July, 2019 Managed Services | Table Of Contents
01 Introduction to Managed Services 04
02 Managed Services Landscape 10
03 Industry Trends 16
04 Competitive Landscape 24
05 Valuation & Buyer Overview 31
06 Miscellaneous Material 40
07 Avendus Overview 53
2 Executive Summary | Managed Services
Landscape Trends Competition
USD Bn Analytics Managed services TAM is Firms offering managed services are expected to grow from 296 rapidly scaling while the market $173Bn in 2018 to $296Bn remains fragmented with no one player CAGR: 11.3% Security by 2023, at a CAGR of accounting for greater than 2% of the 11.3%, with managed cloud 173 market share regionally services being the fastest Cloud growing segment as it Managed evolves from first stage Transactions Services adoption to mature stage IT Administration acceptance Consolidation being driven by 2018 2023 geographic/technology Data Center complementarity and economies of Drivers scale, with increasing contribution from artificial intelligence and machine Network Services learning capability-driven transactions Up to 35% cost reduction over Traditional in-house/traditional IT teams IT Teams and increased operational efficiencies are key drivers for MSP adoption. In order to better cater to small & medium businesses (SMBs), Artificial Machine MSPs are now increasingly Reduction in Intelligence Learning Slated to be among the fastest growing segment in the moving to standardized technology services space delivery of services costs by 35% 3 01 Introduction To Managed Services What Are Managed Services | MSPs Take Ownership of Certain Business Operations/Processes On A Long-Term Basis To Improve Quality & Efficiency
Defining Managed Services Benefits of Managed Services
Global Reach Access to worldwide talent and expertise solutions that operate across a global network
A Managed Service Cost Efficiencies Outsourced ownership of Provider (MSP) Application of deep domain Predictable pricing model, reducing exposure to financial risk certain business operations expertise and market- and fixed headcount fees and processes leading technologies Transforms and Market-Leading Technologies optimizes business Technology that would be too costly to build in-house processes and systems to improve operational Continuous Improvement Long-term partnership with Improvement in operational Continuous improvement of operational and business flexible service models for quality and efficiency quality and efficiency on an processes continued success on a long-term basis ongoing basis Advisory Expertise Continuous access to advisory expertise to solve complex problems
Agility Flexible service models with scalable infrastructure Impact On Businesses Time & Resource Efficiencies » People, processes, and offices are increasingly expensive and time-consuming to build and maintain in-house Allows enterprises to focus time and manpower on other » While businesses benefit from predictable, outcome-based pricing and reduced exposure to financial risk, business activities
the benefits extend beyond cost reduction Deep Domain Insight » Businesses are able to take advantage of expertise, scalable technology, and transform critical processes from this Application of cross-industry, cross-sector specialist knowledge long term, integrated partnership 5 Source: Deloitte Considerations for Enterprises Managing IT | Conflict Between Maintaining Internal Control and Teams Versus Managing Costs and Output
Options For IT Management What Is The Problem With IT?
Retaining Talent: Multiple Skillsets: Managed Out-Task / Companies are vying for a limited Network engineers, application In-House Outsource number of experienced developers, IT generalists, and technology professionals and top information security professionals talent is expensive to hire/retain have different skillsets which require » Larger enterprises often maintain » MSPs assume IT operations for investment for training and their IT infrastructure internally commercial and enterprise clients, development » This form of a DIY approach allows applying their technological for greater control over processes, expertise and refined processes for Manage Multiple Vendors: Manage Multiple Technologies: but with financial and operational clients Companies often employ multiple The IT landscape is changing constraints » These are often superior to the vendors that fit various departments’ rapidly, and more advanced organization’s internal capabilities, needs; however, resources spent on technologies are emerging at an and would be more expensive to managing those multiple vendors start unprecedented scale – it is difficult develop and maintain internally to add up and cause inefficiencies to stay ahead of the curve without a dedicated focus
Key Notes » Most organizations face two major IT-related issues that are at odds with each other: » Keeping the IT infrastructure operating at optimal levels of performance » Managing the rising associated costs » MSPs allow enterprises to access scalable third-party delivery capabilities and infrastructure with various pricing models, enabling clients to increase coverage and volume without additional sizeable investments
6 Source(s): Cisco Rationale for Appointing Managed Services Vendors | As Outsourcing Partners, Managed Services Vendors Help Solve Critical Issues Cost-Effectively
Why Companies Hire MSPs Benefits of MSPs
Reduce recurring in- Increase efficiency by house cost by 30-40% 50-60% Access To Talent ü Avoid expensive and tedious hiring process for qualified employees And Scalable ü MSPs have certified employees with relevant industry expertise, Support Services making it efficient to ramp up as demand increases 80% of network 65% of IT budgets outages are due to spent just to keep the changes “lights on” ü Round-the-clock, proactive services to identify issues to avoid Proactive Support downtime And Maintenance ü Uninterrupted monitoring with continual updating ensures optimal business productivity for clients Common Project Management Tools
ü MSPs evaluate a client’s unique workload and performance Point Products Applications Customized requirements to create customized IT support solutions Single-feature products for small-time Solutions Simple to install, configure, and use, but ü Solutions offered are expandable to meet changing needs providers to help with integrating inadequate when it comes to disparate solutions implementing a complete IT systems management strategy
ü Contracts are often fixed monthly rates/subscriptions Agentless Software Predictable Pricing ü Unplanned and urgent repairs unlikely to strain budgets, compared to With rich features, these tools are ideal Agent-based Software expensive in-house teams for managing software applications and These have feature sets to suit small, network devices medium, and large businesses and give service providers a greater level of control to perform a range of tasks Benefiting From ü MSPs are equipped with the latest IT service technologies to provide Cloud Services The Latest quick business solutions A cost-effective way to monitor, ü manage, maintain, secure, and backup Technology Technology cost spread over a larger user base is more cost effective, and clients may not be able to implement this independently systems
7 Source(s): Cisco Evolution Of Managed Services | Increasing Outsourced And Digital Services As The Industry Matures
100% Insourced Non-Digital
Outsourced Digital Insourced
Penetration Rate Outsourced
0%
Ad hoc Opportunistic Repeatable Managed Optimized
Select managed Full-scale managed digital services digital services Degree of Maturity
8 Note: Digital includes cloud, analytics, social, mobile, and IoT Source: IDC Types Of Managed Services | Security And Analytics Services Are Increasingly Offered As Value-Added Services By MSPs
Types of Managed Services Representative Logos
Managed Analytics
Leveraging new-age analytics solutions (incl. use of AI/ML) to help enterprises make improved decisions
Managed Security .
Remote security within organizations, including SAMM, RCM, SIEM, et al
Managed Cloud Services
Shared resources (databases, hardware, software tools, etc.) across remote networks Areas of interest Managed IT Administration
General applications/systems IT maintenance and support
Managed Data Center Services
Eliminates the cost of owning and operating a data center; this service could include managed hosting, managed storage, and backup
Managed Network Services
Networking applications, functions, and services that enterprise outsource to be remotely operated, monitored, and maintained (WANs, LANs, etc.)
