This document summarizes three real M&A cases in the IT outsourcing industry that occurred in 2018. The first case involved the acquisition of a company for up to $1 million, which had locations only in Ukraine and 95% of its clients in Europe. The second case was between $10-20 million and involved a company with locations in the US, Europe and Ukraine that was acquired as part of a roll-up strategy over the course of 1 year. The third case was between $55-65 million and involved forming a joint venture with a company that had locations in the CIS and Asia and 75% of its clients in the CIS over 6 months.

1. ITO company & Investor
Three Real Cases
Vitaly Gorovoy (InSoft)
Kyiv Outsourcing Forum
October 2018

2. 2
New partner: pros and cons
Pros are… Cons are…
New level
▪ Money
▪ Experience
▪ New level of network
▪ Additional drive and
knowledge
▪ Necessity of additional
control / corporate
governance
Control

3. Typical M&A algorithm
• first contact
• a lot of general negotiations
• understanding of a joint future
• a lot of specific negotiations
• signing of NDA
• studying of the Company’s reporting
• signing of TermSheet
• Due Diligence process
• normalization process and signing the editing version of TS
• official Deal process…
3
from
2.5 months
to
1 year
(InSoft’s average)

4. Just a several target criteria for investors
Clients
geography
diversification
features of Sales process
Employees
quantity and quality
freelance/full-time
outstaffing/outsourcing/
solutions
Financials
annual revenue
EBITDA margin
growth rate
average rate
bad debts
account receivables
Technologies
niche/generalist
stack
Management
business processes
experience of the TOP-team
4

5. Three real M&A cases
• all in IT ousourcing • all in 2018 • real InSoft’s practice
• up to $1M • between $10-20M • between $55-65M
general:
in the money terms:
5

6. Case #1 (up to $1M)
Company
locations: only UA
CAGR (last 3y): 5%
geography of clients: 95% EU, 5% UA
Buyer
type: strategic
strategy: acquisition
duration of process: 2,5 months
6

7. Case #2 (between $10-20M)
Company
locations: USA, EU, UA
CAGR (last 3y): 45%
geography of clients: 90% USA, 10% EU
Buyer
type: financial
strategy: roll-up
duration of process: 1 year
7

8. Case #3 (between $55-65M)
Company
locations: CIS, Asia
CAGR (last 3y): 25%
geography of clients: 75% CIS, 15% Asia
Buyer
type: financial
strategy: joint venture
duration of process: 6 months
8

9. Any questions?