April 2019 The Lighthouse Software Online & Digital Tech Enabled Business Services A Pharus Advisors Holdings, LLC Publication | www.pharus.com Pharus Observations Digital Marketing Capabilities are the New Hot Commodity The appetite for digital and online marketing solutions driven by consumer data and analytics has only increased in the first half of 2019. During April, the digital marketing space saw lively M&A activity, with a number of firms being snapped up by buyers from a range of industries. As much of the interaction between consumers and companies migrates online, companies are scrambling to acquire integrated digital marketing capabilities in order to keep up. Everyone, from consultancies to traditional marketing giants to financial sponsors have recognized the value in the space. On April 14th, the largest of these acquisitions took place when marketing and public relations conglomerate, Publicis (ENXTPA:PUB), acquired the data-driven digital marketing solutions provider, Epsilon Data Management for $4.4 billion. Epsilon’s wealth of first-party data will no doubt serve Publicis well in drawing marketers amid external cost pressure and the shift to digital. S4 Capital (LSE:SFOR), the marketing venture started by retired WPP founder, Sir Martin Sorrell, acquired programmatic solutions provider MightyHive in December 2018 for $150 million. S4’s push into digital started with its July 2018 acquisition of digital content company MediaMonks for $351.8 million and is now continued by this acquisition in digital media planning and programmatic ad-buying. In November 2018, Wisconsin-based printing company Quad/Graphics (NYSE:QUAD) acquired impact marketing and advertising agency, Periscope, for $132.5 million. Quad/Graphics CEO, Joel Quadracci said in the press release that the acquisition would “turbo-charge [their] existing offering with its world-class capabilities in strategy, including media buying and analytics, creative and account management.” We can expect to see further deal activity in the second half of 2019 as demand for these types of companies remains strong. 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 …………......... 36 V. Pharus Overview ……………….......... 45 If you would like to be included on (or removed from) the distribution list for The Lighthouse, please contact Peter Chae 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. 2019 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 April 30, 2019 (Base = 100, 4/2/2018) 120.00 115.00 110.00 105.00 100.00 95.00 S&P 500 (^SPX) - Index Value 90.00 Dow Jones Industrial Average (^DJI) - Index Value Russell 2000 Index (^RUT) - Index Value 85.00 NASDAQ Composite Index (^COMP) - Index Value 80.00 Change % Index As of 30-Apr-19 1 Year 3 Months 1 Month Dow Jones 26,592.91 10.06% 6.73% 1.27% Nasdaq 8,095.39 14.56% 11.17% 3.40% S&P 500 2,945.83 11.25% 8.94% 2.74% Russell 2000 1,591.21 3.20% 6.12% 2.26% 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 7.0x 6.0x 6.0x 5.7x 5.0x 5.7x 4.0x 3.0x 3.2x 2.4x 2.0x 1.0x Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 Application Software Customer Relationship Management (CRM) & Customer Engagement 5.5x 7.3x 7.3x 8.5x 8.1x 8.5x Accounting & Enterprise Resource Planning (ERP) 5.2x 5.0x 5.5x 5.9x 6.5x 7.0x Supply Chain Management (SCM) & Logistics 5.5x 5.0x 5.6x 6.6x 6.5x 7.0x HR & Workforce Management 6.8x 6.1x 7.3x 7.9x 7.0x 7.0x Education Technology 3.2x 2.0x 2.4x 1.9x 2.8x 3.2x Industrial & Automation Softw are 2.1x 1.9x 2.0x 2.2x 2.3x 2.5x Business Intelligence & Data 6.0x 6.0x 6.4x 7.7x 6.9x 7.4x Design & Engineering Softw are 6.3x 5.8x 6.6x 7.6x 7.1x 8.0x EMS / Infrastructure Software Security Softw are 6.0x 5.9x 7.1x 7.9x 7.7x 8.7x System and Netw ork Management Softw are 4.1x 3.8x 3.9x 4.5x 4.6x 4.5x Platform / OS 5.1x 4.8x 4.9x 4.9x 4.6x 4.6x Financial Solutions Banking