hr t n & t s r u russell 2000 1,415.84 2.4% 22.9% · accenture work market $25 q1 2017 great...

MERGERS & ACQUISITIONS • CAPITAL RAISES • FINANCIAL & STRATEGIC ADVISORY

1

HR TECH TRADING MULTIPLES

MAJOR INDICES & RATES

HR TECH NEWS & TRENDS

HR TECHNOLOGY MARKET UPDATE – Q2 2017

Culture & Employee Engagement

▪ A hot topic discussed at the HR Tech World conference inSan Francisco in June was the ability of HR techapplications to improve employee engagement andworkplace culture, thereby providing companies withadvantages in the never-ending war for talent

Continued Growth in Independent Workers

▪ MBO Partners released a new report in June findingcontinued growth in the number of US independentworkers (consultants, freelancers, contractors, andtemp/on-call workers)

▪ They estimate number of independent workers will growto 47.6 million within the next five years

Facebook’s New Job Board

▪ World’s largest social network jumped into job boardmarket

▪ Employers in U.S. and Canada can post position, trackapplications and communicate with applicants

▪ Focus on helping small and medium size businesses findhourly and part time workers (segment where LinkedIn isweakest)

▪ When candidates click “Apply Now” form is pre-populated with their Facebook profile

Artificial Intelligence

▪ Data science and machine learning are playing larger rolein HR tech

▪ Opportunities for AI to reduce the average time to hire of52 days

Staffing firms active in HR tech

▪ Staffing companies have become active investors andacquirers of HR tech companies

▪ Recruit has acquired Indeed and Simply Hired

▪ Adecco is making VC investments having led Series A of$3.5 million in Talentoday, a provider of talentassessment and people analytics

Enterprise Value

LTM Revenue LTM EBITDA

HR Tech 5.19x 16.8x

HR Outsourcing 2.67x 14.0x

% Change

3 Month 12 Month

HR Tech Composite (CHILDS) 57,593.68 6.2% 12.2%

HR Outsourcing (CHILDS) 73,004.97 4.5% 8.4%

Dow Jones 21,414.34 3.0% 19.1%

NYSE 11,752.98 2.1% 12.1%

NASDAQ 6,153.08 3.8% 26.8%

AMEX 2,505.52 2.3% 5.9%

S&P 500 2,425.18 2.3% 15.5%

Russell 2000 1,415.84 2.4% 22.9%

USD/Euro 0.88 (6.0%) (2.7%)

USD/Yen 112.34 0.9% 9.4%

USD/Pound 0.77 (3.9%) 2.4%

U.S. Prime Rate 4.250% 25.00 Bps 75.00 Bps

U.S. Treasury - 10 Year 2.310% (11.00 Bps) 82.00 Bps

LIBOR - 3 month 1.299% 15.16 Bps 64.51 Bps

Fed Funds Overnight Rate 1.060% 15.00 Bps 76.00 Bps

Close as of

6/30/2017

Our senior bankers will be attending HR Technology Conference in Las Vegas. Let us know if interested in meeting to discuss M&A and later stage capital raising

SCOTT RHODES UPDATE

▪ We’d like to thank our clients for their confidence in us.We advised on 5 HR tech deals in last 18 months makingus most active investment bank for middle market HRtech companies. We have 2 HR tech deals in process

▪ The market for M&A and capital raising continues to bestrong for attractive HR tech companies

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CHILDS Advisory Partners

HR TECH NOTABLE TRANSACTIONS

-CAPITAL RAISE-

Talent acquisition software providing recruiting, scheduling, and video interviewing solutions

Transaction Date: June 2017

Investment Size: $31 M

Total Raised: $46.2 M

Investors:

-ACQUISITION-

Payroll, HR, and tax software for the service bureau industry

Transaction Date: May 2017

Total EV: $78.7 M

Key Metrics:

‒ Target Rev: $12.9 M

‒ Target EBITDA: NA

‒ EV/Rev: 6.1x

‒ EV/EBITDA: NA

-ACQUISITION-

HR SaaS that connects job seekers and employers. GTCR had been under LOI to acquire company.

