technology services monthly: regulation technology...

TECHNOLOGY SERVICES MONTHLY:

1717 Arch Street, 39th Floor · Philadelphia, PA 19103 · www.mhhco.com

August 2017

Regulation Technology (“RegTech”)

Cover Source: https://eclipse2017.nasa.gov/

MHH | Technology Services Group 2

Welcome to the August edition of the Mufson Howe Hunter TechnologyServices Monthly. This month, we focus on the Regulation Technology(“RegTech”). Each month, our team aims to provide you with a newsletterthat contains thought-provoking content and analysis, as well as updateson macroeconomic themes, equity capital market performance, privatecapital market trends and noteworthy M&A activity–all of which is relevantto our core industry sectors:

Our Technology Services practice serves growth-oriented, rapidly scalablebusinesses that leverage proprietary and enabling technologies to addressthe evolving needs of modern enterprise customers. We apply deepindustry expertise and broad transaction experience to provide thoughtful,tailored advice and solutions for our clients. Our clients turn to us foroutstanding M&A advisory and capital-raising execution.

We hope you find this information valuable, and we welcome anycomments or suggestions.

Sincerely,

Brandon K. EckManaging Director, Head of Technology Services

Cloud Services Healthcare IT Infrastructure Services Specialty Consulting

Digital Agencies Information Services IT OutsourcingTech-Enabled Business

Process Outsourcing

Tech-Enabled Solutions

InternetOutsourcing

ServicesMobile

Enterprise Software

Welcome to the MHH Technology Services Newsletter!

Select 2017 Franchise Themes

Cloud Brokerage Services & Cloud Enablement: The convergence of IT services,outsourcing, hosting, managed services and cloud business models continues tocause significant change in sourcing strategies. This will benefit IT Outsourcers thatembrace flexible pricing strategies, including the delivery of offerings "as a service.”It will also drive demand for third-party outsourced tools and services.

Offshore Providers’ Transformation: The current political landscape and increasingclient demand for more automated and agile solutions is driving offshore providers toincrease their functional capabilities in cloud-based services that augment anddifferentiate existing delivery models. According to Information Services Group (ISG),As-a-Service annual contract value now represents 36% of the combined global marketfor sourcing services, nearly double early 2014 (ISG, 2016).

IoT-Optimized Infrastructure Services: “Connected things” will streamline vendoroperational models while reducing customer costs. IoT will introduce even more usefuldata to the cloud that needs to be captured and effectively managed. IaaS and PaaScompanies will be a direct beneficiary of this trend. Cisco expects database, analyticsand IoT workloads to account for 22% of the total workloads by 2020 (Cisco, 2016).

Healthcare Consumerism & Patient Engagement: The rising costs of healthcarepremiums and increased out-of-pocket consumer spend from rising deductibles areshifting healthcare consumer behaviors toward a more cost-conscious mentality. Inturn, payors and providers continue to focus on patient engagement-relatedtechnologies that improve the digital consumer experience.

What we are reading…

Population Health Management: Population health management continues to be atop priority for healthcare organizations, as the overall responsibility for keeping apopulation of patients healthy shifts to the provider. This, coupled with the economicmotivation of the risk-based, value-driven reimbursement model, is driving providerdemand for more actionable data about the patients they serve and data relating totheir post-acute care.

How the World’s Biggest Buyout Deal Crashed and Burned

The Real Reason ISPs Hate Net Neutrality Regulation

Why bitcoin and its digital cousins are under increasing scrutiny

How Oracle Engineered Its Sales Staff for the Cloud

3 Trends in Healthcare Technology That You Need to Know About

TECHNOLOGY SERVICES MONTHLY

https://www.bloomberg.com/features/2017-bce-oral-history/

https://www.fastcompany.com/40450516/the-real-reason-isps-hate-net-neutrality-regulation

https://www.theguardian.com/technology/2017/jul/31/cryptocurrencies-more-investment-way-pay-bitcoin-regulation

https://www.wsj.com/articles/how-oracle-engineered-its-sales-staff-for-the-cloud-1502875803

https://www.inc.com/avi-savar/3-technology-trends-that-are-dominating-healthcare.html


The Mufson Howe Hunter Technology Services Group serves growth-oriented, rapidly scalable businesses that leverage proprietary and enabling technologies to address the evolving needs of modern enterprise customers. We apply deep industry expertise and broad transaction experience to provide thoughtful, tailored

advice and solutions for our clients. Our clients turn to us for outstanding M&A advisory and capital-raising execution.

