IT & Professional Services Insights€¦ · M&A activity as the landscape continues to evolve. IT & Professional Services Insights. DECEMBER 2019. January 2019. Bowstring professionals

Insight on Cutting Edge Technology ndash Robotic Process AutomationRPA or Robotic Process Automation is a highly innovative technology process that is gaining significant momentum across the enterprise technology landscape The term RPA refers to the automation of repetitive tasks performed by people in corporate environments More specifically it is the use of miniature software applications or Bots that are easy to use scripts that act as integration connectors into existing enterprise software applications

Corporations are a major driving force for RPA adoption and are implementing the technology for several reasons including

Reduced administrative costs ndash typically via lowering headcount

Increased accuracy of data ndash automation instead of human-entry

Increased efficiency of staff ndash reduction of re-keying

Fast way to leverage existing IT infrastructure and drive massive gains in productivity and utilization

Market Dynamics amp Drivers The RPA market is still in its early stages but the software and associated consulting ecosystem is rapidly developing Gartner estimates that the market for RPA software and consulting services is approximately $23 billion in 2019 and is expected to grow over 25 per year reaching $40 billion by 2022

Key Players Bots are developed using advanced software applications and implemented by consulting companies The following table provides a summary of the major software providers in the RPA space

Industry Predictions Our experienced investment banking professionals have developed several key predictions for the RPA industry and strongly believe that corporations will continue to adopt the use of Bots as we exit the experimental stage and confirm the initial use cases for the technology Further the highly-valued RPA Software vendors will go public raising significant additional capital and creating more awareness for the category The associated consulting services ecosystem will continue to emerge and a handful of high growth pure-play RPA consultancies will be acquired in the next 12-18 months All of these factors will drive strong growth for the burgeoning RPA space over the next five years and we predict significant MampA activity as the landscape continues to evolve

IT amp Professional Services InsightsDECEMBER 2019

January 2019

Bowstring professionals with expertise in Cloud Computing will attend the

AWS reInvent ConferenceSchedule a meeting to discuss

MampA sector trends and insights

dholbrookbowstringadvisorscom

Company Headquarters Key Notes

New York NY Raised $568M in April 2019 at $7B valuation Investors include Accel Coatue Sequoia T Rowe Price Wellington

San Jose CA Raised $290M in Series B funding in November 2019 at $68B valuation Investors include Salesforce Ventures Softbank Goldman Sachs

London England Publicly traded (AIM PRSM) Market capitalization $930M Acquired Thoughtonomy June 2019

Tampa FL Publicly traded (NASDAQ SYKES) Market capitalization $15B Acquired RPA software firm Symphony Ventures in 2018 for ~$70M

Note The testimonials presented in this newsletter are applicable to the individuals depicted and may not be representative of the experience of others The testimonials are not paid and are not indicative of future performance or success

Bowstring Deal Spotlights

Bowstring served as the exclusive financial advisor to Veracity Consulting Group(ldquoVeracityrdquo) a digital transformation firm on its acquisition by Resources Connection Inc(NASDAQ RECN) a multinational business consulting firm operating as Resources GlobalProfessionals (ldquoRGPrdquo)

Veracity is a fast-growing digital transformation firm based in Richmond Virginia thatdelivers innovative solutions to the Fortune 500 and leading healthcare organizationsVeracity achieved $214 million in revenue in 2018 which represents 58 growth over2017

ldquoWe see an exceptional opportunity to accelerate Veracityrsquos momentum to grow and scalewhile delivering combined value to our and RGPrsquos client base around the worldrdquo saidBhadresh Patel CEO of Veracity ldquoBowstring Advisors was extremely helpful during ourjourney to find the right partner The industry knowledge honest and straightforwardadvice and dedication of the Bowstring team members exceeded all expectations They aretrusted advisors and true leaders in the Tech Services industryrdquo

Bowstring served as the exclusive financial advisor to Bluetree Network (ldquoBluetreerdquo) anelectronic health records consulting and strategy firm that helps healthcare providersmaximize their use of technology on its acquisition by Providence St Joseph Health

Bluetree specializes in helping healthcare organizations maximize Epic ndash a digital healthrecords software Founded by former Epic leaders the Companyrsquos experts have deliveredend-to-end strategy delivery and support to more than 140 healthcare systemsnationwide Bluetree will operate as a separate subsidiary of Providence St Joseph Health

Jeremy Schwach CEO of Bluetree said ldquoBowstring has been a great partner over the yearsDuring this process they demonstrated perseverance and flexibility but also werenrsquot afraidto get their hands dirty when we needed help with the heavy lifting I really donrsquot think wewould have been successful without themrdquo