» Traditional managed service model provides network and data center services; with the adoption of cloud services, managed cloud services using private/public cloud infrastructure has become a key component of IT infrastructure services » Security and analytics services are increasingly offered as value-added services by larger MSPs as well as smaller, more specialized MSPs
9 02 Managed Services Landscape Managed Services Global Market | Increased Worldwide IT Spending And Growing Market Demand For MSPs
Increasing Worldwide IT Spending (USD BN) Key Notes » The global managed services market is Data Center Systems Enterprise Software Devices IT Services Communications Services expected to grow from $173bn in 2018 to $3,698 $3,816 $3,538 $296 billion by 2023, at a CAGR of >11%
38% » Cloud-based technology is now the fastest- 39% 39% growing deployment / service type Increasing Worldwide 27% » Key factors driving the adoption of 26% 27% IT Spending cloud managed services include 19% 19% 19% limited internal IT support, budget 12% 10% 5% 11% 5% 5% constraints, and ease of scalability
2017 2018 2019E » Firms offering managed services are key to the IT infrastructure needs of startups and Managed Services Global Market (USD BN) SMEs as they lack in capex and in-house capabilities
CAGR: 11%+ $296 » Government and BFSI sectors are $266 $239 undergoing digitization to improve $215 $193 $173 operational efficiencies, contributing to Growing Market higher growth from those segments Demand for Managed Services
2018 2019E 2020E 2021E 2022E 2023E 11 Source: Gartner, Statista Managed Services Market Drivers | Increased Budget Allocations Leading To Growth Of Managed Services
2019 IT Budget Allocation (%) 2019 Managed Services Budget Breakdown (%)
Managed Hosting Other Hosted / Cloud- 5% Based Services Managed Storage / Backup 21% Managed Security 15% 11% Software Managed Business Apps 26% 5% 10% Managed Hardware Support Managed IT Allocating More Services 6% Managed Communications 9% Capital To Managed 14% ` Managed Cloud Infrastructure 6% Services 8% Managed Networking 8% Managed IT Help Desk 8% 8% 8% Managed Print Services Hardware Managed Mobile Computing 35% Other Key Notes 2019 IT Spend Growth Rates (%) » Enterprises realizing the cost reduction and operational efficiencies of managed services over traditional internal IT teams have driven increasing Enterprise Software 8.3% budget allocation over the years » Budget spend on enterprise software grew the fastest, creating demand IT Services 4.7% for firms with technical capabilities to offer services around such software
» Hosting, storage, and security make up the largest percentage of managed Devices 2.4% Software and Services services offerings, and demand for managed security is expected to Remain Fastest increase further due to the ever-evolving sophistication in cyber attack Data Center Systems 1.6% Growing Segments Of technology IT Spend Communication Services 1.2%
12 Source: Spiceworks, Gartner Key Financial Metrics | Managed Services Continues To Be One Of The Fastest Growing Segments Within Technology Services
2018 Comparative Financial Performance* 2018 Managed Services Growth Rates
Net-New Revenue only looks at new managed services revenue Technology & Managed Cloud 27% that is generated within the year Services Services Net-New – a performance measure for Revenue Growth sales teams
Revenue 1% 20% 27% Growth Total recurring revenue displays 14% overall recurring revenue contribution to the business Total Recurring Revenue Growth 12% (4%) 13% Operating Bookings growth focus on total Income contract value of recurring 40% revenues – including revenue not Key Notes yet recognized (representing the Total Bookings future value) » Managed Services outperformed Technology & Services and Cloud, indicating that Growth managed services offerings are key to driving profitable growth in technology services » Aspects to consider when considering Managed Services growth rates include: Base Revenue looks at growth » Product-centric models – the primary concern is growing new product and generated from existing “aftermarket” product revenues 5% base customers – a performance » “As a service” models – winning a customer sale, client retention, and ultimately Base Revenue measure for customer success teams growing the account extensively Growth
13 Source: Technology Services Industry Association (TSIA) *Selected financial metrics are based on TSIA’s basket of companies in the T&S 50, Cloud 40, and TSIA Managed Services categories Services By Various Business Models | MSPs Selling Services That Augment On- Premise Assets Are In Demand
Top 3 Best-Selling Services Key Notes MSP VAR Solution Provider Systems Integrator Professional Services » MSPs are separate from other business models due Network Backup Cloud-Based Mobile Device Network Security to advanced sales of backup Security Applications / SaaS Management 30% 32% 28% 31% 23% and MDM » Other business models have Network Network Network Network Productivity an edge in greater sell- Management Security Security Security Applications through of cloud 32% 25% 26% 21% 27% applications » Several MSPs are better at Mobile Device Cloud-Based On-Premises Endpoint Cloud-Based Management Applications / SaaS Storage Security Applications / SaaS selling services that 19% 25% 21% 21% 22% augment on-premise assets, whereas other channel Backup On-Premises On-Premises partners are moving to Servers Storage 19% cloud services 25% 18%
Cloud-Based Network Network Applications / SaaS Management Management 17% 19% 18%
On-Premises Cloud-Based Storage Applications / SaaS 17% 18%
Source: Barracuda MSP, The 2112 Group 14 [ ] – Tied, cited as best-sellers by the same percentage of responders 03 Industry Trends Key Industry Trends | MSPs Are Expected To Grow Rapidly Through 2023, With Key Areas Like Analytics/AI/ML, Cloud, & Cybersecurity Growing The Fastest
Consolidation Impact of AI / ML on Offerings Migration From Private to Public Cloud Integration of AI/ML has materially increased Lower costs and increased convenience operational effectiveness and efficiency, allowing have influenced the migration to public for better reach and offering of services 05 01 cloud Cybersecurity
MSPs’ Evolving Role in Cybersecurity INDUSTRY Strong Growth in Multi-Tenant Increasing complexity of cyber crimes TRENDS XaaS is being remedied by the increasing sophistication Multi-tenant XaaS from a vendor of cybersecurity tools and services 04 is the fastest growing segment 02 within the managed cloud space Cloud AI/ML
Shift Towards Remote / Standardized Delivery The last decade has seen a shift towards standardized offerings, reducing lead time and 03 costs while improving quality 16 Migration From Private to Public Cloud | Usage Of Public Cloud Expected To 1 Increase By >40% Year-Over-Year In 2019
Migration Plans – Computing Resources By Platform Top Drivers For Migration
46% Cost 23% 39% 42% 28% 28% Security & Compliance 20% 23% 25% 18% 15% 14% 10% 12% High Availability 18%
Reliability 15% 2017 2018 2019E Scalability 13%
Public Cloud Virtual Machines Physical Machines Private Cloud Application Support 10% » Public cloud usage is expected to increase >40% YoY through 2019; private cloud usage is expected to increase at a slower rate » Virtual machines usage is expected to decrease by 20% and physical machines by 18% » Cost is the top consideration when choosing a target cloud platform year-over-year for the next 2 years » In 2016, reliability was the top consideration, while price was not among the top 3
Key Notes » Migration to the public cloud over the years has outstripped other computing resources due to increasing acceptance and the price/cost ratio » For companies with 1,000+ employees, public and private cloud usage is expected to grow significantly – 49% and 18%, respectively, for the next 2 years, compared to virtual and physical machines which will shrink by 13% and 23%, respectively » Most companies surveyed utilize re-architecture and lift & shift migration strategies, while companies with 1,000+ employees have a preference for lift & shift » Cost of migration is estimated to be $500+/machine for large enterprises, and between $100-$500/machine for smaller enterprises
17 Source: CloudEndure Strong Growth In Multi-Tenant XaaS | IaaS and PaaS Are Expected To Grow 2 Faster Than SaaS Through 2021
Worldwide Public XAAS Revenue Forecast (USD BN)
SaaS IaaS PaaS
CAGR = 18% 113 99 85 72 CAGR = 28% 59 63 50 CAGR = 24% 40 31 28 24 19 23 12 15
2017 2018 2019E 2020E 2021E 2017 2018 2019E 2020E 2021E 2017 2018 2019E 2020E 2021E
Key Notes » Infrastructure-as-a-Service (IaaS) will be the fastest-growing segment, forecasted to grow by 28% to $40Bn in 2019 » By 2022, 90% of enterprises will purchase public cloud IaaS from an integrated IaaS and Platform-as-a-Service (PaaS), and will use the IaaS and PaaS capabilities from that provider » Increasing spending on cloud, along with cloud consulting and integration services, represents a unique opportunity for MSPs » With the broader IT services market growing at a CAGR of <5%, compared to cloud services at >15%, it is important for MSPs to develop technical competencies in cloud services