Brandon EckManaging Director,Head of Technology Services

Prior Experience:

Managing Director, Head of Technology & Services, Janney Montgomery Scott

Principal, Katalyst Securities

Principal, RCW Mirus

215.399.5411 [email protected]

18+ Years of Experience

60+ Transactions Completed

Education:

Gettysburg College (BA)

Senior Banking Team Sector Coverage

Andrew WilsonVice President,Technology Services

Prior Experience:

Senior Associate, Technology & Services, Janney Montgomery Scott

Associate, TMT, J.P. Morgan

Attorney, M&A, Wilson Sonsini Goodrich & Rosati


8+ Years of Experience

20+ Transactions Completed

Education:

Duke University (JD, MBA)

U. North Carolina, Chapel Hill (BA)

Sell-side Advisory

Buy-side Assignments

Private Placements

Recapitalizations

Financial Advisory

Fairness Opinions

Tech-Enabled Solutions

Internet

Outsourcing Services

Mobile

Enterprise Software

IT Outsourcing

Healthcare IT

Digital Agencies

SpecialtyConsulting

InformationServices

InfrastructureServices

Tech-Enabled BPO

Cloud Services

TECHNOLOGY SERVICES PRACTICE OVERVIEW

Business Model Coverage


REGULATION TECHNOLOGYWhat is RegTech?

Regulation Technology addresses regulatory- and compliance-related challenges with

industry-specific technology solutions for financial services, healthcare, government,

information security and environmental protection businesses. For example, financial

services-focused reg-tech vendors provide solutions that help customers manage

enterprise risk, data reporting, as well as FATCA, Tax and AML/KYC compliance.

Financial Services RegTech. The rapid proliferation of new and increasingly complex

regulations are driving robust demand for RegTech solutions in the financial services

sector (e.g., investment banks, wealth managers and hedge funds).

RegTech to date has been focused on the digitization of manual reporting and

compliance processes; for example, in the context of know-your-customer (KYC)

requirements.

However, the potential of RegTech is far greater – it has the potential to enable a

close to real-time and proportionate regulatory regime that identifies and

addresses risk while also facilitating far more efficient regulatory compliance.1

Macro trends enabling RegTech

Increased regulatory burdens – Increased regulation isn’t just a temporarychallenge for global financial institutions – it’s the new reality.

1Outdated legacy technology – 3 of the top 4 concerns of corporate executivesare related to technology, including the ability to scale with the pace ofregulation and the ability to meet impending requirements

3

Increased cost of compliance – Organizations expect to commit an increasedamount of resources (time/staff) to processing compliance policies andprocedures.

2

Source: Moody’s Analytics, Risk Management: The Decade Ahead

A high proportion of boards predicting a ‘significant increase’ in compliance spending:

North America Europe Middle East

60% 75% 80%

North America Europe Middle East

Source: Deloitte, Global Risk Management Survey, 10th Edition

Source: Thomson Reuters, Top 5 Compliance Trends Around the Globe in 2016

Financial services firms’ average costs to meet their obligations are $60million; some are spending up to $500 million on compliance with KYCand Customer Due Diligence (CDD).

1: Arner, Douglas W. and Barberis, Janos Nathan and Buckley, Ross P., FinTech, RegTech and the Reconceptualization of Financial Regulation

