sectorwatch: it services - ukraine€¦ · profit margins, indicating customer pricing power...
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Sectorwatch:IT Services - UkraineJuly 2018
2
IT Services - UkraineJuly 2018
Sector Dashboard [4]
Public Basket Performance [5]
Operational Metrics [7]
Valuation Comparison [10]
Recent Deals [13]
Appendix [14]
7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only inconjunction with a verbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. Alldata cited in this document was believed to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7MSecurities make warranties or representations as to the accuracy or completeness of third-party data contained herein. This document should be treated asconfidential and for the use of the intended recipient only. Please notify 7 Mile Advisors if it was distributed in error.
3
Overview
7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally. We advise on M&A and private capital transactions, and provide market assessments and benchmarking. As a close knit team with a long history together and a laser focus on our target markets, we help our clients sell their companies, raise capital, grow through acquisitions, and evaluate new markets. We publish our sectorwatch, a review of M&A and operational trends in the industries we focus.
Dashboard• Summary metrics on the sector
• Commentary on market momentum by
comparing the most recent 12-month
performance against the last 3-year
averages.
Public Basket Performance• Summary valuation and operating metrics for
a basket of comparable public companies
Valuation Comparison• Graphical, detailed comparison of valuation
multiples for the public basket
Recent Deals• The most recently announced deals in the
sector
4
Dashboard
Operating Metrics
Valuation
Revenue Growth Momentum
0.03 1 - year revenue growth compared to revenue growth
average for last 3 years
Pricing / Gross Margin Momentum
-1.5% 1 - year gross profit % compared to gross profit %
average for last 3 years
Profitability Momentum
1.0% 1 - year EBITDA % compared to EBITDA % average for
last 3 years
Current revenue growth rate exceeds the average of the last 3 years by this
amount, indicating that market momentum is increasing
Current gross profit margin is less than the average of the last 3 years gross
profit margins, indicating customer pricing power
Current EBITDA margin exceeds the average of the last 3 years EBITDA margin
by this amount, a condition that may attract new entrants
7.9%
16.9%
36.7%
0% 10% 20% 30% 40%
Median LTM Rev. Growth %
Median LTM EBITDA Margin %
Median LTM GP Margin %
1.8x
12.3x
19.8x
23.3x
0x 10x 20x 30x
Median TEV / LTM Revenue
Median TEV / LTM EBITDA
Median TEV / LTM EBIT
Median Price / LTM Earnings
5
Public Basket
Company TEV $mLTM Rev
$m
Rev Growth
YoY GP %EBITDA
%TEV / Rev X
TEV / EBITDA
X # FTEsRev / FTE $k
Sirma Group Holding AD 50 34 25% 60% 30% 1.6 5.3 - NA
ATM S.A. 132 39 1% 58% 34% 3.7 12.4 - NA
Asseco South Eastern Europe S.A. 147 169 -1% 25% 18% 0.9 5.4 - NA
Comarch S.A. 371 327 -1% 24% 8% 1.2 15.1 5,541 59
Luxoft Holding, Inc. 1,183 907 15% 37% 11% 1.3 12.1 12,898 70
EPAM Systems, Inc. 6,625 1,550 27% 36% 14% 4.3 29.5 25,962 60
Accenture plc 102,284 38,574 13% 31% 16% 2.7 16.3 425,000 91
International Business Machines Corporation 168,593 80,771 3% 46% 21% 2.1 10.1 366,600 220
Average 34,923 15,296 10% 40% 19% 2.2 13.3 104,500 100
Median 777 617 8% 37% 17% 1.8 12.3 9,220 70
share price as of 26Jul18
6
Public Basket Valuation Trends
Public EBITDA Multiples over Time
Public Revenue Multiples over Time
11.5x
2.2x
0x
2x
4x
6x
8x
10x
12x
14x
16x
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Oct
-16
Jan
-17
Ap
r-1
7
Jul-
17
Oct
-17
Jan
-18
Ap
r-1
8
Jul-
18
TEV/EBITDA - Median TEV/Revenue - Median
TEV/EBITDA - Average TEV/Revenue - Average
0x1x1x2x2x3x3x
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Oct
-16
Jan
-17
Ap
r-1
7
Jul-
17
Oct
-17
Jan
-18
Ap
r-1
8
Jul-
18
TEV/Revenue - Median TEV/Revenue - Average
0x
5x
10x
15x
Oct
-13
Jan
-14
Ap
r-1
4
Jul-
14
Oct
-14
Jan
-15
Ap
r-1
5
Jul-
15
Oct
-15
Jan
-16
Ap
r-1
6
Jul-
16
Oct
-16
Jan
-17
Ap
r-1
7
Jul-
17
Oct
-17
Jan
-18
Ap
r-1
8
Jul-
18
TEV/EBITDA - Median TEV/EBITDA - Average
7
Operational Metrics
LTM Gross Profit Margin % LTM EBITDA %
- 10% 20% 30% 40%
Median
Comarch S.A.
