Financial Technology M&A Update Q3 2016

October 19, 2016 Table of Contents

 M&A Market Brief – Page 3-5  Notable FinTech M&A Transactions, Q3 2016 – Page 6-8  Publicly Traded FinTech Firms (Valuation Table) – Page 9-10  M&A Spotlight: Blackboard Inc. / Higher One – Page 11  M&A Spotlight: IHS / Markit – Page 12  M&A Spotlight: E*TRADE / OptionsHouse – Page 13

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.

Sources for our research and data include: Pitchbook. MergerMarket, FT Partners, Wall Street Journal, S&P Capital IQ, Company Websites, SEC Filings, Bloomberg

M&A Market Brief

Q3 2016 FinTech M&A takes a setback in deals announced but valuations are up Worldwide United States FinTech

• Global M&A activity during the • Global recession largely affects • Despite the global decline of third quarter of 2016 was cut by U.S. deal volume, which declined deals number, U.S. appears half compared to second quarter from $768 B to $563 B. The U.S. robust and contributed the activity. After 2016's surge of M&A accounts for $8.07 B out of the majority M&A fintech deals. U.S. activity, Deals are reserved for the global $8.09 B deals size, accounts for $8.07 B out of the last quarter 2016. considering cross-continent global $8.09 B deals size, transacations. considering cross-border • Global M&A deal value in Q3 transacations. reached $8.09 B, only one-third of • In Q3, U.S. M&A deals outperfom Q2 data, meaning smaller deal the rest of world since U.S. is • Markit Group acquired by IHS for sizes on average in Q3. gradually recovered from crisis $5.9 B and is the largest fintech and stimulated by the new deal announced in Q3 2016. • Political issues and a trade war election . between Europe and U.S. • Financial Technology M&A threatened investors who in turn • In Q3 2016, United States M&A environment is not as active as chose to take conservative stand deal value totaled $580.3 billion, last quarter in the U.S. with only and seeked secure investment with 1,456 transactions. This 19 transcations with valuation of vertical. represents a 15% drop in value $24.68 billion. But quantatively the from Q2 2015. same as last Q2, indicating the • As the approach of Britain's entire market is getting more official exit to EU, Euro stay • The uncertainty resulting from the mature and higher valutations are fluctuated in Q3 while GBP United Kingdom's departure from occuring. plunged again in Q3 following the the EU continue the U.S. outbound drop in Q2. This was a major activity into the UK. Outbound • Other notable M&A transactions reason why deal value for Q3 2016 activity in the UK proved to be announced this quarter includes in the EU fell 50.5% compared to acclerated during the post-Brexit CBOE Holdings acquisition of that of Q2 2016. The expected Period. BATS Global Markets for $3.2 B uptick in EU deal volume are either and Vocallink acquisition by postponed or sink to the bottom . • Investors are still optimistic about MasterCard for $920 M. M&A activities occurring in the U.S. • China is recovering from the Q2 dip for the remainder of 2016 and • The median revenue multiple on and announced 3 fintech deals in continuing into 2017. a year-over-year basis declined Q3 2016. from 3.2x to 2.2x.

• The median EBITDA multiple on a year-over-year basis decreased from 15.2x to 12.1x.

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Global M&A Deal Volume – Quarterly Comparison

Q1 Q2 Q3 Q4

2 0 1 6 633 688.7 573.99

2 0 1 5 758.9 1047.1 971.2 1205.1

2 0 1 4 566.7 963.9 855.7 869.7

2 0 1 3 446.9 559.7 646.4 573.3

2 0 1 2 464.8 565.5 522.9 757.5

2 0 1 1 614.6 586.3 599.6 479.4

2 0 1 0 461.2 433 429.9 713

2 0 0 9 420.8 396.4 327.6 570.1

2 0 0 8 593.2 678.2 684.9 458.8

2 0 0 7 801.5 1280 852 734.4

Source: Mercer Capital

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U.S. FinTech M&A Activity

The volume and size of FinTech M&A transactions have been increasing globally.

Source: Solganick&Co., PitchBook

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Notable FinTech M&A Transactions, Q3 2016

Announcement Deal Value EV / Target Acquirer EV / Rev Target Description Date (mm) EBITDA Developer of professional insurance 9/29/2016 Kapia Solutions RGI Group knowledge asset solutions and applications The company offers brokers an end-to- 9/29/2016 IS2 (eTrading) Applied Systems end online platform for customers to quote, buy, and manage policies Provider of billing and payment software 9/28/2016 TransCentra SourceHOV services The company offers an online platform for Meituan- 9/27/2016 Qiandaibao providing third party mobile payment Dianping products and services The company engages in developing and RTech Healthcare marketing of software and technology 9/21/2016 TransUnion Revenue Technologies that offers post-service eligibility and revenue systems The company provides straightforward, KCD Public 9/19/2016 Wall & Broadway bespoke and modular public relations Relations services to start-ups Provider of cost containment, underpayment & prompt pay. Audit 9/19/2016 T3 Worldwide Equian management and claims quality compliance Knight Capital Provider of online trading and brokerage 9/15/2016 KCG Neonet Group services Provider of subscription billing services for 9/14/2016 Vindicia Amdocs 87.5 17.1 online merchants E*TRADE Operator of an online stock broking 9/12/2016 OptionsHouse 725 7.0 Financial company Applied BlueSquare Merchant Provider of electronic payment processing 9/12/2016 Resolutions Systems West services Coast 9/8/2016 THEIA Partners Julhiet Sterwen Provider of consulting services

