Agenda
I.
II.
III.
IV.
V.
VI.
VII.
VIII.
Executive Summary
Company Overview
Industry Overview
Economic Overview
Deliverable 1: SpringLogix Valuation
Deliverable 2: Transfer Pricing
Conclusion
Appendix
3
5
8
12
16
46
54
57
I. Executive Summary
Executive Summary
Attractive Acquisition Opportunity of SpringLogix
Growth of high-margin software-as-a-service (SaaS) sector and opportunity for operational improvements for
SpringLogix
Private equity firm has attractive financing options due to low interest rates and increasing levels of leverage in
U.S. economy
Suggested enterprise valuation range of $1.5B - $2.0B based on discounted cash flow, public comparables,
precedent transactions, and leverage buyout analyses
Recommended bid for SpringLogix of $42.95 per share, representing a 69% premium over current
share price, implying an enterprise value of $1.6B
Lower corporate tax rate in Ireland leads to a higher European and overall NOPLAT
There is an increase in our valuation using a DCF of $316M with a transfer pricing rate of 3.0%
SpringLogix Overview
Summary
Background:
Products:
Geography:
SpringLogix Overview
Historical Financial Overview
Consolidated P&L
USD ($mm)
License
Maintenance
Service
Total Revenue
2009A
174
302
36
512
Total Expenses
EBITDA
Depreciation
EBIT
Capex
100.0%
2010A
192
333
41
566
100.0%
2011A
198
364
43
605
-352
-68.8%
-386
-68.2%
160
-5
155
31.3%
31.8%
30.3%
180
-5
175
0.8%
34.0%
59.0%
7.0%
-1.0%
100.0%
2012A
184
374
41
599
-411
-67.9%
32.1%
30.9%
194
-5
189
0.9%
33.9%
58.8%
7.2%
-0.9%
100.0%
2013A
174
379
39
592
100.0%
-418
-69.8%
-428
-72.3%
30.2%
29.4%
164
-5
159
27.7%
31.2%
181
-5
176
1.0%
1.2%
1.2%
32.7%
60.2%
7.1%
-0.8%
30.7%
62.4%
6.8%
-0.8%
29.4%
64.0%
6.6%
-0.8%
26.9%
SpringLogix has seen revenue declines in the preceding years due to its inability to compete
with SaaS and cloud service providers
Customer concentration, despite high margins, poses risk as industry moves away from
traditional licensing model
Market cap has decreased from $1.7B to $1.0B since 2012 due to poor performance
Industry Overview
Enterprise Software Industry
Industry Trends
Movement Towards SaaS Solutions
Growing popularity of the Internet across organizations of all sizes has enabled
movement away from proprietary software and towards non-traditional software
Enterprise customers are increasingly recognizing the benefits of adopting cloudcomputing models, including increased flexible subscription pricing, vendor accountability,
and lower deployment and support costs
Budget for Cloud as Percentage of Annual IT Spending
10
Industry Takeaways
SaaS is a More Attractive Sector than License Software
SaaS commands an EBITDA margin of 35-40% while license software EBITDA margins
range between 25-30%
The higher margins in SaaS present value for a potential acquirer in a business like
SpringLogix, which traditionally had low margins but now has the opportunity to
increase them by entering the SaaS space
SaaS companies have much higher EV/Revenue exit multiples (~4.0x) than those of the
overall enterprise software market (~2.0x)
Median EV/Revenue Exit Multiples
11
12
Economic Overview
Recent Leveraged Buyout Trends
LBO leverage has steadily been increasing since the financial crisis in 2008
During 2013, leverage bounced back to the highest levels seen in years, nearing 7.2x
Debt/EBITDA for the top 20% of levered transactions
Debt/EBITDA Multiple Overview
13
Economic Overview
Private Equity Activity in Software Industry
Broad shift in technology M&A away from hardware-focused transactions to cloudbased technologies has led to increased activity in software
Software represents the most active vertical in private equity deal volume and deal value
(35% and 36% respectively)
Cloud powered, software-defined businesses will be likely deal makers or targets in near-future
14
Economic Conclusions
Acquisition Opportunity of SpringLogix
Due to increasing levels of leverage, private equity firms have more opportunity to
contribute lower levels of equity into companies across their funds
Debt is still issued at low prices relative to historical averages, meaning the cash flows of a
company are more likely to cover both interest and principal payments
Average premium of just over 30% for the past three years for leveraged buyout deals
Attractive
Investment
(SPLX)
Turnaround
Strategy via SaaS
Leverage
15
16
Valuation Summary
Valuation From Both Buyer and Seller Perspectives
To determine the most appropriate valuation of SPLX, we considered both the buy-side
and sell-side value perspectives
The buyers perspective was considered through a leveraged buyout methodology
The sellers perspective was considered through a precedent transactions, public
comparables, and discounted cash flow methodologies
Using our analyses, we determined an approximate valuation of $1.6B
LTM EBITDA
9.8x
Multiple
10.1x 14.1x
Leveraged Buyout
Precedent Transactions
6.0x 10.7x
Public Comparables
8.1x 11.8x
9.0x 12.2x
17
$1,000
$1,500
$2,000
$2,500
$3,000
Valuation Assumptions
Projected Income Statements - U.S.