Technology adaptability to changing

regulatory requirements

Legacy systems and antiquated architecture

or end-of-life systems

Inability to respond to time-sensitive and ad-

hoc requests

Lack of flexibility to extend the current

systems

Lack of integration among systems

Lack of cross-asset-class risk calculations

Lack of product and asset class coverage

Lack of aggregation of trading and banking

books 13%

22%

25%

44%

48%

49%

51%

52%


Recent Relevant Investments

Source: CBInsights

Acq

uir

or

Targ

et

Dec-2015 Mar-2015Oct-2016 Aug-2015

De

scri

pti

on • PE Growth

• Governance, risk and compliance (GRC) management software

July-2017

• Later Stage VC• Provides compliance,

risk and anti-fraud service

• Early Stage VC• Corporate compliance

management services

Jan-2017

• Later Stage VC• Develops a cloud

based compliance management software

• PE Growth• Risk management

software and services

• Later Stage VC• Cloud-based vendor

management application security services

May-2015

• Later Stage VC• Enterprise regulatory

software designed to manage client onboarding lifecycle

Dec-2016

• Early Stage VC• Platform for digital

compliance and risk management solutions

REGULATION TECHNOLOGYRegTech Quarterly Global VC ActivityValue Drivers

RegTech will provide operational efficiencies and cost benefits whenapplied to current compliance and risk management practices. Adopterswill see this through:

1) Reduced cost of compliance – RegTech simplifies and standardizes thecompliance process through automated mapping of regulatory riskto key business processes, reducing the need for manual or duplicatechecks.

2) Sustainable and scalable solutions – RegTech allows for flexibility asbusiness and regulatory needs change. Firms can move away fromrigid enterprise risk management systems once the adopted RegTechsolutions are stable.

3) Advanced data analytics – RegTech allows regulatory information tobe analyzed in various ways, including scenario analytics and horizonscanning for new regulations which enables firms to proactivelyidentify risks and issues.

4) Positive customer experience – RegTech will help to drive positivecustomer experiences. For example, a streamlined client life cycleprocess could lead to an improved client experience.

-

$50M

$100M

$150M

$200M

$250M

$300M

$350M

$400M

$450M

-

5

10

15

20

25

30

35

40

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

1Q

16

2Q

16

3Q

16

4Q

16

1Q

17

Total CapitalNumber of Deals

Deal Count Disclosed Funding ($M)


-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17

S&P 500 NASDAQ Dow Jones Industrial Average

U.S. PPI, CPI and PCE

10-Year Treasury Rate

U.S. Unemployment & Labor

U.S. Market Indices

Sources: CapitalIQ , Federal Reserve Bank of St. Louis

U.S. ECONOMIC INDICATORS

Unemployment Rate

Labor Participation Rate

SP500 NSDQ DJIA

July 1.9% 3.4% 2.5%

LTM 13.6% 23.0% 18.8%

3-Year 28.0% 45.3% 32.2%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17

Consumer Pri ce Index Producer Price Index Personal Consumption Expendit ures

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%


10-Year Teasury Rate

62.0%

62.2%

62.4%

62.6%

62.8%

63.0%

63.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%


Unemployment Rate Labor Participation Rate


Source: Pitchbook*For deals with announced transaction value**Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size

U.S. TECH SERVICES MIDDLE-MARKET PRIVATE EQUITY: BUY-OUT ACTIVITYSelect July 2017 Buy-Outs** PE Buy-Outs, Trailing 8 Quarters, as of July 31

PE Buy-Outs, by Deal Size PE Buy-Outs, Historical Annual, as of July 31

Company Investor Date Sector

July 20 IT Outsourcing

July 14 BPO

July 13Information

Services




$0.0B

$0.2B

$0.4B

$0.6B

$0.8B

$1.0B

$1.2B

-

20

40

60

80

100

120

140

4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17


Add-Ons Platform Total Capital Invested*

38%

15%15%

33%$0-25mm

$25-50mm

$50-100mm

$100-250mm

$0.0B

$0.5B

$1.0B

$1.5B

$2.0B

$2.5B

$3.0B

$3.5B

$4.0B

$4.5B

-

50

100

150

200

250

300

350

400

450

500

2010 2011 2012 2013 2014 2015 2016 2017


Deal Count Total Capital Invested*


Company Stage Date Sector

Angel / Seed July 25Information

Services

Early Stage VC

July 24Infrastructure

Services

Angel July 19 Healthcare IT

Angel / Seed July 17 Healthcare IT

Later Stage VC


Later Stage VC

July 10Information

Services

U.S. TECH SERVICES MIDDLE-MARKET PRIVATE EQUITY: MINORITY ACTIVITYSelect July 2017 Minority Deals** PE Minority, Trailing 8 Quarters, as of July 30

PE Minority, by Stage PE Minority, Historical Annual, as of July 30

Source: Pitchbook*For deals with announced transaction value**Please contact the MHH Technology Services Group directly for any information regarding valuation, deal size, and investors