Transaction Date: Q3 closing

Total EV: $627 M

Key Metrics:

‒ Target Rev: $162 M


‒ EV/Rev: 3.9x

‒ EV/EBITDA: NA

-ACQUISITION-

Cloud-based incentive compensation and performance

management solutions


Total EV: $576.8 M

Key Metrics:

‒ Target Rev: $96.8 M


‒ EV/Rev: 6.0x

‒ EV/EBITDA: NA

Seller Financial Sponsors: Alloy Ventures, Eastward Capital, Discovery Group Holding Co.

-CAPITAL RAISE-

Cloud-based recruiting software offering advanced applicant

tracking and search capabilities

Transaction Date: June 2017


Total Raised: $40.7 M

Investors:

-CAPITAL RAISE-

Cloud application for work management and collaboration



Total Raised: $120 M

Investors:

3


Buyer TargetEnterprise Value ($M)

Q2 2017

Vista Equity Partners Xactly Corporation (NYSE:XTLY) $533

K1 Investment Management Certify $100

Asure Software (NasdaqCM:ASUR) iSystems $79

Asure Software (NasdaqCM:ASUR) Compass HRM $6

Infinisource (d.b.a. iSolved) (Accel-KKR) ExcelPay ND

Apollo Global Management; Ontario Teachers’ Pension Plan Board CareerBuilder $627

Bond International Software (Symphony Technology Group) Erecruit (North Bridge Growth Equity) ND

Electronic Commerce (ECI) (Frontier Capital) (n.k.a. Vibe HCM) cfactor Works ND

StoneCalibre Trivantis ND

ESW Capital Jive Software $462

Summit Partners PrismHR (Accel-KKR) ND

Saba Software, Inc. Halogen Software Inc. (TSX:HGN) $175

Pivot Software Remesys Pty Ltd ND

Compunnel Software Group, Inc. Jobhuk, Inc. ND

Engage: BDR Inc. Tiveo, LLC [dba mydiveo] $7

Renovo Capital, LLC Global HR Research, LLC $30

Gartner, Inc.. (NYSE:IT) CEB (Corporate Executive Board) $3,540.7

Q1 2017

Summit Partners Ascentis ND

Atlassian Trello $425

ADP Marcus Buckingham ND

SmartRecruiters Jobspotting ND

PeopleNet, Inc. Fyre ND

PSI Services LLC Performance Assessment Network, Inc. $110

RIVS, Inc. InterviewStream, Inc. ND

Kronos Incorporated Financial Management Solutions, Inc. ND

Asure Software, Inc. (NasdaqCM:ASUR) Corporate Payroll Inc. $3

Roper Technologies, Inc. (NYSE:ROP) Deltek, Inc. [Thoma Bravo; Prospect Capital] $2,800

RECENT HR TECHNOLOGY M&A TRANSACTIONS

4


Representative Investors CompanyCurrent Raise

($M)

Q2 2017

N/D Reflik N/D

Avalon Ventures; PJC; Launch Fund; Pillar Talla $8

Scale Venture Partners; Emergence Capital Partners Textio $20

JMI Equity; First Analysis Corporation Yello $31

Battery Ventures; U.S. Venture Partners; Shasta Entelo $20

Transmedia Capital; Freestyle Capital EaseCentral $7

CrossLink Capital; Origin Ventures; SoftTech OnboardIQ $9

Insight Venture Partners; Madrona Venture Group; Sutter Hill Ventures; Summit Partners

Smartsheet $52

Ballast Point Ventures; Harbert Growth Partners; S3 Ventures Iconixx $4

Accenture Work Market $25

Q1 2017

Great Hill Partners Reflexis ND

Two Sigma Investments; Edgewood Partners Insurance Center Decisely $60

Trinity Ventures, General Catalyst, BoxGroup, Lerer-Hippeau Ventures, Index Ventures, SV Angel

