Upload
others
View
0
Download
0
Embed Size (px)
Citation preview
TECHNOLOGY SERVICES MONTHLY
1717 Arch Street, 39th Floor · Philadelphia, PA 19103 · www.mhhco.com
December 2017
Blockchain
MHH | Technology Services Group 2
Welcome to the December edition of the Mufson Howe Hunter TechnologyServices Monthly. This month, we focus on Blockchain. Each month, ourteam aims to provide you with a newsletter that contains thought-provoking content and analysis, as well as updates on macroeconomicthemes, equity capital market performance, private capital market trendsand noteworthy M&A activity–all of which is relevant to our core industrysectors:
Our Technology Services practice serves growth-oriented, rapidly scalablebusinesses that leverage proprietary and enabling technologies to addressthe evolving needs of modern enterprise customers. We apply deepindustry expertise and broad transaction experience to provide thoughtful,tailored advice and solutions for our clients. Our clients turn to us foroutstanding M&A advisory and capital-raising execution.
We hope you find this information valuable, and we welcome anycomments or suggestions.
Sincerely,
Brandon K. EckManaging Director, Head of Technology Services
Cloud Services Healthcare IT Infrastructure Services Specialty Consulting
Digital Agencies Information Services IT OutsourcingTech-Enabled Business
Process Outsourcing
Tech-Enabled Solutions
InternetOutsourcing
ServicesMobile
Enterprise Software
Welcome to the MHH Technology Services Newsletter!
Select 2017 Franchise Themes
Cloud Brokerage Services & Cloud Enablement: The convergence of IT services,outsourcing, hosting, managed services and cloud business models continues tocause significant change in sourcing strategies. This will benefit IT Outsourcers thatembrace flexible pricing strategies, including the delivery of offerings "as a service.”It will also drive demand for third-party outsourced tools and services.
Offshore Providers’ Transformation: The current political landscape and increasingclient demand for more automated and agile solutions is driving offshore providers toincrease their functional capabilities in cloud-based services that augment anddifferentiate existing delivery models. According to Information Services Group (ISG),As-a-Service annual contract value now represents 36% of the combined global marketfor sourcing services, nearly double early 2014 (ISG, 2016).
IoT-Optimized Infrastructure Services: “Connected things” will streamline vendoroperational models while reducing customer costs. IoT will introduce even more usefuldata to the cloud that needs to be captured and effectively managed. IaaS and PaaScompanies will be a direct beneficiary of this trend. Cisco expects database, analyticsand IoT workloads to account for 22% of the total workloads by 2020 (Cisco, 2016).
Healthcare Consumerism & Patient Engagement: The rising costs of healthcarepremiums and increased out-of-pocket consumer spend from rising deductibles areshifting healthcare consumer behaviors toward a more cost-conscious mentality. Inturn, payors and providers continue to focus on patient engagement-relatedtechnologies that improve the digital consumer experience.
What we are reading…
Population Health Management: Population health management continues to be atop priority for healthcare organizations, as the overall responsibility for keeping apopulation of patients healthy shifts to the provider. This, coupled with the economicmotivation of the risk-based, value-driven reimbursement model, is driving providerdemand for more actionable data about the patients they serve and data relating totheir post-acute care.
Zombie College Football Bowls and Kangaroo Jerky
Eric Schmidt Stepping Down as Alphabet's Executive Chairman to become a Technical Advisor
Sequoia is Looking to Raise a $5 Billion Investment Fund
AI in 2018: What works, what doesn't, and what's still science fiction
Gadgets with Gurman: The Year in Tech
TECHNOLOGY SERVICES MONTHLY
MHH | Technology Services Group 3
The Mufson Howe Hunter Technology Services Group serves growth-oriented, rapidly scalable businesses that leverage proprietary and enabling technologies to address the evolving needs of modern enterprise customers. We apply deep industry expertise and broad transaction experience to provide thoughtful, tailored
advice and solutions for our clients. Our clients turn to us for outstanding M&A advisory and capital-raising execution.
