July 2020 The Lighthouse Software Online & Digital Tech Enabled Business Services A Pharus Advisors Holdings, LLC Publication | www.pharus.com Pharus Observations Cloud Applications Seek Lofty Valuations The cloud application industry continues its ascent with robust M&A activity across a variety of cloud-based platforms and services. As companies around the globe continue to shift to the cloud, strategic and financial buyers are on the hunt for innovative cloud-based technology acquisitions. The global public cloud services market is estimated to be growing at 6.3% in 2020, bringing the total market size to $257.9 billion by the end of the year, up from $242.7 billion in 2019. Encumbered slightly during the first half of 2020 by the COVID-19 pandemic, cloud growth is still expected to increase to 19.0% in 2021 and 18.6% in 2022, with the overall market reaching an estimated $354.6 million in 2022. On July 28, 2020, Network International announced the acquisition of The Direct Pay Online Group (DPO Group) for $288 million. The DPO Group operates a cloud-based eCommerce processing platform that supports multiple transaction types with online and offline capabilities for consumers. As a leader within the eCommerce enablement space in Africa, The DPO Group will help expand Network International’s regional footprint and digital commerce capabilities. Also, in late July, ESW Capital announced its intention to acquire Optiva Inc. for an estimated $256 million. Optiva provides cloud-native revenue management software to communication service providers around the world. This acquisition adds to ESW Capital’s extensive portfolio of mature software companies across a range of verticals with cloud capabilities. On July 20, 2020, Thoma Bravo announced a definitive agreement to acquire Majesco for approximately $590 million. Majesco is a global leader of cloud insurance software solutions for insurance business transformation. Thoma Bravo has a history of acquiring and working with cloud-based platforms, and this acquisition will add to their large portfolio of technology companies. In mid-July, L&T Technology Services (LTTS) announced the acquisition of Orchestra Technology for $25 million. Orchestra Technology develops a cloud-based platform for wireless telecommunications network engineering, testing, and automation applications. This acquisition comes as LTTS looks to expand its technology suite and widen its reach into the telecom OEM and service provider space. In early July, Damstra Holdings announced a takeover bid of Vault Intelligence for approximately $58 million. Vault Intelligence is a workforce SaaS provider that offers cloud- based and mobile software products. Damstra, a fellow workforce SaaS provider, aims to leverage Vault’s unique cloud technologies and product suite to grow its capabilities and create a larger, more diversified workplace management company. Sources: Company filings, Press releases, Morgan Stanley, The Seattle Times, Tech Crunch, Gartner, Pharus research A Pharus Advisors Holdings, LLC Publication | www.pharus.com 2 Table of contents I. Capital Market Trends ……….….......... 4 II. Public Market Valuations ……………… 6 III. M&A Transactions ……………………. 23 IV. Selected Transactions …………......... 32 V. Pharus Overview ……………….......... 