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CLEARSIGHT MONITOR | Digital Transformation | Q1 2019
Thank you to those who attended our Digital Transformation Summit in February! We had over 200 executives, includingthose from Fortune 500 companies, strategic acquirers, private equity firms, and entrepreneurs attend for an insightful andproductive day in Dallas. We hosted two panels, one with digital executives from AT&T, Citi, H&R Block, Omni Hotels, andSouthwest Airlines, and a second panel with M&A executives from Accenture, EY, Genpact, Sunstone Partners, andSverica Capital. For those who missed the opportunity to hear from our panelists, here are the key takeaways from eachpanel:
1) The Impact of Digital Transformation: Fortune 1000 companies are laser focused on customer experience andreorienting themselves to become more agile. As technology advances and customer expectations shift, corporatebehemoths need to rapidly innovate in order to stay ahead of their competition. Whether it be in telecommunications,financial services, healthcare, or hospitality, staying at the forefront of digital transformation and data analytics with anagile approach has become a front-of-mind focus across the entire C-Suite.
2) M&A in Digital Transformation: we aren’t seeing a slowdown in the market and expect 2019 to be robust for M&A inthe space. Rapidly growing companies across strategy, design, and engineering still command premium multiples. Andboth strategics and private equity groups are finding themselves bidding against each other more frequently. Whilestrategics have historically outbid private equity firms, the market is seeing more PE firms step up to strategic multiples forthe right business and management team.
This was a great event that brought decision makers from leading companies all over the US and across the globetogether for invaluable networking. We remain bullish on this space and expect the rest of the year to be even more activethan the strong first quarter we just witnessed!
Best,
Deal TalkPublic Market Activity
Q1 Market Activity
Digital Transformation
Q1 2019
Philo TranDirectorEmail
Joel KallettManaging Director
Gretchen SeayManaging Director
Greg TregerManaging Director
Bhavin PatelDirectorEmail
John RakowskiDirectorEmail
UX DesignDigital Strategy
Digital Transformation
Control + Click to Email a Member of the Senior Team Directly
Email Philo Tran
Engineering & Development
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019
Deal Commentary Clearsight Perspective: As millions of sensors and internet-connected devices flood the
market, every industry must adapt to collect as much actionable data as possible. However, the gatekeepers to understanding this data are IoT integrators like ClearObject who design, develop, and manage platforms that help enterprise clients navigate the complex and rapidly changing IoT landscape. ClearObject’s differentiated capabilities and enterprise client list are a strong platform upon which Egis and ABS can build the preeminent IoT integration service provider.
“ClearObject is uniquely positioned to play an important role in the creation and delivery of scalable cloud-based IoT solutions,” said E. Perot Bissell, managing partner at Egis. “We look forward to providing the financial and strategic resources to facilitate this transformative opportunity in the data-driven economy.”
Deal Commentary Clearsight Perspective: As digital agencies have diversified their capabilities across
strategy, design, and engineering, a broader group of acquirers are now considering digital agencies as avenues for growth. TEKsystems / Allegis would not have traditionally been considered an acquirer of marketing-focused firms, but as clients continue to demand integrated IT solutions, TEKsystems found it necessary to build out their capabilities through M&A. We foresee more acquirers across the IT and BPO spectrum venturing into the digital agency space in the wake of TEKsystems’ purchase.
“As we learned more about [TEKsystems], we could see how well our cultures fit together. Both organizations are driven, thoughtful, client-focused and execution-oriented. We both like to think big and, ultimately, get things done for clients. Our combined expertise and expanded capabilities will allow us to deliver more for our clients, and it gives our people the opportunity to bring new ideas to the table.” said John Simpson and Jeff Hirner, One North’s CEO and COO.
DEALTALK
Egis Capital and ABS Capital Acquire Majority Stake in ClearObject
On January 17, 2019, Egis Capital Partners and ABS Capital Partners announced they acquired a majority interest in ClearObject, an Internet of Things (IoT) systems integration provider for asset and data intensive industries. The acquisition continues Egis and ABS’ strategy of investing in technology-enabled businesses that utilize security infrastructure to drive operational efficiency.
Transaction Summary
Capabilities Overview
Target
Investors
TEKsystems Acquires One North Interactive
On January 4, 2019, TEKsystems, a subsidiary of Allegis Group, announced its acquisition of One North Interactive, an interactive agency that provides marketing and business development services for relationship-based, legal, and professional services organizations. One North will become part of TEKsystems Global Services, its full-stack consulting arm and provider of digital, creative, UX, and technology services in the United States.