$0.0B

$0.5B

$1.0B

$1.5B

$2.0B

$2.5B

-

50

100

150

200

250

300

4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17



$0.0B

$1.0B

$2.0B

$3.0B

$4.0B

$5.0B

$6.0B

$7.0B

$8.0B

0

200

400

600

800

1,000

1,200

2010 2011 2012 2013 2014 2015 2016 2017



49%

26%

18%

7%

Angel / Seed

Early Stage VC

Later Stage VC

PE Growth/Expansion


d

Source: CapitalIQ

VALUATION & PERFORMANCE METRICS

Median Operational KPIs

Median Valuation Metrics

IT Outsourcing: technology services and consulting solutions, including engineering, application development, knowledge management and business process management

Business Process Outsourcing: services for administering and managing select technology-enabled business processes, including outsourced product development, finance and accounting, human resources, research and analytics, and other industry-specific processes

Infrastructure Services: providers of managed, hosting and consulting services around planning, designing, implementing and managing mission-critical IT infrastructure

Information Services: providers of independent rating, benchmarking, research and data analytic services

Healthcare IT: software and technology-related services focused on the design, development, creation, use and maintenance of information systems for the healthcare industry

ITO

BPO

IFS

IS

HIT

Sector Indices Performance, as of July 31, 2017

10.4x

13.7x

11.6x

16.1x

14.1x

ITO BPO IFS IS HIT

EV/2017E EBITDA

16.2x

25.5x23.9x 24.1x 25.0x

ITO BPO IFS IS HIT

FWD PRICE/EARNINGS

2.1x 2.5x

4.1x

6.6x

3.4x

ITO BPO IFS IS HIT

EV/2017E REVENUE

9.3%

6.7%

16.1%

16.0%

8.7%

HIT

IS

IFS

BPO

ITO

2017E REVENUE GROWTH

58.2%

62.5%

64.5%

39.2%

32.2%

HIT

IS

IFS

BPO

ITO

LTM GROSS MARGIN

11.8%

40.5%

24.5%

14.3%

18.3%

HIT

IS

IFS

BPO

ITO

LTM EBITDA MARGIN

-20.0%

-10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%


SP500 NSDQ ITO BPO IFS IS HIT

July 1.9% 3.4% 5.7% 12.6% 5.1% 4.8% (0.8%)

LTM 13.6% 23.0% 13.2% 28.1% 24.6% 21.3% 9.4%

3-Year 28.0% 45.3% 34.6% 55.4% 74.4% 73.7% 15.4%


Valuation Metrics Relative Valuation

Select July 2017 Precedent Transactions*

Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size

Announced Acquirer Target Description

July 28 Information security consultancy services

July 27 Information and communication technology

solutions

July 18 Integrated communication systems

July 12 Digital optimization consultancy and services

July 3 IT operations and maintenance services

IT OUTSOURCING

($ in millions) Operating Metrics Valuation Multiples

LTM LTM

Market Revenue Gross EBITDA(2) EBITDA EV / Revenue EV / EBITDA

Company Cap (1) 2017E 2018E Margin 2017E 2018E Margin LTM 2017E 2018E LTM 2017E 2018E

Accenture plc (ACN) $79,609 $35,233 $37,549 31.6% $5,980 $6,391 17.0% 2.3x 2.2x 2.0x 11.7 x 12.9 x 12.0 x

Cognizant Technology Solutions Corporation (CTSH) $40,829 $14,799 $16,158 39.1% $2,941 $3,423 19.6% 2.7x 2.6x 2.3x 12.7 x 12.8 x 11.0 x

Infosys Limited (INFY) $35,998 $10,917 $11,601 35.4% $2,910 $3,061 27.1% 3.0x 2.8x 2.7x 10.9 x 10.6 x 10.1 x

HCL Technologies Limited (HCLTECH) $19,845 $7,894 $8,333 33.7% $1,795 $1,818 22.4% 2.6x 2.3x 2.2x 11.5 x 10.3 x 10.2 x

Wipro Limited (WIT) $21,782 $8,679 $8,839 28.8% $1,795 $1,669 19.8% 2.1x 2.1x 2.1x 10.7 x 10.2 x 11.0 x