44 If you would like to be included on (or removed from) the distribution list for The Lighthouse, please contact Cole McCourt at [email protected]. The information contained herein is obtained from sources we believe to be reliable but its accuracy and completeness, and that of the opinions based thereon, is not guaranteed. Pharus Advisors Holdings, or one or more of its partners, may have an interest in any of the securities or companies discussed herein. All rights reserved by Pharus Advisors Holdings, LLC. 2020 Copyright Pharus Advisors Holdings, LLC. A Pharus Advisors Holdings, LLC Publication | www.pharus.com 3 Capital market trends A Pharus Advisors Holdings, LLC Publication | www.pharus.com Capital market trends Relative Performance of Major Indices Through July 31, 2020 (Base = 100, 7/31/2019) 140.00 130.00 120.00 110.00 100.00 90.00 Russell 2000 Index (^RUT) 80.00 NASDAQ Composite Index (^COMP) Dow Jones Industrial Average (^DJI) 70.00 S&P 500 (^SPX) 60.00 Change % Index As of 31-July-20 1 Year 3 Months 1 Month Dow Jones 26,428.32 -1.62% 8.55% 2.38% Nasdaq 10,745.27 31.43% 20.88% 6.82% S&P 500 3,271.12 9.76% 12.32% 5.51% Russell 2000 1,480.43 -5.98% 12.95% 2.71% A Pharus Advisors Holdings, LLC Publication | www.pharus.com 5 Public market valuations A Pharus Advisors Holdings, LLC Publication | www.pharus.com Public market valuations Historical Median TEV / Revenue Multiples Application Software EMS / Infrastructure Software Financial Solutions Online & Digital Media Tech Enabled Business Services 8.0x 7.0x 6.7x 6.0x 6.1x 6.0x 5.0x 4.0x 3.3x 3.0x 2.3x 2.0x 1.0x Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Application Software Customer Relationship Management (CRM) & Customer Engagement 7.9x 6.2x 7.0x 8.4x 9.1x 9.5x Accounting & Enterprise Resource Planning (ERP) 6.7x 4.8x 5.3x 5.6x 5.6x 6.0x Supply Chain Management (SCM) & Logistics 6.8x 5.2x 7.2x 8.9x 9.5x 9.9x HR & Workforce Management 3.8x 2.9x 3.3x 4.2x 4.5x 4.5x Education Technology 1.6x 1.1x 1.5x 1.7x 1.6x 2.6x Industrial & Automation Software 2.4x 1.9x 2.4x 2.6x 2.5x 2.4x Business Intelligence & Data 6.2x 4.5x 5.3x 6.0x 7.1x 7.1x Design & Engineering Software 7.0x 6.7x 7.0x 8.0x 7.9x 8.0x EMS / Infrastructure Software Security Software 6.4x 5.9x 6.6x 7.0x 6.7x 7.5x System and Network Management Software 3.5x 2.3x 3.0x 3.6x 3.6x 3.4x Platform / OS 4.3x 5.9x 6.1x 6.3x 6.2x 5.8x Financial Solutions Banking Solutions 8.4x 8.0x 8.4x 7.9x 7.7x 7.7x Capital Market & Investment Solutions 6.8x 6.6x 6.8x 5.9x 5.9x 6.0x Consumer Data & Analytics 6.6x 5.8x 6.1x 6.9x 7.0x 6.7x Payment Processing 4.2x 3.6x 3.9x 3.5x 3.5x 3.5x Insurance Solutions 3.6x 3.0x 4.0x 3.6x 4.3x 4.7x Online & Digital Media Digital Advertising & Marketing 1.6x 1.4x 1.4x 1.5x 1.7x 2.0x Digital Media & Video 5.2x 4.1x 4.4x 6.9x 6.0x 4.0x Digital Advertising Agencies & Service Providers 1.0x 1.0x 1.0x 1.0x 1.1x 1.0x Online Retail & Marketplaces 2.8x 1.7x 2.3x 2.7x 3.8x 3.4x Digital Gaming 2.6x 3.2x 3.3x 3.0x 3.4x 3.3x Social Media 4.6x 4.1x 4.1x 5.1x 4.9x 5.4x Digital Commerce Solutions 1.0x 0.9x 1.3x 1.2x 1.2x 1.3x Other Digital Companies 4.1x 3.6x 3.9x 4.2x 4.5x 4.4x Tech Enabled Business Services IT Services, Integration & Consulting 1.5x 1.4x 1.4x 1.5x 1.5x 1.5x Business Process Management (BPM) 4.7x 3.0x 3.5x 3.7x 4.2x 4.2x Data Center Hosting & Services 5.2x 5.1x 5.9x 6.1x 5.8x 6.0x Call