Financial Technology M&A Update Q2 2016 July 15th, 2016 Table of Contents M&A Market Brief – Page 3-5 FinTech M&A Trends & Drivers – Page 6 Notable FinTech M&A Transactions, Q2 2016 – Page 7-9 Publicly Traded FinTech Firms (Valuation Table) – Page 10-11 M&A Spotlight: Mercury UK Holdco Ltd. / ISP Processing – Page 12 M&A Spotlight: Tech Mahindra / Target Group – Page 13 M&A Spotlight: BM&F Bovespa / Cetip – Page 14 M&A Spotlight: Blackboard Inc. / Higher One – Page 15 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: MergerMarket, FT Partners, Wall Street Journal, S&P Capital IQ, Company Websites, SEC Filings, Bloomberg M&A Market Brief Q2 2016 M&A Activity Slows But Remains Promising Worldwide United States FinTech • Global M&A activity during the • The M&A climate in the United • Overall M&A activity across the second quarter of 2016 improved States is in the process of Financial Technology industry slightly over that of the first rebalancing after a record- remains robust YTD 2016. Several quarter. After 2015's surge of M&A setting year. Nonetheless, US deal notable deals were announced in activity, deals are now adjusting activity in the second quarter Q2 2016, encompassing payments, back to a sustainable level. remained stable. software, outsourcing, etc. • Global M&A deal value in H1 2016 • In Q2 2016, deal value totaled • In Q2 2016, the largest transaction was down 26.6% compared to that $313.2 billion, compared to $248.8 announced in the Financial of H1 2015. billion in Q1 2016. Technology sector was Brazil's BM&F Bovespa announced • Political uncertainties such as the • In H1 2016, United States M&A deal acquisition of Cetip for $3.3 billion. UK's referendum on staying in the value totaled $563 billion, with European Union (EU) and the 2,242 transactions. This represents • Other notable M&A transactions United States election cycle have a 31% drop in value from H1 2015. announced this quarter include contributed to the M&A cooldown, Blackboard's announced and they will continue to do so. • The uncertainty resulting from the acquisition of Higher One and Mercury UK Holdco Limited's • The drama surrounding the United Kingdom's departure from the EU lead to a 27% drop in US announced acquisition of ISP United Kingdom's referendum Processing. caused many firms to postpone outbound activity into the deals. This was a major reason UK. Outbound activity in the UK why deal value for Q2 2016 in the will remain low until the outcomes • The median revenue multiple in United Kingdom fell 50.5% of the post-exit negotiations H1 2016 fell to 1.7x from 2.0x in H2 compared to that of Q1 2016. We become clearer. 2015. (Berkery Noyes) expect to see an uptick in UK deal volume in the coming months as • The M&A environment for the US • Within Financial Technology, the the deals that were postponed are technology industry remained M&A environment remained revisited. robust despite the global M&A favorable. In Q2, FinTech totaled downturn. In H1 2016, technology 58 deals, with a value of $23.81 • China is relaxing its regulations on deal value rose to $81 billion billion in closed transactions. bidding for acquisitions, which will compared to $65 billion in H1 2015, allow the country to better with deal volume increasing 4%. compete with the United States and Europe. This quarter, China made four mega outbound acquisitions. Solganick & Co. 3 Solganic k & Co. Technology and Digital Media Investment Banking M&A Advisory Global M&A Deal Volume – Quarterly Comparison Quarterly M&A activity Q1 Q2 Q3 Q4 Value of deals (US $Bn) 2007 801.5 1,280 852 734.4 2008 593.2 678.2 684.9 458.8 2009 420.8 396.4 327.6 570.1 2010 461.2 433 429.9 713 2011 614.6 586.3 599.6 479.4 2012 464.8 565.5 522.9 757.5 2013 446.9 559.7 646.4 573.3 2014 566.7 963.9 855.7 869.7 2015 758.9 1,047.1 971.2 1,205.1 2016 633 688.7 Source: MergerMarket Solganick & Co. 4 Solganic k & Co. Technology and Digital Media Investment Banking M&A Advisory Global FinTech M&A Activity The volume and size of completed FinTech M&A transactions have been increasing globally. $25.00B $23.81B 70 58 60 $20.00B 53 50 41 $15.00B 36 40 $12.12B 30 $10.00B 23 20 $5.00B $3.19B 10 $1.38B $374.9M $0.00M 0 2012 Q2 2013 Q2 2014 Q2 2015 Q2 2016 Q2 Total Capital Invested Deal Count Source: Solganick & Co. Analysis, PitchBook Solganick & Co. 5 Solganic k & Co. Technology and Digital Media Investment Banking M&A Advisory FinTech