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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 OCTOBER 2016 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, It’s all hot – Infotech M&A and the US Presidential election. Our October 2016 M&A Market Update Dear Clients and Friends: The report that follows is our latest update on the m&a values and trends in the dozen+ sectors of the information technology industry that we follow and sometimes lead. We’re busy. We helped a client close one deal last week and have several others looking close. At the same time, we are less than two weeks away from the US Presidential election – and that takes up my attention too. Anyone who believes the results of this election are pre-ordained should ask the British about Brexit or the Columbians about their recent referendum on peace. In both cases, the results shocked more than half of the population. I’ve voted in many elections. But this will be the first for my daughter. My message to her is simple: vote for whomever you choose. But choose wisely. Get beyond the catch phrases, the cartoon stereotypes, the 30-second TV commercials and the media hype. Do your homework; understand real positions. Understand the consequences. Voting matters. I’ve made my choice. In fact, I voted already via absentee ballot. I based my vote on the person that most shares my values and that has the experience, wisdom, maturity and temperament to lead us in troubled times. I thought about national security, moral leadership, fiscal solvency, healthcare, jobs, infrastructure, care of the elderly, poverty, international trade, education and which of two flawed candidates I would most want the children of this country to emulate. I’ve made my choice. Now I need to go back to helping clients. As you will see from the report below it’s a busy time. A few of the more interesting deals this month include: · Intel (Nasdaq: INTC) spun out McAffee, and sold a majority stake · Parthenon Capital Partners (Boston, MA) acquired a majority in it to TPG for $3.1bn in cash, valuing the entire company at ownership stake in BillingTree for an undisclosed sum. Marlin & $4.2bn or an implied 1.9x revenue, Associates acted as exclusive strategic and financial advisor to · CBOE Holdings (Nasdaq:CBOE) acquired BATS Global Markets BillingTree, (BATS:BATS) for $3.2bn, at 1.9x LTM Revenue and 13.1x LTM · Payroc (Chicago, IL) acquired the assets of iTransact for an EBITDA, undisclosed sum. Marlin & Associates acted as exclusive strategic · Informa PLC (LSE:INF) acquired Penton Information Services for and financial advisor to iTransact. $1.6bn, valuing the company at an implied 4.2x LTM revenue and 11x LTM EBITDA, Don’t forget to vote. It’s important. Sincerely, Kenneth B. Marlin | Managing Partner Marlin & Associates | www.marlinllc.com PS: Recently I engaged in a Q and A session with well-known blogger Robert Morris. It was in two parts. You may find it of interest. Part 1 is here: http://bobmorris.biz/ken-marlin-on-the-marine-corps-way-part-1-of-an-interview-by-bob-morris And Part 2 is here: http://bobmorris.biz/ken-marlin-on-the-marine-corps-way-part-2-of-an-interview-by-bob-morris 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. OCTOBER 2016 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 Healthcare Information Software Systems 11 Information & Market Research 12 Insurance Technology 13 Payment Technology 14 Securities Exchanges 15 Security Software 16 Technology-Enabled Financial Institutions 17 Technology-Enabled Healthcare Services 18 19 18 Merger-and-Acquisition Activity Trends Source: Marlin & Associates, Capital IQ and Public sources. All market and operating data is sourced as of 9/30/16. 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 above. 