18 Source: Gartner Shift Towards Remote/Standardized Delivery | This Streamlines The 3 Process And Allows MSPs To Improve Performance And Quality Of Service
MSPs With Standardized Offerings (%) Key Notes » Prior to 2010, most managed services were custom in nature and delivered through on-site, 74% 68% staff-augmentation models » Over the years, the trend toward standard managed services and standard service catalogs 43% 36% has continued » Standardization and remote delivery of managed services streamlines the process and improves the performance allowing MSPs to service customers better » Significant time reduction to onboard clients increases revenue recognition as the time of 2015 2016 2017 2018 service activation typically represents commencement of billing for the managed service » 74% of managed services providers offered standard managed services in 2018, over twice as many three years ago Observed Performance Improvements
MSPs With Remote Delivery (%) Custom Offers Standard Offers 2018 New 14% Revenue Growth 6% 83%
2018 Operating 80% 13% 16% 79% Income
Time To Quote 169 22 (in Days) 2015 2016 2017
» There has been a steady increase in remote management of customers’ technologies, Quote To Cash 246 129 rising to 83% in 2017 (In Days)
19 Source: Technology Services Industry Association (TSIA) MSPs’ Evolving Role in Cybersecurity | The Increasing Number Of Cyber 4 Incidents Over The Years Has Shaped the New Digital Era
Increasing Number Of Cyber Incidents Over The Years
Number Of Reported US Data Breaches Global Average Ransomware Detections Global Annual Cost Of Cybercrime (in Mn) Per Day (USD)
1,579 2,100bn 1,271 1,244 1,242 1,093 933 783 781 614 447 455bn
2012 2013 2014 2015 2016 2017 2018 2015 2016 2017 2014 2019
Trends Shaping The New Digital Era Key Notes » Widened attack surface – New technology environment (e.g. IoT network, Cloud, connected SCADA) open-up the » Increasing number of global malware attacks in recent years has traditional protection parameter led to enterprises looking to MSPs to ensure secure service » Increased sophistication of attack – Cyber-attacks have become sophisticated given innovation in hacking infrastructure is available techniques » Security is dependent on security solutions and how well the IT » Heavier reliance on third parties – Integration with service providers with inadequate security measures leaves environment is set up to defend and recover from attacks companies unware and vulnerable to risks » MSP business models that take this into consideration stand out » Increased concentration and exposure of critical data assets – Rising number of applications that access data compared to competition assets, increasing risk of cross-contamination
20 Source: Statista, McKinsey, Symantec Consolidation Impact On Offerings From AI/ML | MSPs Are Acquiring AI 5 And ML Capabilities Inorganically
AI/ML Growth Opportunities
TARGET BUYER RATIONALE » AI/ML functionality complements an MSP service
delivery environment – allowing businesses to analyze Jun-19 » US-based AI-powered customer data platform (CDP) for B2B marketers to data in real time and automate their monitoring and scale marketing programs internal conflict resolution » Presence of AI/ML in network operations center (NOC) May-18 » US-based company engaged in developing and providing intelligent and help desks increases the scalability of a MSP’s reach $237Mn medical analytics software and related support services » More efficient monitoring of managed objects
» Increased accuracy of event correlation May-18 » US-based company engaged in developing relationship intelligence platform for professionals » Faster ticket response and resolution times $270Mn » Fewer technicians required per customer
» Conditional-Driven Automation is an application of AI in Dec-17 » US-based developer of conversational artificial intelligence-powered managed services offerings where once a condition is $30Mn intelligent virtual assistants met, the issue is resolved without involving humans » Use of AI in managed services has increased in fields of Key Notes repetitive task-driven automation where the system » Larger incumbents are acquiring AI and ML capabilities inorganically, stretching the pool of AI talent thin works seamlessly with Active Directory groups, Line of » Cisco has led in enterprise networking hardware for years, but the acquisition of Accompany demonstrates that the company Business (LoB), file storage locations, and cloud is investing in software and looking to provide more than a platform applications to reduce lead time and costs on tasks » Symantec launched Endpoint Protection 14, a layered suite of cyber-defense tools that relies on ML to detect potential » MSPs are trying to proactively prevent IT issues and with threats and execute a response based on analysis of more than 4 trillion threat types the growing complexity of IT, AI and ML are fast- » MSP toolset makers like Atera are doubling the size of their R&D budget, seeking to innovate capabilities for all-in-one RMM, becoming a pre-requisite PSA, and remote access platforms
21 Source: MSPAlliance, Merger Market 04 Competitive Landscape MSP Landscape | Number Of MSPs Is Expected To Grow As The Space Remains Ripe For Consolidation
Managed Services Offered Number Of MSPs Globally (‘000s)
Americas EMEA APAC Power Players (<5%) 74 Large, asset heavy MSPs, with strong investments in their own datacenters 18 » Annual Revenue $100m+ 52 » Global footprint 40 12 22 Mid-Sized SPs (~20%) 8 17 Mid-sized MSPs, mostly with own datacenters of a 13 limited scale 34 » Annual Revenue $10m+ 19 23 » National/regional footprint
Long-Tail Channel Partners / MSPs (~75%) 2014 2017 2021E SMB partner ecosystem players, few have their own datacenters » Annual Revenue <$10m » Local footprint The managed services market is unsustainably fragmented, with no one company occupying more than one or two percent market Key Notes share either nationally or within a particular region » All three categories rely heavily on small and midsize businesses (SMBs) for significant “ portion of revenue — Tim Britt, Synoptek CEO » On average, over 75% of an MSP’s revenue is from the SMB space ”
23 Source: AMI Partners Competitive Landscape | Independent MSPs
Proven Market Leaders Independent MSPs
» Average minimum project size for the top 15 independent MSPs is ~$5,000 » These MSPs typically have 50-100 employees, and charge $100-150 an hour on average » IT Svit and YourServerAdmin, based in Ukraine and Germany respectively, charge ~$30-50 an hour – significantly lower than their US-based counterparts Ability to deliver
Emerging Niche Focus
24 Source(s): Clutch Competitive Landscape | Managed Cloud Services
Challengers Leaders Public Cloud Infrastructure MSPs
» Enterprise architecture and technology innovation leaders benefit from a high-quality MSP when operating solutions on Amazon Web Services, Microsoft Azure, and Google Cloud Platform » Customers look for cloud IaaS assistance from a third party because they lack cloud expertise and seek to optimize their operations or scale their resource base » An ecosystem of managed and professional
Ability to execute services providers administer services on top of public cloud IaaS offerings. Many MSPs may also act as a cloud service broker (CSB)
Niche Players Visionaries
Completeness of vision
25 Source(s): Gartner Competitive Landscape | Managed Security Services
Challengers Leaders Managed Security Service Providers
» MSSPs help businesses proactively address advanced information security threats while alleviating the pressures created by resource constraints, skills shortages, compliance requirements, and the rapid adoption of new technologies » Their services provide business with security without any installation of new technologies, worry of aging levels of protection, and hiring staff to configure those systems Ability to execute » By relying on MSSPs as trusted security partners, businesses can focus more on their core priorities and competencies
Niche Players Visionaries Completeness of vision
26 Source(s): Gartner Competitive Landscape | Managed Analytics Services
Challengers Leaders Data & Analytics Managed Services
» D&A managed service providers have developed a spectrum of skill sets, enabling them to operate across multiple domains and service competencies » These capabilities incorporate the following: business consulting, technology consulting, enterprise architecture, information architecture, design, on-site services, remote services, testing, infrastructure integration, change management, and training Ability to execute » Gartner predicts that by 2020, more than 50% of data and analytics service engagements will be AI-enabled, up from 10% in 2017
Niche Players Visionaries Completeness of vision