CGI Group Inc. (GIB.A) $15,355 $8,680 $8,918 30.1% $1,564 $1,657 16.8% 2.0x 1.9x 1.9x 11.0 x 10.6 x 10.0 x

Atos SE (ATO) $15,951 $15,034 $15,316 13.9% $1,963 $2,053 13.3% 1.2x 1.1x 1.1x 8.3 x 8.2 x 7.9 x

Syntel, Inc. (SYNT) $1,631 $884 $887 38.0% $219 $226 26.7% 2.1x 2.2x 2.2x 7.5 x 8.9 x 8.6 x

Virtusa Corporation (VRTU) $970 $933 $1,013 28.0% $64 $93 6.0% 1.2x 1.1x 1.0x 13.9 x 16.1 x 11.0 x

Perficient, Inc. (PRFT) $673 $494 $530 32.8% $71 $83 10.5% 1.5x 1.4x 1.3x 11.4 x 9.8 x 8.4 x

Mean $23,264 $10,355 $10,914 31.1% $1,930 $2,047 17.9% 2.1x 2.0x 1.9x 11.0x 11.0x 10.0x

Median $17,898 $8,680 $8,878 32.2% $1,795 $1,743 18.3% 2.1x 2.1x 2.1x 11.2x 10.4x 10.1x

NA = Not Available; NM = Not Meaningful; LTM = Latest Twelve Months As of close July 31, 2017.

‡ = excluded from Mean and Median calculations Excludes non-recurring, discontinued operations and stock-based compensation

Source: Public Filings, Press Releases and Published Research Reports

(1)

(2)

ACN CTSH

INFY

HCLTECH

WIT

GIB.A

ATOSYNT

VRTU

PRFT

0.0 x

2.0 x

4.0 x

6.0 x

8.0 x

10.0 x

12.0 x

14.0 x

16.0 x

18.0 x

-20.0% -10.0% 0.0% 10.0% 20.0% 30.0%

EV/EBITDA (2017E)

Revenue Growth (2017E)

ACN

CTSH INFY

HCLTECH

WIT

GIB.A

ATO

SYNT

VRTU

PRFT

0.0 x

0.5 x

1.0 x

1.5 x

2.0 x

2.5 x

3.0 x

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

EV/Revenue (2017E)

Revenue Growth (2017E) + EBITDA Margin (LTM)


3.

Valuation Metrics


BUSINESS PROCESS OUTSOURCING


July 31 Engineering, IT and staffing solutions worldwide

July 26 Outsourced finance and accounting services

July 19 Online career and job management services

July 12 . Aged support connectivity platform

July 10 Employee benefit consulting services

Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size

Relative Valuation


LTM LTM



Automatic Data Processing, Inc. (ADP) $53,202 $12,676 $13,407 43.1% $2,648 $2,895 22.0% 4.2x 4.1x 3.9x 18.3 x 19.8 x 18.1 x

Genpact Limited (G) $5,590 $2,693 $2,870 39.2% $459 $497 16.3% 2.4x 2.3x 2.2x 13.9 x 13.7 x 12.7 x

EPAM Systems, Inc. (EPAM) $4,455 $1,430 $1,725 36.5% $256 $317 14.3% 3.2x 2.9x 2.4x 17.2 x 15.9 x 12.9 x

Luxoft Holding, Inc. (LXFT) $2,105 $904 $1,092 39.5% $155 $195 12.3% 2.5x 2.2x 1.8x 15.9 x 12.9 x 10.2 x

ExlService Holdings, Inc. (EXLS) $1,942 $757 $829 34.3% $129 $150 14.0% 2.4x 2.3x 2.1x 14.4 x 13.5 x 11.7 x

WNS (Holdings) Limited (WNS) $1,746 $679 $760 32.3% $133 $166 13.6% 2.6x 2.5x 2.2x 15.1 x 12.5 x 10.1 x

Globant S.A. (GLOB) $1,596 $391 $471 39.3% $65 $83 16.7% 4.6x 4.0x 3.3x 25.7 x 23.8 x 18.7 x

Mean $10,091 $2,790 $3,022 37.7% $549 $615 15.6% 3.1x 2.9x 2.6x 17.2x 16.0x 13.5x

