HOSTING AND MANAGED SERVICES | Q3 2018 Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams Ltd, which is private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams is a trade name under which Harris Williams LLC and Harris Williams Ltd conduct business. HOSTING AND MANAGED SERVICES SECTOR REVIEW | Q3 2018 HARRIS WILLIAMS (“HW”) AS A FIRM TECHNOLOGY, MEDIA & TELECOM (“TMT”) GROUP • 300+ professionals across eight offices globally • 30+ professionals across Boston, San Francisco, and London • 140+ closed transactions in the last 24 months • 47+ closed transactions in the last 24 months • 20th record year in 2017 • 98% of revenue is from sell-side M&A advisory • Education Technology • Manufacturing Technology • 10 industry groups • Fintech • Membership Management • Healthcare IT • Public Sector Software • Hosting and Managed Services • Supply Chain, Transportation & Logistics • Human Capital Management • Infrastructure and Security Software • Internet & Digital Media MARKET COMMENTARY • Significant consolidation and investment activity across managed hosting and services with more than ten significant transactions in the past 6 months • Market opportunity continues to be significant as SMBs turn to third party vendors to manage their cloud and IT environments given the significant scalability and cost efficiencies they provide • Growth in webhosting services supported by a confluence of secular trends including the mission critical nature of having an online presence and the adoption of easy to use and low cost cloud-based website creation and hosting • As businesses and consumers increasingly embrace the digital economy, data usage will only increase, supporting growth for data centers – Read a report published by Harris Williams’ Industrials team KEY CONTACTS Managing Director Managing Director Managing Director Managing Director Managing Director [email protected] [email protected] [email protected] [email protected] [email protected] Office: +1 (617) 654-2102 Office: +1 (617) 654-2133 Office: +1 (617) 654-2117 Office: +44 20 7518 8901 Office: +1 (415) 217-3411 TECHNOLOGY, MEDIA & TELECOM PAGE | 1 HOSTING AND MANAGED SERVICES SECTOR REVIEW | Q3 2018 Refers to a service in which a vendor offers the Refers to the delivery of network, application, Refers to the use of external service providers housing of business-to-business or business-to- system and e-management services across a to effectively deliver IT-enabled business consumer eCommerce websites via vendor-owned network to multiple enterprises, using a “pay as you process, application service and infrastructure shared or dedicated servers and applications for go” pricing model solutions for business outcomes enterprises at the provider-controlled facilities Selected Market Participants Selected Market Participants Selected Global Market Participants SELECTED RECENT HW HOSTING AND MANAGED S E R V I C E S TRANSACTIONS & has acquired have been acquired by has been acquired by has been acquired by has been acquired by Provider of services allowing Provider of web domains, Provider of managed Provider of SME focused Provider of managed hosting SMEs to move their IT shared web hosting and technology services with hosting and cloud solutions, and cloud solutions infrastructure and operations value-added services with national scale in the US and including domains website specialised in managed into the cloud, as well as leading positions in Sweden the capability to design, hosting, email for smaller cloud hosting, desktop-as-a- providing end user support and the Czech Republic, and deploy and support customers and managed service, security and and consulting as part of a presence in Norway, Serbia, technology solutions from servers and applications for connectivity full-service IT offering Slovakia, Spain, Netherlands, cable to cloud larger customers Germany and the UK TECHNOLOGY, MEDIA & TELECOM PAGE | 2 HOSTING AND MANAGED SERVICES SECTOR REVIEW | Q3 2018 August, 20, 2018 Maturing of platforms driven by advanced technologies 150 (i.e., artificial intelligence, automation, chatbots, self- 130 service options) are causing changes to delivery, as well 110 as a reduction in pricing and contract value Enterprise Value / 90 In the News SERVICES MANAGED MANAGED LTM Rev. LTM EBITDA 2019P EBITDA “Orange Business Services reaffirms its ambition to 70 Enterprise Value: €350M 2.3x 9.5x 8.4x Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 become a global leader in multi-cloud services” July, 22, 2018 Growth opportunities exist for service providers with 140 solutions and services meeting the needs of buyers in 130 relation to changes brought about by the combination 120 of cloud, social, mobile and information 110 Enterprise Value / In the News SERVICES 100 GLOBAL IT GLOBAL LTM Rev. LTM EBITDA 2019P EBITDA “Modernised hybrid cloud integration is the key to 90 Enterprise Value: $3.5B 2.2x 11.6x 10.5x Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 unlocking the business value of digital transformation” August, 27, 2018 Demand for an optimised digital environment and processes 110 expected to drive enterprises to seek consulting around 105 cloud adoption and platform-based development to support 100 business needs with rapid delivery. 