United States P&L
USD ($mm)
License
Maintenance
Service
SaaS Subscription
SaaS Service
Total Revenue
YoY Growth
2014E
104
220
25
18
7
374
(18)
(247)
(265)
109
(3)
106
18
58.8%
6.7%
4.9%
2.0%
100.0%
2015E
98
216
24
38
15
391
25.1%
55.2%
6.1%
9.7%
3.9%
100.0%
2016E
94
212
24
88
35
453
4.62%
SaaS-related Expenses
Base Expenses
Total Expenses
SaaS Acquisition
Base Capex
27.7%
28
3
-66.0%
29.0%
0
28.2%
7.5%
0.8%
(38)
(242)
(280)
18
129
(3)
126
28
3
-61.8%
4.6%
32.9%
-0.8%
32.2%
7.2%
0.8%
20.7%
46.8%
5.3%
19.5%
7.8%
100.0%
2017E
96
208
23
98
39
464
15.77%
(89)
(237)
(326)
18
145
(3)
142
28
4
-52.3%
4.0%
32.0%
-0.7%
31.3%
2018E
98
204
23
108
43
476
20.7%
44.8%
5.0%
21.1%
8.5%
100.0%
2.50%
(99)
(223)
(322)
18
160
(3)
157
-48.0%
3.9%
34.5%
-0.6%
33.9%
20.7%
42.9%
4.8%
22.6%
9.0%
100.0%
2019E
101
201
23
117
47
488
2.50%
(109)
(220)
(329)
18
165
(3)
162
-46.2%
3.8%
34.7%
-0.6%
34.1%
20.7%
41.2%
4.7%
23.9%
9.6%
100.0%
2.50%
(118)
(214)
(332)
18
174
(3)
171
-43.9%
3.7%
35.7%
-0.6%
35.1%
6.2%
0.9%
0.6%
0.6%
0.6%
Valuation Assumptions
Projected Income Statements - U.S. (contd)
United States P&L
USD ($mm)
License
Maintenance
Service
SaaS Subscription
SaaS Service
Total Revenue
YoY Growth
2014E
104
220
25
18
7
374
58.8%
6.7%
4.9%
2.0%
100.0%
2015E
98
216
24
38
15
391
25.1%
55.2%
6.1%
9.7%
3.9%
100.0%
2016E
94
212
24
88
35
453
4.62%
SaaS-related Expenses
Base Expenses
Total Expenses
(18)
(247)
(265)
109
(3)
106
SaaS Acquisition
Base Capex
27.7%
28
3
-66.0%
29.0%
0
28.2%
7.5%
0.8%
(38)
(242)
(280)
18
129
(3)
126
28
3
-61.8%
4.6%
32.9%
-0.8%
32.2%
7.2%
0.8%
20.7%
46.8%
5.3%
19.5%
7.8%
100.0%
15.77%
(89)
(237)
(326)
18
145
(3)
142
28
4
-52.3%
4.0%
32.0%
-0.7%
31.3%
2018E
98
204
23
108
43
476
20.7%
44.8%
5.0%
21.1%
8.5%
100.0%
2.50%
(99)
(223)
(322)
18
160
(3)
157
-48.0%
3.9%
34.5%
-0.6%
33.9%
20.7%
42.9%
4.8%
22.6%
9.0%
100.0%
2019E
101
201
23
117
47
488
2.50%
(109)
(220)
(329)
18
165
(3)
162
-46.2%
3.8%
34.7%
-0.6%
34.1%
20.7%
41.2%
4.7%
23.9%
9.6%
100.0%
2.50%
(118)
(214)
(332)
18
174
(3)
171
-43.9%
3.7%
35.7%
-0.6%
35.1%
6.2%
0.9%
19
2017E
96
208
23
98
39
464
0.6%
0.6%
0.6%
Valuation Assumptions
Projected Income Statements - Europe
Europe P&L
USD ($mm)
License
Maintenance
Service
SaaS Subscription
SaaS Service
Total Revenue
YoY Growth
SaaS-related Expenses
Base Expenses
Total Expenses
Net Pre-Tax Synergies
