IT Services, Cloud and Managed Services

M&A Update

Q3 2016 October 31, 2016

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Table of Contents

M&A Market Brief – Page 3

Global M&A YTD 2016 – Page 4

IT Services, Cloud and Managed Services M&A Drivers 2016 – Page 5-6

Notable M&A Transactions, Q2 2016 – Page 7-8

Publicly Traded IT Services Firms (Valuation Table) – Page 9-10

M&A Spotlight: Apollo Global Management / Rackspace – Page 11

M&A Spotlight: Synnex / Minacs – Page 12

M&A Spotlight: Accenture / Redcore and DayNine Consulting– Page 13

DISCLAIMER

The information contained herein is of a general nature and is not intended to address the circumstances of any particular company,

individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such

information is accurate as of the date it is received or that it will continue to be accurate in the future. We perform our own research

and also use third party research. No one should act on such information without appropriate professional advice after a thorough

examination of the particular situation. This is not an offer or recommendation to buy or sell securities nor is it a recommendation

to merge, acquire, sell or exit a specific company or entity. We do not hold any equity or debt position in any of the securities listed

herein as of the date of this report.

Sources for our research and data include: PitchBook, MergerMarket, Wall Street Journal, Company Websites, SEC Filings, Bloomberg, TechCrunch

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M&A Market Brief IT Services, Cloud and Manged Services M&A Activity surges compared to Q2 2016

Worldwide

Global M&A activity during the third quarter of 2016 improved 8.8% over that of the second quarter. Due to political uncertainty, increased regulation, and decreaased confidence by boards, 2016 YTD activity is down 20.2% from last year.

Global deal value for Q3 2016 rose to $812.9 billion from $747.2 billion in Q2 2016. Global M&A deal value in YTD is down to 2.2 trillioncompared to 2.8 trillion in 2015.

Industrial & Chemicals has been the most active sector this year with a 41.1% increase in deal value YTD. A record high 7 mega-deals worth $183.6 billion has pushed M&A activity to a post crisis high, creating more M&A opportunities for PE buyers and sellers.

• Although Brexit caused major economic uncertainty, the concurrent drop in sterling following the decision to leave the EU caused opportunistic dealmakers to engage in a bargain hunt for UK assets. As a result of a few megal deals, Q3M&A activity skyrocketed from 12.9 billion in Q2 to 49.3 billion in Q3.

United States

• US M&A activity remained strong despite concerns over governement anti-trust policies, the Presidental election, and a possible interest rate hike

• In Q3 2016, deal value totaled $384.8 billion, compared to $327.9 billion in Q2 2016 (17.4% increase).

• YTD 2016, US M&A deal value dropped 29.6% from $1.4 trillion 2015 Q1-Q3 to $962.4 billion YTD.

• The US was home to three of the five largest global transactions, including the highest valued deal: Bayer's $65.3 billion acquisition of Monsanto. Overall the US captured 43.8% of the global market share, compared to 24.1% for Europe and 22% for Asia.

• The US technology industry experienced a slight decrease in M&A activity. In Q1-Q3 2016, technology deal value dropped to $141.1 billion compared to $$150.3 billion in 2015 YTD (8.8% decrease).

IT Services

The software & IT services sector led in both deal volume and value, with 1,009 transactions valued at $85.8 billion through the third quarter of this year.

The IT services sector continues to see healthy M&A activity, with 222 M&A transactions either announced or closed in thequarter

Q3 deal value increased significantly to $6.7 billion from 953 million in Q2 for U.S. based IT services deals.

Strategic acquirers accounted for 86% of deal volume in Q3 2016.

Valuations slightly increased for deals that were publicly announced. We noted EV/Revenue multiples ranging from 0.84x to 1.81x and EV/EBITDA multiples ranging from 5.59x to 11.0x.

Buyer interest in cloud software and services continues todrive IT services M&A activity at all size spectrums of the market.

.