27 Source(s): Gartner Competitive Landscape | Managed Machine-To-Machine (M2M) Services
Challengers Leaders Managed M2M Services
» The managed M2M service market provides connected solutions through the use of connectivity, computation, and decision services » Managed M2M services often encompass integrated and managed IT infrastructure and systems, OT infrastructure and systems, software, network services (connectivity), and IT services » By 2023, 10% of M2M connectivity will be provided through hyperscale cloud providers, Ability to execute up from <1% in 2018 » By 2020, at least two IoT mobile virtual network operators (MVNOs) will have been acquired by hyperscale cloud providers
Niche Players Visionaries Completeness of vision
28 Source(s): Gartner 05 Valuation & Buyer Overview Key Factors Leading To Growth Of MSPs
More Efficient and 1 Reliable IT • Access to the latest technology and innovative business grade solutions Operations • Assistance in maximizing uptime and profitability through reduced burdened on internal IT team • Increased reliability through use of 24x7x365 remote monitoring and management
• Compliance concerns are addressed more efficiently, with qualified professional expertise Enhanced Security 2 and Compliance • Provision of supplementing additional managed security protocol, policies, and procedures • With the rise in endpoints of data transfer the need for sophistication of security is adequately met
• Instead of a reactive (post incident) approach, a proactive (pre incident) approach is followed (i.e. potential threats, vulnerabilities, or disturbances are detected and remedied before a compromise of operations) A Proactive Approach 3 to Maintenance • Allows for reduced downtimes increasing efficiency and allowing for enterprises to focus on their core priorities
• Maintenance costs, the highest component of recurring IT expenditure, are far lower • Latest applications and technology are provisioned at a fraction of their costs Cost Effectiveness • With increased flexibility and scalability, efficiency of operations increases dramatically 4 and Return on Investment • The internal team is better placed to focus completely on operations • Internal competencies are leveraged to increase efficiency and returns • Resourced as conserved for on-boarding of quality human capital Better Utilization of 5 Internal Staff
30 Source(s): IDC Buyer Pools & Valuation Considerations | MSPs Witnessing Strong Consolidation In Recent Years
Key valuation considerations Other Factors
Data Management, Market Factors Database § Target Market Size (Verticals/Geography/Capabilities) Systems Help-Desk & Services Offered Administration, § Criticality Of Service & Switching Costs Architecture Support Cloud Migration, § Scarcity Of Assets And Talent Security
Project- 1-3 Years Contract Length / 3-5 Years, Highly Based, Low with Repeat Revenue Characteristics Recurring Recurring Revenue
Reusable Intellectual Property Accelerators Automation of Tasks Coding
EBITDA Margins 15-20% 20-25% 25%+
Increasing Multiples
Key Notes Business Factors Financial Factors » Scaling client size from SMBs to large enterprise accounts increases buyer interest as revenue § Onshore / Offshore Talent § Sustainable Comp. Advantage § Recurring Revenue § Customer Quality & Concentration synergy opportunities for greater cross-sell and upsell become available § Scale / Growth § IP Both Technology & Data » Revenue growth demonstrates growing traction and overall market opportunity, impacting valuation § Revenue Visibility § Business Mix in a meaningful way § Gross Margin § Brand Perception & Positioning § Sustainable EBITDA Margins § Management Team Relative Performance Over The Last Ten Years | Mid Tier IT Services Have Outperformed The Remainder Of The IT Services Market
Market Cap Growth (%)
1,200% Legend: Indian Large IT Services International IT Services Indian Mid IT Services US Mid IT Services BPO S&P 500
1,000%
800%
600%
400%
200%
0% Jul-09 Dec-09 Ma y-10 Oct-10 Ma r-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13 Sep-13 Feb-14 Jul-14 Dec-14 Ma y-15 Oct-15 Ma r-16 Aug-16 Jan-17 Jun-17 Nov-17 Apr-18 Sep-18 Feb-19
Source(s): CapIQ Note: Medians of the following companies were used in the calculations: Indian Large IT Services – TCS, Infosys, Wipro, HCL, TechM, International IT Services – IBM, Accenture, Cognizant, DXC, Capgemini, NTT, Atos 32 Indian Mid IT Services – L&T, Mphasis, Mindtree, Hexaware, NIIT, Zensar, Persistent US Mid IT Services – Virtusa, Perficient, Hackett Group, Presidio, Unisys Relative Performance Over The Last Ten Years | Mid Tier IT Services Firms Are Valued At Higher Multiples
LTM Price / Earnings LTM Enterprise value / EBITDA
60.0x 25.0x
50.0x 20.0x
40.0x 15.0x
30.0x
10.0x 20.0x
5.0x 10.0x
0.0x 0.0x Jul-09 Jul-14 Jul-09 Jul-14 Oct-10 Apr-13 Oct-15 Apr-18 Oct-10 Apr-13 Oct-15 Apr-18 Jan-12 Jun-12 Jan-17 Jun-17 Jan-12 Jun-12 Jan-17 Jun-17 Ma r-11 Feb-14 Ma r-16 Feb-19 Ma r-11 Feb-14 Ma r-16 Feb-19 Dec-09 Aug-11 Nov-12 Sep-13 Dec-14 Aug-16 Nov-17 Sep-18 Dec-09 Aug-11 Nov-12 Sep-13 Dec-14 Aug-16 Nov-17 Sep-18 Ma y-10 Ma y-15 Ma y-10 Ma y-15
Legend:
Source(s): CapIQ Note: Medians of the following companies were used in the calculations: Indian Large IT Services – TCS, Infosys, Wipro, HCL, TechM, International IT Services – IBM, Accenture, Cognizant, DXC, Capgemini, NTT, Atos Indian Mid IT Services – L&T, Mphasis, Mindtree, Hexaware, NIIT, Zensar, Persistent US Mid IT Services – Virtusa, Perficient, Hackett Group, Presidio, Unisys Benchmarking Industry Valuations | Indian Large IT Services Trade At The Highest Multiples Followed By Mid IT Services
LTM EV/Revenue Industry Mean LTM EV/EBITDA Industry Mean 2 Year Forward Revenue CAGR NTM EBITDA Margin Mean
In di an La rg e In di anLa rgeIT S erv ic es IT In di anLa rgeIT S erv ic es Se rv ic Indian Large IT Services 3.1x 13.1x 9.1% es 22.6%
In te rn at oi na l I l T In te rna ti on al S IT er vic es In te rna ti on al S IT er vic es Se rv ic International IT Services 1.8x 10.6x 1.9% es 17.9%
MidIT MidIT Services Se rv ic Indian Mid IT Services 2.0x 12.4x MidIT Services 14.9% es 16.7%
US MidIT US Mid IT Services Se rv ic US Mid IT Services 1.3x 12.5x US Mid IT Services 6.7% es 13.7%
PE Transactions 1.3x PE Transactions 11.2x
Strategic Transactions 1.8x St ra teg ic Tr an sa cti on s 11.2x
Transaction Valuation Trading Valuation
Source(s): Capital IQ; data as of July 2nd 2019 Trading Comparables | Indian IT Services Firms Trade At A Premium Compared To Their International Peers
EV EV / Rev EV / EBITDA P/E EV EV / Rev EV / EBITDA P/E Company Company (USD Mn) LTM NTM LTM NTM LTM NTM (USD Mn) LTM NTM LTM NTM LTM NTM
Indian Large IT Services International IT Services TCS 116,048 5.5x 4.9x 20.3x 18.3x 26.9x 24.4x IBM 161,548 2.1x 2.1x 9.4x 8.9x 14.4x 10.1x Infosys 41,573 3.5x 3.2x 14.0x 12.9x 20.6x 18.8x Accenture 115,822 2.8x 2.6x 17.1x 15.2x 25.7x 24.2x Wipro 20,535 2.4x 2.3x 12.2x 11.1x 19.0x 17.4x Cognizant 34,582 2.1x 2.0x 10.9x 10.3x 18.1x 16.2x HCL 19,912 2.3x 2.0x 10.0x 8.6x 14.4x 13.2x NTT DATA 22,854 1.2x 1.1x 8.3x 7.8x 22.8x NA Tech Mahindra 7,602 1.5x 1.4x 8.3x 7.7x 14.6x 13.4x CGI 22,625 2.6x 2.3x 15.1x 12.7x 23.6x 20.4x Mean 3.1x 2.8x 13.1x 11.7x 19.1x 17.4x Capgemini 22,319 1.5x 1.4x 11.6x 9.4x 24.9x 16.4x Median 2.4x 2.3x 12.2x 11.1x 19.0x 17.4x DXC Technology 19,749 1.0x 0.9x 4.7x 4.3x 11.9x 6.8x Atos 14,848 1.1x 1.1x 7.9x 8.0x 12.9x 8.9x Mean 1.8x 1.7x 10.6x 9.6x 19.3x 14.7x Median 1.8x 1.7x 10.2x 9.1x 20.5x 16.2x
Indian Mid IT Services US Mid IT Services L&T 4,064 3.0x 2.6x 15.4x 13.0x 20.0x 18.0x Presidio 2,032 0.7x 0.7x 9.2x 8.7x 28.1x 8.2x Mphasis 2,496 2.2x 1.9x 13.1x 11.2x 17.3x 15.5x Virtusa 1,624 1.3x 1.2x 16.7x 12.0x 83.6x 14.8x Mindtree 2,027 2.0x 1.8x 13.2x 11.0x 19.9x 17.7x Perficient 1,247 2.4x 2.2x 20.0x 13.8x 42.5x 18.1x Hexaware 1,525 2.2x 1.8x 14.1x 11.6x 19.4x 17.3x Unisys 870 0.3x 0.3x 4.1x 1.8x 33.1x 2.5x NIIT 1,044 2.0x 1.7x 11.9x 9.7x 20.6x 17.2x The Hackett Group 500 1.9x 1.8x 12.4x 9.8x 20.9x 14.0x Zensar 786 1.4x 1.2x 12.4x 8.9x 18.5x 15.6x Mean 1.3x 1.2x 12.5x 9.2x 41.6x 11.5x Persistent 535 1.1x 1.0x 6.7x 6.0x 13.5x 12.0x Median 1.3x 1.2x 12.4x 9.8x 33.1x 14.0x Mean 2.0x 1.7x 12.4x 10.2x 18.5x 16.2x Median 2.0x 1.8x 13.1x 11.0x 19.4x 17.2x
Source(s): Capital IQ; data as of July 2nd 2019 Select Strategic Transactions
TARGET BUYER DESCRIPTION
§ Dec-18 The deal unites two well-known MSPs with expertise across the ServiceNow, Senior Care, and cloud services markets — essentially creating a Top 1 Vertical Market MSP in the process
§ Dec-18 Evergreen Services, backed by Alpine Investors, acquired NetGain Technologies – a provider of managed IT services and support for businesses
Dec-18 § Accenture acquired Oracle cloud partner PrimeQ, a SaaS integrator and MSP in Australia
Nov-18 § Swift Systems provides managed IT services and was acquired by NuMSP which is a managed IT and security services
Nov-18 § Ascential acquired Amazon-centric MSP and consulting firm Flywheel Digital in a deal valued at $400 million