The company helps wealth management Mckinsey & 9/7/2016 PriceMetrix firms to optimize revenue opportunities Company through the use of practice intelligence

Source: PitchBook

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Deal Announcement EV / EV / Target Acquirer Value Target Description Date Rev EBITDA (mm) Terra Payment Provider of international money transfer 8/29/2016 TerraPay Services (UK) services Nielson Holdings 8/25/2016 A 3 Distrib Provider of Prospectus analysis services France The company serves institutional, financial and retail investors in Canada by 8/25/2016 Perimeter Markets BGC Partners providing operations for electronic trading platforms Provides treasury management including Manex Treasury Eurobase 8/23/2016 bills, equities. Euro bonds to corporate Systems Systems treasuries, banks and financial institutions

Yumeshin The company develops computer 8/22/2016 Social Fintech 4.35 2.88 Holdings systems for trading investor monitoring The company offers CASA, loan Sesame Software Speridian origination, loan management, clearing, 8/17/2016 Solutions Technologies pay roll, inventory, CTS. Rupay Card, RTGS and NEFT, IMPS, mobile banking The company operates an online platform which specializes in helping small and 8/9/2016 Deposit a Gift Firespring medium sized non-profit organizations plan and execute successful crowdfunding campaigns The company offers financial and revenue Diamond Municipal 8/8/2016 Aptean management software to the public Solutions sector organizations Provider of technology and payment 8/4/2016 Higher One Blackboard 260 1.5 services to higher education industry 8/2/2016 Bluepoint Solutions Alogent Provider of financial technology software

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Deal EV / EV / Announcement Target Acquirer Value Target Description Rev EBITDA Date (mm)

The company designs and develops 7/31/2016 Bank Soft Systems ProektPir software for remote banking service and financial management in Moscow Russia Provides a bitcoin wallet protection software that requires two factor 7/27/2016 GreenAddress Blockstream authentication and multi-signature to ensure control over transactions The company develops and provides software focused on providing capital 7/21/2016 Azur Universal APT Systems marketing trading, risk management and electronic market trading platform for financial industry Provides online personal finance platform 7/19/2016 Gradiblel CommonBond which offers recommendation to users about how they repay student loan Electronic Funds Provides customized corporate payment 7/19/2016 WEX 1,500 Source services and corporate customers Provides a software that helps banks, 7/14/2016 EverVest Ultra Capital investors and developers to analyze and structure financing for new assets Provider of data and financial solutions 7/13/2016 Markit IHS 5,500 6.5 and services The company enables customers to avail discounts in businesses and internal sites 7/12/2016 Ininal Multinet UP with co-operation of Ekart, MasterCard and ING Bank Provider of credit and debt management 7/11/2016 ABIT EuroSystems products and services Develops an online platform that allows micro-merchants to accept electronic 7/11/2016 Sling (Israel) Avante 10 payments from consumers via smartphones

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Publicly Traded FinTech Firms Valuation Table

Payments Ticker Stock Price Market Cap EV/Revenue EV/EBITDA

Blackhawk Network Holdings HAWK 34.09 1.92B 1.1x 15.3x

Square SQ 11.27 3.85B 1.4x

WorldPay WPG 3.86 7.73B 6.5x 21.4x

Shopify SHOP 42.39 3.47B 8.0x

Seamless Distribution SEAM 0.94 45.86M 1.5x

NAS: Veritex Community Bank 17.46 187.4M 4.7x 12.1x VBTX

Visa Inc V 82.25 194.18B 13.3x 23.9x

Average 5.2x 18.2x

Median 4.7x 18.4x

Processing and Outsourcing Ticker Stock Price Market Cap EV/Revenue EV/EBITDA

ADP ADP 86.87 39.63B 3.5x 16.5x

Diebold, Inc DBD 24.79 1.54B 1.7x 39.6x

Jack Henry & Associates JKHY 82.29 6.49B 5.1 14.0x

Fiserv, Inc. FISV 100.09 22.00B 5.5x 16.4x

Average 4.0x 21.6x

Median 4.3x 16.5x

All data and stock prices as of September 30, 2016 market close.

