IT Services WebinarMarch 31st

World Financial Symposiums

WFS is an international organization dedicated to educating technology leaders through monthly,

Market Spotlight webcasts and day-longGrowth and Exit Strategies for Software and IT Companies

conferences.

www.wfs.com

Nat Burgess - Moderator

Nat joined Corum in 1996 and brings a diverse background in technology M&A and law. While with the Enforcement Division of the U.S. Securities and Exchange Commission, Nat helped identify and build cases against securities fraud schemes. With the Strategic Development Division of Morgan Stanley's M&A group, Nat worked on cross-border acquisitions of U.S. and European companies by Japanese firms, and on financings by large Japanese public companies. Nat moved to Morgan Stanley's Tokyo office, where he reported directly to the President of Morgan Stanley, Japan Ltd. and focused exclusively on cross-border M&A.

After Morgan Stanley, Nat co-founded Postcard Software, a creator of advertiser-driven bilingual (English and Japanese) Internetcontent. At Activision, Nat led the company's on-line business development.

Nat earned an undergraduate degree in Japanese literature from Yale College and a law degree from UCLA. While in law school, Nat wrote articles for the International Forum at Yale, Tokyo Journal.

Agenda• WFS Welcome

• Justine Ruan, Marketing Assistant – WFS

• Moderator Introduction

• Nat Burgess, President – Corum Group

• IT Services M&A Report

• Alina Soltys, Associate – Corum Group

• Yasmin Khodamoradi, Jr. Research Analyst – Corum Group

• Attributes of an Attractive IT Services Company

• Nat Burgess, President – Corum Group

• 5 Challenges to Selling a IT Services Business

• Rahul Bhandari, Senior Director – Corum Group

• Fireside Chat

• Ray Makela, Managing Director – Sales Readiness Group

• Q&A

Evolution of IT Technology

Growth of IT Services Employment

NASDAQComposite

Notable IT Services Deals

IT Services Research Report

Alina Soltys joined Corum Group in 2010, located out of their Seattle headquarters assisting on the transaction side. As an associate, she focuses on strategic positioning, growth opportunity development and financial analysis as well as speaking regularly at conferences such as Casual Connect and WFS. Previously she worked on the buy side at a boutique real estate development firm focused on multi-family acquisitions as well as interning in the Mergers and Acquisitions Group at Colliers International. Alina graduated from the Foster School of Business at the University of Washington with honors, specializing in Finance and Entrepreneurship.

Alina SoltysAssociate

Yasmin KhodamoradiAnalyst

Yasmin Khodamoradi joined Corum Group in 2015 as a junior research analyst. Previously she worked as a finance and operations coordinator at a technology startup and provided writing consultation services to an institutional investing advisory firm. Yasmin graduated from the Foster School of Business at the University of Washington, specializing in Finance and International Business.

SaaS

11.58x – 51.25x

Scalability(EV/S)

Efficiency

(EV/EBITDA)

High Value Specialization

Growth, Execution

Commodity

Market Opportunity

0

0

0

∞

∞

∞

SaaS

2.60x – 8.25x

Software

2.00x – 7.25x

IT Services

0.4x - 1.40x

Software

10.00x – 24.40x

Valuation Matrix

IT Services

6.40x – 13.40x

Source: The 451 Group; comprises of 2 years of data.

SaaS

11.58x – 51.25x

Scalability(EV/S)

Efficiency

(EV/EBITDA)

High Value Specialization

Growth, Execution

Commodity

Market Opportunity

0

0

0

∞

∞

∞

SaaS

2.60x – 8.25x

Software

2.00x – 7.25x

IT Services

0.4x - 1.40x

Software

10.00x – 24.40x

Valuation Matrix

IT Services

6.40x – 13.40x

Source: The 451 Group; comprises of 2 years of data.

Utilization Rate(%)

0 ∞75%+

60 – 75%

<60%

Scalability(Revenue Growth %) 0 ∞

15% +

5% -15%

<5%

Drivers of Valuations for IT Services Companies

Operating Efficiency(Gross Margin %)

0 ∞25% - 35%

< 25%

35%+

<$150k

$150k -$250k

$250k+

Revenue Per Employee

($)

0 ∞

Utilization Rate(%)

0 ∞75%+

60 – 75%

<60%

Scalability(Revenue Growth %) 0 ∞

15% +

5% -15%

<5%

Drivers of Valuations for IT Services Companies

Operating Efficiency(Gross Margin %)

0 ∞25% - 35%

< 25%

35%+

<$150k

$150k -$250k

$250k+

Revenue Per Employee

($)

0 ∞

Utilization Rate(%)

0 ∞75%+

60 – 75%

<60%

Scalability(Revenue Growth %) 0 ∞

15% +

5% -15%

<5%

Drivers of Valuations for IT Services Companies

Operating Efficiency(Gross Margin %)