Brandon EckManaging Director,Head of Technology Services
Prior Experience:
Managing Director, Head of Technology & Services, Janney Montgomery Scott
Principal, Katalyst Securities
Principal, RCW Mirus
215.399.5411 [email protected]
18+ Years of Experience
60+ Transactions Completed
Education:
Gettysburg College (BA)
Senior Banking Team Sector Coverage
Andrew WilsonVice President,Technology Services
Prior Experience:
Senior Associate, Technology & Services, Janney Montgomery Scott
Associate, TMT, J.P. Morgan
Attorney, M&A, Wilson Sonsini Goodrich & Rosati
215.399.5406 [email protected]
8+ Years of Experience
20+ Transactions Completed
Education:
Duke University (JD, MBA)
U. North Carolina, Chapel Hill (BA)
Sell-side Advisory
Buy-side Assignments
Private Placements
Recapitalizations
Financial Advisory
Fairness Opinions
Tech-Enabled Solutions
Internet
Outsourcing Services
Mobile
Enterprise Software
IT Outsourcing
Healthcare IT
Digital Agencies
SpecialtyConsulting
InformationServices
InfrastructureServices
Tech-Enabled BPO
Cloud Services
TECHNOLOGY SERVICES PRACTICE OVERVIEW
Business Model Coverage
MHH | Technology Services Group 4
BLOCKCHAIN
What is Blockchain?
Originally associated specifically with bitcoin, the term blockchain now refers
to any distributed electronic ledger that uses software algorithms to reliably
and anonymously record transactions.1
Rather than rely on a single, centralized source for data validation (e.g., a
bank’s server), blockchain leverages decentralized verification from
numerous participants.
Blockchain uses cryptography and digital signatures to prove online identity
while maintaining anonymity regarding real-world personal identity.
In a public blockchain (e.g., bitcoin) no permission is required to view data
contained in the blockchain, and in the case of bitcoin, anyone may “edit”
such data by adding pending transactions to any given block.
Private blockchains allow defined groups of participants with an established
level of trust (e.g., internal committees or industry groups) to collaborate in
near real-time while avoiding the verification expense of public blockchains.
Blockchain in Financial Services… Some of the largest financial services firms are exploring possible uses of
blockchain to improve high-risk and/or time-consuming operations, including:
Reconciliation of cross-border payments
Compliance with anti-money laundering (AML), know-your-customer (KYC)
and other regulatory requirements
Access and identification security protocols
Use of “smart contracts” for trade settlement and execution of options
contracts, reducing reliance on intermediaries
How Does it Work?Below is an example of a typical cryptocurrency (e.g., bitcoin) transaction2
…and BeyondAlthough most widely associated with cryptocurrency and other financial
services, there are many developing applications of blockchain technology.
Automotive: In August 2017, EY announced the development of a blockchain
system, called Tesseract, that will enable companies or groups of individuals
to more easily share ownership and usage of vehicles.3
Healthcare: Many technologists and healthcare professionals see blockchain
technology as a way to streamline the sharing of medical records, protect
sensitive data and give patients more control over their information.4
Voting: Blockchain technology has been widely discussed as a means to
prevent tampering – or the perception thereof – in political elections,
especially in nations where trust in such processes is limited.
Supply Chain/Logistics: In August 2017, a group of 10 large food and retail
companies announced a partnership with IBM in an effort to explore
blockchain applications within the food supply chain.3
Programmatic Advertising: Philadelphia-based company, Amino Payments,
provides a digital media supply chain platform that tracks every penny of ad-
spend, enabling companies to keep track of where their money is spent.
Alice wants to sendmoney to Ben
A “block” is created for the transaction
This block is broadcast to every party in the network
Network members validate the transaction
The block is added to the chain, creating a permanent and transparent record
Ben receives the money from Alice
1 PWC | 2 Standard Chartered | 3 Reuters | 4 technologyreview.com (September 2017)
MHH | Technology Services Group 5
BLOCKCHAIN
Venture funding for bitcoin and blockchain technology has gone from nearly non-existent in 2012 to over $500 million annually in recent years.
1,3, 4 CB Insights | 2 Pitchbook
Early LeadersThe ten most well-funded blockchain technology companies
Funded Amount1 Company Description2
$136
$117
$116
$94
$90
$76
$67
$44
$40
$34
Provider of payment tools for bitcoin and other digital currency services.
Infrastructure provider allowing companies to successfully digitize their assets and safely transact them over the internet.
Developer of a digital currency platform that helps merchants and consumers transact with bitcoin currency.