EBITDA
Depreciation
EBIT
SaaS Acquisition
Base Capex
Cannibalization of license
sales due to SaaS shift (5%10% off mgmt. projections)
20
2014E
55
149
13
12
5
234
23.5%
63.6%
5.6%
5.2%
2.1%
100.0%
2015E
52
144
12
25
10
243
21.3%
59.2%
4.9%
10.4%
4.2%
100.0%
2016E
49
139
12
59
24
282
3.94%
(12)
(165)
(177)
-70.5%
57
(2)
55
19
2
(26)
(159)
(185)
23.4%
12
71
(2)
69
0.9%
19
2
24.3%
0
-65.3%
(59)
(153)
(212)
28.2%
0.8%
19
2
-0.8%
49.3%
4.3%
20.9%
8.3%
100.0%
2017E
50
134
11
66
27
288
15.85%
12
82
(2)
80
4.9%
29.1%
17.2%
-54.3%
(67)
(143)
(210)
28.2%
0.7%
-0.7%
46.6%
3.8%
23.1%
9.2%
100.0%
2018E
51
129
11
73
29
293
2.00%
12
89
(2)
87
4.3%
28.9%
17.2%
-49.7%
(74)
(139)
(213)
30.4%
0.7%
-0.7%
44.0%
3.8%
25.0%
10.0%
100.0%
2019E
52
125
11
80
32
299
2.00%
12
92
(2)
90
4.2%
31.1%
17.2%
-47.4%
(80)
(134)
(214)
30.7%
0.7%
-0.7%
41.8%
3.7%
26.6%
10.7%
100.0%
2.00%
12
97
(2)
95
4.1%
31.4%
17.2%
-44.8%
4.0%
32.3%
-0.7%
31.6%
0.7%
Valuation Assumptions
Projected Income Statements - Europe (contd)
Europe P&L
USD ($mm)
License
Maintenance
Service
SaaS Subscription
SaaS Service
Total Revenue
YoY Growth
SaaS-related Expenses
Base Expenses
Total Expenses
Net Pre-Tax Synergies
EBITDA
Depreciation
EBIT
SaaS Acquisition
Base Capex
2014E
55
149
13
12
5
234
23.5%
63.6%
5.6%
5.2%
2.1%
100.0%
2015E
52
144
12
25
10
243
21.3%
59.2%
4.9%
10.4%
4.2%
100.0%
2016E
49
139
12
59
24
282
3.94%
(12)
(165)
(177)
-70.5%
57
(2)
55
19
2
(26)
(159)
(185)
23.4%
12
71
(2)
69
0.9%
19
2
24.3%
0
-65.3%
(59)
(153)
(212)
28.2%
0.8%
19
2
-0.8%
49.3%
4.3%
20.9%
8.3%
100.0%
-54.3%
(67)
(143)
(210)
28.2%
0.7%
-0.7%
17.2%
46.6%
3.8%
23.1%
9.2%
100.0%
2018E
51
129
11
73
29
293
2.00%
12
89
(2)
87
4.3%
28.9%
21
2017E
50
134
11
66
27
288
15.85%
12
82
(2)
80
4.9%
29.1%
17.2%
-49.7%
(74)
(139)
(213)
30.4%
0.7%
-0.7%
44.0%
3.8%
25.0%
10.0%
100.0%
2019E
52
125
11
80
32
299
2.00%
12
92
(2)
90
4.2%
31.1%
17.2%
-47.4%
(80)
(134)
(214)
30.7%
0.7%
-0.7%
41.8%
3.7%
26.6%
10.7%
100.0%
2.00%
12
97
(2)
95
4.1%
31.4%
17.2%
-44.8%
4.0%
32.3%
-0.7%
31.6%
0.7%
2015E
2016E
2017E
2018E
2019E
Total Revenue
608
635
735
752
769
787
Total Expenses
Total Synergies
EBITDA
(443)
166
(465)
30
200
(538)
30
227
(532)
30
250
(542)
30
257
(546)
30
271
Depreciation
EBIT
(5)
161
(5)
195
(5)
222
(5)
245
(5)
252
(5)
266
(64)
96
(78)
117
(89)
133
(98)
147
(101)
151