WayUp $19

Keen Venture Partners Beekeeper $8

DRW Ventures; FJ Labs; GGV Capital; KWDC Ventures Shiftgig, Inc. $20

Updata Jellyvision $20

Sorenson Capital, Foundational Capital, Summit Partners, Adam Street Partners Visier $45

Canopy San Diego MJ Hybrid Solutions, Inc. $0

Summit Partners LLP Ascentis Corporation -

Diagram Collage Technologies Inc. $4

OpenView Deputy $25

500 Startups Boon Company, Inc. $0

Edison Partners; NorthCap Partners; Cultivation Capital; Chicago Ventures; Mission Operators Group

Gan Integrity Inc. $9

Adecco Group AG (SWX:ADEN) Talentoday Inc. $3

Mohr Davidow Ventures; iNovia Capital; Nokia Growth Partners; GreycroftPartners LLC

WorkFusion, Inc. $35

RECENT HR TECHNOLOGY CAPITAL RAISES

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EV/LTM Revenue

M&A ACTIVITY AND TRENDS


EV/Revenue

SOFTWARE M&A VALUATIONS

Sources: Capital IQ, Gartner, Forrester, CHILDS proprietary database

U.S. MIDDLE MARKET SOFTWARE & SERVICES M&A ACTIVITY – QUARTERLY TRENDS

Deal Count 390 399 428 433 447 514 482 502 528 501 492 516 478 467 394 420 461 401

% Δ N/A 2% 7% 1% 3% 15% (6%) 4% 5% (5%) (2%) 5% (7%) (2%) (16%) 7% 10% (13%)

▪ M&A activity in U.S. for middle market softwaredeals continued to soften in Q2 2017 with 401deals announced

▪ Represents a 13% volume decline over theprevious quarter and 14% decline from thesame period last year

▪ Complaints getting louder from privateequity investors about reduction in numberof deals coming to market and lowerquality deals

▪ Opportunity for high quality growth dealsto be well received by buyers

▪ We define middle market as deals withenterprise value less than $1 billion

▪ Valuations for publicly traded technologycompanies continue to increase. Public HR techcompanies enjoyed big jump in average revenuemultiple from Q1 to Q2 from 4.1x to 5.7x

▪ IPO market continues to shut off to most companiesas exit strategy. Q2 saw pickup in technology IPOswith Cloudera, Okta, Yext, Appian and Tintri allgoing public. However several recent notabletransactions such as SNAP have performed badlyand are trading below their IPO issue prices

SOFTWARE PUBLIC MARKET VALUATIONS

300 314 338

309 329

386 366 379

408 380 385 391 377 378

341 348

404

328

72 75

78 96

93

108

92 94

100

100 79 100

81 69

39 52

43

53

13 8

10 23 21

15

19 21

15

17 21

18

16 15

11 13

10

14 5

2

2 5 4

5

5 8

5

4 7

7

4 5

3 7

4

6

200

250

300

350

400

450

500

550

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17

Dea

l Vo

lum

e

Undisclosed Less than $100M $100M - $499M $500M - $1,000M

2.43x

2.49x 2.48x

2.27x

2.34x

2.22x

2.05x

2.10x

2.15x

2.20x

2.25x

2.30x

2.35x

2.40x

2.45x

2.50x

2.55x

2012 2013 2014 2015 2016 2017 YTD

4.04x

5.12x

4.22x4.24x

5.82x

4.10x4.43x

6.28x5.70x

0.00x

1.00x

2.00x

3.00x

4.00x

5.00x

6.00x

7.00x

Enterprise Software SaaS HR Tech

Q4 2016 Q1 2017 Q2 2017

6


HR TECHNOLOGY PUBLIC TRADING STATISTICS

Source: Capital IQ* Denotes figure excluded from mean calculation

HR TECHNOLOGY

HRO (HUMAN RESOURCES OUTSOURCING)

(USD in millions, except for stock price)

(USD in millions, except for stock price)

DATES EVENT LOCATION

June 18 - 21 SHRM Annual Conference & Expo New Orleans, LA

Oct 10 - 13 HR Technology Conference & Exposition Las Vegas, NV

Oct 24 – 26 Staffing World Chicago, IL

Sept 13 - 14 SIA Collaboration in The Gig Economy Dallas, TX

HCM CONFERENCES [1]