Nov-18 § SoftwareOne, backed by KKR private equity dollars, has been in acquisition mode in recent months — acquiring IT services provider Comparex
Oct-18 § Sierra Systems Group provides IT and management consulting services and was acquired by NTT DATA a IT services company
Oct-18 § ConvergeOne, which provides collaboration and technology solutions to Fortune 500 companies, acquired Advantel Networks to extend its managed services reach across the West Coast`
§ Jul-18 Atos acquired Syntel to expands its capabilities in North America with end-to-end services, strongly reinforces its Banking, Finance & Insurance verticals
Source(s): CapIQ, Merger Market Select PE Transactions
TARGET BUYER DESCRIPTION
§ Private equity firm Craftsman Capital has acquired CMIT Solutions, the national MSP (managed services Dec-18 provider) franchising organization with 22 offices across 33 states
§ ConvergeOne provides collaboration and technology solutions for large and medium enterprises in the Nov-18 United States
§ An investor group led by affiliates of Searchlight Capital Partners acquired Mitel for $2 billion in cash Apr-18
§ Private equity firm Madison Dearborn Partners (MDP) acquired Remote DBA Experts (RDX), an MSP that Apr-18 provides remote database administration (DBA) and cloud managed services
§ CareWorx provides technology solutions to senior care organizations in North America and internationally Mar-18
§ Abry Partners acquired Breakthrough Technology Group (BTG), and merged BTG with NexusTek; BTG is a Dec-17 managed private cloud service provider
§ Barracuda focuses on email security, email management, network security, application security, and data Nov-17 protection solutions that can be deployed in cloud and hybrid environments
§ Reliam provides managed cloud hosting services, including strategy, planning, design, architecture, build, Nov-17 test, deployment, security, operations, support, and cost optimization
Source(s): CapIQ, Merger Market 06 Miscellaneous Material Transaction Comparables | Strategic Transactions (1/9)
Date Target Description Target Vertical Bidder
Implementation / Jun-19 J and J Technical Services New Mexico-based full-service MSP that offers IT services for small and mid-sized businesses NuMSP Consulting Implementation / Jun-19 Lime Collar Group Ontario-based provider of service management solutions to enterprises in Canada and the US Fully Managed Consulting
May-19 Blue Logic Provider of cloud solutions and IT security services Cloud BCN Group
May-19 NetFusion Provider of managed IT services to law and accountancy firms IT Services NuMSP
May-19 DNG Provider of IT help desk, cloud services, IT security, VoIP, consulting, and related services Cloud Compudyne
May-19 Deep Blue Manages commercial WiFi networks for retail venues, large entertainment venues, and hospitality brands Networking Comcast
May-19 Computech City Provider of managed services in the healthcare space Healthcare Medicus IT
Apr-19 AZBS Provider of managed services to small medium businesses IT Services NuMSP
Apr-19 UDS Solutions architect and security company Security NST
Apr-19 DCS Provider of cloud computing, technical support, hosted desktops, mobile computing and security IT Services Rouse
Apr-19 Diverse Technology Provides cloud services for hosted data, voice, and business IT solutions Cloud Ntiva
Apr-19 MTP Provider of managed security services Security MTP
39 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (2/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn)
Mar-19 Digital Corporation Provider of communication and networking solutions for SMBs Network NXTsoft NA
Mar-19 Duluth Provider of managed cybersecurity services Security Coretelligent NA
Mar-19 Continuity Solution Provider of continuity planning and cloud services Cloud Konica Minolta NA
Feb-19 Proactive Technologies The deal unites two highly respected MSPs that have deep expertise in alternative investment firms Financial Services Abacus Group NA
Infrastructure / Feb-19 Certus IT Certus IT is a managed IT services provider and Dell EMC partner SysGroup $10 Network The deal marries Carbonite’s cloud- and appliance-driven backup and disaster recovery (BDR) business with Feb-19 Webroot Cybersecurity Carbonite $619 Webroot’s MSP- and SMB-centric cybersecurity business US-based provider of cloud voice services, Communications Platform as a Service (CPaaS), and Internet of Feb-19 Apeiron Systems Telecommunications KonaTel NA Things (IoT) services The Australia-based service provider focusing exclusively on the Salesforce Platform accelerates Simplus’ Implementation / Feb-19 Sqware Peg Simplus NA expansion into the Asia-Pacific region Consulting LGS Innovations and LGS is a technology company that provides custom and commercial communications, R&D, and supporting Jan-19 Cybersecurity CACI International $975 Mastodon Design services Ntiva, backed by Southfield Capital, acquired Network Alliance (“NAI”), a MSP that provides customized IT Infrastructure / Jan-19 Network Alliance Ntiva NA solutions to small and medium-sized businesses Network Provider of network infrastructure analytics software – the company will be plugged into Cisco's Crosswork Jan-19 Singularity Networks Analytics Services Cisco Systems NA Network Automation portfolio, which helps service providers to automate their networks Software Information Software Information Systems provides technology infrastructure and managed information technology Infrastructure / Converge Technology Jan-19 $15 Systems services in the United States Network Solutions
40 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (3/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) Hosting.com provides managed cloud hosting services to mid-size enterprises for business-critical applications Jan-19 Hosting.com Hosting / Cloud Hostway Corporation NA and data in the United States and internationally ServerCentral, a managed IT infrastructure provider, acquired Turing Group, an Amazon Web Services (AWS) Implementation / Dec-18 Turing Group ServerCentral NA Advanced Consulting Partner Consulting
Dec-18 Black Box Corp. AGC Singapore acquires Black Box Corp, a $600 million technology solutions provider in Pittsburgh Telecommunications AGC Singapore $16
Momentum Telecom acquired Phoenix, Arizona-based CloudNet Group, a provider of cloud voice, mobility, SD- Dec-18 CloudNet Telecommunications Momentum Telecom NA WAN, contact center, and other unified communications solutions The deal unites two well-known managed services providers (MSPs) with expertise across the ServiceNow, Implementation / Dec-18 Fully Managed CareWorx NA Senior Care and cloud services markets Consulting Evergreen Services Infrastructure / Dec-18 NetGain Technologies NetGain Technologies provides managed IT services and support for businesses Group / Alpine NA Network Investors Implementation / Dec-18 PrimeQ Accenture acquired Oracle cloud partner PrimeQ, a SaaS integrator and MSP in Australia Accenture $31 Consulting Ultimate Technical Infrastructure / Dec-18 NuMSP acquired UTSI, an SMB IT services provider in New Orleans that serves the broader Louisiana market NuMSP NA Solutions (UTSI) Network Lighthouse Computer Converge Technology Dec-18 Lighthouse Computer Services provides IT solutions in analytics, cloud, infrastructure, middleware, and security Cybersecurity $23 Services Solutions
Nov-18 Swift Systems Swift Systems provides managed IT services Hosting / Cloud NuMSP NA
The deal will enhance MCP’s IT and managed services offering, and bolster the firm’s service portfolio and Infrastructure / Nov-18 Athena Mission Critical NA physical presence in certain key markets Network Keytech was founded more than 25 years ago, going on to specialize in managed services along with backup Pure Technology Group Nov-18 Keytech Hosting / Cloud NA and data continuity (PTG) Implementation / Nov-18 Flywheel Digital Acquired Amazon-centric MSP and consulting firm Flywheel Digital in a deal valued at up to $400 million Ascential $400 Consulting
41 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (4/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) IT services provider specializing in licenses management, sourcing, technical product consulting, and cloud Infrastructure / Nov-18 Comparex SoftwareOne / KKR NA based professional services Network Network Medics is a managed services provider (MSP) that supports customers across Minneapolis-St. Paul, Oct-18 Network Medics Hosting / Cloud NuMSP NA Minnesota Implementation / Oct-18 Sierra Systems Group Sierra Systems Group provides IT and management consulting services in North America NTT DATA NA Consulting Valiance Partners, the US-based computer software and services data migration company primarily for the life Implementation / Oct-18 Valiance Partners NNIT A/S $25 sciences industry Consulting Evolver and eVigilant merged to form Converged Security Solutions, an MSSP focused on federal and Oct-18 eVigilant Cybersecurity Evolver NA commercial customers AdvanTel is engaged in designing, implementing, and maintaining communication solutions for companies and Oct-18 AdvanTel Telecommunications ConvergeOne NA organizations worldwide Advantel Networks designs, implements, and maintains communications solutions for companies worldwide Infrastructure / Oct-18 Advantel Networks ConvergeOne $16 and is based in CA, USA Network Computacenter made its largest acquisition in nearly 15 years and a strong push into the US market with the Oct-18 FusionStorm Cybersecurity Computacenter $90 acquisition of FusionStorm, the San Francisco-based IT solutions provider System Partners is an Australia-based Salesforce cloud consulting and integration partner. This marked DXC’s Implementation / Sep-18 System Partners DXC Technology NA third buyout of an Australian company Consulting