(106)
160
5
3
(52)
52
5
6
(52)
76
5
20
(53)
105
5
0
(5)
147
5
3
(5)
154
5
2
(5)
162
1.091
48
1.191
64
1.300
81
1.419
104
1.548
100
1.690
96
Discount Factor
Discounted FCF
22
Terminal
Value
1421
Valuation Assumptions
Projected Net Working Capital
Net Working Capital Assumptions
FYE 2013
FYE 2014
FYE 2015
FYE 2016
FYE 2017
FYE 2018
FYE 2019
53.02
6.54%
4.90%
53.02
6.54%
4.90%
53.02
6.54%
4.90%
53.02
6.54%
4.90%
53.02
6.54%
4.90%
53.02
6.54%
4.90%
53.02
6.54%
4.90%
11.94
12.15%
27.20%
8.18%
11.94
12.15%
27.20%
7.94%
11.94
12.15%
27.20%
7.94%
11.94
12.15%
27.20%
7.94%
11.94
12.15%
27.20%
7.94%
11.94
12.15%
27.20%
7.94%
11.94
12.15%
27.20%
7.94%
FY 2013 NWC ratios (DSO, DPO, etc.) held constant for projection period
23
Transition to SaaS business should have negligible impact on cash cycle, as the existing
revenue sources will still account for over 65% of Total Revenue in 2019
Year over year drivers of working capital items lead to decreases in NWC; represents a cash inflow
in the DCF
Valuation Assumptions
Projected Balance Sheet
Consolidated Balance Sheet
USD ($mm)
FYE 2013
92
86
28
29
235
FYE 2014
20
88
29
30
167
FYE 2015
20
92
30
31
174
FYE 2016
20
107
35
36
198
FYE 2017
20
109
35
37
201
FYE 2018
20
112
35
38
205
FYE 2019
20
114
36
39
209
51
46
19
1,598
62
1,776
46
46
66
1,598
62
1,817
41
46
112
1,598
62
1,859
36
47
159
1,598
62
1,902
31
47
159
1,598
62
1,896
26
47
159
1,598
62
1,891
20
47
159
1,598
62
1,886
Total Assets
2,011
1,985
2,033
2,100
2,097
2,096
2,095
Accounts Payable
Accrued Expenses
Deferred Revenue
Current Portion of LT Debt
Other Current Liabilities
Total Current Liabilities
14
52
161
35
262
14
54
165
35
269
15
57
173
37
281
18
65
200
43
326
17
65
205
42
329
18
66
209
43
336
18
66
214
43
342
427
427
427
34
379
384
423
34
379
342
418
34
351
299
414
34
282
256
410
34
225
192
406
34
159
128
401
34
1,577
1,489
1,455
1,424
1,311
1,193
1,064
434
496
578
675
787
903
1,030
2,011
-
1,985
-
2,033
-
2,100
-
2,097
-
2,096
-
2,095
-
Cash
Accounts Receivable
Prepaid Expenses
Other Current Assets
Total Current Assets
Total Liabilities
Equity
Total Liabilities & Equity
Ck
24
Ke
E/V
11.50%
71.45%
Kd
D/V
t
5.38%
28.55%
40.00%
WACC
9.14%
Ke Breakdown
Risk-Free Rate
Beta Levered
SPLX
0.85
39.95%
0.68
BBB
29%
0.85
7.93%
Size Premium
1.73%
25
Beta Decomposition
Kd Decomposition
Beta Lev.
