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IT Consulting - M&A Summary

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Analysis of recent transactions in System Software Industry detailing on Transaction Multiples (Revenue & EBITDA), Multiples Chart, Active Buyers & Transaction Data. A goldmine of resource for Entrepreneurs.

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IT Consulting - M&A Summary

  1. 1. page A L P S V E N T U R E P A R T N E R S 1 This report is intended solely for the informational and is not intended to be and should not be used by any other person or entity. No other person or entity is entitled to rely, in any manner or for any purpose, on this report. IT CONSULTING! T R A N S A C T I O N M U LT I P L E S | H I S T O R I C A L T R E N D S | G E O G R A P H I C H E AT M A P
  2. 2. page A L P S V E N T U R E P A R T N E R S 2 Merger & Acquisition Summary – IT Consulting & Other Services Valuation Summary Total Deal Value ($mm) 71,212 Average Deal Value ($mm) 153 Average TEV/Revenue 1.9x Average TEV/EBITDA 12.4x Average Day Prior Premium (%) 10% Average Week Prior Premium (%) 12% Average Month Prior Premium (%) 19% *Source – CapitalIQ, AlpsVP Analysis Date Range: Jan 1, 2013 – March 25, 2019 info@alpsvp.com Transaction Ranges Greater than $1 billion 12 $500 - $999.9 mm 9 $100 - $499.9 mm 56 Less than $100 mm 387
  3. 3. page A L P S V E N T U R E P A R T N E R S 3 Transaction Multiples - Trends *Source – CapitalIQ, AlpsVP Analysis 1.3x 1.8x 2.0x 2.2x 1.9x 2.1x 10.3x 10.1x 13.3x 12.7x 14.3x 19.9x 0.0x 5.0x 10.0x 15.0x 20.0x 25.0x 2014 2015 2016 2017 2018 2019 Multiples Average TEV/Revenue Average TEV/EBITDA Historical Multiples 2014 2015 2016 2017 2018 2019 5 Year Average TEV/Revenue 1.3x 1.8x 2.0x 2.2x 1.9x 2.1x 1.9x Average TEV/EBITDA 10.3x 10.1x 13.3x 12.7x 14.3x 19.9x 12.1x info@alpsvp.com
  4. 4. page A L P S V E N T U R E P A R T N E R S 4 Transaction Numbers - Trends *Source – CapitalIQ, AlpsVP Analysis 13 8 13 15 5 2 74 80 74 82 64 13 - 10 20 30 40 50 60 70 80 90 2014 2015 2016 2017 2018 2019 Number of Transactions > $1 billion $500 - $999.9mm $100 - $499.9mm Less than $100mm (in $ Million) 2014 2015 2016 2017 2018 2019 5 Year Average Deal Value $61.7 $168.2 $155.1 $138.8 $251.4 $211.9 $155.0 info@alpsvp.com
  5. 5. page A L P S V E N T U R E P A R T N E R S 5 Geographic Heat Map *Source – CapitalIQ, AlpsVP Analysis; Number of transactions in Major Regions; Asia Pacific – 22.0% Americas – 56.8% Europe/MENA/Africa – 21.1% info@alpsvp.com Region / Transactions Number Total Value Average Size Asia Pacific 217 $15,691 $72 Europe/MENA/Africa 159 $15,061 $95 Americas 88 $40,460 $460
  6. 6. page A L P S V E N T U R E P A R T N E R S 6 Investment Focus info@alpsvp.com Geographic Location Number of Transactions Average Historical Multiples Average Transaction Size (USD mn) China 69 4.0x 88.5 United States 65 1.4x 610.5 United Kingdom 48 1.8x 37.3 India 35 1.4x 58.9 Japan 28 1.4x 67.0 South Korea 21 1.0x 28.2 France 18 1.1x 158.5 Hong Kong 17 2.2x 23.8 Australia 17 1.2x 60.0 Germany 13 0.8x 52.8 Sweden 12 1.0x 54.5 Italy 12 0.9x 92.6 Singapore 10 3.5x 338.0 Canada 10 1.1x 37.1 Spain 10 1.1x 53.1 Others 79 1.7x 102.4 *Source – Data based on transactions during Jan 01, 2013 and March 25, 2019 from CapitalIQ, AlpsVP Analysis
  7. 7. page A L P S V E N T U R E P A R T N E R S 7 Largest Transactions Target Deal Value ($mm) CSRA Inc. $9,951.1 Everett Spinco, Inc. $8,859.0 Rackspace Hosting, Inc. $4,948.2 iGATE Corporation $4,600.8 Accenture Holdings plc $3,821.8 Sapient Corp. $3,686.7 Dell $3,055.0 Aricent Inc. $2,000.0 ConvergeOne Holdings, Inc. $1,651.5 Groupe Steria SCA $1,330.6 *Source – CapitalIQ, AlpsVP Analysis info@alpsvp.com
  8. 8. page A L P S V E N T U R E P A R T N E R S 8 IND UST RY INSIG HT S