Solutions 6.5x 6.0x 6.5x 6.5x 6.8x 6.9x Capital Market & Investment Solutions 6.0x 5.8x 6.3x 6.8x 7.0x 6.1x Consumer Data & Analytics 5.4x 5.4x 5.4x 5.5x 5.8x 6.1x Payment Processing 4.1x 4.0x 4.4x 4.6x 4.7x 4.8x Insurance Solutions 4.3x 4.0x 5.0x 5.1x 4.3x 4.3x Online & Digital Media Digital Advertising & Marketing 1.6x 1.4x 1.9x 1.7x 1.8x 1.9x Digital Media & Video 3.8x 4.0x 5.3x 7.6x 6.0x 5.5x Digital Advertising Agencies & Service Providers 1.2x 1.2x 1.3x 1.2x 1.2x 1.4x Online Retail & Marketplaces 2.8x 2.3x 2.7x 2.5x 2.3x 2.3x Digital Gaming 2.7x 2.3x 2.4x 2.1x 2.5x 2.7x Social Media 4.9x 4.6x 4.6x 4.7x 4.7x 4.8x Digital Commerce Solutions 1.4x 1.2x 1.4x 1.4x 1.4x 1.5x Other Digital Companies 4.4x 4.0x 4.5x 4.9x 4.4x 4.7x Tech Enabled Business Services IT Services, Integration & Consulting 1.4x 1.2x 1.6x 1.5x 1.6x 1.6x Business Process Management (BPM) 5.5x 5.5x 5.6x 5.4x 5.4x 5.9x Data Center Hosting & Services 5.5x 4.8x 6.0x 5.5x 5.1x 5.8x Call Center 0.8x 0.8x 0.9x 1.0x 1.0x 1.0x 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 8.5x 6.8x 52.5x 46.9x Accounting & Enterprise Resource Planning (ERP) 7.0x 5.5x 36.0x 23.5x Supply Chain Management (SCM) & Logistics 7.0x 6.6x 34.9x 29.3x HR & Workforce Management 7.0x 5.9x 24.8x 35.4x Education Technology 3.2x 2.7x 24.9x 24.7x Industrial & Automation Software 2.5x 2.4x 15.2x 15.2x Business Intelligence & Data 7.4x 6.9x 14.3x 30.1x Design & Engineering Software 8.0x 6.1x 30.7x 23.4x EMS / Infrastructure Software Security Software 8.7x 6.8x 29.3x 23.5x System and Network Management Software 4.5x 4.2x 23.7x 16.0x Platform / OS 4.6x 4.4x 16.8x 12.2x Financial Solutions Banking Solutions 6.9x 6.7x 24.0x 16.6x Capital Market & Investment Solutions 6.1x 6.4x 24.2x 19.8x Consumer Data & Analytics 6.1x 5.7x 23.8x 16.5x Payment Processing 4.8x 4.1x 16.0x 12.7x Insurance Solutions 4.3x 18.1x 17.3x Online & Digital Media Digital Advertising & Marketing 1.9x 1.7x 11.9x 13.0x Digital Media & Video 5.5x 4.0x 21.0x 26.8x Digital Advertising Agencies & Service Providers 1.4x 1.4x 9.4x 8.5x Online Retail & Marketplaces 2.3x 2.5x 22.2x 14.2x Digital Gaming 2.7x 2.6x 12.9x 8.7x Social Media 4.8x 3.4x 24.1x 10.7x Digital Commerce Solutions 1.5x 1.3x 10.7x 11.4x Other Digital Companies 4.7x 3.5x 22.1x 16.0x Tech Enabled Business Services IT Services, Integration & Consulting 1.6x 1.4x 13.1x 11.2x Business Process Management (BPM) 5.9x 5.3x 17.5x 12.9x Data Center Hosting & Services 6.8x 5.5x 21.9x 18.1x Call Center 1.0x 0.9x 9.1x 7.8x Medians Application Software 5.7x 5.2x 22.7x 23.0x EMS / Infrastructure Software 6.0x 5.6x 20.3x 16.7x Financial Solutions 5.7x 5.4x 21.5x 16.5x Online & Digital Media 3.2x 2.7x 16.3x 12.9x Tech Enabled Business Services 2.4x 2.2x 13.7x 11.6x 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 Customer Relationship Management (CRM) & Customer Engagement Five9 NasdaqGM:FIVN $2,982 $3,064 10.9x 9.4x NM 56.6x LivePersonFive9 NasdaqGS:LPSNNasdaqGM:FIVN $1,656$1,979 $1,703$2,013 6.4x9.1x 5.5x8.0x NM 87.6x64.7x NICELivePerson Systems TASE:NICENasdaqGS:LPSN $8,653$1,117 $8,632$1,175 5.8x5.0x 5.4x4.5x 22.9xNM 17.5x47.0x PegasystemsMINDBODY NasdaqGS:PEGANasdaqGM:MB $5,548$1,667 $5,692$1,870 6.4x8.5x 5.9x6.2x NM 92.8xNM Salesforce.comNICE Systems NYSE:CRMTASE:NICE $116,333$6,396 $117,308$6,414 8.8x4.9x 6.9x4.3x 76.3x20.9x 26.1x14.3x SDLPegasystems LSE:SDLNasdaqGS:PEGA $4,605$609 $4,860$627 1.5x5.7x 1.3x4.7x 14.8xNM 11.8x28.0x VeevaSalesforce.com NYSE:VEEVNYSE:CRM $21,372$92,910 $22,682$96,081 23.4x8.4x 19.5x6.7x 80.3x86.1x 51.7x29.3x ZendeskSDL NYSE:ZENLSE:SDL $9,365$462 $9,231$493 14.4x1.2x 10.8x1.2x 13.7xNM 11.4xNM Veeva NYSE:VEEV $10,157 $11,075 14.0x 11.8x 59.6x 35.5x Median 7.6x 6.4x 49.6x 51.7x Zendesk NYSE:ZEN $5,545 $5,844 11.9x 9.1x NM NM AccountingMedian & Enterprise Resource Planning (ERP) 8.4x 6.2x 40.3x 29.3x Avalara, Inc.