95 90 LOCAL IT LOCAL Enterprise Value / In the News SERVICES 85 LTM Rev. LTM EBITDA 2019P EBITDA “Tieto enters into strategic partnership with Citrix for 80 Enterprise Value: NA 0.9x 10.1x 9.7x Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 providing new generation hybrid cloud services~ August, 20, 2018 Market growth supported by a confluence of secular trends 150 including the mission critical nature of having an online 130 presence for businesses and the adoption of easy to use and low cost cloud-based website creation and hosting 110 Enterprise Value / 90 In the News LTM Rev. LTM EBITDA 2019P EBITDA “Endurance International Said to Mull Strategic 70 WEB HOSTING WEB Enterprise Value: NA 4.7x 13.2x 12.9x Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 Options” September, 24, 2018 Increasing demand from customers for interconnected 110 ecosystems across data centers in order to drive value for customers who want to interconnect with other 100 customers, suppliers, partners and cloud/IT providers Enterprise Value / 90 In the News LTM Rev. LTM EBITDA 2019P EBITDA “Businesses need better automation to regain 80 Enterprise Value: $1.8B / COLOCATION DATA CENTERS DATA 8.1x 15.9x 14.6x Sep-17 Dec-17 Mar-18 Jun-18 Sep-18 control of their data centers” Note: (1) Group weighted average stock price performance over the past year based on market capitalisations; Sources: Factset; market data as of 30 September 2018, Gartner, broker notes, company websites TECHNOLOGY, MEDIA & TELECOM PAGE | 3 HOSTING AND MANAGED SERVICES SECTOR REVIEW | Q3 2018 Webhosting • Austrian provider of webhosting services • With over 100,000 customers and more than 250,000 domains, the Company is the market leader Enterprise Value: c. $115M EV / 2018 Rev: c. 8x for webhosting in Austria 2018 Rev: c. $14M EV / 2018 EBITDA: c. 16x • World4You will remain independent and will enhance 1&1’s European hosting and cloud application business, further solidifying its market position in Austria Managed Services • Norway-based provider of cloud computing services for the enterprise sector • Basefarm has a strong operational presence in several European countries, particularly in Norway, Enterprise Value: c. $400M EV / 2018 Rev: c. 3x Sweden, the Netherlands, Austria and in Germany 2018 Rev: c. $130M EV / 2018 EBITDA: c. 12x • This acquisition is set to reinforce Orange Business Services’ position as a significant player in the European cloud computing services market Domain Registrar • US-based domain registrar holding the world’s largest portfolio of new top-level domains (TLDs) • Donuts provides its registrar / reseller customers with innovative services for the discovery, Enterprise Value: NA EV / Rev: NA registration, usage and monetization of high-quality domain names Rev: NA EV / EBITDA: NA • The financial resources provided by Abry Partners will help Donuts to accelerate its growth and innovation Webhosting • Netherlands-based provider of business-critical managed services and shared hosting for SMEs • IT-Ernity offers a portfolio of standardized fully-managed solutions as well as shared hosting, Enterprise Value: NA EV / Rev: NA domain registration and secure infrastructure connectivity through xDSL and fiber Rev: NA EV / EBITDA: NA • The combined entity will create a new market leader with 1.2 million domain names Global IT Services • US-based provider of information technology and business process outsourcing services • Syntel will significantly strengthen Atos’ Business & Platform Solutions Division worldwide with its Enterprise Value: $3.5B EV / LTM Rev: 3.7x delivery platform generating some of the highest margins in the industry LTM Rev: $966M EV / LTM EBITDA: 13.4x • This transaction expands Atos’s capabilities in North America to provide end-to-end services to US customers as well as strongly reinforcing its Banking, Finance & Insurance verticals Sources: MergerMarket, companies’ press releases, HW proprietary information TECHNOLOGY,