Luxoft Holding, Inc.
EPAM Systems, Inc.
Accenture plc
Asseco South EasternEurope S.A.
International BusinessMachines Corporation
Sirma Group Holding AD
ATM S.A.
- 20% 40% 60% 80%
Median
Comarch S.A.
Asseco South Eastern Europe S.A.
Accenture plc
EPAM Systems, Inc.
Luxoft Holding, Inc.
International Business MachinesCorporation
ATM S.A.
Sirma Group Holding AD
8
Operational Metrics
LTM Revenue Growth %LTM Revenue per
Full Time Employee x 000’s
(10%) - 10% 20% 30% 40%
Median
Asseco South Eastern Europe S.A.
Comarch S.A.
ATM S.A.
International Business MachinesCorporation
Accenture plc
Luxoft Holding, Inc.
Sirma Group Holding AD
EPAM Systems, Inc.
$- $100 $200 $300
Median
Comarch S.A.
EPAM Systems, Inc.
Luxoft Holding, Inc.
Accenture plc
International Business MachinesCorporation
9
Operational Metrics
Accounts Receivable TurnoverAverage Days
Sales Outstanding
0x 2x 4x 6x 8x 10x
Median
Comarch S.A.
Sirma Group Holding AD
EPAM Systems, Inc.
Luxoft Holding, Inc.
Accenture plc
Asseco South EasternEurope S.A.
ATM S.A.
International BusinessMachines Corporation
0 30 60 90 120 150
Median
International BusinessMachines Corporation
ATM S.A.
Asseco South EasternEurope S.A.
Accenture plc
Luxoft Holding, Inc.
EPAM Systems, Inc.
Sirma Group Holding AD
Comarch S.A.
10
Valuation
TEV / LTM Revenue TEV / LTM EBITDA
0x 1x 2x 3x 4x 5x
Median
Asseco South EasternEurope S.A.
Comarch S.A.
Luxoft Holding, Inc.
Sirma Group Holding AD
International BusinessMachines Corporation
Accenture plc
ATM S.A.
EPAM Systems, Inc.
0x 10x 20x 30x 40x
Median
Sirma Group Holding AD
Asseco South EasternEurope S.A.
International BusinessMachines Corporation
Luxoft Holding, Inc.
ATM S.A.
Comarch S.A.
Accenture plc
EPAM Systems, Inc.
11
Valuation
TEV / LTM EBIT Price / LTM Earnings
0x 20x 40x 60x
Median
Asseco South EasternEurope S.A.
Sirma Group Holding AD
International BusinessMachines Corporation
Accenture plc
Luxoft Holding, Inc.
EPAM Systems, Inc.
ATM S.A.
Comarch S.A.
0x 20x 40x 60x 80x
Median
Asseco South EasternEurope S.A.
Sirma Group Holding AD
ATM S.A.
Luxoft Holding, Inc.
International BusinessMachines Corporation
Accenture plc
EPAM Systems, Inc.
Comarch S.A.