Developer of global financial settlement services enabling customers to instantly pay vendors in any currency with no chargebacks.
The company's application platform provides decentralized digital currency, enabling users and senders to earn digital money on any device, in any country, with no need for a bank account.
The company offers interoperable blockchain technologies (sidechains) and applies innovative uses of cryptography for commercial privacy within blockchain infrastructures.
Provider of tools for digital ledgers to track and settle digital assets in a cryptographically secure environment, enabling financial services firms to improve their efficiency and security.
Developer of bitcoin applications, enabling financial institutions to offer seamless, programmatic and peer-to-peer transfer of digital assets.
The company provides a peer-to-peer payment system and digital currency to its clients, along with security services that include digital wallet and digital vault for client bitcoin accounts.
Operator of a bitcoin exchange marketplace whose systems make use of blockchain technology for settlement of financial transactions.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
(Tim Draper)
4
Most Active VC Investors in Bitcoin3
1
2
3
4
5
6
7
8
9
10
MHH | Technology Services Group 6
U.S. PPI, CPI and PCE
10-Year Treasury Rate
U.S. Unemployment & Labor
U.S. Market Indices
Sources: CapitalIQ , Federal Reserve Bank of St. Louis
U.S. ECONOMIC INDICATORS
Unemployment Rate
Labor Participation Rate
SP500 NSDQ DJIA
October 2.2% 2.8% 3.8%
LTM 29.1% 20.4% 26.9%
3-Year 43.5% 28.1% 36.2%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17
S&P 500 NASDAQ Dow Jones Industrial Average
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17
10-Year Teasury Rate
62.0%
62.2%
62.4%
62.6%
62.8%
63.0%
63.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17
Unemployment Rate Labor Participation Rate
-3.0%
-2.5%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17
Consumer Pri ce Index Producer Price Index Personal Consumption Expendit ures
MHH | Technology Services Group 7
Company Investor Date Sector
Nov 16Infrastructure
Services
Nov 16Infrastructure
Services
Nov 8 Healthcare IT
Nov 7 IT Outsourcing
Nov 1Infrastructure
Services
Nov 1Business Process
Outsourcing
Source: Pitchbook*For deals with announced transaction value**Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size
U.S. TECH SERVICES MIDDLE-MARKET PRIVATE EQUITY: BUY-OUT ACTIVITYSelect Nov. 2017 Buy-Outs** PE Buy-Outs, Trailing 8 Quarters, as of Nov. 30
PE Buy-Outs, by Deal Size PE Buy-Outs, Historical Annual, as of Nov. 30
$0.0B
$0.2B
$0.4B
$0.6B
$0.8B
$1.0B
$1.2B
-
20
40
60
80
100
120
140
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total CapitalNumber of Deals
Add-Ons Platform Total Capital Invested*
36%
20%
13%
32%$0-25mm
$25-50mm
$50-100mm
$100-250mm
$0.0B
$0.5B
$1.0B
$1.5B
$2.0B
$2.5B
$3.0B
$3.5B
$4.0B
$4.5B
-
100
200
300
400
500
600
2010 2011 2012 2013 2014 2015 2016 2017
Total CapitalNumber of Deals
Deal Count Total Capital Invested*
MHH | Technology Services Group 8
Company Stage Date Sector
Angel / Seed Nov 30Infrastructure
Services
Angel / Seed Nov 16 Healthcare IT
Early Stage VC Nov 7 Healthcare IT