0 ∞25% - 35%

< 25%

35%+

<$150k

$150k -$250k

$250k+

Revenue Per Employee

($)

0 ∞

Utilization Rate(%)

0 ∞75%+

60 – 75%

<60%

Scalability(Revenue Growth %) 0 ∞

15% +

5% -15%

<5%

Drivers of Valuations for IT Services Companies

Operating Efficiency(Gross Margin %)

0 ∞25% - 35%

< 25%

35%+

<$150k

$150k -$250k

$250k+

Revenue Per Employee

($)

0 ∞

Developed Markets:IT Services Peer Group

0.40 x

0.50 x

0.60 x

0.70 x

0.80 x

0.90 x

1.00 x

5.00 x

6.00 x

7.00 x

8.00 x

9.00 x

10.00 x

11.00 x

EV/SEV/EBITDA

Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15

EV/EBITDA 9.00 x 8.56 x 8.64 x 8.77 x 8.40 x 8.54 x 8.41 x 8.42 x 8.34 x 8.64 x 8.75 x 9.45 x 9.81 x

EV/S 0.82 x 0.82 x 0.78 x 0.80 x 0.77 x 0.81 x 0.79 x 0.81 x 0.77 x 0.82 x 0.80 x 0.80 x 0.89 x

Emerging Markets: IT Services Peer Group

0.40 x

0.90 x

1.40 x

1.90 x

2.40 x

2.90 x

3.40 x

5.00 x

7.00 x

9.00 x

11.00 x

13.00 x

15.00 x

17.00 x

19.00 x

EV/SEV/EBITDA

Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15

EV/EBITDA 14.26 x 11.71 x 12.16 x 11.79 x 12.15 x 12.81 x 13.44 x 13.82 x 15.07 x 17.15 x 17.84 x 13.37 x 15.09 x

EV/S 2.78 x 2.32 x 2.17 x 2.76 x 2.77 x 2.26 x 2.15 x 2.44 x 2.43 x 2.72 x 2.76 x 2.40 x 2.81 x

IT Services Market Cap by Region

*As of March 27th 2015

758

261

145

304

$0

$100

$200

$300

$400

$500

$600

$700

$800

US & Canada Asia/Pacific Europe Latin America &Caribbean

Africa & MiddleEast

IT Services Market Cap by Region* ($B)

North America

Total transactions volume 372

Total transactions value $13 636m

Europe

Total transactions volume 352

Total transactions value $7 014m

Latin America

Total transactions volume 38

Total transactions value $606m

Mideast / Africa

Total transactions volume 39

Total transactions value $380m

Asia / Pacific

Total transactions volume 236

Total transactions value $5 105m

Source: CapitalIQ

36%

34%

23%

4%3%

IT Services M&A Volume 2014

United States andCanada

Europe

Asia / Pacific

Africa / Middle East

Latin America andCaribbean

1037

deals

51%

26%

19%

2%2%

IT Services M&A Value 2014 ($B)

United States andCanada

Europe

Asia / Pacific

Africa / Middle East

Latin America andCaribbean

$26.7B

M&A Data by Geography

IT Services M&A Activity : Annual 2008-2014

924

736

930968 950 931

1037

0

200

400

600

800

1000

1200

$0

$5

$10

$15

$20

$25

$30

$35

$40

2008 2009 2010 2011 2012 2013 2014

Global IT Services M&A Values ($B) and Volumes

Total Disclosed Deal Value ($BB) Total Number of Transactions

Source: Capital IQ

924

736

930 968 950 931 1037

0

200

400

600

800

1000

1200

$0

$5

$10

$15

$20

$25

$30

$35

$40

2008 2009 2010 2011 2012 2013 2014

Global IT Services M&A Values ($B) and Volumes

Total Disclosed Deal Value ($BB) Total Number of Transactions

Source: Capital IQ, 451

3032 30303294

3796

3647

3284

3935

0

500

1000

1500

2000

2500

3000

3500

4000

4500

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

2008 2009 2010 2011 2012 2013 2014

Bill

ion

s

Tech M&A Values [$B] and Volumes

Sum of Total Deal Amt. Count of Target

Top 10 IT Services Buyers (2014)

0

1

2

3

4

5

Accenture Hitachi Atos EPAMSystems, Inc.

Iron MountainInc.

UST Global Inc. Winxnet, Inc Perficient TIVIT Telstra

Most Active Buyers by Number of Transactions

Source: Capital IQ

2013-2014 M&A Deal Flow by Transaction Size

IT Services: Developed MarketsDeal Spotlight

Sold to

Target: Xerox Acquirer: Atos SE [France]Transaction Value: $1.1 billion

- IT outsourcing business assets of Xerox.

- Increases focus on its BPO and document outsourcing businesses within its services segment.

