IT Services, Cloud and Managed Services M&A Update July / August 2014

Transcription

1 Technology and Digital Media Investment Banking M&A Advisory IT Services, Cloud and Managed Services M&A Update July / August 2014 August 29, 2014 Generation Equity Advisors, LLC 8560 W. Sunset Blvd, Suite 500 West Hollywood, CA (310) TechMediaMergers.com

2 Generation Equity Advisors is an independent investment banking and M&A advisory firm focused exclusively on the global Software, IT Services and Digital Media industry sectors. We cover the IT Services sector comprehensively including companies that provide cloud services, systems integrators, IT consultants, hosting/data centers, VAR s and managed services firms. We advise buyers and sellers of companies and efficiently execute M&A transactions that help increase shareholder value. Our professionals have advised on $20+ billion in M&A transactions to date and have current clients and relationships globally with software, IT services and digital media companies as well as leading private equity firms. Aaron Solganick, CEO Generation Equity Advisors +1 (310) x101 aaron@generationequityadvisors.com Table of Contents: M&A Update Page 3 Public Company Valuation Table Page 4 M&A Snapshot Page 5 M&A Transaction Highlights Page 6 Sources for our research and data include: S&P Capital IQ, SEC Filings Yahoo! Finance and Company Websites DISCLAIMER The information contained herein is of a general nature and is not intended to address the circumstances of any particular company, individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. We perform our own research and also use third party research. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. This is not an offer or recommendation to buy or sell securities nor is it a recommendation to merge, acquire, sell or exit a specific company or entity. We do not hold any equity or debt position in any of the securities listed herein as of the date of this report. Generation Equity Advisors, LLC Page 2

3 M&A Update IT Services, Cloud, VAR s, Managed Services (July-Aug 2014) M&A deal volume increased by 39% year-over-year (YOY) and 15% successively to 872 deals and at corporate volume reported 806 deals, reporting its fourth consecutive increase, up 17% successively and year-over-year rise of 41%. Cloud and smart mobility have been responsible for about 42% of technology deals, with the global technology M&A rising by 57% to (USD) $52.4 billion this year, according to a new report by Ernst & Young. The report noted that the disclosed value of M&A deals rose by 70% to $119 billion during the second half of 2014, while the value dropped 21% in 2Q14 compared to Q1. During the quarter, private equity (PE) volume dropped by 6% consecutively following five consecutive quarterly increases, while rose 16% YOY and its aggregate value reached $5.9 billion, declined 55% sequentially and 58% YOY. In addition, the average value of PE deals reached $266 million, reporting 41% drop sequentially and 58% YOY, marking the lowest level in three years. However, the overall average deal value declined 24% consecutively and 7% YOY to $231 million, the report added. Overall, global technology M&A is on path for a record year in Technology companies are cash rich, and interest rates are low. Buyers are in full force looking to acquire companies that are strategic to their business and growth initiatives. In addition, the IPO market has open its gates again in 2014 which feeds further M&A transactions. There were several M&A transactions announced within the IT services, cloud and managed services sectors in July and August We expect it to continue into the rest of 2014 and into Cloud services firms are in high demand for private equity firms because they like their recurring revenue and longer term contracts. We have been in recent contact with a number of private equity firms that continue to express a strong interest in acquiring cloud services firms. We are seeing average valuation ranges from 0.8x to 1.0x TTM revenues and 6.0x 9.0x TTM EBITDA for most IT services firms including project based systems integrators and IT consulting firms. The more profitable, the larger the revenues and higher amounts of recurring revenue have commanded higher transaction premiums. Cloud, managed and hosting services providers are currently commanding a an average valuation ranging from 1.9x 2.3x of TTM revenues and 7.2x 9.4x TTM EBITDA multiples YTD M&A Valuation Multiples - August 2014 IT Services Cloud, Managed and Hosting Services VAR Value/Revenue (ttm) Value/EBITDA (ttm) 0.8x 1.0x 1.9x 2.3x 0.2x 0.4x 6.0x 9.0x 7.2x 9.4x 6.0x - 7.7x

4 Average Publicly Traded IT Services Firms Valution Table CONSULTING Ticker Stock Price Market Cap EV/Revenue EV/EBITDA Advisory Board Co. ABCO B Charles River Associates Intl CRAI M FTI Consulting FCN B Hackett Group HCKT M Huron Consulting Group HURN B Information Services Group III M Navigant Consulting NCI M Resources Connection RECN M Average SYSTEMS INTEGRATORS Ticker Stock Price Market Cap EV/Revenue EV/EBITDA Cap Gemini CAP.PA B CIBER CBR M CGI Group GIB B Edgewater Technology EDGW M Hackett Group HCKT M Perficient PRFT M Sapient SAPE B Average OUTSOURCING Ticker Stock Price Market Cap EV/Revenue EV/EBITDA Accenture ACN B ATOS ATO.PA B Computer Services Corp. CSC B HP HP B IBM IBM B igate Corp. IGTE B Unisys UIS B Average OFFSHORE Ticker Stock Price Market Cap EV/Revenue EV/EBITDA Cognizant Technology Solutions CTSH B Hexaware HEXT M igate Corp. IGTE B Infosys INFY B Syntel SYNT Virtusa VRTU B Wipro WIT B Average Data and Stock Prices as of August 19, 2014 and are in US Dollars EV = Value EBITDA=Earnings VAR Before Interest, Taxes, Depreciation Ticker & Amortization Stock Price Market Cap EV/Revenue EV/EBITDA CDW CDW 5.68B 5.68B eplus PLUS M Generation Equity Advisors, LLC Page 4 Insight s NSIT B Systemax SYX M