Center 1.1x 1.1x 1.1x 1.1x 1.2x 1.2x A Pharus Advisors Holdings, LLC Publication | www.pharus.com 7 Public market valuations Current & Forward Market Multiples Median TEV/Revenue Median TEV/EBITDA LTM NTM LTM NTM Application Software Customer Relationship Management (CRM) & Customer Engagement 9.4x 8.3x 27.6x 37.8x Accounting & Enterprise Resource Planning (ERP) 7.4x 5.8x 30.8x 21.4x Supply Chain Management (SCM) & Logistics 9.9x 10.4x 35.8x 33.6x HR & Workforce Management 4.5x 4.6x 54.7x 30.1x Education Technology 2.6x 3.2x 27.7x 16.4x Industrial & Automation Software 2.4x 2.5x 16.4x 17.8x Business Intelligence & Data 7.1x 7.9x 16.9x 26.0x Design & Engineering Software 8.0x 8.0x 38.4x 28.8x EMS / Infrastructure Software Security Software 7.5x 6.5x 36.7x 29.4x System and Network Management Software 4.5x 3.2x 12.8x 13.3x Platform / OS 5.8x 5.9x 15.5x 13.9x Financial Solutions Banking Solutions 7.7x 8.1x 28.0x 22.3x Capital Market & Investment Solutions 6.0x 7.5x 23.7x 24.3x Consumer Data & Analytics 6.7x 7.1x 24.3x 20.9x Payment Processing 3.5x 3.9x 16.2x 14.8x Insurance Solutions 4.7x 8.0x 19.8x 25.6x Online & Digital Media Digital Advertising & Marketing 2.0x 2.0x 13.2x 12.7x Digital Media & Video 5.1x 4.7x 25.2x 32.2x Digital Advertising Agencies & Service Providers 1.0x 1.2x 6.1x 7.2x Online Retail & Marketplaces 3.4x 3.4x 25.3x 18.9x Digital Gaming 3.3x 3.3x 15.0x 11.3x Social Media 5.7x 5.4x 19.3x 15.3x Digital Commerce Solutions 1.3x 1.3x 8.3x 9.2x Other Digital Companies 4.4x 4.4x 20.5x 18.5x Tech Enabled Business Services IT Services, Integration & Consulting 1.5x 1.5x 11.0x 11.5x Business Process Management (BPM) 4.4x 3.8x 12.7x 12.0x Data Center Hosting & Services 6.5x 5.9x 32.2x 26.2x Call Center 1.2x 1.2x 7.8x 9.8x Medians Application Software 6.0x 5.8x 23.6x 22.3x EMS / Infrastructure Software 6.9x 5.9x 20.8x 17.2x Financial Solutions 6.1x 7.1x 23.7x 22.3x Online & Digital Media 3.5x 3.3x 18.3x 15.2x Tech Enabled Business Services 2.3x 2.3x 11.3x 11.9x A Pharus Advisors Holdings, LLC Publication | www.pharus.com 8 Public market valuations Application Software TEV/Revenue TEV/EBITDA ($ in millions) TEV Market Cap LTM NTM LTM NTM Customer Relationship Management (CRM) & Customer Engagement x Customer Relationship Management (CRM) & Customer Engagement Five9 NasdaqGM:FIVN $2,861 $2,946 9.9x 8.5x NM 48.7x LivePersonFive9 NasdaqGS:LPSNNasdaqGM:FIVN $1,979$2,000 $2,013$2,031 9.1x7.5x 8.0x6.3x NM 64.7xNM MedalliaLivePerson NYSE:MDLANasdaqGS:LPSN $1,117$3,981 $1,175$4,337 5.0x9.4x 4.5x8.3x NM 47.0xNM NICEMINDBODY Systems TASE:NICENasdaqGM:MB $12,827$1,667 $12,690$1,870 8.5x7.7x 6.2x7.7x 27.6xNM 23.3xNM PegasystemsNICE Systems NasdaqGS:PEGATASE:NICE $6,396$9,459 $6,414$9,400 4.9x9.6x 4.3x8.2x 20.9xNM 14.3xNM Salesforce.comPegasystems NYSE:CRMNasdaqGS:PEGA $171,970$4,605 $175,560$4,860 5.7x9.4x 4.7x8.3x 56.6xNM 28.0x26.8x SDL LSE:SDL $561 $553 1.1x 1.2x 9.2x 10.1x Salesforce.com NYSE:CRM $92,910 $96,081 8.4x 6.7x 86.1x 29.3x Veeva NYSE:VEEV $38,396 $39,724 32.1x 26.5x NM 71.5x SDL LSE:SDL $462 $493 1.2x 1.2x 13.7x 11.4x Zendesk NYSE:ZEN $10,674 $10,521 11.5x 9.6x NM 93.8x Veeva NYSE:VEEV $10,157 $11,075 14.0x 11.8x 59.6x 35.5x MedianZendesk NYSE:ZEN $5,545 $5,844 11.9x9.4x 9.1x8.3x 27.6xNM 37.8xNM AccountingMedian & Enterprise Resource Planning (ERP) 8.4x 6.2x 40.3x 29.3x Avalara, Inc.