Angel / Seed Nov 2Information
Services
Angel / Seed Nov 1 Healthcare IT
Later Stage VC Nov 1Infrastructure
Services
U.S. TECH SERVICES MIDDLE-MARKET PRIVATE EQUITY: MINORITY ACTIVITYSelect Nov. 2017 Minority Deals** PE Minority, Trailing 8 Quarters, as of Nov. 30
PE Minority, by Stage PE Minority, Historical Annual, as of Nov. 30
Source: Pitchbook*For deals with announced transaction value**Please contact the MHH Technology Services Group directly for any information regarding valuation, deal size, and investors
$0.0B
$0.5B
$1.0B
$1.5B
$2.0B
$2.5B
-
50
100
150
200
250
300
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17
Total CapitalNumber of Deals
Deal Count Total Capital Invested*
48%
27%
18%
7%
Angel / Seed
Early Stage VC
Later Stage VC
PE Growth/Expansion
$0.0B
$1.0B
$2.0B
$3.0B
$4.0B
$5.0B
$6.0B
$7.0B
$8.0B
0
200
400
600
800
1,000
1,200
2010 2011 2012 2013 2014 2015 2016 2017
Total CapitalNumber of Deals
Deal Count Total Capital Invested*
MHH | Technology Services Group 9
Source: CapitalIQ
VALUATION & PERFORMANCE METRICS
Median Operational KPIs
Median Valuation Metrics
IT Outsourcing: technology services and consulting solutions, including engineering, application development, knowledge management and business process management
Business Process Outsourcing: services for administering and managing select technology-enabled business processes, including outsourced product development, finance and accounting, human resources, research and analytics, and other industry-specific processes
Infrastructure Services: providers of managed, hosting and consulting services around planning, designing, implementing and managing mission-critical IT infrastructure
Information Services: providers of independent rating, benchmarking, research and data analytic services
Healthcare IT: software and technology-related services focused on the design, development, creation, use and maintenance of information systems for the healthcare industry
ITO
BPO
IFS
IS
HIT
Sector Indices Performance, as of November 30, 2017
SP500 NSDQ ITO BPO IFS IS HIT
October 2.2% 3.6% 4.2% 5.6% 2.9% 2.5% (1.7%)
LTM 21.1% 29.6% 23.7% 31.5% 33.9% 31.3% 22.5%
3-Year 27.6% 45.3% 35.3% 50.0% 81.1% 61.9% 9.5%
9.4%
6.8%
19.8%
17.3%
9.0%
HIT
IS
IFS
BPO
ITO
2017E REVENUE GROWTH
57.4%
62.2%
63.9%
36.8%
31.7%
HIT
IS
IFS
BPO
ITO
LTM GROSS MARGIN
11.2%
39.8%
25.4%
14.0%
16.7%
HIT
IS
IFS
BPO
ITO
LTM EBITDA MARGIN
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17
2.0x
2.9x3.7x
7.5x
3.9x
ITO BPO IFS IS HIT
EV/2017E REVENUE
10.5x
15.7x
12.0x
17.6x 17.0x
ITO BPO IFS IS HIT
EV/2017E EBITDA
15.9x
29.6x
20.9x
26.5x29.2x
ITO BPO IFS IS HIT
FWD PRICE/EARNINGS
MHH | Technology Services Group 10
Valuation Metrics Relative Valuation**
Select November 2017 Precedent Transactions*
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Excluded: ACN and DXC
Announced Acquirer Target Description
November 30 Engineering and R&D services
November 21 Managed cloud and hosting services
November 16 Managed services, hosting options, security
services, and IT consulting services
November 13 Managed IT operations, application hosting, and
managed cloud services
November 1 IT management consulting services
IT OUTSOURCING
