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Market Update M&Amarlin & Associates Investment Banking and Strategic Advisory to the Technology, Information and Healthcare Industries

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Market Update M&Amarlin & Associates Investment Banking and Strategic Advisory to the Technology, Information and Healthcare Industries June 2017 MARKET UPDATE M&AMARLIN & ASSOCIATES INVESTMENT BANKING AND STRATEGIC ADVISORY TO THE TECHNOLOGY, INFORMATION AND HEALTHCARE INDUSTRIES New York San Francisco Washington, D.C. Toronto www.MarlinLLC.com © Marlin & Associates Holdings LLC, All Right Reserved DEAR CLIENTS AND FRIENDS, Facts can fool you. Our June 2017 Market Update. Dear Clients and Friends, The report found below contains an update on m&a deals, values and trends in the industries that we follow and sometimes lead. See below for our full June Market Update. Recently, we saw an interesting set of charts put out by PitchBook on m&a trends in the PE industry. We like PitchBook and respect their work. But sometimes, their data overwhelms us. Several of the recent charts were put under the heading “An expensive market contributes to declining activity”. It showed that transaction multiples for PE-related deals have risen from 8.1x EBITDA in 2010 to 10.8x in 2017. But it’s also a different and more optimistic time than 2010. Further, multiples were 9.1x in 2011. So I’m not sure how much this rise in multiples is impacting PE m&a behavior. Another chart showed that the percentage of IT-related PE deals that are for software firms has increased from around 25% of deals in 2006 to more than 60% of transactions today. That leads me to think about the whole issue of “mix”. Perhaps people are not exactly paying more for the same types of companies - but instead are paying more for firms with more potential. That makes sense. PitchBook clearly showed that the number of reported transactions in the first quarter of 2017 – as well as the value of those transactions - is significantly off the torrid pace we have seen over the past three years. Can Q1 be extrapolated to the rest of the year – and beyond? I’m certainly not sure that the two sets of facts (multiples and volume) are directly correlated. Could there be something else at work here? So I’ll add a couple of other data points: We talk to a lot of people at PE firms who had strong Q4 last year and are now just filling their pipelines. No PE partner we talk to says that they are slowing down. And certainly our business has not slowed down. Our take: A strong economy combined with optimistic buyers and sellers contributes to buyer interest and that leads to strong prices. The deal volume we see seems to remain at a very high level. We hope it stays this way… Some of the more interesting m&a transactions, trends and values are discussed in our report found below. Among others, we note: • Moody’s Corporation (NYSE:MCO) agreed to acquire Bureau van • FLEETCOR Technologies (NYSE:FLT) agreed to acquire Cambridge Dijk Electronic Publishing for $3.2bn, valuing the company at an Global Payments for $675mm, implied 11.6x 2016 revenue and 22.7x 2016 EBITDA, • Apple (NASDAQ:AAPL) agreed to acquire Lattice Data for • First Data (NYSE:FDC) agreed to acquire CardConnect (NASDAQ:CCN) approximately $200mm, for $750mm valuing the company at an implied 4.6x LTM revenue • Asure Software (NASDAQ:ASUR) acquired iSystems from Silver Oak and 27.8x LTM EBITDA, Services Partners for $55mm. • London Stock Exchange Group (LSE:LSE) agreed to acquire The Yield Book and Citi Fixed Income Indices from Citi for $685mm, valuing the company at an implied 6.4x 2016 revenue and 14.9x 2016 EBITDA, We will be attending Money20/20 Europe on June 26th-28th . To arrange a meeting there, please contact Paul Friday at [email protected]. Sincerely, Kenneth B. Marlin | Managing Partner Marlin & Associates | www.marlinllc.com P.S. My book: “The Marine Corps Way To Win on Wall Street” does a pretty good job of showing what we do that is different than most firms – and why. For more please visit www.marlinLLC.com. Marlin & Associates is one of the most active firms advising buyers and sellers of U.S. and international middle-market firms that provide software, data, and related services. The firm is based in New York City, with offices in San Francisco, CA, Washington, D.C., and Toronto, Canada. It has been the recipient of numerous awards including “Boutique Investment Bank of the Year,” “Middle-Market Investment Bank of the Year,” "Middle-Market Financing Agent of the Year – Equity," and “TMT Advisory Bank of the Year.” Marlin & Associates' team of professionals has advised over 200 information- technology transactions. JUNE 2017 MARLIN & ASSOCIATES MARKET UPDATE 03 Sector Comparison Snapshot 04 Sector Analyses 04 Application Software 05 B2B E-commerce & Marketing Technologies 06 Banking Software & Processors 07 Business Intelligence Software 08 Capital Markets Software & Services 09 Data & Analytics – Financial Services 10 Information & Market Research 11 Insurance Technology 12 Payment Technology 13 Securities Exchanges 14 Security Software 15 Technology-Enabled Financial Institutions 16 Merger-and-Acquisition Activity Trends Sources: Marlin & Associates, Capital IQ and Public sources. All market and operating data is sourced as of 5/31/17. These companies are a sample of firms in the sector as M&A defines it, and do not comprise a comprehensive list of all firms in the sector. M&A calculates mean and median multiples for the sector using data from a set of firms that it believes to be reasonable and which may not be identical to the set reflected 02 above. JUNE 2017 SECTOR COMPARISON SNAPSHOT: CURRENT REVENUE & EBITDA MULTIPLES Enterprise Value / 2017 Revenue Securities Exchanges B2B E-commerce & Marketing Technologies Application Software Data & Analytics - Financial Services Banking Software & Processors Business Intelligence Software Payment Technology Security Software Capital Markets Software & Services Insurance Technology Tech-enabled Financial Institutions * Information & Market Research 0x 2x 4x 6x 8x 10x Enterprise Value / 2017 EBITDA Security Software Application Software Banking Software & Processors Insurance Technology Capital Markets Software & Services Data & Analytics - Financial Services Tech-enabled Financial Institutions * Securities Exchanges Payment Technology B2B E-commerce & Marketing Technologies Business Intelligence Software Information & Market Research 0x 5x 10x 15x 20x 25x 30x *Tech-enabled Financial Institutions multiples calculated using Market Cap / Revenue and Market Cap / EBT Sources: Marlin & Associates, Capital IQ and Public sources. All market and operating data is sourced as of 5/31/17. These companies are a sample of firms in the sector as M&A defines it, and do not comprise a comprehensive list of all firms in the sector. M&A calculates mean and median multiples for the sector using data from a set of firms that it believes to be reasonable and which may not be identical to the set reflected 03 above. JUNE 2017 Application Software Public Market Data 5 Year LTM Revenue & EBITDA Multiples 5 Year M&A Application Software Index[1] vs. S&P 500, base = 100 8. 0x 45x 310 280 7. 0x 40x 250 6. 0x 35x 220 190 5. 0x 30x 160 EV / EBITDA EV / Revenue EV 130 4. 0x 25x 100 3. 0x 20x 70 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 EV / LTM Revenue EV / LTM EBITDA M&A Appli cation Softwar e Index S&P 500 Company Market Enterprise EV / Revenue EV / EBIT DA Revenue Growth EBITDA M ar gin (USD millions) Cap Value CY2016A CY2017E CY2016A CY2017E CY2016A CY2017E CY2016A CY2017E Oracle 190,820 185,843 5.0x 4.9x 12.7x 10.9x (1%) 2% 39% 45% SAP 127,585 128,453 5.2x 4.8x 19.1x 13.9x 6% 8% 27% 34% Salesforce 63,301 62,617 7.5x 6.1x nm 28.3x 26% 23% 6% 22% Intuit 36,566 35,473 7.3x 6.7x 25.1x 17.3x 9% 10% 29% 39% Workday 20,378 18,803 12.0x 9.2x na 63.2x 35% 31% na 14% CA 13,185 13,342 3.3x 3.3x 10.4x 9.0x (0%) 2% 32% 36% Constellation 11,219 11,093 5.2x 4.6x 27.2x 17.9x 16% 13% 19% 26% Amdocs 9,508 8,559 2.3x 2.2x 12.2x 11.1x 3% 4% 19% 20% NICE 4,823 4,955 4.9x 3.7x 22.4x 13.1x 10% 32% 22% 28% Paycom Softw are 3,830 3,769 11.4x 8.8x 55.4x 31.7x 47% 30% 21% 28% Softw are 3,618 3,513 3.6x 3.5x 12.2x 10.7x (0%) 4% 29% 32% Manhattan Associates 3,290 3,189 5.3x 5.2x 15.7x 14.7x 9% 1% 34% 36% Zendesk 2,532 2,285 7.3x 5.4x na nm 49% 35% na 3% Paylocity 2,530 2,429 9.2x 7.4x nm 42.6x 41% 25% 3% 17% Xero 2,489 2,407 12.2x 8.6x na nm 48% 41% na 1% Callidus 1,538 1,355 6.6x 5.5x na 44.8x 19% 18% na 12% Trim Mean 21,775 21,492 6.7x 5.6x 18.3x 21.4x 19% 17% 24% 25% Median 7,165 6,757 5.9x 5.3x 17.4x 16.0x 13% 15% 25% 27% [1] Cloudera (NYSE:CLDR) added to the index as of IPO 4/27/17 Recent Activity Date Acquirer(s) / Investor(s) Target / Issuer Description Announced Asure Software (NASDAQ:ASUR) acquired iSystems from Silver Oak Services Partners for $55mm. iSystems develops payroll, tax and HR software for the payroll 5/26/17 service bureau market and other financial services providers. Asure plans to acquire approximately $130mm in additional payroll revenue from iSystems’ customer base of more than 100 service bureaus.
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