Transaction SummaryTarget
Buyer
Select Client Relationships
2Sources: Company websites, financial filings, press releases, and Capital IQ
Announced DateDeal Type
Target InformationYear FoundedTarget HQ# of Employees
04-Jan-2019Acquisition
2012Chicago, IL
~100
Transaction Information
Announced DateDeal Type
Target InformationYear FoundedTarget HQ# of Employees
17-Jan-2019Majority Recap
2010Fishers, IN
~50
Transaction Information
Ideation & Planning
Design & MVP Deployment
Managed Services & Continued Innovation
Launch & Deployment
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019
Public Companies Median Trading Multiples
PUBLICMARKETS
EV / 2019E Revenue
Performance of Public Companies
EV / 2019E EBITDA
EV / 2020E Revenue
EV / 2020E EBITDA
3-Year Historic Revenue Growth 2019E Revenue Growth
2019E Gross Margin 2019E EBITDA Margin
Digital Technology Services IT Services and BPO Providers Marketing Services
Digital Technology Services IT Services and BPO Providers Marketing Services
3
Source: Capital IQ, market data as of 31-Mar-2019
26.7%
9.1%
1.5%
22.7%
8.9%
1.8%
4.1x
2.0x1.2x
3.4x
1.8x1.2x
22.1x
10.3x8.0x
18.1x
9.5x7.3x
37.5% 35.5% 34.3% 18.4%
16.4% 16.7%
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019
PUBLICMARKETS
EV / LTM EBITDA – Last Two Years
EV / LTM Revenue – Last Two Years
Stock Price Performance – Last Twelve Months
4
Source: Capital IQ, market data as of 31-Mar-2019
5.0 x
2.1 x
1.2 x
0.5x
1.5x
2.5x
3.5x
4.5x
5.5x
Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019
Digital Technology Services IT Services Companies & BPO Providers Marketing Services Companies
29.9 x
11.6 x
8.1 x5.0x
10.0x
15.0x
20.0x
25.0x
30.0x
35.0x
Apr 2017 Jul 2017 Oct 2017 Jan 2018 Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019
Digital Technology Services IT Services Companies & BPO Providers Marketing Services Companies
109.8%
149.0%
108.4%
87.2% 80%
90%
100%
110%
120%
130%
140%
150%
160%
Apr 2018 Jul 2018 Oct 2018 Jan 2019 Apr 2019
S&P 500 Digital Technology ServicesIT Services Companies & BPO Providers Marketing Services Companies
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019 5
Source: Capital IQ as of 31-Mar-2019
Date Announced Target Buyer / Investor Target Description / Deal Commentary
1/4/2019
OMG Mobile offers software development services OMG has been developing software for Speedy since 2012 and
this acquisition hastens the development of Speedy’s digitally-enabled courier services platform
1/4/2019
One North Interactive provides marketing and business development services for relationship-based, legal, and professional services organizations
TEKsystems’ Global Services business unit will rapidly improve its digital strategy and design capabilities
1/7/2019
Luxoft provides software development services and IT solutions Combining Luxoft’s digital engineering and DXC’s IT
modernization and integration capabilities will help create a differentiated end-to-end digital transformation offering
1/7/2019
INDETAIL provides web and mobile application development services
Smartvalue significantly expands its service offerings to local governments and other public institutions
1/7/2019 Interglobe Technologies provides IT and BPO solutions Interglobe will use this capital injection to invest in customer
development and analytics capabilities
1/7/2019
Loansquare engages in the development of web platforms for the financial sector
Linedata seeks to strengthen its platforms and services for lenders
1/9/2019
Path Interactive provides search and digital marketing agency services
SourceLink grows its SEO and ROI-driven digital direct marketing capabilities
1/11/2019 TeksInc provides IT consulting, cybersecurity, managed
services, and cloud services Simpatico expands its service offering to cover SMBs
1/14/2019
TRY Opt provides advertising, marketing, and digital strategy services
GroupM, a WPP Company, expands its geographic reach to the Nordic region
1/15/2019
FloorForce offers digital marketing and website platform development services for the flooring industry
