FOCUS SECTOR: SOFTWARE & TECHNOLOGY IT SERVICES INDUSTRY REPORT
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FOCUS SECTOR: SOFTWARE & TECHNOLOGY
IT SERVICES INDUSTRY REPORT
MAY 2019
Bridgepoint Investment Banking is a division of Bridgepoint Holdings, LLC. Securities offered through an unaffiliated entity, M&A Securities Group, Inc., member FINRA/SIPC. This
entity is not affiliated or associated with, authorized or sponsored by Bridgepoint Advisers LimitedIT SERVICES INDUSTRY REPORT
MAY 2019
bridgepointib.com BRIDGEPOINT INSIGHTS
Valuations Create Attractive Window For Monetization
EXECUTIVE SUMMARY BIG PICTURE
Public IT Consulting firms’ median IT Services company valuations and
valuation multiples are currently earnings have seen consistent
trading at 13.4x, up 45.7% from the most expansion with minimal cyclicality
recent cycle trough of 9.2x in October
2014 Private Equity Investment as a
According to Gartner, many percentage of IT Services M&A activity
enterprises lack necessary internal increased at a 6.8% CAGR from 2015-2018
talent to continue driving adoption of
leading technologies at a time when IT Cycle timing is critical to maximize
is growing in importance – indicating transaction value. Recent Increase of 2.9x
that the IT consulting services industry (25.2%) of public IT Services firms’ median
will grow by 4.7% in 2019 and 4.8% in TEV / EBTIDA multiple indicates that now is
2020 an attractive time for businesses to
Global IT Services Revenues are explore recapitalization strategies
expected to grow by 4.7% year over
year to $1.03 trillion in 2019 Bridgepoint Investment Banking advises
IT Services firms owners seeking near-
According to IDC, project-oriented
term liquidity or growth financing that it is
revenue grew by 5.2% in the first half of
imperative to consider exploring
2018, led by third parties in the business
consulting and application monetization, financing and other
development space strategic options
IT Services Valuation Cycle
TEV / EBITDA TEV / Revenue
15.0x 2.00x
Current Median 13.4x 1.48x
Historical Median 11.5x 1.53x
14.0x Peak Median 14.6x 1.81x
1.90x
Trough Median 9.2x 1.23x
13.0x 1.80x
TEV / LTM REVENUE
TEV / LTM EBITDA
12.0x 1.70x
11.0x 1.60x
10.0x 1.50x
9.0x 1.40x
8.0x 1.30x
7.0x 1.20x
TEV / EBITDA Historical TEV/EBITDA TEV / Revenue Historical TEV/Revenue
Note: Composite composed of selected public comparable companies listed on page 3.
Source: Bridgepoint Investment Banking, Capital IQ, Deloitte, Equiteq, Gartner, IBISWorld, IDC
Bridgepoint Investment Banking is a division of Bridgepoint Holdings, LLC. Securities offered through an unaffiliated entity, M&A Securities Group, Inc., member FINRA/SIPC
1IT SERVICES INDUSTRY REPORT
MAY 2019
bridgepointib.com BRIDGEPOINT INSIGHTS
IT Services Spending
$1,300.0 $1,300.0
$1,200.0
$1,200.0
$1,079.0
$1,100.0
$1,030.0
$983.0
$1,000.0
$933.0
$900.0
$900.0 $871.3 $865.8
$800.0
2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: Gartner
Key Business Considerations
KEY IT SERVICES TRENDS VALUATION CONSIDERATIONS
The valuation market for IT Services Firms will likely
Evolving Technologies Will Lead to
Sustained IT Services Industry Growth
outpace the overall global market as the industry
continues to grow faster than GDP
Many Enterprises Are Struggling To Demand for IT Services Firms capable of developing