Sep-18 Ascenty The deal positions Digital Realty to gain a major IT infrastructure footprint in Brazil and Latin America Data Centers Digital Realty $1,827
Implementation / Sep-18 Fluido Fluido is a Salesforce cloud consulting, implementation and training partner with reach across Europe Infosys $75 Consulting
Sep-18 Shift 7 Group Shift7 Group offers outsourced management information technology and telecom solutions Hosting / Cloud Adept $10
Atos Syntel provides digital transformation, information technology (IT), and knowledge process outsourcing Implementation / Jul-18 Syntel Atos $3,542 (KPO) services worldwide Consulting
42 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (5/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) Secure Technologies International provides information technology security consulting, information security Jun-18 Secure Technologies Cybersecurity Calian Group $4 planning, managed security, systems integration, and training support services Evergreen Services Interlaced is a team of consultants, engineers, and strategists that make up one of only a few sophisticated Implementation / May-18 Interlaced Group / Alpine NA Apple-centric IT providers in the world Consulting Investors Red Sky Solutions is a US-based company offering cybersecurity solutions in IT and providing security services May-18 Red Sky Solutions Cybersecurity Presidio $41 and solutions
May-18 MegaPath MegaPath provides business communications and connectivity solutions for medium and large enterprises Telecommunications Fusion Connect $72
Sage Data Security provides advisory, assessment, and incident response information security services to May-18 Sage Data Security Cybersecurity Tyler Technologies $12 protect information assets and ensure regulatory compliance Cynosure is a US-based provider of guidewire platform implementation services to Property and Casualty (P&C) Implementation / Mar-18 Cynosure Zensar Technologies $33 insurance carriers Consulting Silverline, a Salesforce platinum cloud consulting partner, will continue developing solutions across the Implementation / Mar-18 Silverline Pamlico Capital NA Salesforce Financial Services Cloud and Salesforce Health Cloud Consulting
Feb-18 Interoute GTT, a cloud networking provider to multinational clients, acquired European fiber network operator Interoute Telecommunications GTT Communications $2,300
Arrow Electronics’ The System Integration Business unit specializes in unified communications, contact center, and voice and data Feb-18 System Integration Telecommunications ConvergeOne $31 technologies Business General Dynamics acquired government IT contractor CSRA for $9.6 billion, making it the number two provider Infrastructure / Feb-18 CSRA General Dynamics $9,600 of federal IT services Network
Jan-18 SingleHop The deal combined two major IT service providers that offer colocation, managed, cloud, and network services Hosting / Cloud Internap (INAP) $137
Dec-17 Zenium CyrusOne, a global data center real estate investment trust (REIT), acquired Zenium for $442 million Data Centers CyrusOne $442
43 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (6/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn)
Dec-17 Metronode Equinix acquired Metronode, thus gaining 10 data center facilities across Australia Data Centers Equinix $792
Velocity acquired the U.S. operations of IO Data Centers. The total consideration represents a multiple of 15x Dec-17 IO Data Centers Data Centers Iron Mountain $1,315 synergized 2018 EBITDA, post integration Complete Office Oct-17 Provides office services and products to small-medium enterprises Workplace Services Office Depot $150 Solutions The deal will create major synergies between the retail giant’s physical locations and CompuCom’s extensive IT Oct-17 CompuCom Workplace Services Office Depot $1,000 services experts Transbeam is a US-based provider of broadband services including VoIP, cloud, and IT services, strengthening Oct-17 Transbeam Telecommunications GTT Communications $28 GTT’s position in the managed hybrid networking sector Fusion acquired the cloud and business services customers along with the operations and infrastructure of Aug-17 Birch Communications Telecommunications Fusion $280 Atlanta-based Birch Communications, the combined operations will have a value of about $950 million SC3 is a US-based provider of mission support, consulting, and technology solutions to the federal government Implementation / General Dynamics Aug-17 SC3 $200 in defense, intelligence, and civil markets Consulting Corporation Strategic Products and Strategic Products and Services (SPS) is a US-based multivendor communication and networking managed Infrastructure / Aug-17 ConvergeOne $51 Services service provider Network Options Technology Options Technology is a UK-based company engaged in providing managed services and IT infrastructure Aug-17 Financial Services Bregal Sagemount $100 Limited products to the global financial services sector MAG Datacenters operates Fortrust, a Denver-based private data center business with 210,000 square feet of Jul-17 Fortrust Data Centers Iron Mountain $128 multi-tenant data center space PARX is a Salesforce Certified Platinum Partner across Germany, Austria, and Switzerland (known as the DACH Implementation / Jul-17 PARX Peristent Systems $17 market) Consulting
44 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (7/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) Tribridge is a US-based company engaged in providing mid-market and enterprise customers software services Implementation / DXC Technology Jul-17 Tribridge $152 and cloud solutions Consulting Company Perseus is an Ireland-based company providing managed services for high precision, speed, and performance Jun-17 Perseus Telecommunications GTT Communications $38 applications
Jun-17 ViaWest The deal creates a combined company that specializes in colocation, connectivity, cloud, and managed services Hosting / Cloud Flexential (nka Peak 10) $1,675
Digital Realty Trust acquired rival data center operator DuPont Fabros, growing Digital Realty’s presence in high- Jun-17 DuPont Fabros Data Centers Digital Realty $7,600 demand U.S. metro areas and hyperscale product offerings Westcon is a technology distributor that offers security, collaboration, networking, and data center products to Implementation / Jun-17 Westcon-Comstor Synnex $800 customers globally Consulting ECommerce Systems (ECS) is a US-based IT consulting firm, reinforcing CGI’s global capabilities across several in- Implementation / Apr-17 ECommerce Systems CGI Group $15 demand digital transformation areas Consulting Broadview offers unique, proprietary unified communications solutions that will advance Windstream’s product Implementation / Apr-17 BroadView Windstream $228 portfolio and ability to provide enhanced services to business customers Consulting Infrastructure / Apr-17 Wilcon Fiber Optics Crown Castle paid about $600 million for Wilcon, gaining fiber optic, and data center infrastructure Crown Castle $600 Network Avnet Technology Infrastructure / Feb-17 Tech Data swallowed ATS to push deeper into enterprise IT solutions from major data center companies Tech Data $2,600 Solutions Network Consolidated Communications The Enterprise Services equipment and IT Services business of Consolidated Communications will enable ePlus Dec-16 Telecommunications ePlus Technology $13 (IT/Enterprise Services to expand into a new geography and will add new enterprise customers and employees assets) Datalink Corporation is the listed US-based company, engaged in providing cloud services, data center, and data Nov-16 Datalink Corporation Hosting / Cloud Insight Enterprises Inc $206 storage solutions and services Rackspace Hosting The Cloud Sites business unit of Rackspace Hosting will enable Liquid Web to provide all-in-one technology Aug-16 Hosting / Cloud Liquid Web $39 (Cloud Sites assets) platform designed for high-traffic websites with easy scalability