AdHawk advances its larger strategy to expand their presence in the floor covering industry
Q1MARKETACTIVITY
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019 6
Source: Capital IQ as of 31-Mar-2019
Date Announced Target Buyer / Investor Target Description / Deal Commentary
1/16/2019 Fractal Analytics provides data transformation solutions Apax’s $200mm investment will accelerate Fractal’s growth in
AI-enabled services
1/16/2019
P2V Solutions provides custom software development, IoT, and AI services
ActionPoint’s first ever acquisition helps them expand into the Microsoft Cloud ecosystem
1/17/2019 Filter offers experience design and digital marketing services Merkle gains Filter’s executional expertise in serving Fortune
500 CPG clients
1/17/2019 ClearObject is an IoT systems integrator Investment from Egis and ABS will help grow ClearObject into a
preeminent enterprise IoT systems integrator
1/18/2019
D.H. Systems provides website and application development solutions for the automotive industry
Newly-formed Synetiq gains the technical capabilities to create the EU’s largest car salvaging platform
1/21/2019
Software Information Systems (SIS) provides technology infrastructure and managed services
Converge gains a robust public and private cloud delivery solution
1/23/2019
Vioo develops and delivers digital solutions in the retail / wholesale / BFSI industries
BExcellent gains the capability to digitize their current educational services offering
1/24/2019 Cloud Comrade implements cloud-based IaaS solutions STT deepens its participation in the growth of the cloud sector
through an Asia-focused strategy
1/25/2019
District M operates a digital media company that offers programmatic solutions to advertisers and publishers
Investment allows District M to grow into new geographic media markets
1/30/2019
DT Business of The DT business of Statera provides strategy, implementation, and managed services in the Salesforce ecosystem
Catalyte expands into a new Denver location that improves its ability to build onshore workforces to better serve US clients
Q1MARKETACTIVITY
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019 7
Source: Capital IQ as of 31-Mar-2019
Date Announced Target Buyer / Investor Target Description / Deal Commentary
1/31/2019 Gexeed provides business and IT consulting services in Japan BMI gains additional technical capabilities to add to its existing
consulting service offering
1/31/2019 E3creative operates as a digital creative agency Dept expands its footprint in the UK and plans to announce a
new creative hub centered around E3creative
1/31/2019 Nelite provides IT consulting, integration, and outsourcing
services Exakis doubles down on their Microsoft ecosystem expertise
1/31/2019 Dream Local Digital provides digital marketing services for
SMBs Funding allows Dream Local to expand nationally
2/1/2019
E-Patrol provides digital asset management and custom software development services
Backing from Hevella allows E-Patrol to expand headcount and coverage to the entire EU
2/5/2019 The Simulation Group provides data and analytics solutions BCG gains depth in its advanced analytics, AI, and machine
learning strategy practice
2/6/2019
BCM One provides technology solutions for business infrastructure and applications
TSCP plan to pursue a buy-and-build strategy to integrate more digital capabilities into BCM One’s managed services
2/7/2019
Soft Computing provides data science, digital marketing, and big data technology services
Publicis expands its data-driven customer experience design offerings
2/13/2019
SLAP Digital operates as a digital marketing company that provides analytics services
Easycom will integrate SLAP’s interactive and creative capabilities into their diversified consulting offering
2/18/2019
Synergi Software provides integrated cloud and productivity services and solutions
Investment will help expand Synergi’s cloud, business intelligence, and automation offerings