The Bluetree transaction represents Bowstringrsquos 18th Healthcare IT (HCIT) transaction

Bowstring served as the exclusive financial advisor to Receivable Solutions (ldquoRSirdquo) anational provider of revenue cycle management (ldquoRCMrdquo) services to hospitals and healthsystems on its growth recapitalization investment from WestView Capital Partners(ldquoWestViewrdquo) a Boston-based private equity firm focused on middle-market growthcompanies

RSirsquos receivable management and revenue cycle outsourcing services offer an attractivevalue proposition for hospitals looking to outsource all or portions of their revenue cycleoperations while maintaining best in class patient experience

Paul Reardon and Donnie DuRant co-founders of RSi remarked ldquoWe selected BowstringAdvisors because of their specific RCM knowledge a very comprehensive process that wewould follow and their confidence in being able to provide us with a very favorableoutcome The Bowstring team developed a personal relationship with us and it helpednavigate the decision-making and planning process even when there were tough decisionsto be maderdquo

ITPS Trading Multiples

Conferences Trading Multiples Indices amp Rates

Major Indices amp Rates

Reflections from IT Nation Connect

Source SampP Capital IQ public statistics as of 10302019

Enterprise Value

LTM Revenue LTM EBITDA

IT Services 26x 149x

Consulting 19x 129x

Managed Services 36x 119x

During our conversations at this yearrsquos IT Nation Connect we heard the following three statements mentioned on a consistent basis

Technology advancements have made a huge impact on the SMB market SMB firms no longer have to hire dedicated in-house IT resources but instead can rely on MSPs to provide remote sophisticated IT maintenance monitoring and support Improvements in technology have made this a high demand service ‒ providing 247 support via a standard monthly fee model The key to success is to focus on people and support in addition to technologies in order to be viewed as a trusted partner not just a provider

The universe of MSPs continues to be highly fragmented There are tens of thousands of MSP providers across the US and very few have been able to surpass $4M or $5M of EBITDA Those that have achieved that scale have mostly been acquired by PE firms There are still some independent ldquodiamonds in the roughrdquo with EBITDA scale but most MSPs still have less than $10M of revenue This SMB MSP market represents an incredible consolidation opportunity due to advances in technology to enable remote solutions the aging of the original MSP founders and the increasing demand for this solution

Organic growth continues to be challenging Most SMB MSP clients rely on referrals or word of mouth to engage an MSP provider Many of the most successful MSPs still utilize a founder CEO led sales model so figuring out how to scale the sales team is a challenge for MSPs Staying focused on a local geography does help enable the sales process

Recent Awards amp Award Nominations

Change

3 Month 12 Month

Dow Jones 27876 (00) 93

NYSE 13441 04 92

NASDAQ 8520 04 160

AMEX 2431 (39) (22)

SampP 500 3110 11 136

Russell 2000 1589 (08) 44

USDEuro 091 02 22

USDYen 10890 02 (35)

USDPound 077 (56) (11)

US Prime Rate 475 (009 Bps) (005 Bps)

US Treasury - 10 Year 177 (014 Bps) (043 Bps)

LIBOR - 3 month 192 (015 Bps) (025 Bps)

Fed Funds Overnight Rate 155 (024 Bps) (017 Bps)

Close as of 10302019

US PE Middle Market Deal Activity

Quarterly Trends in US Middle-Market ITPS MampA Activity

MampA Activity and Trends

ITPS Public Market Valuations

Middle-market valuations across the ITPS space remainhealthy and public ITPS companies are averaging 158xthrough Q3 2019

US private equity buyout activity has slightly droppedthrough the YTD period ended Sept 2019 versus thesame period last year

We attribute a majority of this slowdown to sellerswanting full credit for fiscal year 2019 results anddeliberately extending processes to push buyers forhigher valuations

Waiting for full year results while tracking a potentialeconomic downturn has been a delicate balancing act forsellers this year but we believe the underlying marketremains strong and that transaction activity will acceleratethrough the end of the year and lead to a stronger start toFY 2020 versus the prior period

Bowstring Advisors has successfully directed manybusinesses through similar economic climates and ourgroup of seasoned investment banking professionals havesignificant experience leveraging complex transactiondynamics to maximize outcomes for clients

(EV EBITDA)

( of Deals)

Sources SampP Capital IQ public statistics as of 10302019 Pitchbook ldquo2019 Annual US PE Middle Market Reportrdquo Bowstring proprietary MampA database