12
Valuation
Historical Valuation Multiples versus Gross Profit
Historical Valuation Multiples versus Revenue Growth Rate
5x 5x 10x 12x 12x 15x 16x 30x
60.0%
25.2%
45.5%
37.4%
57.8%
24.2%
31.4%
36.0%
0%
10%
20%
30%
40%
50%
60%
70%
0x
5x
10x
15x
20x
25x
30x
35x
LTM
GP
%
EBIT
DA
(x)
EBITDA(x) LTM GP%
5x 5x 10x 12x 12x 15x 16x 30x
24.5%
(1.3%)
3.0%
15.4%
0.7% (0.6%)12.8%
27.0%
-5%
0%
5%
10%
15%
20%
25%
30%
0x
5x
10x
15x
20x
25x
30x
35x
LTM
RG
R%
EBIT
DA
(x)
EBITDA(x) LTM RGR%
13
Recent Transactions
Date Target Buyer / Investor
Total Transaction
Value Target
Revenue TEV /
Revenue TEV /
EBITDA
17Jul18 3DLOOK, LLC Horizon Capital; 500 Startups; U.Ventures 1.00 - - -
14May18 YouTeam Ltd. Horizon Capital; U.Ventures - - - -
28Feb18 CoreValue AVentures Capital; AVentures Capital venture fund - - - -
14Nov17 Forex Development Corporation (nka:FDCTech, Inc.)
Krypton Capital - 0.47 - -
2Nov17 TeamFusion, Inc. AVentures Capital - - - -
7Sep17 Spinbackup, Inc. AVentures Capital; AVentures Capital venture fund 0.50 - - -
27Jun17 PromoRepublic Tekes; Howzat Partners; Digital Future; Spring Capital 1.20 - - -
25May17 AB Ukraine Limited Liability Company Volia Limited - - - -
23Jun16 KitApps, Inc. TMT Investments PLC; Digital Future 1.70 - - -
16Mar16 Reply Services WannaBiz; Digital Future 0.40 - - -
31Dec15 PromoRepublic Tekes; Vendep Oy (nka:Vendep Capital Oy); Digital Future 0.55 - - -
15Dec15 Instant API, Inc. Imperious Group 0.35 - - -
18Nov15 Ciklum ApS Soros Fund Management LLC; Ukrainian Redevelopment Fund LP - - - -
14
APPENDIX:
Public Basket
Constituents
7 Mile Advisors appreciates the opportunity to present this confidential information to the Company. This document is meant to be delivered only inconjunction with a verbal presentation, and is not authorized for distribution. Please see the Confidentiality Notice & Disclaimer at the end of the document. Alldata cited in this document was believed to be accurate at the time of authorship and came from publicly available sources. Neither 7 Mile Advisors nor 7MSecurities make warranties or representations as to the accuracy or completeness of third-party data contained herein. This document should be treated asconfidential and for the use of the intended recipient only. Please notify 7 Mile Advisors if it was distributed in error.
IT Services - UkraineJuly 2018
15
Public Basket
Sirma Group Holding AD
Sirma Group Holding AD provides software solutions and
services worldwide. It offers software products for the banks,
insurance companies, and other financial services providers;
healthcare; publishing and media, and cultural heritage; and
retail industries, as well as to cross industry and public sector. It
also provides technology, software development, system
integration, staffing and outsourcing, and consulting services.
The company was founded in 1992 and is based in Sofia,
Bulgaria.
Date Key Development Headline3/12/18 Sirma Group Holding AD (BUL:SKK) signed a deal to acquire
26.06% stake in Ontotext AD from New Europe Venture Equity
L.P. a fund managed by NEVEQ Capital Partners for €4.2 million.
0x
1x
2x
3x
4x
5x
Revenue Multiples - Sirma Group Holding
AD
TEV/Revenue Average
0x
15x
30x
45x
60x
EBITDA Multiples - Sirma Group Holding
AD
TEV/EBITDA Average
0x
15x
30x
45x
60x
P/E Multiples - Sirma Group Holding AD
P/E Average
16
Public Basket
ATM S.A.