  9. 9. page A L P S V E N T U R E P A R T N E R S 9 Industry Outlook (1/4) [1] Source: IT Consulting in US published by IBISWorld, Dec 2018 info@alpsvp.com IT Consulting in US1 The IT Consulting industry comprises companies that help businesses design and implement information technology (IT) systems and infrastructure. Due to the low capital requirements of the industry, a modest number of operators are small nonemployers or independent contractors. Over the five years to 2018, shifting technological trends toward cloud computing and data analytics have caused larger operators to acquire smaller companies and develop new products to stay relevant. For example, Accenture PLC purchased more than six major companies in 2017, including OCTO Technology, a leading digital consulting firm. Likewise, International Business Machines Corp. (IBM) announced its biggest anticipated acquisition in company history in October 2018 with the purchase of open software company Red Hat Inc. for $33.0 billion, signaling the company’s rising interest in developing hybrid cloud systems. 25.6% 11.9% 11.3% 11.0% 8.7% 31.5% Custom services IT infrastructure Technical consulting Technical support Computer systems development Others Shifting technology trends have boosted demand for new services and encouraged companies to replace older, more- traditional technology. Additionally, strong corporate profit growth during most of the current period and constantly rising investment in computers and software have helped support the industry’s growth. Overall, industry revenue is projected to expand at an annualized rate of 2.7% to $426.0 billion over the five years to 2018. This includes a projected 4.9% increase in 2018, supported by a strong anticipated 6.7% jump in corporate profit over the same year. With rising revenue and low barriers to entry, industry competition is also expected to intensify as new players enter the market to provide emerging technologies to customers. However, sustained demand will still enable profit margins to reach a healthy 7.1% of annual industry revenue in 2018.
  10. 10. page A L P S V E N T U R E P A R T N E R S 10 Industry Outlook (2/4) info@alpsvp.com IT Consulting in US1 As the economy continues to strengthen, corporate profit will rise further and support increased investment in computers and software. In particular, growth in demand from the finance and insurance sector, which represents the largest market for industry operators, is anticipated to benefit the IT Consulting industry. Additionally, the continued shift to cloud computing and rising use of data analytics will heighten security concerns for businesses, precipitating increased demand for industry services. As a result of robust downstream demand, IBISWorld expects industry revenue to rise at an annualized rate of 2.4% to $479.7 billion over the five years to 2023. 381.7 398.2 406.0 426.0 443.2 452.9 461.4 470.6 479.7 5.4% 4.3% 2.0% 4.9% 4.0% 2.2% 1.9% 2.0% 1.9% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 0 100 200 300 400 500 600 2015 2016 2017 2018 2019 2020 2021 2022 2023 ITConsultinginUSRevenue($B) Market Size ($B) Growth (%age) [1] Source: IT Consulting in US published by IBISWorld, Dec 2018
  11. 11. page A L P S V E N T U R E P A R T N E R S 11 Alps Venture Partners has established a team of experts that have experience in valuing businesses across diverse industry sectors and all developmental stages; ranging from clients with seed funding to pre-IPO stage. With the team having experience of both valuations and audits, our detailed and insightful valuation appraisal reports, along with our responsive support, help our clients easily pass through any stringent audit review process in a smooth, efficient and time-bound manner.