45 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (8/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) EPIQ Systems is the US-based company headquartered in Kansas City, Kansas, is a provider of integrated Jul-16 EPIQ Systems BDR OMERS-Consortium $1,005 technology and services for the legal profession Blue Wolf Group is a US-based consulting agency that designs, builds, and innovates customer and employee Mar-16 Blue Wolf Group Hosting / Cloud IBM Corporation $200 experiences Serena Software is a US based company, providing services, and infrastructure software that manages Infrastructure / Micro Focus Mar-16 Serena Software $540 application changes across an enterprise Network International Plc The Systems Group (TSG), is a US-based company providing broadcast-LAN architecture, file-based workflows, Infrastructure / Mar-16 The Systems Group Diversified $30 centralized SNMP monitoring, and control products Network InterCloud Systems j2 Cloud Services (KeepITsafe), the Ireland based company engaged in providing online backup services and a Feb-16 (Online data backup subsidiary of j2 Global Communications, has acquired Online data backup related business assets of InterCloud BDR j2 Cloud Services $24 assets) Systems EarthLink (IT services Infrastructure / Feb-16 EarthLink offers managed network, security, and cloud services to business and residential customers Synoptek $29 business) Network The managed application and managed hosting services unit of AT&T will be integrated the IBM Cloud portfolio AT&T (managed Dec-15 and will enable both companies to more easily integrate networks and cloud workloads with their IT Hosting / Cloud IBM Corporation $40 hosting assets) environments IGX Global is a US-based provider of information network and security integration services and products, and Infrastructure / Dec-15 IGX Global ePlus Technology $17 will improve ePlus’ engineering delivery of security and secured networking solutions Network Fidelity National Nov-15 SunGard Data Systems Allows FNIS to access to Sungard’s thousands of lucrative trading and money management clients Financial Services $9,800 Information Services Implementation / Oct-15 Cloud Sherpas Leader in cloud advisory and technology services specializing in Google, Salesforce, and ServiceNow Accenture $410 Consulting Windstream Hosted Provider of data center solutions, managed hosting solutions for maintaining and protecting back-office Oct-15 Hosting / Cloud TierPoint $575 Solutions information technology systems and applications Implementation / Oct-15 EdgeRock Technology EdgeRock is an IT staffing company that provides SAP, Oracle, and PeopleSoft consultants to IT managers CDI $35 Consulting
46 Source(S): CapIQ, Merger Market Transaction Comparables | Strategic Transactions (9/9)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) One Source Networks is a provider of global data, Internet, Session Initiation Protocol (SIP) trunking and Sep-15 One Source Networks Telecommunications GTT Communications $175 managed services Advanced Integrated Advanced Integrated Technologies Group (ATIG) provides IT and professional services including data centre, Infrastructure / Jul-15 Logicalis Group Limited $42 Technologies Group unified communications, cloud, and infrastructure integration Network The transaction will expand CyrusOne’s existing portfolio to 31 data centers across 12 distinct markets (10 Jul-15 Cervalis Data Centers CyrusOne (NAS: CONE) $400 cities in the U.S., London and Singapore) Sage technologies provides outsourced managed care operations, third party claims administration, financial Implementation / Arcadia (Healthcare Jun-15 Sage Technologies $28 leadership, data analytics, and quality improvement programs Consulting Solutions) NetWolves Corporation provides telecommunications and internet managed services, and the acquisition Jun-15 NetWolves Corporation allows Vasomedical to strengthen its presence in the healthcare industry with NetWolves' managed network Telecommunications Vasomedical $20 services platform and to create operational synergies Virtustream provides a comprehensive set of hybrid cloud offerings, including private, managed, and public Infrastructure / May-15 Virtustream EMC Corporation $1,200 cloud solutions; allowing EMC customers move all applications to cloud-based IT environments Network
Kansas City-based Iris Data Services is the market leading provider of managed services for electronic discovery May-15 Iris Data Services BDR Epiq Systems $134 (eDiscovery) Cervalis is an owner and operator of data centers, and the acquisition will allow CyrusOne to diversify its Apr-15 Cervalis Holdings Data Centers CyrusOne $400 geographical presence and enter the Northeast market Singapore TrustWave Holdings TrustWave Holdings is a provider of on-demand data security and payment card industry compliance Apr-15 Cybersecurity Telecommunications $833 (98% Stake) management solutions to organizations Limited Apparatus’ Kore Managed IT Solutions platform strengthens Virtusa’s growing Infrastructure Management Infrastructure / Apr-15 Apparatus Virtusa Corporation $37 Services and complements Virtusa’s IT outsourcing capabilities Network
47 Source(S): CapIQ, Merger Market Transaction Comparables | PE Transactions (1/3)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) Virteva delivers managed IT services and project-based consulting services that optimize our customer’s IT Apr-19 Virteva Network RJL Equity Partners NA infrastructure and operations EarthLink Consumer EarthLink Consumer Internet Business of Windstream Holdings comprises internet access, online back-up, Dec-18 Hosting / Cloud Trive Capital $330 Internet Business managed web design, web hosting, and email services ConvergeOne provides collaboration and technology solutions for large and medium enterprises in the United Infrastructure / Nov-18 ConvergeOne CVC Capital Partners $1,652 States Network Searchlight Capital Apr-18 Mitel Mitel provides cloud and on-site business communications and collaboration software, services, and solutions Telecommunications $2,000 Partners Bomgar is a remote support solution that allows support technicians to remotely connect to end-user systems Francisco Partners Apr-18 Bomgar Cybersecurity $739 through firewalls from their computer or mobile device (Dipanjan Deb) Implementation / Mar-18 CareWorx CareWorx provides technology solutions to senior care organizations in North America and internationally Kayne Partners $17 Consulting Ardian (Edouard SQS Software Quality The combination of the Assystem Group and SQS AG will create a global service provider for quality control and Implementation / Feb-18 Boscher), Assystem, $394 Systems process integrity across the entire spectrum of physical and digital products Consulting others Barracuda will operate as a privately-held company with a continued focus on email security, management, Nov-17 Barracuda Networks Cybersecurity Thoma Bravo $1,600 network security, application security, and data protection solutions Abacus provides three main products and services, AbacusFLEX, a professionally managed hosted IT solution, Abacus Group LLC (48% WestView Capital Jul-17 Application Hosting, a fully redundant and secured managed infrastructure, and VOICE, a fully managed hosted Hosting / Cloud $52 Stake) Partners unified communications solution Tata Technologies Tata Technologies Ltd, a Singapore-based company provider of engineering services outsourcing, product Jun-17 Networking Warburg Pincus LLC $360 Limited (49% Stake) lifecycle management software solutions, and enterprise resource management services Claranet received a US$103 million (£80 million) minority stake investment from Tikehau Capital, an asset Implementation / May-17 Claranet Tikehau Capital $103 management and investment group. The CSP is a Microsoft, AWS and Google cloud partner Consulting
48 Source(S): CapIQ, Merger Market Transaction Comparables | PE Transactions (2/3)
Date Target Description Target Vertical Bidder Deal Value (US$ Mn) Virtusa, a global business consulting and IT outsourcing company – the company will focus on expanding its May-17 Virtusa IT Services Orogen Group $108 services for the financial services vertical Tangoe is a listed US-based provider of IT and Telecom Expense Management software along with related Apr-17 Tangoe (89.75% Stake) Mobility Marlin Equity Partners $233 services Infrastructure / Mar-17 Maintech Maintech provides infrastructure support services for corporate IT enterprises in North America Oak Lane Partners $18 Network
Feb-17 Optiv Security Optiv Security is a market-leading provider of end-to-end cyber security solutions Cybersecurity KKR $2,000