[1]: Green font represents planned attendance by CHILDS Advisory Partners

Market Data Operating Statistics EV as a Multiple of: Growth

Stock Price LTM LTM CY2017 16 - '17

Company Name 6/30/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage

Automatic Data Processing, Inc. $102.46 97.0% $45,841.7 $44,845.5 $12,213.2 $2,770.6 22.7% 3.67x 16.2x 3.54x 16.0x 4.6% 5.2%

Willis Towers Watson Public Limited Company145.46 96.7% 19,665.1 23,038.1 7,862.0 1,525.0 19.4% 2.93x 15.1x 2.77x 11.0x 1.7% 28.8%

Capita plc 8.98 64.8% 5,977.4 8,762.8 6,061.3 754.9 12.5% 1.37x 11.0x 1.43x 10.4x (0.6%) 8.0%

51job, Inc. 44.73 95.2% 2,736.1 1,967.6 352.4 103.7 29.4% 5.58x 19.0x 4.22x 11.7x 20.5% 13.4%

TriNet Group, Inc. 32.74 97.8% 2,245.3 2,479.1 3,135.0 175.9 5.6% 0.79x * 14.1x 0.66x * 10.6x 9.2% 20.3%

Insperity, Inc. 71.00 75.8% 1,495.9 1,294.6 3,021.6 120.4 4.0% 0.43x * 10.8x 0.37x * 7.0x 11.2% 9.8%

CBIZ, Inc. 15.00 94.3% 802.7 1,014.2 817.1 92.3 11.3% 1.24x 11.0x 1.14x 9.0x 6.7% 6.3%

Barrett Business Services, Inc. 57.29 85.6% 415.5 400.6 859.6 27.6 3.2% 0.47x * 14.5x NM * NM * NM 27.2%

Connecture, Inc. 0.62 22.3% 14.0 102.9 82.6 (11.3) (13.7%) 1.25x NM * ND * ND * NM 8.5%

Mean 81.1% $3,822.8 $617.7 10.5% 2.67x 14.0x 2.62x 10.8x 7.6% 14.2%

Median 94.3% $3,021.6 $120.4 11.3% 2.15x 14.3x 2.77x 10.6x 6.7% 9.8%

% of 52

Week HighMarket Cap.

Enterprise

Value

3 Year

Rev CAGR

Market Data Operating Statistics EV as a Multiple of: Growth

Stock Price LTM LTM CY2017 16 - '17

Company Name 6/30/17 Revenue EBITDA % Margin Revenue EBITDA Revenue EBITDA GrowthAverage

Paychex, Inc. $56.94 90.3% $20,464.2 $20,140.8 $3,151.3 $1,366.5 43.4% 6.39x 14.7x 5.89x 13.3x 5.1% 7.8%

Workday, Inc. 97.00 92.6% 20,079.0 18,504.7 1,701.6 (242.2) (14.2%) 10.87x * NM * 7.45x 45.4x * 31.3% 46.9%

The Ultimate Software Group, Inc. 210.06 93.1% 6,243.0 6,167.7 860.7 63.8 7.4% 7.50x 98.4x * 5.09x 21.0x 19.9% 23.4%

Paycom Software, Inc. 68.41 92.9% 4,065.4 4,004.0 382.9 73.9 19.3% 11.17x * 50.5x * 7.27x 25.0x 31.7% 44.5%

WageWorks, Inc. 67.20 83.5% 2,657.1 2,294.1 434.9 81.9 18.8% 5.70x 31.2x 3.49x 11.1x 31.2% 23.7%

Paylocity Holding Corporation 45.18 91.0% 2,327.2 2,225.8 283.8 16.6 5.8% 7.84x 134.2x * 5.29x 28.9x 25.9% 41.4%

Cornerstone OnDemand, Inc. 35.75 74.9% 2,031.3 1,981.7 435.4 (41.8) (9.6%) 4.55x NM * 3.89x 25.6x 13.8% 40.5%

