Quarterly Update Q1 2015 Financial Technology Sector Overview of Market Activity in the Financial Technology Sector William Blair & Company Financial Technology Sector – First Quarter 2015 Update M&A and capital markets activity remained strong during the first quarter of 2015, particularly in the United States. In fact, U.S. stock indices marked all-time highs during the quarter and deal-making activity continued its upward trajectory, propelled by improving confidence among consumers and corporate executives, low-cost credit, and record levels of cash. While market participants largely ignored the prospect of rising interest rates, a collapsing energy sector, global currency concerns, and continued economic uncertainty abroad, this could be an area of concern moving into the second quarter of 2015. One of the most prominent storylines within the financial technology sector in the first quarter was the escalating bets made on payments solutions by the likes of tech giants Apple, Google, and Samsung. The release of Apple Pay unilaterally raised the stakes across the industry and was a catalyst for a wave of high-profile announcements, including Samsung’s acquisition of LoopPay, Google’s acquisition of Softcard, and PayPal’s acquisition of Paydiant. Traditional payments providers are thus being further pressured to accelerate innovation and expand international reach, which has in turn refocused corporate strategies away from building domestic scale and vertical plays toward acquiring differentiated, earlier-stage, technology platforms with global capabilities. Global’s acquisition of Realex, Worldpay’s acquisition of SecureNet, and MasterCard’s acquisition of TNS’s gateway are recent examples of this trend, which we believe will be a significant driver of sector M&A activity going forward. Across the broader financial technology industry, we continue to see M&A outcomes falling into a barbell formation, with widespread demand, condensed buyer due diligence, and aggressive valuations for high-quality assets, while other assets receive more limited interest. As competitive dynamics rise and opportunities for quality and size become scarcer, we expect to see a heightened interest in trades that are unlikely to have materialized in prior years. Likewise, the mega-deals that have recently resurfaced in other sectors of the economy have yet to return to financial technology, but current competitive and market conditions are highly favorable and we believe it is only a matter of time before there is a major industry-altering transaction within the financial technology sector as well. In terms of capital markets momentum, publicly listed financial technology companies as a group continue to trade near all-time highs. Sector-wide technological innovation remains a key driver of growth and favorable secular trends in global electronic payments are as strong as ever. For financial technology companies looking to raise capital, prospects remain extremely attractive. Demand for sector investments continues to explode across the public, venture and private equity communities, particularly within the emerging high-growth areas of mobile payments, personal wealth management, and online/marketplace lenders. William Blair has one of the most active financial technology investment banking franchises in the industry, and we remain highly optimistic on the sector overall. As always, we appreciate your interest in our practice, and please do not hesitate to reach out if there is anything we can do to be helpful. Best regards, Your William Blair financial technology team Rob Metzger Dan Daul Phil Olson Dan Laszlo Managing Director Managing Director Managing Director Director Financial Technology Sector – Q1 2015 Financial Technology Sector – First Quarter 2015 Update 1 William Blair & Company William Blair Financial Technology Team Contact Information Rob Metzger, head of technology and co-head of financial technology, joined the investment banking department of William Blair & Company in 1999. While at William Blair & Company and in his prior position at ABN AMRO Incorporated, he focused on the investment banking needs of insurance, financial technology, and specialty finance companies. Mr. Metzger graduated in 1989 with highest honors from the University of Illinois, receiving a B.S. in accountancy. In 1995, he graduated with distinction from Northwestern University’s J.L. Kellogg Graduate School of Management, receiving an M.B.A. in finance and strategy. He is a certified public accountant. +1 312 364 8517 [email protected] Dan Daul, managing director and co-head of financial technology, joined the investment banking department of William Blair & Company in 2004. While at William Blair & Company and in his prior