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2017E 2018E Margin 2017E 2018E Margin LTM 2017E 2018E LTM 2017E 2018E
Accenture plc (ACN) $90,984 NA $38,716 31.7% $6,086 $6,769 16.3% 2.4x NM 2.3x 13.2 x 14.4 x 12.9 x
Cognizant Technology Solutions Corporation (CTSH) $42,620 $14,804 $16,197 38.6% $3,039 $3,515 19.9% 2.7x 2.6x 2.4x 12.5 x 12.7 x 11.0 x
DXC Technology Company (DXC) $27,426 $20,182 $24,018 25.3% $3,938 $4,927 13.8% 2.1x 1.7x 1.4x 14.7 x 8.5 x 6.8 x
Infosys Limited (INFY) $34,583 $10,866 $11,556 35.3% $2,906 $3,036 27.0% 2.8x 2.7x 2.5x 10.2 x 10.0 x 9.6 x
Wipro Limited (WIT) $21,896 $8,555 $8,808 28.9% $1,838 $1,824 20.2% 2.2x 2.1x 2.1x 10.6 x 9.9 x 10.0 x
HCL Technologies Limited (HCLTECH) $18,295 $7,896 $8,499 33.8% $1,752 $1,873 22.4% 2.3x 2.2x 2.0x 10.5 x 9.9 x 9.2 x
CGI Group Inc. (GIB.A) $14,956 $8,601 $8,950 30.1% $1,559 $1,652 16.7% 1.9x 1.9x 1.8x 10.5 x 10.5 x 9.9 x
Atos SE (ATO) $15,494 $15,145 $15,580 13.9% $1,995 $2,083 13.3% 1.1x 1.0x 1.0x 8.0 x 7.9 x 7.6 x
Syntel, Inc. (SYNT) $2,122 $898 $892 37.7% $227 $231 26.7% 2.6x 2.7x 2.7x 9.4 x 10.6 x 10.4 x
Virtusa Corporation (VRTU) $1,361 $961 $1,096 28.2% $68 $96 6.5% 1.6x 1.5x 1.3x 17.8 x 21.0 x 14.9 x
Perficient, Inc. (PRFT) $676 $485 $515 33.7% $70 $80 11.1% 1.6x 1.5x 1.4x 11.3 x 10.6 x 9.3 x
Mean $24,583 $8,839 $12,257 30.7% $2,134 $2,371 17.6% 2.1x 2.0x 1.9x 11.7x 11.5x 10.1x
Median $18,295 $8,578 $8,950 31.7% $1,838 $1,873 16.7% 2.2x 2.0x 2.0x 10.6x 10.5x 9.9x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close November 30, 2017.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
ACN
CTSH
INFY
HCLTECHWIT
GIB.A
ATO
SYNT
VRTU
PRFT
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
-10.0% 0.0% 10.0% 20.0% 30.0%
EV/EBITDA (2017E)
Revenue Growth (2017E)
ACN
CTSH INFY
HCLTECHWIT
GIB.A
ATO
SYNT
VRTU
PRFT
0.0 x
0.5 x
1.0 x
1.5 x
2.0 x
2.5 x
3.0 x
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
EV/Revenue (2017E)
Revenue Growth (2017E) + EBITDA Margin (LTM)
MHH | Technology Services Group 11
3.
Valuation Metrics
Select November 2017 Precedent Transactions*
BUSINESS PROCESS OUTSOURCING
Announced Acquirer Target Description
November 21 Incoming and outgoing call center and back
office services
November 20 Telemarketing, digital marketing, and analytics Business support services unit (51% Stake)
November 15 Payroll and tax management services
November 12 . Project and permanent placement services
November 1 Consulting and outsourcing solutions
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size
Relative Valuation
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2017E 2018E Margin 2017E 2018E Margin LTM 2017E 2018E LTM 2017E 2018E
Automatic Data Processing, Inc. (ADP) $50,762 $12,740 $13,638 42.9% $2,604 $2,902 21.6% 4.0x 4.0x 3.7x 17.6 x 19.4 x 17.4 x
Genpact Limited (G) $6,224 $2,726 $2,910 39.1% $454 $500 16.8% 2.6x 2.6x 2.4x 14.6 x 15.4 x 14.0 x
EPAM Systems, Inc. (EPAM) $5,357 $1,447 $1,761 36.6% $258 $320 14.4% 3.6x 3.4x 2.8x 19.6 x 18.9 x 15.2 x
WNS (Holdings) Limited (WNS) $2,072 $687 $769 32.2% $127 $165 12.8% 3.0x 2.9x 2.6x 17.5 x 15.7 x 12.1 x
ExlService Holdings, Inc. (EXLS) $2,083 $758 $831 34.4% $130 $148 14.0% 2.5x 2.5x 2.3x 15.0 x 14.4 x 12.7 x
Luxoft Holding, Inc. (LXFT) $1,729 $884 $1,048 37.6% $135 $173 10.9% 2.0x 1.9x 1.6x 13.8 x 12.4 x 9.7 x