D/E
Beta Unlev S&P Rating
D/V
0.55
72.30%
0.38
BB
42%
0.76
4.20%
0.74
AAA
4%
1.14
93.90%
0.73
48%
0.57
64.70%
0.41
BBB
39%
0.91
89.50%
0.59
47%
1.41
82.10%
0.94
BBB+
45%
0.58
14.10%
0.53
BBB+
12%
0.97
20.60%
0.86
AAA
17%
1.17
41.00%
0.94
A+
29%
0.95
0.00%
0.95
0.51
28.00%
0.44
22%
3.04%
Ke
Company
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Hewlett-Packard Company (NYSE:HPQ)
Intuit Inc. (NasdaqGS:INTU)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
Paychex, Inc. (NasdaqGS:PAYX)
SAP AG (DB:SAP)
11.50%
Ke
E/V
11.50%
71.45%
Kd
D/V
t
5.38%
28.55%
40.00%
WACC
9.14%
Ke Breakdown
Company
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Hewlett-Packard Company (NYSE:HPQ)
Intuit Inc. (NasdaqGS:INTU)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
Paychex, Inc. (NasdaqGS:PAYX)
SAP AG (DB:SAP)
SPLX
Beta Decomposition
Kd Decomposition
Beta Lev.
D/E
Beta Unlev S&P Rating
D/V
0.55
72.30%
0.38
BB
42%
0.76
4.20%
0.74
AAA
4%
1.14
93.90%
0.73
48%
0.57
64.70%
0.41
BBB
39%
0.91
89.50%
0.59
47%
1.41
82.10%
0.94
BBB+
45%
0.58
14.10%
0.53
BBB+
12%
0.97
20.60%
0.86
AAA
17%
1.17
41.00%
0.94
A+
29%
0.95
0.00%
0.95
0.51
28.00%
0.44
22%
0.85
39.95%
0.68
3.04%
0.85
7.93%
Size Premium
1.73%
Risk-Free Rate
Beta Levered
Ke
26
BBB
29%
11.50%
Ke
E/V
11.50%
71.45%
Kd
D/V
t
5.38%
28.55%
40.00%
WACC
9.14%
Ke Breakdown
SPLX
Risk-Free Rate
3.04%
0.85
7.93%
Size Premium
1.73%
Beta Levered
Ke
27
Company
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Hewlett-Packard Company (NYSE:HPQ)
Intuit Inc. (NasdaqGS:INTU)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
Paychex, Inc. (NasdaqGS:PAYX)
SAP AG (DB:SAP)
Beta Decomposition
Kd Decomposition
Beta Lev.
D/E
Beta Unlev S&P Rating
D/V
0.55
72.30%
0.38
BB
42%
0.76
4.20%
0.74
AAA
4%
1.14
93.90%
0.73
48%
0.57
64.70%
0.41
BBB
39%
0.91
89.50%
0.59
47%
1.41
82.10%
0.94
BBB+
45%
0.58
14.10%
0.53
BBB+
12%
0.97
20.60%
0.86
AAA
17%
1.17
41.00%
0.94
A+
29%
0.95
0.00%
0.95
0.51
28.00%
0.44
22%
0.85
39.95%
0.68
BBB
29%
11.50%
Source: CapitalIQ
Ke
E/V
11.50%
71.45%
Kd
D/V
t
5.38%
28.55%
40.00%
WACC
9.14%
Ke Breakdown
Risk-Free Rate
SPLX
Beta Levered
39.95%
0.68
BBB
29%
0.85
1.73%
28
0.85
7.93%
Ke
Beta Decomposition
Kd Decomposition
Beta Lev.