position at Robert W. Baird & Co., Mr. Daul focused on the investment banking needs of financial technology, transaction processing, and IT security companies. Mr. Daul has been involved in more than 50 transactions aggregating more than $5.0 billion in transaction value, with an emphasis on mergers and acquisitions. He graduated in 1991 from the University of Wisconsin with a B.S. degree. In 1997, he graduated from Northwestern University’s J.L. Kellogg Graduate School of Management and received an M.B.A. in finance and strategy. +1 312 364 8457 [email protected] Phil Olson, managing director in the financial technology group, joined the investment banking department of William Blair & Company in 2003. Both at William Blair & Company and in his prior position at Merrill Lynch, he focused on the investment banking needs of financial technology and financial services companies. Mr. Olson graduated in 2001 with high honors from the University of Illinois with a B.S. in finance. In 2007, he graduated from Northwestern University’s J.L. Kellogg Graduate School of Management with an M.B.A. in finance and entrepreneurship. +1 312 364 8798 [email protected] Daniel Laszlo, director in the financial technology group, joined William Blair & Company in 2011. Previously he worked at GTCR, where he focused on private equity investments in the financial technology and specialty finance sectors. Before GTCR, Mr. Laszlo worked at Goldman Sachs, where he focused on the investment banking needs of a variety of financial services clients. During his career, he has completed more than 15 mergers and acquisitions and debt and equity transactions. Mr. Laszlo holds an M.B.A. in finance and a B.S. in accounting and finance from the Kelley School of Business at Indiana University. +1 312 364 5084 [email protected] Financial Technology Sector – Q1 2015 2 William Blair Financial Technology Team Contact Information William Blair & Company William Blair Industry Events 2015 Private Equity Conference to be held September 16-17, 2015, Four Seasons Hotel Chicago 18th Annual Private Equity Conference 50-plus companies expected to participate More than 600 institutional private equity investors and venture capital 2015 Growth Stock Conference investors to be held June 9-11, 2015, Roundtable discussions focused on Four Seasons Hotel Chicago the following industry sectors and topics: 35th Annual – Technology Growth Stock Conference – Financial services – Business services 2014 conference highlights: – Commercial services 2015 Technology Company Growth Conference to be held May – 230 companies participated – Consumer and retail 14, 2015, Four Seasons Hotel San – More than 1,000 institutional – Healthcare Francisco clients – Industrials – More than 4,000 one-on-one 3rd Annual Technology meetings arranged Company Growth Conference 75-plus presenting companies in 2014 – Leading late-stage private technology companies Business Development/ Financial Sponsor invitations: – Public companies with >$1B market cap – Large private companies with >$500M in revenues – Operating (or seeking acquisitions) in Technology, Financial Technology, and/or Healthcare IT Financial Technology Sector – Q1 2015 William Blair Industry Events 3 William Blair & Company William Blair’s Momentum in FinTech Produces a Record Breaking Year 12 M&A Deals representing over $2.6 billion in transaction value 9 Equity Deals representing over $2.6 billion in transaction value $172,500,000 Not Disclosed $120,750,000 $1,000,500,000 $157,800,000 has been acquired by has acquired Convertible PayChoice Initial Public Offering Bond Offering Worldpay Follow-on Offering (PAI Group, Inc) December 2014 December 2014 December 2014 December 2014 October 2014 $160,000,000 $400,000,000 Not Disclosed $351,900,000 $205,000,000 has been acquired by has been acquired by has been acquired by has been acquired by Cardtronics Green Dot Corporation Francisco Partners Follow-on Offering ACI Worldwide October 2014 October 2014 October 2014 September 2014 August 2014 $532,500,000 $210,000,000 $225,000,000 $318,933,200 $137,729,750 has been acquired by has been acquired by has merged with WEX Inc. Optimal Payments Plc Taxware, LLC Follow-on Offering Initial Public Offering July 2014 July 2014 July 2014 June 2014 March 2014 $420,000,000 $276,000,000 $151,800,000 $92,000,000 $41,000,000 has been acquired by Private Equity Global Payments, Inc. Initial Public Offering Initial Public Offering Follow-on Offering Placement March 2014 March 2014 March 2014 March 2014 February 2014 Note: February 2014, WorldRemit private placement not shown. Financial Technology Sector – Q1 2015 4 William Blair’s Momentum in FinTech Produces a Record Breaking Year William Blair & Company Spotlight – William Blair Recent M&A