Callidus Software Inc. 24.20 97.4% 1,569.9 1,386.6 216.5 (7.7) (3.5%) 6.41x NM * 4.72x 34.4x * 19.2% 22.5%

Benefitfocus, Inc. 36.35 80.8% 1,128.4 1,179.3 242.7 (13.2) (5.4%) 4.86x NM * 3.51x 36.8x * 13.7% 29.6%

HealthStream, Inc. 26.32 83.5% 839.1 723.8 238.5 23.6 9.9% 3.12x 33.3x * 2.28x 14.4x 8.4% 16.3%

Asure Software, Inc. 14.61 84.6% 180.3 209.2 39.5 6.0 15.1% 5.29x 34.9x * 2.83x 11.7x 49.9% 15.0%

DHI Group, Inc. 2.85 33.8% 144.2 196.3 215.6 39.5 18.3% 0.89x * 4.4x 0.76x * 3.5x (7.3%) (3.3%)

Mean 83.2% $683.6 $113.9 8.8% 5.74x 16.8x 4.70x 17.2x 20.2% 25.7%

Median 87.5% $333.3 $20.1 8.7% 5.70x 14.7x 4.72x 14.4x 19.5% 23.5%

3 Year Rev CAGR

% of 52Week High

Market Cap.Enterprise

Value

7

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

HR Tech

(20.0%)

(10.0%)

0.0%

10.0%

20.0%

30.0%

40.0%

HR Tech HRO (Human Resources Outsourcing) S&P 500


STOCK MARKET FUNDAMENTALS

HR Tech: ASUR, BNFT, CALD, CSOD, DHX, HSTM, PAYX. WAGEHR Outsourcing: ADP. CBZ, CNXR, CPI, JOBS, WLTW

HR SECTOR INDICES VS. S&P 500

VALUATION TREND DATA (EV/LTM REVENUE)

23.6%

29.6%

13.9%

1 mo. 12 mos. 3 yrs

HR Tech (3.5%) 26.1% 24.4%

HRO 1.1% 7.2% (23.7%)

1 mo. 12 mos. 3 yrs

S&P 500 0.4% 15.5% 23.6%

HR Tech (2.6%) 9.0% 29.6%

HRO 2.4% 8.9% 13.9%

5.7x

2.7x

8


FIRM OVERVIEW

MERGERS & ACQUISITIONS

CAPITAL RAISESFINANCIAL &

STRATEGIC ADVISORY

CHILDS ADVISORY PARTNERS’ SERVICES

• 46 professionals across four offices in the U.S. with headquarters in Atlanta

• 72 total transactions closed since the beginning of 2014 with 26 in the technology space

• Over 450 transactions completed in the middle market (Enterprise Value less than $1.0 billion)

• 60% transactions since 2013 have involved a strategic buyer; 40% a financial sponsor

QUICK FACTS

• 2016 U.S. Boutique Investment Bank of the Year

• 2016 Ranked #1 by 451 Group for IT Services transactions in the U.S.

• 2014 Cross-Border Transaction of the Year Finalist

• 2014 Professional Services Transaction of the Year Finalist

• 2013 Strategic Acquisition of the Year Winner

• 2013 U.S. Boutique Investment Bank of the Year Finalist

ACCOLADES

CORE COVERAGE

Process Outsourcing

Human Capital

Industrial Services

B U S I N E S S

S E R V I CE SH E A L THCA R E T E CHN O L O G Y

IT Professional Services

Software

Recruiting

Onboarding

Talent

Workforce

Analytics

Compliance

Human Resources

Healthcare

Marketing

Vertical SaaS

Data & Analytics

SOFTWARE HR T ECH

9


TEAM’S EXTENSIVE EXPERIENCE IN HR TECHNOLOGY

Sell-Side Advisory▪ On-demand workforce optimization solutions that monitor transitions, analyze metrics,

and automate deployment processes

People Business Network (PBN)