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801.5

593.2

420.9

461.2

614.6

465.0

446.8

657.0

759.4

639.9

1280.0

678.2

396.4

432.1

586.4

565.5

560.0

963.9

1039.0

747.2

852.0

684.9

327.6

492.9

599.6

523.0

645.6

856.5

957.5

812.9

734.4

458.8

570.1

713.3

479.4

757.5

571.4

868.5

1205.0

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Value of deals ($USD bn)Q1 Q2 Q3 Q4

Global M&A Deal Value — Quarterly Comparison

Source: MergerMarket

IT Services M&A Activity — Quarterly Comparison

Source: Petsky Prunier, Berkery Noyes

Total 3,667.8

Total 2,415.1

Total 1,714.9

Total 2,099.6

Total 2,279.9

Total 2,310.9

Total 2,223.8

Total 3,255.9

Total 3,960.9

Total 2,199.9

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IT Services, Cloud and Managed Services M&A Drivers for 2016-2020 Hybrid Cloud By 2020, only 20% of enterprise workloads are expected to remain on premises as outsourced and cloud facilities become more popular. Having both on premises and cloud facilities allows user companies instant access to standard business capabilities via the public cloud, as well as a regular but more secure access via the customized private cloud. According to industry experts, by 2018, at least 50% global IT spending is forecast to be cloud-based, with over 50% enterprises expected to create and/or partner with industry cloud platforms. Further, during 2013–2018, the global cloud market is estimated to grow at ~19% CAGR to $139 billion, including a $70 billion contribution by private cloud. Although the hybrid deployment model offers greater flexibility for IT and the enterprise, it has brought additional problems for IT professionals. CIOs and administrators have to find new ways to measure key performance indicators (KPIs) as data center sources become more complex. Furthermore, using a hybrid model involves comprehensive training for employees and additional costs in coordinating movement from on-premises and off-premises facilities. Service brokers have a new importance in the IT process, ensuring continuity and consistency between providers, KPIs and service-level agreements. Source: http://www.thesmartcube.com/insights/sourcing/item/it-outsourcing-trends-in-2016

Cyber Security Top Trend: With the emergence of telematics and IoT in business and consumer applications, companies are dealing with higher rates of cyber attacks. For IT and tech-enabled services companies, these security threats present opportunities for potential business and another layer of internal complexity. Due to the increasing number of separate technology solutions, systems integrators and IT services providers will find it harder to deliver an acceptable security solution, and there will be a corresponding increase in the more flexible SaaS model of security from specialized vendors. Additionally, service providers have typically been the cause of security breaches. With increasing fines, more data at stake, and more complex systems, firms may defer business to highly specialized vendors. Source: Hampleton Partners Artificial Intelligence

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Tech companies like Google, Apple, Salesforce, and Amazon are investing in more AI-orientated research and acquiring more AI start-ups at a rapid rate. investment in AI is so strong that nearly 60% of the AI companies acquired since 2011 had VC backing. In 1H2016 Apple, Salesforce, Amazon and eBay have made 6 deals in SaaS & Cloud. There were multiple deals focused on AI-based image recognition software. In fact, Apple, Salesforce, Amazon and also KYOCERA have invested in companies with image recognition SaaS. Apple’s acquisition of Emotient, a provider of emotion detection and sentiment analysis software, is an interesting example of this trend. While this technology has been recently applied to areas such as healthcare in order to help read the emotions of people who struggle to express themselves, it is unclear how Apple plans to use it going forward.

Source: http://searchitoperations.techtarget.com/news/450401389/Future-IT-trends-watch-list-highlights-adaptive-security-mesh-architectures-IoT

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Notable IT Services M&A Transactions, Q3 2016

Deal Date Company Name Buyer Description Deal Size (million,

USD)

EV/ Revenue

EV/ EBITDA

05-Oct-2016 Tegen Metaphor IT Provider of managed IT and support services

30-Sep-2016 Epiq Systems Document Technologies

Provider of technology based services and solutions for the legal sector

1,000.00 1.71 11.00

26-Sep-2016 Red Stack Technology

Audax Group Provider of Oracle-based information technology products and services

26-Sep-2016 DayNine Consulting

Accenture Provider of Workday implementation and HR management services

13-Sep-2016 Attenda Ensano and Charlesbank Capital Partners

Provider of hybrid cloud IT and managed services

12-Sep-2016 Anthelio Healthcare Solutions

Atos Provider of information technology and business process outsourcing services to hospitals and healthcare institutions

275.00 1.38

22-Aug-2016 Redcore Accenture Provider of consulting and

services for security, identity and access management

17-Aug-2016 Adapt Datapipe and ABRY Partners

Provider of full managed IT and network services

05-Aug-2016

Rackspace US Apollo Global Management

Provider of website hosting services

4,300.00 1.81 5.59

02-Aug-2016

Minacs Synnex Provider of business process outsourcing services

420.00 0.84 7.64

27-Jul-2016 Intercom Consulting & Federal Systems

AE Industrial Partners

Provider of information technology services

27-Jul-2016 Healthcare Services Management

Huron Consulting Group

Provider of healthcare information technology and management consulting services

26-Jul-2016 Invoyent West Monroe Partners

Provider of healthcare consultancy services

26-Jul-2016 inhouseIT CalNet Technology Group and Boathouse Capital

Provider IT and managed services, consulting, cloud and hosted communications

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Notable IT services M&A Transactions cont. , Q3 2016 25-Jul-2016 Art of BI Software Datavail Provider of consulting and

systems integration for Oracle analytics focused on OBIEE and Hyperion

20-Jul-2016 Capscient PCB Apps Provider of JD Edwards systems integration and consulting