ATM S.A. provides telecommunications and value-added
services in Poland and internationally. It operates through two
segments, Data Center Services and Telecommunications
Services. The company offers colocation services, such as
renting space for hardware and ensuring uninterruptible power
supply and network connection; and hosting services, including
renting servers with Internet access based on its data center. It
also provides data security center services consisting of renting
backup front-office and back-office environments; Atman data
center WAW-2; Internet access for telecommunications
operators, Internet and application service providers, and
business customers; and teletransmission services comprising
broadband data transmission, as well as operates optical data
transmission network. In addition, the company designs and set
ups telecommunications and IT networks; and provides
telecommunications solutions based on digital fiber optic or radio
links. It serves telecommunications, banking and finance,
industry, commerce, services, media, and publishing sectors.
The company was founded in 1987 and is based in Warsaw,
Poland.
Date Key Development Headline8/1/17 MCI Capital S.A. (WSE:MCI) made a tender offer to acquire an
additional 43.43% stake in ATM S.A. (WSE:ATM) from Nationale-
Nederlanden Powszechne Towarzystwo Emerytalne S.A., PKO
OFE and others for approximately PLN 180 million.
0x
2x
4x
6x
Revenue Multiples - ATM S.A.
TEV/Revenue Average
0x
5x
10x
15x
20xEBITDA Multiples - ATM S.A.
TEV/EBITDA Average
0x
50x
100x
150x
200xP/E Multiples - ATM S.A.
P/E Average
17
Public Basket
Asseco South Eastern Europe S.A., together with its
subsidiaries, sells its own and third-party software for banking
and financial, payment, telco and utilities, and public services
and government industries in Poland, South Eastern Europe,
and Turkey. It operates through Banking Solutions, Payment
Solutions, and Systems Integration segments. The company
offers payment industry solutions for non-financial and financial
institutions, and merchants supporting card and card-less
transactions, including processing, mobile payment, E-
commerce, POS and ATM related services and solutions,
security and fraud, and payment acceptance solutions. It also
provides omni-channel solutions designed to distribute banking
services over distribution channels; integrated banking systems
based on the Oracle and Microsoft platforms; and authentication
security solutions, reporting systems for regulatory compliance
and managerial information, and risk management systems. In
addition, the company offers software solutions for leasing and
consumer finance, and small payment institutions; infrastructure,
voice/contact center, and security solutions; and billing,
application performance management, enterprise spend
management, content management, and security systems.
Further, it provides suppliance, installation, and services in the
field of ATMs and payment terminals; and integration and
implementation services for IT systems and hardware. Asseco
South Eastern Europe S.A. is a subsidiary of Asseco Poland
S.A.
0.0x
0.5x
1.0x
1.5x
2.0xRevenue Multiples - Asseco South Eastern
Europe S.A.
TEV/Revenue Average
0x
3x
6x
9x
12x
15xEBITDA Multiples - Asseco South Eastern
Europe S.A.
TEV/EBITDA Average
0x
10x
20x
30xP/E Multiples - Asseco South Eastern
Europe S.A.
P/E Average
Asseco South Eastern Europe S.A.
18
Public Basket
Comarch S.A.
Comarch S.A. designs, implements, and integrates IT solutions
worldwide. Its Telecommunications division offers solutions in
the areas of IOT Ecosystem, sales and customer management,
billing and charging, BSS, future-proof operations, integrated
assurance, resource planning and inventory, service design and
fulfillment, and professional services. Its Enterprise Resource
Planning (ERP) division provides various ERP solutions. The
company’s Public division offers ERGO solutions, electronic flow
solutions, e-Office platform, ERP class integrated IT system,
security platform, smart city platform, smart parking solutions,
eRecording solutions, and video terminal solutions. Its Services
division designs, implements, and integrates IT solutions for
loyalty programs, marketing campaign management, employee
motivation management, electronic data interchange and
business information, document management, and sales process
management support systems and mobile applications; and
offers IT infrastructure management for services companies. The
company also offers solutions for IT systems for hospitals;
software products for radiology; medical record management in
medical institutions; Internet of Things, short series
manufacturing solutions, mobility solutions, certification tool,
embedded systems, and outsourcing systems; and advertising
and other services, as well as operates sports activities and sells
tickets to sports events. Comarch S.A. was founded in 1993 and
is headquartered in Kraków, Poland.