Globant S.A. (GLOB) $1,404 $407 $491 36.8% $65 $83 13.7% 3.6x 3.4x 2.8x 21.0 x 21.0 x 16.4 x
Mean $9,947 $2,807 $3,064 37.1% $539 $613 14.9% 3.0x 2.9x 2.6x 17.0x 16.7x 13.9x
Median $2,083 $884 $1,048 36.8% $135 $173 14.0% 3.0x 2.9x 2.6x 17.5x 15.7x 14.0x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close November 30, 2017.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
ADP
G
EPAM
WNS EXLS
LXFT
GLOB
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
EV/EBITDA (2017E)
Revenue Growth (2017E)
ADP
G EPAM
WNS EXLS
LXFT
GLOB
0.0 x
0.5 x
1.0 x
1.5 x
2.0 x
2.5 x
3.0 x
3.5 x
4.0 x
4.5 x
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
EV/Revenue (2017E)
Revenue Growth (2017E) + EBITDA Margin (LTM)
MHH | Technology Services Group 12
Valuation Metrics
Select November 2017 Precedent Transactions*
INFRASTRUCTURE SERVICES
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Excluded: WIX
Announced Acquirer Target Description
November 29 . Peer-to-peer cloud storage network
November 27 Cloud access security company
November 15 Web hosting, cloud, and email services
November 9 Private data centers and Infrastructure-as-a-
Service solutions
November 8 Cloud-based archiving platform
Relative Valuation**
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2017E 2018E Margin 2017E 2018E Margin LTM 2017E 2018E LTM 2017E 2018E
Equinix, Inc. (REIT) (EQIX) $36,339 $4,349 $5,046 50.4% $2,041 $2,434 42.8% 10.9x 10.3x 8.9x 23.2 x 21.9 x 18.4 x
United Internet AG (UTDI) $13,592 $4,994 $6,038 35.3% $1,321 $1,451 22.0% 3.3x 3.2x 2.6x 14.7 x 12.0 x 10.9 x
Zayo Group Holdings, Inc. (ZAYO) $8,742 $2,481 $2,647 63.9% $1,233 $1,336 45.4% 6.0x 5.7x 5.3x 12.0 x 11.4 x 10.6 x
VeriSign, Inc. (VRSN) $11,345 $1,165 $1,208 83.2% $804 $867 65.0% 9.9x 9.8x 9.4x 14.1 x 14.2 x 13.1 x
GoDaddy Inc. (GDDY) $6,166 $2,224 $2,541 64.8% $586 $702 11.7% 3.9x 3.7x 3.3x 26.0 x 14.2 x 11.8 x
Endurance International Group Holdings, Inc. (EIGI) $1,342 $1,172 $1,172 50.5% $341 $343 23.5% 2.7x 2.8x 2.8x 9.3 x 9.5 x 9.4 x
Wix.com Ltd. (WIX) $2,496 $424 $557 83.5% $68 $109 -9.1% 5.8x 5.4x 4.1x NM 33.6 x 21.0 x
Web.com Group, Inc. (WEB) $1,121 $755 $783 68.9% $193 $205 20.3% 2.4x 2.4x 2.3x 10.2 x 9.2 x 8.7 x
Internap Corporation (INAP) $351 $280 $279 51.6% $90 $94 27.2% 3.0x 3.0x 3.1x 10.7 x 9.5 x 9.1 x
Mean $9,055 $1,983 $2,252 61.3% $742 $838 28.6% 5.3x 5.1x 4.6x 15.0x 15.1x 12.6x
Median $6,166 $1,172 $1,208 63.9% $586 $702 25.4% 3.9x 3.7x 3.3x 13.1x 12.0x 10.9x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close November 30, 2017.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
EQIX
UTDI
ZAYO
VRSN GDDY
EIGI WEB
INAP
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
-10.0% 0.0% 10.0% 20.0% 30.0%
EV/EBITDA (2017E)
Revenue Growth (2017E)
EQIX
UTDI
ZAYO
VRSN
GDDY
EIGI
WEB
INAP
0.0 x
2.0 x
4.0 x
6.0 x
8.0 x
10.0 x
12.0 x
0.0% 20.0% 40.0% 60.0% 80.0%
EV/Revenue (2017E)
Revenue Growth (2017E) + EBITDA Margin (LTM)
MHH | Technology Services Group 13
TECHNOLOGY SERVICES: INFORMATION SERVICES
Valuation Metrics
Select November 2017 Precedent Transactions*
INFORMATION SERVICES
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Gartner (IT) y/y growth rate pro forma adjusted for the acquisition of CEB, Inc.
