it services, cloud and managed services...

M&A Market Brief

EV/Revenue EV/EBITDA

Source: Solganick & Co. IT Services Index

As of May 31, 2016

10.62

13.93

7.11

13.78

8.11

Consulting

Systems Integrators

Outsourcing

Offshore

VAR

1.33

1.43

1.04

2.96

0.51

Consulting

Systems Integrators

Outsourcing

Offshore

VAR

Solganick & Co.

IT Services, Cloud and Managed Services

Monthly M&A Update: May 2016

Solganick & Co. Investment Banking + M&A Advisory

Although the number and volume of deals tumbled in the first quarter of 2016, the second quarter has seen improvement in deal counts of IT service activities. The M&A market in May also demonstrates a promising trend, with significant merger and acquisition activities in IT consulting, IT security services and systems integration sectors. While the valuation in technologysector drops significantly, IT services remained in a similar valuation pattern as previous quarters, and improved from April toMay.

With the improvement in deal counts in the second quarter of 2016, the deal size has also improved in May. There are two $100 million-plus deals: OpenText acquired ANXeBusiness and Black Knight Financial Services acquired eLynx. Both deals demonstrate the continued active market for the cloud-based information service and IT services for financial institutions. Cloud-based information services and financial technology has been recent hot spots of M&A due to the strong market potential and robust demand. Transactions in May show that the trend will continue to exist in the IT services market.

The market valuation of IT services have also improved significantly in all sectors except the VAR sector. The offshore EV/Revenue has been improved the most from 2.77x (April) to 2.96x (May). The EV/EBITDA multiple has been improved from 12.88x to 13.78x,representing a significant jump in a single month. This further demonstrates the strong confidence in the ITservice market.

Highlight - Deals of the Month

F12.net acquired Xcel Professional ServicesMay 23, 2016 - F12.net is an Alberta, Canada Alberta based company that offers managed IT services and consulting on special projects. It has mastered the Haas (hardware as a service) business model and offers strong customer service. On May 23rd, F12 acquired the managed services provider (MSP), Xcel Professional Provider (MSP). Xcel operated in three sectors: managed IT services, managed Cloud and Professional Services. Founded in 2009, Xcel has completed 1164 tickets and achieved 99.1% clientsatisfaction. It specializes in the oil and gas, construction and non-profit sectors.

After the acquisition, the companies will unify under F12.net brand. As Xcel focuses on IT services for small and medium businesses in Calgary and Edmonton, this acquisition will help F12.net expands its presence in the Alberta and Calgary markets.Due to the influence of the slowdown of the oil and gas sector, this acquisition helps F12 better position itself in the market.

In a statement, Alex Webb, the CEO of F12, mentions that “This acquisition fits with F12’s strategy of expanding by finding disciplined managed services companies who have found the secret of efficient IT support and high customer satisfaction. XCEL’s team fits our culture; they are a humble, hardworking team who enjoy working with each other and value their customers”

Terms of the deal were not disclosed.

Huron Consulting Group (Nasdaq: HURN) closed the acquisition of ADI StrategiesMay 2, 2016 – Huron Consulting Group is a leading provider of business consulting services and specializes in serving clients inthe healthcare, higher education, life sciences and commercial sectors. It first announced the purchase of the ADI Strategies onApril 26th and the deal is closed on May 2nd. ADI Strategies is based in San Francisco and is an Oracle Platinum Partner. It helps companies in diverse industries work more efficiently by designing, building and implementing analytic solutions.

After the acquisition, ADI Strategies will be included in the Huron Business Advisory segment. This transaction will help Huron create one of the largest and fastest-growing Oracle application and analytic practices. This allows Huron to deliver the latesttechnology to a broader client base.

Terms of the deal were not disclosed. The agreement of purchase is expected to be signed in the second quarter 2016.


Highlight - Deals of the Month

Higher Upstream LLC acquired AtherioMay 11, 2016 - Headquartered in Irvine, CA, Higher Upstream is an international provider of professional and managed services, enterprise software development, system integration, and recruitment specializing in solutions built in the Oracle platforms including JD Edwards, Lawson and PeopleSoft. As a gold partner of Oracle, Higher Upstream delivers comprehensive business solutions in theenterprise resource planning (ERP) systems space. With over 30 years of diversified and international management experience in optimizing business performance, Higher Upstream is well versed in industry sectors of manufacturing and distribution, energy, chemical, life sciences, agriculture, food processing, government entities, property management and construction. On May 11th, Higher Upstream announced the acquisition of Atherio. This deal is advised by Solganick & Co.

Atherio is a leading global Oracle technology services company providing end-to-end technology enabled businesses solutions to the enterprise. Headquartered in Bethesda, Maryland with offices in Dallas and San Francisco, Atherio is one of the fastest growing companies in the US. It is differentiated in the market through the focus on client satisfaction, flexible delivery models and by ensuring measurable business models for clients. This acquisition enables Higher Upstream better integrate the Oracle technology services and expands the geographical outreach.

Terms of the deal were not disclosed. Solganick & Co. advised Higher Upstream on its acquisition of Atherio.