Median $2,105 $904 $1,092 39.2% $155 $195 14.3% 2.6x 2.5x 2.2x 15.9x 13.7x 12.7x




(1)

(2)

ADP

G

EPAM

LXFT EXLS WNS

GLOB

0.0 x

5.0 x

10.0 x

15.0 x

20.0 x

25.0 x

30.0 x

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

EV/EBITDA (2017E)


ADP

G

EPAM

LXFT EXLS WNS

GLOB

0.0 x

0.5 x

1.0 x

1.5 x

2.0 x

2.5 x

3.0 x

3.5 x

4.0 x

4.5 x

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

EV/Revenue (2017E)



Valuation Metrics


INFRASTRUCTURE SERVICES

Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Excluded: WIX


July 27 Infrastructure-as-a-service (IaaS) solutions

July 20 IT hardware, maintenance and systems

integration solutions

July 18 Managed hosting solutions to data centers

July 13 Network security technology and threat

detection services

July 10 Technology solutions and data center

environments

Relative Valuation**


LTM LTM



Equinix, Inc. (EQIX) $35,117 $4,323 $4,938 50.4% $2,036 $2,401 42.0% 10.1x 9.1x 8.0x 21.9 x 19.3 x 16.4 x

United Internet AG (UTDI) $12,072 $5,003 $5,353 34.4% $1,110 $1,219 21.3% 3.2x 2.8x 2.6x 15.1 x 12.4 x 11.3 x

Zayo Group Holdings, Inc. (ZAYO) $8,058 $2,497 $2,674 64.7% $1,249 $1,356 45.2% 6.5x 5.4x 5.0x 12.7 x 10.8 x 9.9 x

VeriSign, Inc. (VRSN) $10,109 $1,161 $1,202 82.9% $810 $851 65.0% 8.8x 8.8x 8.5x 12.7 x 12.6 x 11.9 x

DuPont Fabros Technology, Inc. (DFT) $4,830 $580 $653 66.7% $360 $409 61.2% 13.3x 12.5x 11.1x 21.2 x 20.1 x 17.7 x

GoDaddy Inc. (GDDY) $3,948 $2,221 $2,543 64.4% $532 $668 11.8% 2.2x 2.0x 1.8x 14.6 x 8.4 x 6.7 x

Endurance International Group Holdings, Inc. (EIGI) $1,320 $1,169 $1,193 50.2% $331 $338 24.0% 2.8x 2.8x 2.7x 9.5 x 9.8 x 9.6 x

Wix.com Ltd. (WIX) $2,805 $423 $556 84.1% $77 $134 -10.9% 7.4x 6.2x 4.7x NM 34.2 x 19.5 x

Web.com Group, Inc. (WEB) $1,016 $755 $788 68.8% $192 $208 20.1% 2.2x 2.2x 2.1x 9.6 x 8.7 x 8.0 x

Internap Corporation (INAP) $304 $282 $280 49.6% $88 $91 24.5% 2.2x 2.2x 2.2x 8.5 x 7.1 x 6.8 x

Mean $7,958 $1,841 $2,018 61.6% $678 $768 35.0% 5.9x 5.4x 4.9x 14.0x 14.3x 11.8x

Median $4,389 $1,165 $1,197 64.5% $446 $538 24.5% 4.9x 4.1x 3.7x 12.7x 11.6x 10.6x




(1)

(2)

EQIX

UTDI ZAYO

VRSN

DFT

GDDY

EIGI WEB

INAP

0.0 x

5.0 x

10.0 x

15.0 x

20.0 x

25.0 x

-10.0% 0.0% 10.0% 20.0% 30.0%

EV/EBITDA (2017E)


EQIX

UTDI

ZAYO

VRSN

DFT

GDDY

EIGI

WEB

INAP

0.0 x

2.0 x

4.0 x

6.0 x

8.0 x

10.0 x

12.0 x

14.0 x

0.0% 20.0% 40.0% 60.0% 80.0%

EV/Revenue (2017E)



TECHNOLOGY SERVICES: INFORMATION SERVICES

Valuation Metrics


INFORMATION SERVICES

Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Gartner (IT) y/y growth rate pro forma adjusted for the acquisition of CEB, Inc.