Q1MARKETACTIVITY
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019 8
Source: Capital IQ as of 31-Mar-2019
Date Announced Target Buyer / Investor Target Description / Deal Commentary
2/18/2019 Business SA operates as a digital TV agency The newly-created Heroiks now covers media space across all
of France
2/22/2019 Redshift provides UX services such as research, strategy,
design, and development Blink, also a UX-focused agency, significantly increases scale
2/23/2019 Inspirisys operates as an IT services and consulting company CAC holdings diversifies its APAC portfolio with expansion into
India
2/25/2019 Anitian delivers security solutions and consultancy services Funding from ForgePoint will help Anitian further develop
automated compliance and security solutions
2/26/2019 Trenser Technology provides application development services JPD plans to use its current holdings to create several strategic
partnership opportunities for Trenser
3/4/2019
?What If! develops and invents new products, brands, services, and business models to help its partners build their own in-house innovation capabilities
Accenture enhances its front-end innovation capabilities
3/4/2019 FoundMeOnline operates a digital marketing agency SEO Houston expands beyond the Texas market and solidifies
its positioning in the Google Analytics ecosystem
3/7/2019
Springbox provides digital marketing, strategy, and design services
Prophet deepens its capabilities in digital experience creation and demand generation
3/11/2019
Realise Unlimited offers analytical consultancy services Unlimited Group continues to invest in its marketing
communication business unit by adding advanced analytical capabilities
3/11/2019 Velosio deploys business applications through the cloud Funding from Harren will help Velosio expand beyond the
Microsoft ecosystem into NetSuite
Q1MARKETACTIVITY
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019 9
Source: Capital IQ as of 31-Mar-2019
Date Announced Target Buyer / Investor Target Description / Deal Commentary
3/15/2019
Amify partners with companies to control and optimize their presence on the Amazon marketplace
Funding will be used to expand the senior management team and build a more robust sales & marketing engine
3/15/2019
MDC Partners provides marketing, advertising, activation, communications, and strategy consulting services
Capital injection and new management from Stagwell aimed at reinvigorating growth at MDC
3/15/2019 Storm Digital operates as a digital marketing agency Accenture bolsters its presence and programmatic advertising
capabilities in the Netherlands
3/15/2019
IT Competence Group provides IT consulting and outsourcing services
Audius will integrate IT Competence Group to strategically exploit economies of scale
3/17/2019
Sev1Tech provides IT, engineering, and project management consulting services
DFW’s investment will support Sev1Tech’s transition to serve larger clients
3/18/2019
Mindtree provides digital transformation and technology services globally
L&T’s hostile takeover of Mindtree creates one of the largest IT & BPO service provers in India
3/20/2019 Redder provides digital advertising services DAN expands its digital, creative, and PR capabilities in
Vietnam
3/21/2019
Macom is an IT product and service company that provides software development services
Capital from Manappuram will help Macom better serve other Manappuram portfolio companies
3/22/2019 Scalian provides project support consulting services Cobepa plans to invest an additional $200mm to transform
Scalian into the premier EU-focused consulting firm
3/29/2019
Santy operates as a branding and marketing agency that provides advertising and PR services
Riester gains a robust advertising and PR client base throughout the southwest US
Q1MARKETACTIVITY
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019
PUBLICMARKETS
IT Services and BPO Providers Comparable Companies
Marketing Services Comparable Companies
Digital Technology Services Comparable Companies