0.0x
0.5x
1.0x
1.5x
2.0xRevenue Multiples - Comarch S.A.
TEV/Revenue Average
0x
5x
10x
15x
20xEBITDA Multiples - Comarch S.A.
TEV/EBITDA Average
0x
20x
40x
60x
80x P/E Multiples - Comarch S.A.
P/E Average
19
Public Basket
Luxoft Holding, Inc.
Luxoft Holding, Inc., together with its subsidiaries, provides
software development services and IT solutions to multinational
corporations. The company offers application software
development, software architecture design, performance
engineering, optimization and testing, process consulting, and
software quality assurance services; functional specification and
mock-up, product design, engineering, automated testing,
maintenance, support, and performance engineering services;
and IT strategy, software engineering process, and data security
consulting services. Its products and platforms include Populus,
a tool chain for human machine interface (HMI) design and
development, and the deployment of automotive user interfaces
for distributed embedded systems; Qt Automotive Suite, which
enables developers to create stunning user experience and ease
the integration toward the system backend; AllView, an user-
experience demonstrator; software tools and consulting services
focused on scheduling analysis, architecture optimization, and
timing verification; Pelux, a base development platform; and
ARP, an automotive hardware reference platform. Luxoft
Holding, Inc. was founded in 2000 and is headquartered in Zug,
Switzerland.
Date Key Development Headline6/17/18 Luxoft Holding, Inc. (NYSE:LXFT) acquired Smashing Ideas, Inc.
from Penguin Random House LLC.
11/17/17 Luxoft Holding, Inc. Seeks Acquisitions
0x
2x
4x
6xRevenue Multiples - Luxoft Holding, Inc.
TEV/Revenue Average
0x
6x
12x
18x
24x
30xEBITDA Multiples - Luxoft Holding, Inc.
TEV/EBITDA Average
0x
10x
20x
30x
40x
50xP/E Multiples - Luxoft Holding, Inc.
P/E Average
20
Public Basket
EPAM Systems, Inc.
EPAM Systems, Inc. provides software product development and
digital platform engineering services primarily in North America,
Europe, Asia, and Australia. It offers software product
development services, including product research, customer
experience design, prototyping, program management,
component design and integration, lifecycle software testing,
product deployment, end-user customization, performance
tuning, product support and maintenance, managed services,
and porting and cross-platform migration. The company provides
custom application development services, such as business and
technical requirement analysis, user experience design, solution
architecture creation and validation, development, component
design and integration, quality assurance and testing,
deployment, performance tuning, support and maintenance,
legacy applications re-engineering/refactoring, porting and cross-
platform migration, and documentation. The company was
founded in 1993 and is headquartered in Newtown,
Pennsylvania.
Date Key Development Headline3/14/18 EPAM Systems, Inc. (NYSE:EPAM) acquired Continuum LLC.
1/11/18 Epam Systems and Black Box Create In-Store Dynamic
Advertising Solution Using Instant Facial Recognition
11/2/17 EPAM Systems Seeks Acquisitions
0x
2x
4x
6xRevenue Multiples - EPAM Systems, Inc.
TEV/Revenue Average
0x
10x
20x
30x
40xEBITDA Multiples - EPAM Systems, Inc.
TEV/EBITDA Average
0x
30x
60x
90x
120xP/E Multiples - EPAM Systems, Inc.
P/E Average
21
Public Basket
Accenture plc
Accenture plc provides consulting, technology, and outsourcing
services worldwide. Its Communications, Media & Technology
segment provides professional services that help clients
accelerate and deliver digital transformation, and enhance
business results through industry-specific solutions for
communications, media, and high tech industries, as well as for
software platforms. The company’s Financial Services segment
offers services that address profitability pressures, industry
consolidation, regulatory changes, and the need to continually
adapt to new digital technologies. This segment serves clients in
banking, capital markets, and insurance industries. Its Health &
Public Service segment provides research-based insights and
offerings, including consulting services and digital solutions to
help clients deliver social, economic, and health outcomes.
Accenture plc was founded in 1989 and is based in Dublin,
Ireland.