M&A Trends & Drivers 2016 Transaction Security: As technology continues to advance within FinTech along with steady growth in e-commerce and mobile usage, more people are starting to turn to card-not-present transactions. This is creating a need for better security measures in order to combat fraud and to safeguard users’ information. Looking forward into the next couple of years, it can be expected that many more merchants and issuers will adopt and integrate newer security measures such as encryption, tokenization and biometrics. Global Money: Consumers and businesses with global mobility are addressing their cross-border transaction needs through the emergence of International Payment Specialists. These specialists can provide customers and businesses with cross-border payment and foreign exchange services that are more cost-effective, efficient and transparent than what traditional banks can offer. Some notable players in the space include Currencies Direct and FIRMA Foreign Exchange. Partnerships Between Old And New: While traditional banking institutions still maintain the majority of customer relationships, there are niches in FinTech where the new and innovative combine with the more traditional methods of banking. FinTech presents financial institutions with new strategic options, with the most interesting and notable option being partnerships. We already see banks and FinTech companies partnering in lending and wealth management. Digital Wealth Management: Digital wealth managers or robo advisors are beginning to emerge. Although digital wealth managers currently manage a small portion of the assets within the industry, digital wealth managers have the potential to cause massive disruption in the wealth management industry. Robo advisors like Personal Capital and Wealthfront are providing many of the same services such as financial planning at a fraction of the cost that traditional advisors charge. Blockchain: Blockchain is a distributed ledger of all transactions between counterparties across a peer-to-peer network. Adopting blockchain can reduce counterparty and operational risk, eliminate market inefficiencies, reduce fraud and increase transparency. In the financial services industry, blockchain opens up various revolutionary possibilities such as smart contracts. Firms like IBM are exploring and developing new forms of blockchain applications. Source: FT Partners, Accenture Solganick & Co. 6 Solganic k & Co. Technology and Digital Media Investment Banking M&A Advisory Notable FinTech M&A Transactions, Q2 2016 Deal Announcement EV / EV / Target Acquirer Value Target Description Date Rev EBITDA (mm) Provider of technology and payment 6/30/2016 Higher One Blackboard 260 1.5 services to the higher education industry. The company provides transaction VietUnion Online processing, online payment, 6/23/2016 NTT Data Services withdrawal and online payment registration services. Provider of a banking software that Sharp enables users to exchange 6/22/2016 Nymbus BancSystems requirements related to ATM/Debit Card and check processing services. Black Knight Provider of business intelligence 6/22/2016 Motivity Solutions 36 Financial Services software for the mortgage industry. The company provides enterprise lending services to help mortgage 6/16/2016 Optimal Blue GTCR banks, community banks and credit unions facilitate the mortgage Developer of cloud-based platform for 6/16/2016 eSupply Systems RealPage 7 0.2 the property-management industry. Provider of software and business process outsourcing to financial 5/27/2016 Target Group Tech Mahindra 162 2.6 services, insurance and brokers clients. De La Rue Cash Provider of cash processing hardware, 5/22/2016 Processing CPS Topco 14 0.5 software and related services. Solutions Nera Payment 5/19/2016 Ingenico SA 63 1.9 Developer of payment software. Solutions Coin's Wearable Provider of mobile payment 5/18/2016 Fitbit Payments Assets technology. Provider of data aggregation, Portfolio Asset reporting and collaboration platform 5/17/2016 RealPage 5 Management for institutions holding multiple real estate asset classes. The company provides entity management and financial software 5/16/2016 Infoscreen Microgen 2 1.4 used by clients in the trust and fund administration sector. Provider of secure electronic Black Knight 5/16/2016 eLynx document-delivery services to the Financial Services mortgage industry.