10
Source: Capital IQ, market data as of 31-Mar-2019
Closing % of 52 Equity LTM 3 Year 2019EPrice Week Market Enterprise EV / Revenue Multiples EV / EBITDA Multiples EBITDA CAGR Revenue
Digital Technology Services Index 31-Mar-2019 High Cap Value LTM 2019 2020 LTM 2019 2020 Margin 2015A-18A Growth %EPAM $ 169.13 97.4 % $ 9,863 $ 9,118 4.9 x 4.0 x 3.3 x 32.2 x 22.8 x 18.7 x 15.3 % 26.2 % 22.7 %Globant S.A. 71.40 96.5 2,693 2,606 5.0 4.1 3.4 27.5 21.5 17.5 18.1 27.1 22.7
High 97.4 % $ 9,863 $ 9,118 5.0 x 4.1 x 3.4 x 32.2 x 22.8 x 18.7 x 18.1 % 27.1 % 22.7 %Median 96.9 6,278 5,862 5.0 4.1 3.4 29.9 22.1 18.1 16.7 26.7 22.7Mean 96.9 6,278 5,862 5.0 4.1 3.4 29.9 22.1 18.1 16.7 26.7 22.7Low 96.5 2,693 2,606 4.9 4.0 3.3 27.5 21.5 17.5 15.3 26.2 22.7
Closing % of 52 Equity LTM 3 Year 2019EPrice Week Market Enterprise EV / Revenue Multiples EV / EBITDA Multiples EBITDA CAGR Revenue
IT Services & BPO Index 31-Mar-2019 High Cap Value LTM 2019 2020 LTM 2019 2020 Margin 2015A-18A Growth %Accenture $ 176.02 99.2 % $ 115,631 $ 111,592 2.7 x 2.5 x 2.4 x 16.7 x 15.2 x 14.0 x 16.3 % 9.2 % 7.9 %Altran $ 10.98 71.6 2,786 4,321 1.3 1.2 1.1 9.6 7.4 7.3 13.4 14.2 10.5Atos 96.52 67.5 11,468 17,039 1.2 1.1 1.1 9.1 8.6 7.5 13.4 4.7 8.9Capgemini 121.32 90.2 20,900 22,370 1.5 1.4 1.3 11.6 9.6 9.1 12.8 3.4 7.2CGI Group 68.74 99.6 19,355 20,534 2.3 2.3 2.2 13.7 12.3 12.1 16.6 3.7 3.7Cognizant 72.45 86.9 42,267 38,501 2.4 2.2 2.1 11.6 10.3 9.5 20.6 9.1 7.7Genpact 35.18 99.9 6,798 7,733 2.6 2.3 2.1 17.2 13.3 11.9 15.0 6.5 13.0HCL 15.70 96.7 21,301 21,194 2.5 2.2 2.0 10.9 9.5 8.5 23.2 10.7 13.3Hexaware 4.98 61.9 1,479 1,357 1.9 1.7 1.5 12.5 11.0 9.7 15.4 14.3 16.5MindTree 13.62 79.9 2,255 2,155 2.1 2.0 1.8 14.1 13.0 11.9 15.1 16.0 13.2Mphasis 14.27 77.4 2,763 2,623 2.4 2.2 1.9 14.1 12.1 10.6 17.4 7.6 12.5Tech Mahindra 11.20 92.4 9,942 8,888 1.8 1.7 1.6 10.3 9.3 9.0 17.8 9.4 8.7Wipro 3.24 84.1 14,716 10,709 1.3 1.2 1.1 6.7 5.9 5.5 19.1 4.9 6.2
High 99.9 % $ 115,631 $ 111,592 2.7 x 2.5 x 2.4 x 17.2 x 15.2 x 14.0 x 23.2 % 16.0 % 16.5 %Median 86.9 11,468 10,709 2.1 2.0 1.8 11.6 10.3 9.5 16.3 9.1 8.9Mean 85.2 20,897 20,694 2.0 1.8 1.7 12.2 10.6 9.7 16.6 8.7 9.9Low 61.9 1,479 1,357 1.2 1.1 1.1 6.7 5.9 5.5 12.8 3.4 3.7
Closing % of 52 Equity LTM 3 Year 2019EPrice Week Market Enterprise EV / Revenue Multiples EV / EBITDA Multiples EBITDA CAGR Revenue
Marketing Services Index 31-Mar-2019 High Cap Value LTM 2019 2020 LTM 2019 2020 Margin 2015A-18A Growth %Dentsu $ 42.19 81.9 % $ 11,927 $ 13,462 1.5 x 1.4 x 1.3 x 8.6 x 8.1 x 7.3 x 16.8 % 7.2 % 6.1 %IPG 21.01 81.5 8,171 11,271 1.4 1.3 1.3 9.1 7.8 7.5 15.4 1.5 8.5Omnicom 72.99 92.7 16,298 18,897 1.2 1.2 1.2 8.1 8.0 7.8 15.5 0.4 (0.7)Publicis 53.57 75.9 12,356 12,033 1.1 1.1 1.1 4.9 5.2 4.9 21.6 (0.4) 0.4WPP 10.56 58.9 13,317 16,401 0.8 0.8 0.8 5.8 5.8 5.6 14.3 7.8 1.8
High 92.7 % $ 16,298 $ 18,897 1.5 x 1.4 x 1.3 x 9.1 x 8.1 x 7.8 x 21.6 % 7.8 % 8.5 %Median 81.5 12,356 13,462 1.2 1.2 1.2 8.1 7.8 7.3 15.5 1.5 1.8Mean 78.2 12,414 14,413 1.2 1.2 1.1 7.3 7.0 6.7 16.7 3.3 3.2Low 58.9 8,171 11,271 0.8 0.8 0.8 4.9 5.2 4.9 14.3 (0.4) (0.7)
CLEARSIGHT MONITOR | Digital Transformation | Q1 2019
ABOUT US
Clearsight Advisors is a premier, independent investment bank dedicated toproviding world-class M&A and capital raising solutions exclusively to growth-oriented Technology and Business Services companies. Clearsight combinesdeep market insights across software, services and data. This market knowledgecombined with superior strategic and financial advice allows Clearsight to act as acatalyst, enabling entrepreneurs, private equity owners and boards of directors tosuccessfully advance their vision. Clearsight Capital Advisors, Inc., a whollyowned subsidiary, is a registered member of FINRA & SIPC. For moreinformation, please visit www.clearsightadvisors.com
CONTACT US
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703.672.3100
www.clearsightadvisors.com
@clearsightmb
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has been acquired by