July 27 Merchant risk intelligence solutions

July 25 Market surveillance and compliance monitoring

solutions

July 17 Software solutions for real-time fraud

prevention, predictive analytics, etc.

July 10 IP management solutions

July



LTM LTM



S&P Global Inc. (SPGI) $39,473 $5,874 $6,214 70.6% $2,757 $2,947 45.9% 7.2x 7.1x 6.7x 15.2 x 15.2 x 14.2 x

Quintiles IMS Holdings, Inc. (Q) $19,866 $8,026 $8,517 41.6% $2,007 $2,177 21.6% 4.0x 3.4x 3.2x 17.0 x 13.7 x 12.7 x

Moody's Corporation (MCO) $25,141 $3,912 $4,106 71.8% $1,847 $1,950 47.9% 7.0x 6.9x 6.5x 13.8 x 14.5 x 13.8 x

IHS Markit Ltd. (INFO) $18,505 $3,545 $3,706 61.5% $1,393 $1,503 29.1% 6.7x 6.3x 6.0x 17.8 x 16.1 x 14.9 x

Verisk Analytics, Inc. (VRSK) $14,428 $2,094 $2,224 63.6% $1,019 $1,099 46.4% 8.2x 7.9x 7.4x 17.8 x 16.2 x 15.1 x

Gartner, Inc. (IT) $11,604 $3,303 $4,043 60.2% $700 $859 13.6% 4.4x 3.6x 3.0x 26.9 x 17.2 x 14.0 x

MSCI Inc. (MSCI) $9,855 $1,266 $1,379 78.1% $657 $734 50.7% 9.4x 8.9x 8.1x 17.5 x 17.1 x 15.3 x

FactSet Research Systems Inc. (FDS) $6,560 $1,262 $1,361 55.5% $430 $464 35.0% 5.9x 5.5x 5.1x 15.7 x 16.1 x 15.0 x

Mean $18,179 $3,660 $3,944 62.8% $1,351 $1,467 36.3% 6.6x 6.2x 5.8x 17.7x 15.8x 14.4x

Median $16,466 $3,424 $3,874 62.5% $1,206 $1,301 40.5% 6.8x 6.6x 6.3x 17.2x 16.1x 14.5x




(1)

(2)

SPGI

Q MCO

INFO VRSK IT MSCI

FDS

0.0 x

2.0 x

4.0 x

6.0 x

8.0 x

10.0 x

12.0 x

14.0 x

16.0 x

18.0 x

20.0 x

0.0% 5.0% 10.0% 15.0%

EV/EBITDA (2017E)


SPGI

Q

MCO INFO

VRSK

IT

MSCI

FDS

0.0 x

1.0 x

2.0 x

3.0 x

4.0 x

5.0 x

6.0 x

7.0 x

8.0 x

9.0 x

10.0 x

0.0% 20.0% 40.0% 60.0% 80.0%

EV/Revenue (2017E)



TECHNOLOGY SERVICES: INFORMATION SERVICES


July 24 Health information services

July 19 SaaS based healthcare solutions

July 17 Healthcare IT consulting

July 12 HIPAA compliance services and healthcare

IT solutions

July 10 Payer-provider and value-based analytics

Valuation Metrics


HEALTHCARE IT

Source: CapitalIQ*Please contact the MHH Technology Services Group directly for any information regarding valuation and deal size**Excluded: CSLT


Constellations Healthcare IT business unit


LTM LTM



Cerner Corporation (CERN) $21,344 $5,206 $5,638 85.2% $1,709 $1,873 28.0% 4.3x 4.1x 3.8x 14.6 x 12.4 x 11.3 x

Veeva Systems Inc. (VEEV) $8,911 $670 $801 68.8% $213 $257 24.3% 14.2x 12.3x 10.3x 44.4 x 38.8 x 32.1 x

athenahealth, Inc. (ATHN) $5,523 $1,225 $1,392 51.7% $266 $312 11.1% 5.0x 4.7x 4.1x 29.3 x 21.5 x 18.4 x

Allscripts Healthcare Solutions, Inc. (MDRX) $2,234 $1,777 $2,024 49.6% $354 $403 9.7% 2.4x 2.2x 1.9x 19.2 x 11.0 x 9.7 x