19-Jul-2016 Ardenta ABRY Partners Provider of cloud based information technology services to eGaming co's

18-Jul-2016 INSYS Group Luxoft Holding Provider of information technology and business consulting services, security and big data solutions

71.90 1.36

05-Jul-2016 Webvanta Provider of web hosting and support services

01-Jul-2016 PPL Solutions Hansen Technologies

Provider of back office services including customer care and billing solutions for cable and pay tv and telecom co's

Source: Solganick & Co. Analysis, Pitchbook

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Publicly Traded IT Services Firms Valuation Table (as of 9/30/16)

IT Consulting Ticker Stock Price Market Cap (mm) EV/ Revenue EV/ EBITDA

CRA International CRAI $26.59 $235.2 0.7x 10.9x

FTI Consulting FCN $44.56 $1,821.3 1.2x 10.6x

Huron Consulting Group HURN $59.76 $1,290.4 2.1x 9.9x

Information Services Group III $3.99 $147.1 0.9x 11.3x

Navigant Consulting NCI $20.22 $962.1 1.3x 9.3x

Resources Global Professionals RECN $14.94 $549.5 0.7x 7.8x

The Advisory Board Company ABCO $44.74 $1,857.0 3.1x N/A

The Hackett Group HCKT $16.52 $497.2 1.9x 18.9x

Average 1.5x 11.2x

System Integrators Ticker Stock Price Market Cap (mm) EV/ Revenue EV/ EBITDA

Accenture ACN $122.17 $76,397.2 2.4x 15.6x

Capgemini CAP.PA $97.68 $16,454.0 1.5x 13.9x

Ciber CBR $1.15 $91.9 0.1x 6.0x

CGI Group GIB $47.73 $14,620.1 2.2x 12.6x

Edgewater Technology EDGW $8.50 $100.1 0.8x 28.5x

The Hackett Group HCKT $16.52 $497.2 1.9x 18.9x

Perficient PRFT $20.15 $680.9 1.6x 13.8x

Average 1.5x 15.6x

Value Added Resellers (VAR) Ticker Stock Price Market Cap (mm) EV/ Revenue EV/

EBITDA

CDW CDW $45.73 $7,663.2 0.9x 11.4x

ePlus PLUS $94.41 $680.5 0.5x 7.0x

Insight Enterprises NSIT $32.55 $1,201.5 0.2x 7.0x

Average 0.5x 8.5x

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Outsourcing Ticker Stock Price Market Cap (mm) EV/ Revenue EV/ EBITDA

Accenture ACN $122.17 $76,397 2.4x 15.6x

Atos ATO.PA $107.47 $10,874 0.9x 9.0x

Computer Sciences CSC $52.21 $7,233 1.2x 8.9x

Hewlett-Packard HPQ $15.53 $27,224 0.3x 3.2x

IBM IBM $158.85 $153,440 2.3x 9.6x

Unisys UIS $9.74 $487 0.1x 3.6x

Average 1.2x 8.3x

Offshore Ticker Stock Price Market Cap (mm) EV/ Revenue EV/ EBITDA

Cognizant Technology Solutions CTSH $47.71 $28,997 2.1x 10.4x

Infosys INFY $15.54 $35,514 3.2x 11.6x

Syntel SYNT $41.91 $3,524 2.7x 8.7x

Virtusa VRTU $24.68 $724 1.5x 14.3x

Wipro WIT $7.15 $17,565 2.1x 9.6x

Average 2.3x 10.9x

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M&A Spotlight Apollo acquires Rackspace for $4.3 billion

August 26, 2016 – Rackspace (NYSE: RAX), the #1 managed cloud company, announced that it has entered

into a definitive agreement with Apollo Global Management, (NYSE: APO), a leading global alternative

private equity firm with Searchlight Capital Partners, L.P. also making a strategic equity investment in the

acquired company. For Rackspace, the deal marks the end of its public struggle against bigger cloud rivals

that offered lower-cost computing power, storage and other IT services over the internet. The cloud-

services company was unable to keep up with tech giants Amazon, Microsoft Corp. and Google in terms of

price, quality, and variety of services. Rackspace recently started helping companies shift their IT operations

to data centers run by Amazon and Microsoft, but it wasn’t enough to make up for declines in its traditional

businesses. Becoming a private company will give Rackspace time and space to complete the transition to

a services business. The company has lost about 60 percent of its market value since its shares peaked

above $80 in early 2013.