custom applications to support business processes
Develop Custom Applications At The
Rate Needed To Run Their Business indicates sustained strong valuation tailwinds
The Velocity of Technical Advancement Firms that help clients implement the technologies
Requires Enterprises To Engage Outside requisite to remaining competitive and generate
Expertise To Remain Competitive recurring revenue will gain higher valuations
Demand for Consultants Specializing in
IT Services Firms that can prove they have a mission
Specific Areas Is Increasing critical differentiated service will continue to see
strong valuations
Firms that provide a high touch value added services
Shortage of IT Professionals Driving
Investment In High Tech At a Premium
like transforming unstructured enterprise data into
insightful business data command high valuations
Firms that have a historical track record of higher
High Attrition Rates of Junior Staff
Continues to Remain A Challenge
retention of junior talent will be attractive
acquisition targets
Source: Bridgepoint Investment Banking, Capital IQ, Gartner, IBISWorld, IDC
2IT SERVICES INDUSTRY REPORT
MAY 2019
bridgepointib.com BRIDGEPOINT INSIGHTS
Selected Public Comparables
($ in millions, except per share data) 4/20/2019 Equity Enterprise P/E TEV / Revenue TEV / EBITDA TEV / EBIT
Company Name Country Share Price Value Value LTM LTM LTM LTM
Accenture plc Ireland $178.61 $113,923.3 $109,870.9 26.0x 2.69x 16.5x 18.0x
Booz Allen Hamilton Holding Corporation United States $56.94 $7,976.3 $9,538.6 19.9x 1.45x 14.3x 15.9x
CGI Inc. Canada $70.93 $19,411.1 $20,784.9 - 2.39x 14.2x 16.1x
Cognizant Technology Solutions United States $71.34 $40,612.2 $36,846.2 19.8x 2.29x 11.1x 13.0x
DXC Technology Company United States $64.58 $17,325.0 $22,744.0 10.8x 0.95x 4.1x 6.8x
EPAM Systems, Inc. United States $171.42 $9,287.1 $8,541.6 40.4x 4.63x 30.2x 34.8x
Gartner, Inc. United States $157.20 $14,139.9 $16,265.2 118.2x 4.09x 26.7x 44.3x
ICF International, Inc. United States $75.18 $1,414.5 $1,603.2 23.6x 1.20x 13.3x 17.1x
Infosys Limited India $10.33 $44,866.0 $41,095.1 20.5x 3.49x 13.8x 15.3x
Insight Enterprises, Inc. United States $57.12 $2,042.7 $2,401.1 12.6x 0.34x 8.7x 10.1x
International Business Machines United States $140.33 $124,874.9 $161,874.9 14.8x 2.06x 9.3x 12.9x
Leidos Holdings, Inc. United States $65.25 $9,371.7 $12,206.7 17.2x 1.20x 11.6x 15.4x
ManTech International Corporation United States $55.58 $2,215.2 $2,217.4 27.0x 1.13x 13.4x 19.7x
Perficient, Inc. United States $28.24 $931.3 $1,006.4 38.7x 2.02x 16.8x 25.4x
RCM Technologies, Inc. United States $4.06 $52.3 $79.3 18.5x 0.40x 9.3x 11.4x
Science Applications International United States $73.01 $4,331.0 $6,221.0 23.5x 1.34x 17.5x 20.3x
Unisys Corporation United States $10.83 $560.6 $652.3 8.4x 0.23x 2.4x 2.8x
Virtusa Corporation United States $52.70 $1,576.8 $1,782.1 251.4x 1.48x 19.3x 27.0x
Wipro Limited India $4.39 $24,640.8 $20,437.8 - 2.42x 12.5x 14.7x
Total
P/E TEV / Revenue TEV / EBITDA TEV / EBIT
High 251.4x 4.63x 30.2x 44.3x
Mean 40.7x 1.88x 13.9x 17.9x
Median 20.5x 1.48x 13.4x 15.9x
Low 8.4x 0.23x 2.4x 2.8x
Selected Recent Industry Transactions
Date Announced Target Acquiror
04/30/2019 Autodata Solutions Company Thoma Bravo, LLC
04/26/2019 Imex Systems Inc. (TSXV:IMEX) NxGen Communications Corp.