Recapitalization Advisory▪ WFM consulting services and analytics software to the retail, healthcare, manufacturing

and public sector industries

Sell-Side Advisory▪ Research and consulting services focused on assessment and development of leaders

Buy-Side Advisory▪ Job application evaluation and suitability software solutions

Sell-Side Advisory▪ Leading provider of Workday consulting services and the first acquisition in the

ecosystem

Recapitalization Advisory▪ End-to-end talent management software solutions exclusively for healthcare organizations

Recapitalization Advisory▪ SaaS-based provider of workforce management solutions with a focus on time &

attendance

Sell-Side Advisory▪ Provider of integrated talent acquisition solutions such as MSP, VMS, payroll, and

recruitment process outsourcing

Buy-Side Advisory▪ Leading automated employment and salary verification service provider

Buy-Side Advisory▪ Workforce planning, scheduling, and management solutions

Buy-Side Advisory▪ Provider of unemployment tax compliance, employment verification, unemployment

claims administration, and international employment tax services

Buy-Side Advisory▪ SAP and SuccessFactors partner in North America specializing in HCM consulting services

Sell-Side Advisory▪ Oracle/PeopleSoft consulting services to the healthcare and state/local industries

Sell-Side Advisory▪ Provider of pre-hire and post-hire talent assessments

Undisclosed Financial Sponsor

Capital Raise▪ Leading HR & finance consultancy with a focus on deploying Workday and other cloud-

based software solutions

Sell-Side Advisory▪ Provides recruitment process outsourcing services to the life sciences industry

10


CHILDS’ HR TECHNOLOGY TEAM

CHILDS Advisory Partners | 3438 Peachtree Road, Suite 1400 Phipps Tower | Atlanta, GA 30326 | 404.751.3000 | www.childsadvisorypartners.com

CHILDS OFFERS THE SENIOR LEVEL ATTENTION AND ADVISORY FOCUS OF A BOUTIQUE FIRM

COUPLED WITH BANKERS WITH BULGE BRACKET EXPERIENCE

\

▪ Former Corporate Development executive for two S&P 500 companies, Equifax and Waste Management

▪ CEO of private equity backed business called Bagster sold to Fortune 500 strategic buyer

▪ 14 years of investment banking experience including Citigroup and Bank of America with over 80 M&A and capital markets transactions

▪ MBA from Kellogg School at Northwestern University (Beta Gamma Sigma) and BA from UNC Chapel Hill (Phi Beta Kappa)

▪ Co-founder of Bulger Capital Partners

▪ Co-head of East Coast Services and Software for Needham & Company

▪ 18 years of investment banking experience executing M&A transactions and raising capital

▪ MBA from F.W. Olin School of Business at Babson College and a BA from Hobart College

▪ 7 years of investment banking experience with Morgan Stanley and KPMG

▪ Executed 15 M&A and capital markets transactions (over $15 billion in value)

▪ MBA from Darden School of Business at the University of Virginia and undergraduate from the University of Virginia

Scott RhodesManaging [email protected]

Tom DonahueManaging [email protected]

Justin BentleyVice [email protected]

▪ 8 years of investment banking experience

▪ Current and past clients include companies such as Nexus, Bear Data, Aggressor and Utopia

▪ Former investment banker at SunTrust Robinson Humphrey

▪ Graduated cum laude from Washington & Lee University

Steve CarrVice President [email protected]

▪ Former M&A investment banker at SunTrust Robinson Humphrey

▪ Prior to joining SunTrust, Mr. Silverman was an analyst in the technology group at Canaan Partners, a venture capital firm based in California

▪ M.A.c.c. and B.B.A. from the University of Georgia

▪ CPA earned in 2013

Kenny [email protected]

▪ 7 years of investment banking experience

▪ Current and past clients include companies such as Peoplenet Channelinsight, McKinnis, Aggressor, FineLine Technologies, and Solstice Mobile

▪ Graduated cum laude from the University of Georgia

R.B. McCutcheonVice President [email protected]

hr t n & t s r u russell 2000 1,415.84 2.4% 22.9% · accenture work market $25 q1 2017 great...

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