  12. 12. page A L P S V E N T U R E P A R T N E R S 12 Corporate Finance Services We provide clients with high quality research, analytical and advisory support for transactions. We offer a range of services such as initial opportunity assessment, market analysis, financial modeling, commercial and financial due diligence, valuation, capital structure planning, and deal structuring. v  Investment Opportunity Assessment v  Target Identification v  Preparation of Pitch Books v  Buyer & Seller Services v  Fairness Opinions v  Financial Modeling v  Business and Financial Due Diligence etc. Transaction advisory Financial Modeling Whether it is evaluating new business ventures, proposed transactions or financial and operational strategies, a robust and dynamic financial model is an integral component to the decision- making process. Transaction Identification We can help by global target identification considering the requirements with maximum synergy. The financial due diligence process is a necessity to any transaction. Our aim is to enable owners and managers to make such investments with confidence by supporting and advising at every stage. We will help reduce the risk – and stress – of investing at home or in another country. Due Diligence Custom Research We provide clients with customized research report, model, decks with client specific requirements such as: v  Business plan development, v  Diagnostic review of operations v  Competitor benchmark analysis v  Intellectual Property info@alpsvp.com
  13. 13. page A L P S V E N T U R E P A R T N E R S 13 Financial Reporting and Tax Compliance Services IRC 409a We have experience of handling more than 2000+ 409a valuations across Industries. With the team having experience of both valuations and audits, our detailed and insightful Section 409A appraisal reports, along with our responsive support, help our clients easily pass through any stringent audit review process in a smooth, efficient and time-bound manner. Fair Value Measurement We help PE and VC clients to comply with ASC 820 and IFRS 13 standard’s complex provisions and avoid any audit issues in their quarterly and annual reporting. Relative TSR Programs We value the awards with Relative TSR metrics, using sophisticated modeling techniques which allow clients to quickly and accurately value new grants. Our business valuation experienced team along with the team of veteran Patent lawyers position us uniquely to assist clients in completing annual Goodwill and Investment Impairment testing. ASC 350 / IAS 38 ASC 718 (FAS 123R)/IFRS 2 Our experienced team at Alps Venture Partners has performed hundreds of stock options valuations for ASC 718 for privately held companies and publicly listed companies across diverse industry sectors and enterprise development stages. ASC 805 / IFRS 3 We have unmatched proficiency in delivering Business Combinations Accounting solutions to clients in v a r i e d i n d u s t r i e s . O u r comprehensive USPAP compliant appraisal reports are auditable and cost-effective, and help our clients stay focused on the deal. IRC 83 B Election Alps Venture Partners has extensive experience in assisting companies seeking to comply with IRC 83 B election. Failing to make a timely 83(b) election may lead to disastrous tax consequences for a start-up company founder or employee. info@alpsvp.com
  14. 14. page A L P S V E N T U R E P A R T N E R S 14 Disclaimer The contents of this presentation are protected by copyright. You may read the contents and make copies for your own personal use. You may also give copies of reasonable extracts, on an occasional basis, free of charge to your contacts for their personal use provided that Alps Venture Partners is acknowledged as the source, the text is not altered in any way, and this warning is brought to their attention. Any other use or copying of the contents of this presentation is prohibited, unless Alps Venture Partners gives its prior written consent. For further information please contact us at info@alpsvp.com Pursuant to Title 17, United States Code, Section 512(c)(2), notifications of claimed copyright infringement under United States copyright law should be sent to Service Provider’s Designated Agent. ALL INQUIRIES NOT RELEVANT TO THE ABOVE PROCEDURE WILL RECEIVE NO RESPONSE. This Agreement (and any further rules, policies, or guidelines incorporated by reference) shall be governed and construed in accordance with the laws of the United States (USA), United Kingdom, Canada, Brazil, France, and India without giving effect to any principles of conflicts of law. Alps Venture Partners welcomes your questions or comments regarding this Statement of Privacy. If you believe that Alps Venture Partners has not adhered to this Statement, please contact Alps Venture Partners at our given toll free contact numbers. Copyright © 2019 ALPS VENTURE PARTNERS. All Rights Reserved