Source: PitchBook

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Publicly Traded FinTech Firms Valuation Table

Software Ticker Stock Price Market Cap EV/Revenue EV/EBITDA

Paycom Software, Inc. PAYC 49.65 2.97B 8.7x 35.9x

Paylocity Holding Corporation PCTY 44.64 2.28B 9.2x 204.7x

Envestnet, Inc. ENV 36.45 1.56B 3.3x 43.9x

Financial Engines, Inc. FNGN 28.97 1.79B 3.9x 21.4x

Xero Limited. XRO 13.27 1.82B 9.3x -

Average 7.0x 64.5x

Median 8.7x 21.4x

All data and stock prices as of September 30, 2016 market close.

Source: PitchBook

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M&A Spotlight

Blackboard. to Acquire Higher One for $260 Million

Aug 4, 2016 – Blackboard Inc., the top educational technology enterprise announced that an affiliate of the company has reached a definitive agreement to purchase financial payments technology firm Higher One Holdings, Inc. with all-cash deal of $260M, including a mutual agreement to use CASHNet, the online secure payment solution provider.

Blackboard is an educational technology company HQ at D.C. and known as it Blackboard Learn system. The deal is practically reached by Blackboard’s parent company Providence Equity Partners with the purpose to handle payments. It is believed that such acquisition is targeted to complement their own payment service Transact. Providence Equity Partners specifically created a subsidiary Winchester Acquisition Corp to accomplish the deal.

Higher One (NYSE: ONE) is a leading financial technology company which provides cost-saving solutions to enhance student’s tuition payment service. CASHNet, subsidiary to Higher One, offer secure transaction services over 700 major school and educational institutions. The solution structure is built on a compliant platform which get constantly updated and debugged.

Source: https://www.insidehighered.com/quicktakes/2016/07/01/blackboard-owner-acquires-higher- one http://www.cashnet.com/about/

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IHS to Acquire majority of Markit for $5.9 Billion

July 12, 2016 – U.S. based IHS agreed to merge with Markit to generate a $13 billion data solution behemoth IHS Markit (Nasdaq: INFO). The all-stock deal rises the valuation of the company to $5.9 billion while IHS shareholders will run 57% of the new company. The newly combined company will be based in U.K. to effectively decline the corporate tax rate.

Information Handling Services (NYSE: IHS) provide critical information and insight products and services through internet-based applications and portals. The company provide important information and data by twisting data with its proprietary and third party technology to create graphical user interfaces.

Markit provides financial services and data by creating their own credit derivative pricing terminal, which is the core value of their assets. The company targets on clients of high equity individual investor government agencies and institutional investors

Through this acquisition, IHS and Markit will integrate their clients, services and resources. The combined company’s reported results for fiscal year 2015 include $3.3 billion in revenue. $1.2 billion in EBITDA.

According to Jerre Stead, the chairman and chief executive officer of IHS Markit, “This merger is such an important milestone for our company, colleagues, customers, shareholders and the entire business information industry. With our unique positions in energy, financial services and transportation, the key is the limit in terms of the analytics and next-generation solutions we will provide to customers worldwide and across the industries, as the new global information leader”

Source: http://www.cnbc.com/2016/03/21/ihs-and-markit-to-merge-in-deal-valued-at-more- than-13b.html http://press.ihs.com/press-release/corporate/ihs-and-markit-complete-merger-form-global- information-powerhouse

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E*TRADE to Acquire OptionsHouse for $725 Million

Sep 12, 2016 – OptionsHouse’s parent company Aperture New Holdings Inc., was acquired by E*TRADE (NAS: ETFC) for $725 Million in an all cash deal.

OptionsHouse is a Chicago-based futures and options brokerage. The company has 154,000 customers account and $3.6 billion in customers’ assets, which includes $1.6 billion cash.

E*Trade is a New York City-based online discount stock brokerage firm. The company provide trading kit solutions: information, platform, advice and guidance. The company set up specific investment plan for different groups of clients: retirement plan, wealth plan. E*Trade is planning to issue $400M preferred stock to finance the deal

According to OptionsHouse, this acquisition will be expected to close in Q4, wait for regulatory approval and other customary closing conditions. After the close of the deal, OptionsHouse’s business will be integrated to be part of E*TRADE and will have full access to E*TRADE’s complementary tools and services as well as retaining the top-rated OptionsHouse services being provided already.

This deal will bring a sizeable amount of accounts to E*TRADE and remarkably improves its derivative capabilities. E*TRADE is expecting the transaction to keep neutral for earnings in 2017 and start to be accretive in 2018.

Source: https://www.optionshouse.com/blog/announcements/etrade-financial-acquiring- optionshouse/ http://fortune.com/2016/07/25/etrade-buying-online-brokerage http://www.marketwatch.com/story/etrade-agrees-to-acquire-optionshouse-parent-for-725- million-2016-07-25

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About Solganick & Co.

Solganick & Co., Inc. is an independent investment banking and M&A advisory firm focused exclusively on the global technology and digital media industry sectors, including fintech. 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 entrepreneurs, companies and leading private equity firms within the sectors we cover.

Please contact us for information regarding this report or to inquire about an M&A transaction.

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