5 M&A Spotlight Acuative, Inc. acquires IT/network consulting and integration firm Thrupoint, Inc. July 17, 2014 Acuative, a global provider of technology solutions, is pleased to announce that it has acquired the international divisions of Thrupoint, Inc., a leading provider of IT/network consulting and professional services. This completes Acuative s acquisition of Thrupoint, which began in March 2014 with the acquisition of their U.S.division. Acuative has gained two new offices in Uxbridge, England, and Riyadh, Kingdom of Saudi Arabia as well as extended service coverage in Europe, Asia, Africa, and the Middle East, and an international client base. Combining Acuative s advanced network operations, infrastructure management, field service, managed services, and logistics capabilities with Thrupoint s expertise in IT consulting and professional services will deliver a broad portfolio of global technology solutions. Thrupoint specializes in the development of architectures and roadmaps to help clients manage and leverage their IPT/unified communications, security, mobility/wireless, data center, and storage technology. Using a holistic approach that addresses short term and long term needs, Thrupoint provides consulting and professional services that address every phase of technology management for clients. They currently support a number of major global clients in the financial and service provider sectors. Thrupoint will operate under the Acuative brand moving forward. Deal terms were undisclosed. For more information, please go to: Generation Equity Advisors, LLC Page 5

6 Q M&A Announcements IT Services, Cloud and Managed Services (U.S.) Announced Date Target/Issuer Buyers/Investors Sellers Implied Value Implied Value/Revenues Implied Value/EBIT Primary Industry [Target/Issuer] 08/14/2014 Professional Access Ltd. Zensar Technologies, Inc. 3i Infotech IT Consulting, Systems Integration 08/07/2014 Symform, Inc. (Cloud) Quantum Corporation (NYSE:QTM) OVP Venture Cloud Storage Solutions 08/04/2014 NetCentrics Corporation Haystax Technology, Inc IT Consulting, Systems Integration 07/28/2014 Systems Integration, Inc. Rimhub Holdings, Inc IT Consulting, Systems Integration 07/21/2014 NXO Americas, Inc. Global Convergence, Inc. NextiraOne IT Consulting, Systems Integration 07/18/2014 Tarshan LLC ENABIL Solutions Ltd IT Consulting, Systems Integration 07/17/2014 Thrupoint, Inc. Acuative Corporation Data Processing and Outsourced Services 07/16/2014 Network Custom Solutions & Support, Inc. Network Data Systems, Inc Data Processing and Outsourced Services 07/15/2014 Software Solutions, Inc. Net@Work, Inc IT Consulting, Systems Integration 07/15/2014 EmeryMartin Consulting The CHR Group, Inc IT Consulting, Systems Integration 07/09/2014 Tektivity Inc. Carrier Access, Inc IT Consulting, Systems Integration 07/09/2014 Langham Consulting Services Inc. TMG Consulting, Inc IT Consulting, Systems Integration 07/07/2014 Blue Slate Solutions LLC Exlservice Holdings, Inc IT Consulting, Systems Integration 07/07/2014 Network Business Solutions, Inc. Summit Technologies Company LLC Data Processing and Outsourced Services 07/02/2014 GreenLeaf Consulting LLC ENDEXX Corp. (OTCPK:EDXC) IT Consulting, Systems Integration 07/01/2014 MNS Holdings LLC Tolt Solutions, Inc. ipass Inc IT Consulting, Systems Integration 07/01/2014 Foresite MSP, LLC Moneo Technology Solutions LLC IT Consulting, Managed Security and Cloud Solutions

7 Generation Equity Advisors, LLC is an independent investment bank and M&A advisory firm focused exclusively on the global Software, IT Services, Internet and Digital Media industry sectors. We advise buyers and sellers of companies and efficiently execute transactions to increase shareholder value. Our professionals have advised on $20+ billion in M&A transactions to date and have current relationships globally with companies as well as leading private equity firms. Please contact for information regarding this report or to inquire about an M&A transaction: Aaron Solganick, CEO Generation Equity Advisors, LLC 8560 W. Sunset Blvd, Suite 500 West Hollywood, CA (310) TechMediaMergers.com Follow Us on Twitter: TechMediaMerger