($ Billions)

$194 $207$248 $245

$351 $317 $315$373 $404

13381517

19331737

2276 22502417

2582 2853

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Deal Value Number of Deals Closed

156x147x

119x 116x

130x120x

IT Services Consulting Managed ServicesQ1 2019 Q2 2019 Q3 2019

109 10998

87 8699 98

89 85102 99 104 108 112 115 110 107

24 2028

16 14 2717

16 2221 18 17 9 11 133

5 5 3 24

5 4 31

2 3 3 0 6 2 0 1

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2015 2016 2017 2018 2019

Undisclosed Less than $100M $100M - $499M $501M - $1000M

Notable RPA Transactions

Source Capital IQ and Pitchbook

Developer of a SaaS based robotic process automation

platform designed to automate the execution of business

processes by human workers

Provider of robotic process automation artificial intelligence

crowd sourcing and impact sourcing solutions

Q2 2019

ACQUIRED BY

A PORTFOLIO COMPANY OF

Q4 2018

Developer of a SaaS based RPA platform designed to automate

the execution of business processes by human workers

Provider of RPA artificial intelligence crowd sourcing and

impact sourcing solutions

Powerful all-in-one platform that models analyzes and

optimizes business processes

Kofax is a leading provider of software to simplify transform

business operations

Leading Robotic Process Automation vendor providing a complete software platform to help organizations efficiently automate business processes

Q3 2019 Q3 2019

Q2 2019

PE GROWTH EXPANSION

A SUBSIDIARY OF

LATER STAGE VC

ACQUIRED BY

Leading RPA vendor providing a complete software platform

to help organizations efficiently automate business processes

RPA platform for building and executing software bots

powered by AI trained to automate complex business

processes

Q4 2019

LATER STAGE VC

Provider of information technology services

Provider of managed IT services based in Germany

Provider of full-service managed IT services

Q4 2019

Notable Consulting Transactions

ACQUIRED BY

Q1 2019 Q1 2019

Notable Managed Services Transactions

Provider of digital transformation consulting

services

Provider of software development services and

innovative IT solutions

Provider of cloud-based computing services to

businesses in Latin America

Q1 2019 Q1 2019

ACQUIRED BY ACQUIRED BY

ACQUIRED BY

Q2 2019

ACQUIRED BY

Public Trading StatisticsConsulting

Managed Services

IT Services

Source SampP Capital IQ public statistics as of 10302019 Denotes figure excluded from mean median calculation

Market Data Operating Statistics EV as a Multiple of GrowthStock Price LTM LTM CY2019 16 - 17

Company Name 103019 Revenue EBITDA Margin Revenue EBITDA Revenue EBITDA Growthg

Infosys Limited $66060 780 $28006022 $26453767 $123860 $29810 241 30x 126x 27x 109x 74 76

Wipro Limited $25475 845 $14487657 $12326717 $5990750 $1261630 211 21x 98x 19x 98x 74 36

Tech Mahindra Limited $75440 891 $6555208 $5709518 $3555890 $607350 171 16x 93x 15x 87x 100 87

Cognizant Technology Solutions C $5989 800 $330767 $316757 $166280 $31690 191 19x 100x 18x 90x 98 78

EPAM Systems Inc $17725 882 $97222 $91764 $20460 $3215 157 45x 285x 33x 175x 250 251

Globant SA $9263 825 $33943 $34037 $5784 $1040 180 59x 327x 42x 211x 281 256

TTEC Holdings Inc $4776 947 $22200 $25603 $16015 $1938 121 16x 138x 15x 113x 158 80

ICF International Inc $8449 978 $15875 $20159 $14188 $1296 91 14x 156x 13x 132x 37 70

Huron Consulting Group Inc $6649 972 $14441 $17693 $8499 $1090 128 21x 162x 19x 153x 09 50

Perficient Inc $3938 942 $12933 $14104 $5313 $672 126 27x 210x 23x 137x (04) 31

The Hackett Group Inc $1695 742 $5061 $5015 $2587 $406 157 19x 123x 17x 94x 12 02

Mean 873 $900875 $176376 161 26x 149x 22x 127x 99 93

Median 882 $16015 $1938 157 21x 132x 19x 113x 74 76

of 52Week High

Market CapEnterprise

Value3 Year Rev

Company Name 103019 Revenue EBITDA Margin Revenue EBITDA Revenue EBITDA Growth

Accenture plc $18658 920 $1184901 $1128012 $432150 $69230 160 26x 163x 286x 154x 100 95