04/24/2019 Autopro Automation Fulcrum Automation Technologies
04/24/2019 Adaptive Technologies Group Cyemptive Technologies, Inc.
04/22/2019 AZBS, Inc. NuMSP LLC
04/16/2019 SeNet International Gaming Laboratories International
04/16/2019 Midtown Technology Partners Montra Solutions LLC
04/12/2019 CellTuck, LLC Level 5 Advertising, LLC
04/10/2019 Virteva LLC Crossfuze LLC
04/08/2019 Enterprise Solutions Consulting TMG Consulting, Inc.
04/05/2019 MidCo Inc. FE Moran Security Solutions
04/03/2019 Project One, Inc. Eliassen Group, LLC
03/27/2019 Rural Sourcing, Inc. Bain Capital Private Equity, LP
03/26/2019 Workforce Insight, LLC Management Buyout
03/21/2019 Essential Consulting LLC Besler & Co., Inc.
03/18/2019 Omni Resources, Inc. Saggezza Inc.
03/13/2019 Dynamo Development, Inc. SeriesOne, Inc.
02/26/2019 Datix Inc. Clients First Business Solutions LLC
02/13/2019 Proactive Technologies, LLC Abacus Group, LLC
Transaction Highlight Transaction Highlight
Engility Holdings, an IT services contractor was acquired Polaris Consulting, a custom application development
by Science Applications International on 9/10/2018 firm was acquired by Virtusa Consulting on 7/26/2018
Valuation Data Valuation Data
Total Enterprise Value (TEV): $1,555 Total Enterprise Value (TEV): $821.4
TEV / EBITDA: 18.3x; TEV / Revenue: 13.7x TEV / EBITDA: 15.3x; TEV / Revenue: 11.4x
Source: Bridgepoint Investment Banking, Capital IQ
3IT SERVICES INDUSTRY REPORT
MAY 2019
BRIDGEPOINT INSIGHTS
EXECUTIVE SUMMARY
Market-leading boutique investment bank providing M&A and capital raising
advisory solutions
197+ years cumulative investment banking experience spanning 118 transactions
$102+ billion of M&A, capital raising, corporate finance and transaction advisory
service experience
42 completed M&A assignments spanning more than $30 billion
77 completed corporate finance transactions, raising more than $73 billion in capital
SELECTED RECENT BRIDGEPOINT TRANSACTIONS
USD 33 million
HAS BEEN ACQUIRED BY
USD 45 million
USD 60 million Unitranche financing for Equity & debt capital raise to
Global financing recapitalization support management Sell-side advisory
acquisition
Sell-side advisory
.
Financial Advisor Sole Financing Arranger Sole Financing Arranger Sole Financial Advisor Financial Advisor
SECTORS OF FOCUS
SOFTWARE & CONSUMER & FINANCIAL TRUCKING &
HEALTHCARE INDUSTRIALS REAL ESTATE IMPACT
TECHNOLOGY RETAIL SERVICES TRANSPORTATION
SENIOR LEADERSHIP
Matt Plooster Mike Anderson Wm. Lee Merritt Gary Grote
Managing Managing Managing Managing
Director Director Director Director
Adam Claypool Joe Liss Natasha Subhash
Managing Managing Plooster Marineni
Director Director COO Vice President
OMAHA OFFICE LINCOLN OFFICE DES MOINES OFFICE DENVER OFFICE
450 Regency Parkway, Suite 300 816 P Street, Suite 200 666 Walnut Street, Suite 1720 140 Hurd Lane
Omaha, NE 68114 Lincoln, NE 68508 Des Moines, IA 50309 Avon, CO 81620
402.817.7901 402.817.7900 515.325.7615 877.315.2931
bridgepointib.com
In order to offer securities-related Investment Banking Services discussed herein, to include M&A and institutional capital raising, certain representatives of Bridgepoint Investment Banking are
registered representatives of M&A Securities Group, Inc., an unaffiliated broker-dealer and member FINRA/SIPC. This entity is not affiliated or associated with, authorized or sponsored by Bridgepoint
Advisers Limited.
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