02 OCTOBER 2016 SECTOR COMPARISON SNAPSHOT: CURRENT REVENUE & EBITDA MULTIPLES Enterprise Value / 2015 Revenue Securities Exchanges Application Software B2B E-commerce & Marketing Technologies Healthcare Info Software Data & Analytics - Financial Services Banking Software & Processors Business Intelligence Software Security Software Payment Technology Tech-enabled Healthcare Services Information & Market Research Capital Markets Software & Services Tech-enabled Financial Institutions * Insurance Technology 0x 2x 4x 6x 8x 10x 12x Enterprise Value / 2015 EBITDA Healthcare Info Software Capital Markets Software & Services Banking Software & Processors Tech-enabled Healthcare Services Data & Analytics - Financial Services Security Software Insurance Technology Securities Exchanges Business Intelligence Software Application Software Payment Technology Information & Market Research B2B E-commerce & Marketing Technologies Tech-enabled Financial Institutions * 0x 5x 10x 15x 20x 25x 30x *Tech-enabled Financial Institutions multiples calculated using Market Cap / Revenue and Market Cap / EBT Source: Marlin & Associates, Capital IQ and Public sources. All market and operating data is sourced as of 9/30/16. 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 above. 03 OCTOBER 2016 Application Software Public Market Data 5 Year LTM Revenue & EBITDA Multiples 5 Year M&A Application Software Index vs. S&P 500, base = 100 8.0x 45x 260 7.0x 36x 220 6.0x 27x 5.0x 18x 180 EV / EBITDA EV / Revenue 4.0x 9x 140 3.0x 0x 100 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 Oct-11 Oct-12 Oct-13 Oct-14 Oct-15 Oct-16 EV / LTM Revenue EV / LTM EBITDA M&A Application Software Index S&P 500 Company Market Enterprise EV / Revenue EV / EBITDA Revenue Growth EBITDA Margin (USD millions) Cap Value CY2015A CY2016E CY2015A CY2016E CY2015A CY2016E CY2015A CY2016E Oracle 165,801 151,858 4.1x 4.1x 10.0x 9.1x (3%) (0%) 41% 45% SAP 107,943 112,506 4.9x 4.6x 17.8x 13.5x 18% 6% 27% 34% Salesforce 49,643 50,984 7.6x 6.1x na 32.6x 24% 25% 7% 19% Intuit 28,273 28,193 6.3x 5.9x 21.7x 16.1x 6% 8% 29% 36% Workday 18,083 16,536 14.2x 10.6x na na 48% 34% n/a 8% CA Technologies 13,728 13,040 3.2x 3.2x 10.6x 8.1x (7%) 0% 31% 40% Constellation Software 9,478 9,574 5.2x 4.5x 22.4x 17.9x 10% 15% 23% 25% NetSuite 8,926 8,804 11.9x 9.1x na na 33% 30% n/a 8% Amdocs 8,648 7,523 2.1x 2.0x 10.9x 10.0x 1% 3% 19% 20% Manhattan Associates 4,162 4,067 7.3x 6.6x 24.0x 19.0x 13% 11% 30% 35% NICE Systems 4,160 3,770 4.1x 3.8x 16.9x 13.3x 6% 8% 24% 28% Software AG 3,183 3,111 3.2x 3.2x 10.8x 9.9x 2% 2% 30% 32% Paycom Software 2,942 2,891 12.9x 8.8x 68.7x 34.2x 49% 45% 19% 26% Zendesk 2,831 2,606 12.5x 8.4x na na 64% 48% n/a 2% Paylocity 2,270 2,184 11.6x 8.3x na na 47% 40% n/a 11% Callidus Software 1,048 954 5.5x 4.7x na 36.7x 27% 18% 0% 13% Trim Mean 18,876 18,985 7.2x 5.8x 16.9x 17.6x 20% 18% 24% 24% Median 8,787 8,164 5.9x 5.3x 17.3x 14.8x 16% 13% 26% 26% Recent Activity Date Acquirer(s) / Investor(s) Target / Issuer Description Announced C3 (Redwood City, CA) raised $70mm in series D funding led by TPG Growth. C3 9/1/16 delivers IoT software to the enterprise market. C3 will use the proceeds to accelerate the expansion of its customer service capacity globally. JDA Software (Scottsdale, AZ) completed a $570mm recapitalization from Blackstone 8/19/16 and New Mountain Capital. JDA Software designs and develops end-to-end integrated supply chain and retail management software solutions. Oracle (NYSE:ORCL) agreed to acquire NetSuite (NYSE:N) at a 19% premium to the 7/28/16 prior day’s trading price. The transaction valued NetSuite at an implied enterprise value of $8.7bn or 10.3x LTM revenue. Source: Marlin & Associates, Capital IQ and Public sources. All market and operating data is sourced as of 9/30/16.
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