FTI Consulting Inc $10890 921 $39789 $41967 $22555 $3348 148 19x 125x 211x 121x (01) 76

Exponent Inc $6449 887 $33483 $31629 $3744 $970 259 84x 326x 884x 39x 102 81

Resources Connection Inc $1480 825 $4740 $5483 $7227 $585 81 08x 94x 084x 88x (25) 68

CRA International Inc $4299 793 $3386 $5022 $4409 $419 95 12x 133x 121x 108x 139 115

Mean 869 $94017 $14910 149 19x 129x 20x 102x 63 87

Median 887 $7227 $970 148 04x 110x 04x 88x 100 81

3 Year Rev CAGR

of 52Week High

Akamai Technologies Inc $8739 938 $141572 $147941 $28349 $7922 279 52x 187x 48x 113x 60 72

Zayo Group Holdings Inc $3424 997 $80899 $139307 $25780 $11707 454 54x 119x 53x 105x 290 144

j2 Global Inc $9526 987 $46599 $56950 $13125 $4923 375 45x 119x 40x 97x 279 166

CSG Systems International Inc $5222 913 $16628 $19479 $9893 $1676 169 20x 117x 21x 88x 38 ND

Endurance International Group Ho $448 445 $6543 $24385 $11185 $2802 250 22x 85x 21x 77x 59 ND

Internap Corporation $221 254 $561 $7746 $3079 $873 284 25x 89x 25x 70x (59) ND

Mean 756 $15235 $4984 302 36x 119x 35x 92x 111 127

Median 926 $12155 $3862 282 35x 118x 32x 93x 60 144

of 52Week High

Value3 Year Rev

IT Services Consulting Managed Services SampP 500

IT Services Consulting Managed Services

Stock Market FundamentalsSector Indices vs SampP 500

Valuation Trend Data (EV LTM EBITDA)

3 mos 12 mos 3 yrsIT Services 15 (44) 86Consulting (108) 26 74Managed Services 23 (60) (95)

3 mos 12 mos 3 yrsIT Services 104 300 309Consulting 215 211 602

Managed Services 203 (07) 315SampP500 117 93 414

Bowstring Advisors a division of Citizens Capital Markets 3550 Lenox Road NE Three Alliance Center Suite 1200 Atlanta GA 30326 4044614600 bowstringadvisorscom

Bowstring Core Coverage

Human Capital Management

Staffing Recruiting

Education amp Training

HR Services

BPO Professional Services

Healthcare

Revenue Cycle Management

Provider Services amp Technology

Payer Services amp Technology

IT Services

IT amp Professional Services

Consulting

Solution Providers

Managed Services

Tech-Enabled Services

Industrial Services

Facility

Distribution Supply Chain

Environmental

Infrastructure

Software

Human Resources

Marketing

Industrial

Vertical SaaS

Data amp Analytics

We combine sector intelligence with a client-focused approach to realize your companyrsquos true valueWe are the next generation middle-market investment bank

Quick Facts

70+ banking professionals across the US

120+ transactions since 2015 totaling approximately $9B in transaction value

Dedicated sponsor coverage team

Oaklins Member - Global strategic buyer access

Engagements tailored to clientsrsquo specific objectives and relevant market dynamics

Service Offerings

Mergers amp Acquisitions

Capital Raises

Financial amp Strategic Advisory

BOSTONATLANTA LOS ANGELEScopy2019 Citizens Financial Group Inc All rights reserved Banking products and services are offered by Citizens Bank NA Member FDIC Securities products and services are offered through Citizens Capital Markets Inc Member FINRA SIPC

Citizens Bank amp Citizens Commercial Banking are brand names of Citizens Bank NA Citizens Capital Markets and Bowstring Advisors a division of Citizens Capital Markets are brand names of Citizens Financial Group Inc

IT amp Professional Services Team

Jack Fay

4044614640jfaybowstringadvisorscom

Vice PresidentJustin Bentley

4044614648jbentleybowstringadvisorscom

DirectorSteve Carr

4044614613scarrbowstringadvisorscom

Director

Scott Rhodes

4044614621srhodesbowstringadvisorscom

Managing DirectorTom Donahue

6176635508tdonahuebowstringadvisorscom

Managing DirectorDon Holbrook

9495969112dholbrookbowstringadvisorscom

Managing Director

Matt Mazar

4044614668mmazarbowstringadvisorscom

AssociateChris McGanity

4044614647cmcganitybowstringadvisorscom

Vice PresidentTaylor Knox

4044614610tknoxbowstringadvisorscom

Associate

Bowstring Recent Technology Transactions

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