IT Services: Developed MarketsDeal Spotlight

Sold to

Target: FishNet SecurityAcquirer: Accuvant (Blackstone Group)Transaction Value: $350 million

- Information security solutions that combine technology, services, support and training.

- First deal done after Blackstone’s acquisition of Accuvant.

IT Services: Emerging MarketsDeal Spotlight

Sold to

Target: CTIS Technologia [Brazil]Acquirer: Sonda SA [Chile]Transaction Value: $170 million

- Outsourcing focused on business processes and application management, infrastructure support, service desk, and print outsourcing.

- Will boost operations in Latin America’s largest IT market.

IT Services: Emerging MarketsDeal Spotlight

Sold to

Target: Aditi Technologies [India]Acquirer: Symphony Teleca Corp.Transaction Value: Undisclosed

- Outsourced, cloud and mobile software development and testing services, system migration and consulting services.

- Will focus on Symphony’s “Systems of Engagement”, applying cloud, mobility and analytics.

IT Services: Recent DealsDeal Spotlight

Sold to

Target: Scitor CorporationAcquirer: SAICTransaction Value: $790 Million

- Systems, network and cybersecurity engineering, integration and related ICT management consulting services primarily for federal, state and local government agencies, the Department of Defense and intelligence sector.

- Will expand classified contracts within the intelligence sector.

Nat Burgess - Moderator

Nat joined Corum in 1996 and brings a diverse background in technology M&A and law. While with the Enforcement Division of the U.S. Securities and Exchange Commission, Nat helped identify and build cases against securities fraud schemes. With the Strategic Development Division of Morgan Stanley's M&A group, Nat worked on cross-border acquisitions of U.S. and European companies by Japanese firms, and on financings by large Japanese public companies. Nat moved to Morgan Stanley's Tokyo office, where he reported directly to the President of Morgan Stanley, Japan Ltd. and focused exclusively on cross-border M&A.

After Morgan Stanley, Nat co-founded Postcard Software, a creator of advertiser-driven bilingual (English and Japanese) Internetcontent. At Activision, Nat led the company's on-line business development.

Nat earned an undergraduate degree in Japanese literature from Yale College and a law degree from UCLA. While in law school, Nat wrote articles for the International Forum at Yale, Tokyo Journal.

Regions Expected to Drive M&A

Source: KPMG 2015 M&A Outlook Survey [technology]

Market Segments Expected to Drive M&A

Source: Ernst & Young Global Technology M&A Update

Attributes of an Attractive IT Services Company

Rahul BhandariManaging Director – Corum Group

In his long experience in technology, Rahul has worked in a variety of management, operational, and technical positions directly with government agencies, Fortune 500 and international companies in the US, Canada, Australia, Europe and India.

Rahul led a Data Analytics and Business Intelligence firm from zero revenue into a highly successful company during economically challenged times. One of several firms to win the $60B US Navy and $4B DoD contracts. He was the Co-Founder and Vice President of Accenture Ventures, a $1B corporate VC fund and global incubator, where he was investor, adviser and board member to a portfolio of internet companies. Rahul established and led the M&A business integration group at Thomson Publishing; Thomson Corporation acquired Reuters creating Thomson Reuters valued at over $26B. Rahul also founded and led the Advance Technology Group at DynCorp to provide system integration solutions to healthcare clients. He was also a Principal Consultant at Oracle.

Rahul attended senior executive programs at the Harvard and Stanford Business Schools. He is a graduate of the International Business and Leadership program, Georgetown Graduate School of Business. Rahul earned a BA in Computer Science and Business Administration from Northwestern College graduating in three years. Rahul previously held five Oracle Master Level certifications.

5 Challenges to Selling a IT Services Business

1. Talent Retention

2. Low Valuations

3. Outsourcing

4. Integration Challenge

5. The Right Buyer

Fireside Chat

Ray MakelaManaging Director – Sales Readiness Group (SRG)

Nat BurgessPresident – Corum Group

Ray MakelaManaging Director – Sales Readiness Group (SRG)

Ray Makela has over 20 years of management, consulting, and sales experience. He is an industry thought-leader who writes frequently on best practices for coaching and developing sales teams. Ray currently oversees all client engagements for SalesReadiness Group (SRG) as well as serves as a senior facilitator on sales management, coaching, negotiation and sales trainingworkshops. Prior to Sales Readiness Group, Ray served as Chief Customer Officer (CCO) at Codesic Consulting where he was responsible for business development, managing customer relationships, and the development and implementation of Codesic's sales training initiatives. Ray has also held management positions at Accenture and Claremont Technology Group were he was a management consultant and trainer in the Change Management practice. He earned his B.A in Speech Communications from the University of Washington and an M.P.A. in Public Administration and Information Systems Management from the University of Southern California.

Q&A

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