November 2015 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, The past 30 days probably haven’t been a lot more surreal than the 30 days prior – it’s just that the recent Presidential debates have made me focus on the macro headlines more. The global environment is still in turmoil: Europe is still looking for solutions to a stagnant economy, an aggressive Russia, and 6 million desperate refugees. Brazil is still mired in corruption, Abenomics doesn’t yet seem to working in Japan, China’s growth is slowing but not their pollution or their global ambitions, and killings by ISIS now outnumber those by al-Qaeda, but not yet Assad. Same old same old. Meanwhile in the U.S., Republicans and Democrats are in a constant squabble over a pipeline that may create 35 permanent jobs; how to close the prison at Guantanamo that no one wants; how many more years we should have boots on the ground in Afghanistan; and how many more boots we should send to Iraq and Syria. We argue about the merits of taking health insurance away from 15 million people; and how much to subsidize industries that are some politicians’ flavors of the month (Oil or Solar? Hedge Funds or Healthcare?); we question if we should arm our elementary school teachers (really!). Some expect Mexico to pay for a 1,000 mile wall to keep would-be immigrants out; others want to increase taxes on everyone who earns enough money to buy a bicycle. Meanwhile, in classic fashion, equity markets are strong, interest rates remain at historically low levels, and buyers and sellers want to transact. It’s business as usual. So we chase deals. It’s surreal. The trends are generally positive in the dozen plus sectors that we follow and sometimes lead. M&A values and volume remain strong. Some of the more interesting transactions this month include: • Intercontinental Exchange (NYSE:ICE) agreed to acquire Interactive Data for $5.2bn, valuing the company at an implied 5.5x LTM revenue and 13.8x LTM EBITDA; The global environment is still in • SilverLake and Thoma Bravo agreed to acquire SolarWinds turmoil: Europe is still looking for (NYSE:SWI) for $4.5bn; • Pamplona Capital Management agreed to acquire MedAssets solutions to a stagnant economy; an (NasdaqGS:MDAS) for $31.35 per share or approximately $2.7bn, valuing the company at an implied 3.5x LTM revenue aggressive Russia; and 6 million and 12.4x LTM EBITDA; refugees. China’s growth is slowing • WEX (NYSE:WEX) agreed to acquire Electronic Funds Source LLC for $1.5bn; but not their pollution or their global • Cisco Systems (NasdaqGS:CSCO) agreed to acquire Lancope ambitions and American politicians for $453mm; • Thales e-Security agreed to acquire Vormetric for $400mm, are in a constant squabble. valuing the company at an implied 5.3x LTM revenue; Meanwhile equity markets are strong, • Deluxe Corporation (NYSE:DLX) agreed to acquire Datamyx for $160mm; interest rates are low and buyers and • Alteryx raised $85mm in a funding round co-led by ICONIQ sellers want to transact. So we chase Capital and existing investor Insight Venture Partners; • Early Warning agreed to acquire clearXchange for an deals. It’s surreal. undisclosed sum. Sincerely, Kenneth B. Marlin www.MarlinLLC.com 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. MARLIN & ASSOCIATES MARKET UPDATE NOVEMBER 2015 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 10/30/15. 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 02 above. NOVEMBER 2015 SECTOR COMPARISON SNAPSHOT: CURRENT REVENUE & EBITDA MULTIPLES Enterprise Value / 2014 Revenue Securities Exchanges Business Intelligence Software B2B E-commerce & Marketing Technologies Security Software Application Software Data & Analytics - Financial Services Healthcare Info Software Payment Technology Banking Software & Processors Tech-enabled Financial Institutions * Information & Market Research Tech-enabled Healthcare Services Capital Markets Software & Services Insurance Technology 0x 2x 4x 6x 8x 10x Enterprise Value / 2014 EBITDA Healthcare Info Software Security Software Business Intelligence Software Application Software B2B E-commerce & Marketing Technologies Banking Software & Processors Data & Analytics - Financial Services Payment Technology Capital Markets Software & Services Information & Market Research Securities Exchanges Tech-enabled Healthcare Services Tech-enabled Financial Institutions * Insurance Technology 0x 10x 20x 30x 40x *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 10/30/15. 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 03 above. NOVEMBER 2015 Application Software Public Market Data 5 Year LTM Revenue & EBITDA Multiples 5 Year M&A Application Software Index vs. S&P 500, base = 100 6.5x 325 35x 5.5x 29x 275 4.5x 23x 225 3.5x 17x 175 EV / EBITDAEV EV / EVRevenue 2.5x 11x 125 1.5x 5x 75 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 Nov-10 Nov-11 Nov-12 Nov-13 Nov-14 Nov-15 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 Revenue (USD millions) Cap Value CY2014A CY2015E CY2014A CY2015E CY2014A CY2015E CY2014A CY2015E Oracle 171,450 158,011 4.1x 4.2x 9.3x 9.1x 3% (3%) 44% 46% SAP 93,946 100,218 5.2x 4.4x 15.1x 12.8x 4% 17% 34% 35% Intuit 27,075 25,878 5.6x 5.9x 18.5x 18.6x 11% (4%) 31% 32% CA Technologies 12,101 11,439 2.6x 2.8x 8.3x 7.2x (0%) (9%) 31% 40% Amdocs 9,436 8,034 2.2x 2.2x 11.8x 10.7x 7% 3% 19% 20% Constellation Softw are 9,412 9,616 5.8x 5.3x 39.3x 21.2x 38% 9% 15% 25% Manhattan Associates 5,382 5,262 10.7x 9.5x 39.4x 29.0x 19% 13% 27% 33% SolarWinds 4,314 4,210 9.8x 8.3x 30.8x 20.9x 28% 18% 32% 40% NICE Systems 3,768 3,336 3.3x 3.6x 17.6x 13.4x 7% (8%) 19% 27% Paycom Softw are 2,270 2,254 14.9x 10.6x na 49.3x 40% 41% 15% 22% Softw are AG 2,221 2,224 2.4x 2.3x 9.3x 7.7x (12%) 1% 25% 30% Zendesk 1,695 1,409 11.1x 7.0x na na 76% 58% n/a n/a Paylocity 1,684 1,602 12.5x 9.2x na na 41% 36% n/a 4% SciQuest 285 149 1.5x 1.4x 29.0x 7.6x 13% 3% 5% 19% Trim Mean 14,442 14,623 6.3x 5.4x 20.1x 15.1x 18% 10% 25% 29% Median 4,848 4,736 5.4x 4.9x 17.6x 13.1x 12% 6% 26% 30% Recent Activity Date Acquirer(s) / Investor(s) Target / Issuer Description Announced HCL Technologies (NSEI:HCLTECH) acquires PowerObjects for $46mm in cash. 10/29/15 PowerObjects is a leading provider of Microsoft Dynamics customer relationship solutions. HCL plans to bolster its global applications business with the acquisition. Silver Lake (Chicago, IL) and Thoma Bravo (Menlo Park, CA) agree to acquire SolarWinds for $4.5bn in cash. As a private company, SolarWinds plans to have 10/21/15 optimal operating flexibility to execute on its long-term strategy of providing superior products for IT and Dev Ops Pros globally. Amazon (NASDAQ:AMZN) acquires Elemental Technologies for approximately 9/3/15 $500mm in cash. Elemental’s technology will be incorporated into Amazon’s Web Services unit in its cloud infrastructure, servicing mobile videos. Source: Marlin & Associates, Capital IQ and Public sources. All market and operating data is sourced as of 10/30/15. 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.