Contax announced the acquisition of Onshore PartnersMay 13, 2016 – CONTAX is a Gold SAP Partner, authorized by SAP to sell, implement and support SAP cloud and on-premisesoftware. As a privately held company headquartered in Chicago, it has eight delivery centers in USA, Canada, Australia and the Netherlands and has a global presence in SAP partner ecosystem. Contax’s solutions include ERP, CRM, HCM, EPM and BI. On May 13th, Contax announced the acquisition of the Onshore Partners.

Onshore Partners is a boutique IT consulting firm that brings the talent in the SAP BPC and Enterprise performance managementecosystem. As a SAP Services Partner, Onshore Partners specialize in the Enterprise Performance Management (EPM) and SAP BPC services. With a strong core practice, deeply skilled resources, and a focus on quality of delivery, Onshore Partners offers solutions maximize business performance and allows clients to focus on driving business results.

After the acquisition, the addition of the Onshore Partner’s experience and expertise is believed to bring Contax closer to the goal of being No.1 in the SAP solutions space. “Onshore Partners has built a great reputation for providing expert EPM services. Theyhave serviced a very similar base to ours, and have become a significant player in their niche.” said Michael Pearson, Presidentand CEO of Contax, “The addition of Onshore’s specialized expertise in EPM allows us to better serve our existing customers, and enables us to continue building our BPC software and solutions practice in North America, Europe and Australia.”

Terms of the deal were not disclosed. Solganick & Co. advised CONTAX on its acquisition of OnShore Partners.


Source: Pitchbook

Select Deals Announced in May 2016


Announcement

Date Target Acquirer Target Desciption Deal Size

5/27/2016NetBoss Technologies

Enghouse Systems

Provider of network management and assurance services to network operators. The company provides an integrated service platform encompassing fault and performance management, service correlation and customer analytics.

7.24

5/27/2016 Softmart PC ConnectionProvider of complete end-to-end technology services. The company is a single-source provider that delivers technology, tools and services.

NA

5/26/2016 MC+A YippyProvider of technology support and consulting services. The company has designed, developed and deployed work for Google clients.

NA

5/25/2016 Lifecode Vela DiagnosticsProvider of data interpretation service. The business unit provides integration, data interpretation, and report generation pipelines services.

NA

5/23/2016Xcel Professional Services

F12.net

Provider of outsourced IT support and consulting services. The company offers network design and implementation, server virtualization, managed IT and cloud services to the small and medium businesses.

NA

5/23/2016 Intelligent Decisions Federal Data SystemsProvider of IT services. The company offers services related to cybersecurity, cloud, simulations and network management.

NA

5/17/2016 FreedomVoice GoDaddy Operating Company

Provider of communication and IT services. The company provides telecom tech support, cloud-hosted and virtual phone systems to support entrepreneurs and small business owners. Its system offers its clients to manage business calls, voicemail messages and faxes.

47

5/16/2016 eLynx Black Knight Financial Services

Provider of secure electronic document-delivery services to the mortgage industry. The company offers web-based services for paperless document collaboration and distribution services.

115

5/13/2016 Onshore Partners Contax

Provider of SAP solutions and business technology consultancy services, the company offers Enterprise Performance Management (EPM) services and specialized SAC BPC services to companies throughout the United States

NA

5/11/2016 Atherio Higher Upstream

Provider of Oracle solutions and techology enabled business services in the United States. The company provides outsourced consultancy services in the fields of web, mobile, e-Commerce, ERP, CRM, MDM, and payments technology

NA

5/10/2016Omega Discovery Solutions

Skyline Discovery Consulting

Provider of data-management technology for the legal sector. The company develops custom workflows for eDiscovery projects, based on specifics of the dataset, client experience, software preference, timeline and budget.

NA

5/5/2016 ANXeBusiness OpenText

Provider of cloud-based information exchange services. The company offers managed compliance, security and connectivity services to US automotive and healthcare industries.

100

5/3/2016 Danya International DLH Holdings

Provider of knowledge management and program management systems. The company is engaging in providing technology-enabled services by using communications, evaluations and technology programs.

38.75

5/3/2016 Milestone Systems Kudeski Group

Provider of network security services. The company provides network security and infrastructure, training, consulting and managed services in the areas of financial, retail and services, government, business services, legal, healthcare, manufacturing and education.

NA

5/3/2016 Teknovare BP3

Provider of decision management systems. The company operates as a technology support consulting firm that offers services regarding businesses policy analysis, business rules management systems and custom optimization through its designed support tools.

NA

5/2/2016 ADI Strategies Huron Consulting Group

Provider of business consulting and advisory services. The company offers service such as enterprise performance management, risk management, and business intelligence with the primary focus on implementation of the Oracle enterprise application suite.

NA

5/1/2016 KlearSky Solutions Tessitura Network

Provider of IT consulting services to the performing and visual arts sector. The company provides digital design, digital branding, website development, database management service and custom technology integration to its clients.

NA

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.

Contact Us

Aaron Solganick, CEO

Email: [email protected]

Michael Okayo, Associate


Rachael Fang, Associate


Alex Khoras, Director of Business Development


Elaine Song, Analyst


David Gunther, Analyst


Zach Chen, Analyst


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