Veritas Capital Fund Jan-17 Peraton Corporation Peraton offers technology focused services and solutions to various federal government agencies Cybersecurity $690 Management Together, the company offers proprietary tools that stretch across the eDiscovery spectrum, the industry’s KLDiscovery (fka Dec-16 Kroll Ontrack most robust and scalable infrastructure, world-leading data recovery software and service, and unparalleled BDR $410 LDiscovery) Relativity expertise Masergy The acquisition will enable Masergy to provide hybrid networking, managed security and cloud Oct-16 Telecommunications Berkshire Partners $900 Communications communications solutions to medium and large enterprise customers in the global market Mphasis is an IT services company based in Bangalore, India. The company provides infrastructure technology, The Blackstone Group Sep-16 Mphasis applications outsourcing services, architecture guidance, application development and integration, and Cybersecurity $818 (NYS: BX) application management services Rackspace Hosting, through its subsidiaries, provides managed cloud services in the business information Apollo Global Aug-16 Rackspace Hosting Hosting / Cloud $4,948 technology (IT) market worldwide Management ChrysCapital's strategic investment will enable Infogain to broaden its solution offerings, pursue strategic Implementation / Aug-15 Infogain ChrysCapital $63 acquisitions, explore new geographies, and accelerate the expansion of its employee base Consulting
49 Source(S): CapIQ, Merger Market Transaction Comparables | PE Transactions (3/3)
Date Target Target Description Target Vertical Bidder Deal Value (US$ Mn) CH2M, the US-based company is engaged in providing engineering, water, environmental, transportation, and Implementation / Apollo Global May-15 CH2M $300 federal consulting services Consulting Management Ensono is a provider of infrastructure management solutions that help clients deliver better, faster, more Infrastructure / Charlesbank Capital May-15 Ensono LP $140 cost-effective results Network Partners; M/C Partners Implementation / Apr-15 New Signature New Signature offers technology and web solutions to businesses globally Columbia Capital $35 Consulting Bridge Growth Partners acquired CRGT, a leading provider of custom software development and data Bridge Growth Jan-15 CRGT Cybersecurity $225 analytics to federal government agencies, from an affiliate of Veritas Capital Partners
50 Source(S): CapIQ, Merger Market 07 Avendus Overview Avendus Is A Full-Service Global Financial Services Firm
Investment Banking • Mergers and Acquisitions • Private Equity
Wealth Management • Investment Advisory for UHNI and Family Offices • Treasury Management for Corporates
Focused on providing Entrepreneurs & solutions to the drivers of Mid-Sized the future Companies Alternative Asset Management
• Private Equity Strategies • Long Only Strategies • Alternate Strategies
Credit Solutions • Promoter and Growth Financing • Special Situation Financing • Lending to Micro and Small Enterprises
52 Avendus Fact Sheet
M&A Transactions PE Transactions with deal value of $9Bn since with deal value of ~$8Bn since Cross Border INVESTMENT 125+ 2007 145+ 2007 65+ Transactions BANKING
WEALTH in Assets Under Deals Syndicated $4 Management CREDIT Total Deal Size Syndicated USD MANAGEMENT 30 488Mn Bn Serving 1000+ Families SOLUTIONS
Ocean Dial Zodius Enhanced Absolute ASSET $160 Technology $445+ Return Fund $500+ Return Fund $400+ Long Only Mn Fund Mn I and II Mn AUM Mn Funds MANAGEMENT AUM AUM AUM
Employees Rank in India Offices Outstanding Investment CORPORATE 350+ Globally Investment Bank- In cities across #1 Private Equity, 9 India, Europe and Banker 2018 United States TiECon 2019
Figures mentioned above are across all Avendus Group Entities globally Data as of May, 2019 53 Investment Banking Overview: Vertically Focused Groups
ENTERPRISE TECHNOLOGY AND DIGITAL MEDIA & TECHNOLOGY CONSUMER, BUSINESS SERVICES, FIG SERVICES Technology, IT enabled Services, Business Software & Hardware Technology platforms, Manufacturing & Services companies in Food Process Outsourcing (BPO), Knowledge Internet, Digital Media, Communication Tech, & Beverages, Retail, Media, Business Services, Process Outsourcing (KPO), Analytics Mobile Apps & Value added Services (VAS) Education, Logistics & Financial Services
Naspers Ventures Has Merged with Private Equity Has acquired Private Equity Private Equity Has acquired Private Equity Private Equity Private Equity
INR 2,250 Mn Undisclosed Undisclosed Undisclosed $1 Bn $100 Mn Undisclosed $48 Mn $47 Mn Advisor to: Advisor to: KPIT Advisor to: UST Advisor to: eInfochips Advisor to: Swiggy Advisor to: BMS Advisor to: Ridlr Advisor to: Shubham Adviser to: NeoGrowth Sapphire Food Pending Closure June 2018 January 2018 Dec 2018 July 2018 April 2018 January 2018 January 2018 Dec 2018
INDUSTRIALS LIFE SCIENCES / HEALTHCARE INFRASTRUCTURE Manufacturing & Services companies across Generic Pharma, Contract Research & Power, Roads & Construction, Ports, Automotive, Heavy machinery, Ancillary Manufacturing, Clinical Research (CRO), API & Renewable Energy, Mining, Real Estate, Equipment, Capital Goods, Transportation, Formulations, Agri-Inputs & Indian Care Leisure & Commercial Renewables & Process Industries Providers
Private Equity Private Equity Has acquired Has acquired Private Equity Private Equity Acquired majority stake Private Equity Private Equity
Undisclosed Undisclosed Undisclosed $43 Mn Undisclosed Undisclosed $25 Mn Undisclosed $23 Mn Advisor to: OmniActive Advisor to: Borosil Advisor to: Borosil Advisor to: Paras Advisor to: Metropolis Advisor to: Devidayal Advisor to: Pristine Advisor to: KMB Advisor to: Atria January 2017 July 2016 January 2016 July 2017 September 2015 March 2011 January 2015 December 2014 February 2014
Represents Avendus’ transaction experience in technology 54 One Of The Largest ET&S Teams With Global Presence | Track Record Of Executing 8 Transactions Since 2018 Deal Segmentation1
125+ ~$8 Bn in Globally 20+ 19% Transactions Deal Value Professionals 81%
M&A PE Syndication
Sell-Side vs. Buy-Side1 » Thought Leader: Cloud, Digital, Analytics 24% Largest ET&S Has Merged Has Acquired Has Acquired Deep Domain » Relationship Network: Constant Transactions Expertise dialogue with 500+ firms and funds 76% Globally Undisclosed $1.2 Bn $536 Mn Advisor to: KPIT Advisor to: Patni Financial Advisor » Theme Based Advisory: Anticipate Pending Closure Closed Closed future trends
Sellside Buyside
Employees by Geography » ~80% M&A vs. 20% Fund Raising 24% Successful Has acquired Has acquired Has acquired Transaction » Deal size: $25M-1.2B Global Sale 57% 19% Undisclosed Undisclosed Undisclosed Features » 65% Sell-Side vs. 35% Buy-Side Processes Advisor to: InterGlobe Advisor to: eInfochips Advisor to: LaserLine* Closed Closed Closed » 60%+ Mandates Closed
US Europe India
1 Deals from 2007-current 55 Summary of Representative Transactions
Select Services-Focused Transactions SaaS / Software Transactions M&A Private Equity M&A / Private Equity
Has merged with Has acquired Private Equity Private Equity Private Equity Strategic Sale to
Undisclosed Undisclosed Undisclosed $250 Mn $50 Mn $70 Mn Advisor to: KPIT Advisor to: InterGlobe Advisor to: Mid Europa Advisor to: UST Advisor to: Zenoti Advisor to: Wibmo Pending Closure January 2019 Nov 2018 June 2018 May 2019 April 2019
Has acquired Has acquired Private Equity Private Equity Private Equity Private Equity
Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed $65 Mn Advisor to: CitiusTech Advisor to: SCOPE Advisor to: FPE Advisor to: Visionary Advisor to: Nykaa Advisor to: Acko August 2018 June 2018 June 2018 December 2017 April 2019 March 2019
Has acquired Has acquired Private Equity Private Equity Strategic Sale to Strategic Sale to
Undisclosed Undisclosed Undisclosed Undisclosed $66 Mn Undisclosed Advisor to: Runway Advisor to: TATA Advisor to: Mettl Advisor to: Upstream Advisor to: Servion Co-Advisor to: Apex May 2018 April 2018 December 2014 October 2018 September 2018 September 2014 56 Glossary Of Key Terms
AI Artificial intelligence MSP Managed service providers AM Application management MSSP Managed security service provider BFSI Banking, financial services, and insurance MVNO Mobile virtual network operators CAD Custom application development NOC Network operations center CAGR Compounded annual growth rate OT Operational technology CAPEX Capital expenditure PaaS Platform as a service CSB Cloud service broker PSA Professional service automation D&A Data analytics RMM Remote monitoring and management DIY Do-it-yourself SaaS Software as a service IaaS Infrastructure as a service SIP Session initiation protocol IDC International Data Corporation SLA Service level agreement IoT Internet of things SMB Small & medium businesses IP Internet protocol SME Small & medium enterprises ISV Independent software vendor TAM Total addressable market IT Information technology Telco Telecommunications ITS Intelligent transportation system VAR Value add reseller LAN Local area network VoIP Voice over internet protocol LoB Line of business WAN Wide area network M2M Machine-to-machine XaaS Collective term for anything as a service MDM Mobile device management ML Machine learning MS Managed services
57 Contact Details
Puneet Shivam Rohan Sura Head US and Co-Head ET&S Vice President
Email: [email protected] Email: [email protected] Mobile: +1 917 554 7030 Mobile: +1 212 960 3165 Landline: +1 646 707 0789 Landline: +1 646 707 0789
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