WebMD Health Corp. (WBMD) $2,463 $726 $744 63.4% $240 $246 26.0% 3.5x 3.4x 3.3x 11.5 x 10.3 x 10.0 x

Inovalon Holdings, Inc. (INOV) $1,854 $451 $488 64.4% $108 $122 16.0% 3.8x 3.5x 3.2x 19.6 x 14.6 x 12.9 x

Quality Systems, Inc. (QSII) $1,080 $524 $538 56.5% $78 $87 11.8% 2.0x 2.0x 2.0x 15.2 x 13.5 x 12.2 x

National Research Corporation (NRCI.B) $794 $119 $130 58.2% $40 $44 34.2% 6.7x 6.4x 5.9x 18.7 x 19.1 x 17.2 x

HealthStream, Inc. (HSTM) $753 $247 $270 56.5% $36 $43 9.9% 2.7x 2.6x 2.4x 25.0 x 17.5 x 14.9 x

Computer Programs and Systems, Inc. (CPSI) $415 $269 $282 52.7% $49 $53 10.9% 2.1x 2.1x 2.0x 16.5 x 11.5 x 10.5 x

Castlight Health, Inc. (CSLT) $561 $133 $170 67.8% ($26) ($12) -42.3% 4.0x 3.4x 2.7x NM NM NM

Mean $4,537 $1,121 $1,231 60.7% $309 $344 18.2% 4.7x 4.3x 3.9x 21.4x 17.0x 14.9x

Median $1,854 $524 $538 58.2% $108 $122 11.8% 3.8x 3.4x 3.2x 19.0x 14.1x 12.6x




(1)

(2)

CERN

VEEV

ATHN

MDRX WBMD

INOV QSII

NRCI.B …

CPSI

0.0 x

5.0 x

10.0 x

15.0 x

20.0 x

25.0 x

30.0 x

35.0 x

40.0 x

45.0 x

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

EV/EBITDA (2017E)


CERN

VEEV

ATHN

MDRX

WBMD

INOV

QSII

NRCI.B

HSTM CPSI

0.0 x

2.0 x

4.0 x

6.0 x

8.0 x

10.0 x

12.0 x

14.0 x

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

EV/Revenue (2017E)


TECHNOLOGY SERVICES MONTHLY

The Mufson Howe Hunter Technology Services IndicesIT Outsourcing is currently comprised of: ACN, CTSH, INFY, NESI:HCLTECH, GIB.A, WIT, ENXTPA:ATO, SYNT, VRTU, PRFT; Business Process Outsourcing Index is currently comprised of: ADP, G, EPAM, LXFT, EXLS, WNS,GLOB; Infrastructure Services Index is currently comprised of: EQIX, ZAYO, UTDI, VRSN, DFT, GDDY, EIGI, WIX, WEB, INAP; Information Services Index is currently comprised of: SPGI, Q, MCO, INFO, VRSK, IT, MSCI, FDS;and, Healthcare IT is currently comprised of: CERN, VEEV, ATHN, MDRX, WBMD, INOV, QSII, HSTM, NRCI.B, CPSI, CSLT.

The companies that comprise each Index periodically change as a result of mergers, acquisitions, initial public offerings and other transactions; therefore, comparisons to historical time periods and historicalperformance for each Index may not entirely correspond and correlate to the Index’s current performance. Historical performance is not a guarantee or prediction of future results. The information and statistical datacontained herein have been obtained from sources that Mufson Howe Hunter believes are reliable, but Mufson Howe Hunter makes no representation or warranty as to the accuracy or completeness of any suchinformation and data and expressly disclaims any and all liability relating to or resulting from your use of these materials. The information and data contained herein are current only as of the date(s) indicated andMufson Howe Hunter has no intention, obligation or duty to update these materials after such date(s). These materials do not constitute an offer to sell or the solicitation of an offer to buy any securities.

Copyright © July 2017 Mufson Howe Hunter & Company LLC. All rights reserved. Technology Services Monthly is produced monthly by Mufson Howe Hunter. Mufson Howe Hunter provides a full range of investment

banking services to Technology Services companies. For more information, visit www.mhhco.com.Icons by Flaticon.

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Brandon EckManaging Director,

Head of Technology Services


For more information, please contact:

Andrew WilsonVice President,

Technology Services


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