Growth, Profitability, and Business Model
BusinessModel
RevenueScale
Profitability
Revenue Growth
1
2
3
4
F/O: 18%
T+90: 61%
T+365: 30%
O/C: 205%
F/O: 0%
T+90: 23%
T+365: 53%
O/C: 94%
F/O: 0%
T+90: 31%
T+365: (6%)
O/C: (7%)
F/O: 21%
T+90: 64%
T+365: 84%
O/C: 30%
F/O: 21%
T+90: 64%
T+365: 76%
O/C: 170%
F/O: 0%
T+90: 13%
T+365: 15%
O/C: 10%
F/O: 0%
T+90: 13%
T+365: 1%
O/C: (20%)
F/O: 8%
T+90: 31%
T+365: 9%
O/C: 83%
F/O: 4%
T+90: 32%
T+365: 17%
O/C: 40%
F/O: 0%
T+90: 7%
T+365: (21%)
O/C: 5%
F/O: 0%
T+90: 11%
T+365: (22%)
O/C: (22%)
F/O: 0%
T+90: 14%
T+365: (21%)
O/C: (2%)
F/O: 4%
T+90: 13%
T+365: (20%)
O/C: (2%)

16. 1) 278 technology companies that have gone
public since 2010
2) Over half of those companies destroyed value
Companies
that hit all
boxes at IPO:
5%
Companies
that missed on
one metric:
28%Companies
that missed on
two metrics:
47%
Companies
that missed
three metrics
or more:
20%
Observations of Key Success Factors for Technology IPOs
15
Companies
that created
value:
41%
Companies
that destroyed
value:
59%
3) Highest value creation: Companies that hit all
boxes at IPO and companies that only missed
on revenue scale (>$150MM LTM revenue)
4) Most value destruction: All of the cohorts that
missed business model have destroyed value
3) Companies that missed on both profitability
and growth were among those that
underperformed the most
1
2
3
4
5

17. • Track your KPIs
• Refine your forecasting process
• Conduct mock earnings calls with your Board and close advisors
• Determine your positioning
• Get to know public market investors early
• Build your Board
• Develop a financial model with an appropriate amount of
conservatism
16
Areas to Focus on If You Are Thinking About an IPO

18. Where Are the Unicorns?
Note
1. Source PitchBook, CapitalIQ, Wall Street Journal, Morgan Stanley Internal
2. As of 09/08/2017
17
Recently Priced Equity Valuations Greater than $2.0Bn(1)
68.0
31.0
20.0
16.0
12.3
12.0
10.0
9.0
7.5
5.7
5.0
4.5
4.3
4.0
4.0
3.8
3.7
3.5
3.5
3.4
3.0
3.0
3.0
3.0
2.9
2.7
2.6
2.5
2.4
2.3
2.1
2.1
2.0
2.0
2.0
2.0
60.0
50.0
46.0
18.5
18.3
12.0
11.6
8.0
8.0
8.0
7.7
6.5
6.0
4.5
4.0
3.8
3.4
3.4
3.0
3.0
2.6
2.5
2.2
2.0
2.0
8.5
2.3
2.3
0
10
20
30
40
50
60
70
80
Uber
AntFinancial
DidiChuxing
Xiaomi
Airbnb
Palantir
Lufax
Meituan-Dianping
WeWork
Pinterest
Toutiao
SpaceX
Flipkart
Dropbox
Stripe
Spotify
DJI
Koubei.com
ZhongAnOnline
Cainiao
Lyft
Snapdeal
Grab
ViceMedia
OutcomeHealth
Ele.me
MagicLeap
SoFi(SocialFinance)
YIXIA
Wish
Houzz
GarenaOnline
Slack
IntarciaTherapeutics
CreditKarma
Tanium
LeSports
Instacart
OlaCabs
DocuSign
Fanatics
KuaishouTechnology
Moderna
VANCL
Auto1Group
BloomEnergy
OscarHealthInsurance
Mobike
UnityTechnologies
InMobi
Qualtrics
Mozido
Adyen
Domo
HelloFresh
BonaFilmGroup
DraftKings
Uptake
Avant
Coupang
Github
Razer
TrendyGroup
Zenefits(YourPeople)
USA
Asia
Rest Of World
Asia
USA
Rest of World
Asia
52%
USA
45%
Rest of World
3%
Valuation by Region(1) (2)
(% of Total Valuation)

19. Current M&A Themes
18
Expansion of buyer universe – buyer universe has expanded beyond traditional US
tech buyers, and now includes sponsors, foreign, and non-tech buyers across sectors
such as industrials, healthcare, and automotive
1
Imperative for growth – in a relatively low-growth environment, inorganic growth is
driving the strategic moves
2
Dream deals – investor environment supportive of “dream deals” with low interest
rates, robust public market valuations and tech titans sitting on $700Bn+ of cash
3
Boards are proactive – initiating the review of transformational transactions, with a
focus on ensuring they do not miss “first mover” advantage
4
Sponsors are active – private equity players have been able to both outpace and
outbid strategic buyers
5
Companies willing to pay a premium for growth and seize opportunities
to fill portfolio gaps with respect to products, technology and geography

20. $100
$138
$72
$145
$179
$365
$336
$96
273
331
229
245
356
414
439
291
2010 2011 2012 2013 2014 2015 2016 2017YTD
M&A Volume Number of Transactions
2010–2017YTD, M&A Deal Volume and Number of Transactions
Volume ($Bn) # of Transactions
$104
$178
Deal Volume in 1H 2015/2016
After an Active 2015 and 2016, M&A Volumes Have Abated
19Note
1. As of 09/12/2017

21. 4 Buyer Groups Now Dominate Technology M&A
$29Bn of Cross-Industry
Buyers Up 277% since
2012
Cross-Industry
20%
Foreign
22%
U.S. Tech
26%
Sponsors
32%
20
Sponsor 2.0
Buying Through Platforms
Tech Titans Have Over
$700Bn in Cash for M&A
Note
1. Source Morgan Stanley, Thomson, Capital IQ, Bloomberg

22. $133 Bn
$21 Bn
$66 Bn
$70 Bn
$262 Bn
$95 Bn
$35 Bn
$27 Bn
$21 Bn
$14 Bn $4 Bn $7 Bn
$3 Bn
Tech Titans Have Deployable Cash Balances
21
$758Bn
Total Aggregated
Cash Balance:
Note
1. Cash denotes Cash & Cash Equivalents
2. Source: CapIQ

23. 22
Thank You