Announced Acquirer Target Description
November 29 . Procurement and sourcing applications
November 28 Multi-asset trading technology and infrastructure
November 15 BI and enterprise analytics services
November 3 Channel data solutions for tech companies
November 1 Operator of search marketing platform
Relative Valuation**
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2017E 2018E Margin 2017E 2018E Margin LTM 2017E 2018E LTM 2017E 2018E
S&P Global Inc. (SPGI) $42,197 $5,966 $6,314 71.1% $2,874 $3,072 46.7% 7.6x 7.5x 7.1x 15.8 x 15.5 x 14.5 x
Moody's Corporation (MCO) $29,013 $4,098 $4,507 71.2% $1,955 $2,169 47.6% 8.5x 8.3x 7.5x 16.9 x 17.3 x 15.6 x
IQVIA Holdings Inc. (Q) $21,472 $8,036 $8,531 42.1% $2,034 $2,221 22.1% 3.9x 3.8x 3.6x 16.3 x 14.9 x 13.7 x
IHS Markit Ltd. (INFO) $17,662 $3,567 $3,803 61.3% $1,385 $1,515 30.8% 6.1x 6.0x 5.7x 16.0 x 15.6 x 14.2 x
Verisk Analytics, Inc. (VRSK) $15,880 $2,130 $2,306 63.1% $1,041 $1,130 46.3% 8.9x 8.7x 8.1x 19.6 x 17.9 x 16.5 x
Gartner, Inc. (IT) $10,959 $3,358 $4,023 60.0% $698 $836 12.2% 4.6x 4.1x 3.4x 30.7 x 19.6 x 16.4 x
MSCI Inc. (MSCI) $11,592 $1,271 $1,402 78.2% $660 $750 51.3% 10.4x 10.1x 9.2x 19.2 x 19.5 x 17.2 x
FactSet Research Systems Inc. (FDS) $7,817 NA $1,373 52.9% $434 $469 33.4% 6.5x NM 5.9x 17.9 x 18.8 x 17.4 x
Mean $19,574 $4,061 $4,032 62.5% $1,385 $1,520 36.3% 7.1x 6.9x 6.3x 19.0x 17.4x 15.7x
Median $16,771 $3,567 $3,913 62.2% $1,213 $1,322 39.8% 7.0x 7.5x 6.5x 17.4x 17.6x 16.0x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close November 30, 2017.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
SPGI
MCO Q
INFO
VRSK IT
MSCI
0.0 x
4.0 x
8.0 x
12.0 x
16.0 x
20.0 x
24.0 x
-60.0% -40.0% -20.0% 0.0% 20.0% 40.0% 60.0%
EV/EBITDA (2017E)
Revenue Growth (2017E)
SPGI MCO
INFO
VRSK
IT
0.0 x
1.0 x
2.0 x
3.0 x
4.0 x
5.0 x
6.0 x
7.0 x
8.0 x
9.0 x
10.0 x
0.0% 20.0% 40.0% 60.0% 80.0%
EV/Revenue (2017E)
Revenue Growth (2017E) + EBITDA Margin (LTM)
MHH | Technology Services Group 14
TECHNOLOGY SERVICES: INFORMATION SERVICES
Announced Acquirer Target Description
November 29 Health information and technology company
November 23 Patient record systems, process automation
systems, and management info systems
November 23 Clinical software developer
November 15 Healthcare IT solutions for student health centers
November 6 Pharmacy network design and management
Valuation Metrics
Select November 2017 Precedent Transactions*
HEALTHCARE IT
Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Excluded: CSLT
Relative Valuation**
($ in millions) Operating Metrics Valuation Multiples
LTM LTM
Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA
Company Cap (1) 2017E 2018E Margin 2017E 2018E Margin LTM 2017E 2018E LTM 2017E 2018E
Cerner Corporation (CERN) $23,498 $5,154 $5,578 85.1% $1,671 $1,832 27.8% 4.6x 4.5x 4.2x 15.8 x 13.9 x 12.7 x
Veeva Systems Inc. (VEEV) $8,467 $681 $806 69.4% $227 $261 25.0% 11.9x 11.4x 9.6x 36.3 x 34.0 x 29.6 x
athenahealth, Inc. (ATHN) $5,318 $1,212 $1,344 52.0% $265 $340 11.0% 4.6x 4.5x 4.1x 28.3 x 20.6 x 16.1 x
Allscripts Healthcare Solutions, Inc. (MDRX) $2,584 $1,817 $2,141 50.3% $367 $429 10.1% 2.5x 2.4x 2.0x 20.0 x 11.9 x 10.2 x
Inovalon Holdings, Inc. (INOV) $2,319 $452 $488 64.6% $111 $124 17.0% 4.7x 4.5x 4.2x 22.8 x 18.3 x 16.5 x
Quality Systems, Inc. (QSII) $919 $527 $536 56.4% $82 $81 11.3% 1.8x 1.8x 1.8x 13.8 x 11.6 x 11.6 x