Date Key Development Headline7/23/18 Accenture Forms Strategic Alliance and Invests in Data
Intelligence Company Ripjar
7/11/18 Accenture plc (NYSE:ACN) acquired Kogentix Inc.
6/30/18 Accenture Reportedly Seeks Acquisitions
6/7/18 Accenture plc (NYSE:ACN) entered into an agreement to acquire
designaffairs GmbH.
6/4/18 SAP SE to Team with Accenture, Capgemini and Deloitte to
Accelerate Customer Adoption of SAP S/4Hana(R) Cloud in
Target Industries
0x
1x
2x
3x
4xRevenue Multiples - Accenture plc
TEV/Revenue Average
0x
6x
12x
18x
24x
30xEBITDA Multiples - Accenture plc
TEV/EBITDA Average
0x
10x
20x
30x
40xP/E Multiples - Accenture plc
P/E Average
22
Public Basket
International Business Machines Corporation
International Business Machines Corporation operates as an
integrated technology and services company worldwide. Its
Cognitive Solutions segment offers Watson, a cognitive
computing platform that interacts in natural language, processes
big data, and learns from interactions with people and
computers. This segment also offers data and analytics
solutions, including analytics and data management platforms,
cloud data services, enterprise social software, talent
management solutions, and solutions tailored by industry; and
transaction processing software that runs mission-critical
systems in banking, airlines, and retail industries. International
Business Machines Corporation was founded in 1911 and is
headquartered in Armonk, New York.
Date Key Development Headline7/17/18 Columbia University and IBM Establish New Center to Accelerate
Innovation in Blockchain and Data Transparency
7/16/18 IBM, Banca Carige Launches Dock a USD 500 Million US Joint
Venture
6/14/18 International Business Machines Corporation (NYSE:IBM)
acquired Oniqua Pty Ltd. from ASCO Holdings Limited.
6/7/18 Intellect Design Arena Limited and International Business
Machines Corporation to Deliver Seamless Digital Transformation
to the Large Banks with IBM Cloud
4/26/18 Host Hotels & Resorts, Inc. Announces Joint Development
Agreement with IBM Research
0x
1x
2x
3x
4x
5x
Revenue Multiples - International Business
Machines Corporation
TEV/Revenue Average
0x
5x
10x
15x
20x
EBITDA Multiples - International Business
Machines Corporation
TEV/EBITDA Average
0x
10x
20x
30x
40x
P/E Multiples - International Business
Machines Corporation
P/E Average
23
Contact Information7MA provides Investment Banking & Advisory Services to the Business Services and Technology Industries globally.
We advise on M&A and private capital transactions, and provide market assessments and benchmarking. As a close-
knit team with a long history together and a laser focus on our target markets, we help our clients sell their
companies, raise capital, grow through acquisitions, and evaluate new markets. Securities offered through 7M
Securities LLC.
Leroy Davis, Partner 704.899.5962 [email protected]
Tripp Davis, Partner 704.899.5762 [email protected]
Andy Johnston, Partner 704.899.5961 [email protected]
Tom Dinnegan, Managing Director 310. 426.2410 [email protected]
Ben Lunka, Managing Director 704.496.2995 [email protected]
Jeff Stoecklein, Managing Director 312.373.3737 [email protected]
Kristina Sergueeva, Director 704.899.5149 [email protected]
Neil Churman, Director 704.899.5960 x 121 [email protected]
John Cooper, Director 704.973.3996 [email protected]
Tim Frye, Director 704.973.3994 [email protected]
Casey Augustine, Business Development - Manager 704.973.3999 [email protected]
Nicholas Prendergast, Financial Analyst 704.899.5960 [email protected]
Ariail Siggins, Marketing Director 704.899.5960 x 123 [email protected]
Sydney Larese, Associate 704.899.5960 [email protected]
Marty Johnson, Associate 704.899.5960 [email protected]
Rory Julyan, Associate 704.899.5960 [email protected]
Garth Martin, Associate 704.899.5960 x 109 [email protected]
Chevonese Dacres, Analyst 360.499.1502 [email protected]