The transaction has a total value of $4.3 billion, which includes the assumption of $43 million of net cash.

The company’s shares will sell at $32.00, a 38% premium to the company’s closing stock price on August 3,

2016--- the last trading day prior to speculation about a potential sale. This transaction is expected to close

in the fourth quarter of this year.

Source: http://blog.rackspace.com/rackspace-become-private-company-acquisition-apollo-global-management

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Synnex buys Minacs for $420 million. July 13, 2016 – Synnex has announced that is has completed an agreement to buy business process

outsourcing company Minacs from its private equity owners for $420 million, This acquisition is the second-

largest deal the United States-headquartered information technology supply chain services company has

made in India. Synnex said it will merge Minacs with its Concentrix BPO unit. The acquisition will add $400

million in revenue to Concentrix, which had already become the largest BPO employer in India after

Synnex’s 2013 acquisition of IBM's Daksh business for over $500 million.

For Synnex, the transaction will bolster domain expertise in Concentrix’s automotive industry vertical and

accelerate marketing optimization and Internet of Things solutions with Minacs’ proprietary technology. The

transaction is expected to close by the quarter ended December 2016. Until the transaction is completed,

the companies will operate independently. This acquisition is part of a growing list of Indian IT and BPM

(earlier known as BPO) deals that have continued to attract investors and are becoming a key source of

merger and acquisition activity.

Source:http://economictimes.indiatimes.com/articleshow/53177235.cms?utm_source=contentofinterest&utm_medium=text&utm

_campaign=cppst

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Accenture completes deals for Redcore and Daynine consulting Aug. 22, 2016 – Accenture (NYSE: ACN) has agreed to purchase Redcore, a privately held Australia-based

consulting company that specializes in providing identity and access management services (IAM), as well

as security services for Cloud, network management, public key infrastructure, cyber defense, applications

and the internet of things. As part of its offerings, Redcore offers holistic authentication, authorization and

administration services across a range of cloud, web, mobile and adaptive access-management

technologies. The acquisition will strengthen Accenture’s existing IAM services and other critical cyber

defense services.

Sept. 26, 2016 – Accenture (NYSE: ACN) has entered an agreement to acquire DayNine, a leading global

Workday consulting and deployment services provider with considerable expertise in assisting companies

in transforming their employee experience and financial management systems to better navigate change

and drive growth. The acquisition will extend Accenture’s already strong position in Workday and provide

new value for clients. After the deal is finalized, an estimated 400 DayNine professionals with 1,250 Workday

certifications will join Accenture’s existing Workday group operating within the Accenture Cloud First

Applications team. The combined group, which will be led by DayNine CEO and co-founder Tim Ramos,

will become the largest certified workforce in the Workday ecosystem and will work across all phases of

Workday deployment.

Sources: https://newsroom.accenture.com/news/accenture-to-acquire-australian-security-company-redcore.htm

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https://newsroom.accenture.com/news/accenture-to-acquire-daynine-expanding-workday-capabilities-to-transform-employee-experience-for-clients.htm

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About Solganick & Co. Solganick & Co., Inc. is an independent investment banking and M&A advisory firm focused exclusively on the global Software, IT Services and Digital Media industry sectors. We advise buyers and sellers of companies and efficiently execute M&A transactions that help increase shareholder value. Our professionals have advised on $20+ billion in M&A transactions to date and have current clients and relationships globally with entrepreneurs, companies and leading private equity firms within the sectors we cover. Please contact us for information regarding this report or to inquire about an M&A transaction.

Solganick & Co., Inc. 515 S. Flower St. Ste 500 Los Angeles, CA 90071 +1 (310) 684-3130 www.solganickco.com Aaron Solganick, CEO Alexander Khoras, Director of Business Development aaron@solganickco.com akhoras@solganickco.com Rachael Fang, Associate Michael Okayo, Associate rfang@solganickco.com mokayo@solganickco.com Sid Akkineni, Analyst W. Alex Huang, Analyst sakkineni@solganickco.com ahuang@solganickco.com Follow Us on Twitter: @Solganickco