National Research Corporation (NRCI.B) $897 $118 $128 58.2% $39 $43 33.5% 7.4x 7.3x 6.8x 21.3 x 22.2 x 20.2 x
HealthStream, Inc. (HSTM) $758 $247 $266 56.7% $37 $42 11.1% 2.6x 2.6x 2.4x 22.0 x 17.0 x 14.9 x
Computer Programs and Systems, Inc. (CPSI) $407 $268 $284 53.2% $49 $53 10.5% 2.1x 2.1x 1.9x 16.3 x 11.2 x 10.4 x
Castlight Health, Inc. (CSLT) $522 $131 $164 66.1% ($24) ($9) -41.8% 3.5x 3.4x 2.7x NM NM NM
Mean $4,569 $1,061 $1,173 61.2% $283 $320 11.6% 4.6x 4.4x 4.0x 21.8x 17.9x 15.8x
Median $1,619 $489 $512 57.4% $96 $103 11.2% 4.1x 3.9x 3.4x 21.3x 17.0x 14.9x
NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close November 30, 2017.
‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation
Source: Public Filings, Press Releases and Published Research Reports
(1)
(2)
CERN
VEEV
ATHN
MDRX
INOV
QSII
NRCI.B
HSTM
CPSI
0.0 x
5.0 x
10.0 x
15.0 x
20.0 x
25.0 x
30.0 x
35.0 x
40.0 x
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%
EV/EBITDA (2017E)
Revenue Growth (2017E)
CERN
VEEV
ATHN
MDRX
…
QSII
NRCI.B
HSTM
CPSI
0.0 x
2.0 x
4.0 x
6.0 x
8.0 x
10.0 x
12.0 x
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
EV/Revenue (2017E)
Revenue Growth (2017E) + EBITDA Margin (LTM)
TECHNOLOGY SERVICES MONTHLY
The Mufson Howe Hunter Technology Services IndicesIT Outsourcing is currently comprised of: ACN, CTSH, INFY, NESI:HCLTECH, GIB.A, WIT, ENXTPA:ATO, SYNT, VRTU, PRFT; Business Process Outsourcing Index is currently comprised of: ADP, G, EPAM, LXFT, EXLS, WNS,GLOB; Infrastructure Services Index is currently comprised of: EQIX, ZAYO, UTDI, VRSN, DFT, GDDY, EIGI, WIX, WEB, INAP; Information Services Index is currently comprised of: SPGI, Q, MCO, INFO, VRSK, IT, MSCI, FDS;and, Healthcare IT is currently comprised of: CERN, VEEV, ATHN, MDRX, WBMD, INOV, QSII, HSTM, NRCI.B, CPSI, CSLT.
The companies that comprise each Index periodically change as a result of mergers, acquisitions, initial public offerings and other transactions; therefore, comparisons to historical time periods and historicalperformance for each Index may not entirely correspond and correlate to the Index’s current performance. Historical performance is not a guarantee or prediction of future results. The information and statistical datacontained herein have been obtained from sources that Mufson Howe Hunter believes are reliable, but Mufson Howe Hunter makes no representation or warranty as to the accuracy or completeness of any suchinformation and data and expressly disclaims any and all liability relating to or resulting from your use of these materials. The information and data contained herein are current only as of the date(s) indicated andMufson Howe Hunter has no intention, obligation or duty to update these materials after such date(s). These materials do not constitute an offer to sell or the solicitation of an offer to buy any securities.
Copyright © December 2017 Mufson Howe Hunter & Company LLC. All rights reserved. Technology Services Monthly is produced monthly by Mufson Howe Hunter. Mufson Howe Hunter provides a full range of
investment banking services to Technology Services companies. For more information, visit www.mhhco.com.Icons by Flaticon.
1717 Arch Street, 39th Floor · Philadelphia, PA 19103 · www.mhhco.com
Brandon EckManaging Director,
Head of Technology Services
215.399.5411 [email protected]
For more information, please contact:
Andrew WilsonVice President,
Technology Services
215.399.5406 [email protected]