D/E
Beta Unlev S&P Rating
D/V
0.55
72.30%
0.38
BB
42%
0.76
4.20%
0.74
AAA
4%
1.14
93.90%
0.73
48%
0.57
64.70%
0.41
BBB
39%
0.91
89.50%
0.59
47%
1.41
82.10%
0.94
BBB+
45%
0.58
14.10%
0.53
BBB+
12%
0.97
20.60%
0.86
AAA
17%
1.17
41.00%
0.94
A+
29%
0.95
0.00%
0.95
0.51
28.00%
0.44
22%
3.04%
Company
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Hewlett-Packard Company (NYSE:HPQ)
Intuit Inc. (NasdaqGS:INTU)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
Paychex, Inc. (NasdaqGS:PAYX)
SAP AG (DB:SAP)
11.50%
2015E
2016E
2017E
2018E
2019E
Total Revenue
608
635
735
752
769
787
Total Expenses
Total Synergies
EBITDA
(443)
166
(465)
30
200
(538)
30
227
(532)
30
250
(542)
30
257
(546)
30
271
Depreciation
EBIT
(5)
161
(5)
195
(5)
222
(5)
245
(5)
252
(5)
266
(64)
96
(78)
117
(89)
133
(98)
147
(101)
151
(106)
160
5
3
(52)
52
5
6
(52)
76
5
20
(53)
105
5
0
(5)
147
5
3
(5)
154
5
2
(5)
162
1.091
48
1.191
64
1.300
81
1.419
104
1.548
100
1.690
96
Discount Factor
Discounted FCF
29
Terminal
Value
162
9.14%
2.25%
2401
1420.8
8.66x
74.28%
1421
Enterprise Value
Terminal
Growth
Rate
1.75%
2.00%
2.25%
2.50%
2.75%
7.14%
2,299
2,392
2,494
2,607
2,733
8.14%
2,016
2,082
2,154
2,232
2,317
WACC
9.14%
1,810
1,859
1,913
1,970
2,031
10.14%
1,653
1,691
1,732
1,776
1,823
11.14%
1,529
1,560
1,593
1,627
1,664
Terminal
Growth
Rate
1.75%
2.00%
2.25%
2.50%
2.75%
7.14%
79%
79%
80%
81%
82%
8.14%
76%
76%
77%
78%
79%
WACC
9.14%
73%
74%
74%
75%
76%
10.14% 11.14%
70%
68%
71%
68%
72%
69%
72%
70%
73%
70%
Enterprise value sensitivity is based on our target WACC and terminal growth rates, with
corresponding changes of 1.0% and .25%
From our analysis, WACC has a larger impact on Enterprise Value than does the terminal
growth rate
A 2.25% terminal growth rate implies an exit multiple of 8.7x 2019E EBITDA
30
Public Comparables
Selection Criteria for Comparable Companies
Industry sector
Financial profile
Business model
Geography
Customers
Peer group consists of two major market segments in the software industry: applications
software and systems software
Applications software comprises programs that perform specific functions
Systems software comprises operating systems and data center management
SpringLogix is comparable to application software companies because it specializes in
planning, budgeting, and financial reporting software solutions
Management states that SpringLogixs primary competition comes from large software
providers that offer similar products, which fall in line with systems software companies
To determine the most comparable metrics, we used different weights for each market
segment: 30% for Applications Software and 70% for Systems Software
31
Public Comparables
Public Comparables Analysis
Financial Metric
any
me
Price
Market
Value of
Equity
Shares
Company
Outstanding
Name
Financial Metric
Market
Enterprise
Shares LTM
Enterprise NTM
LTM
Price
Value of
NTM
Value
Outstanding
Sales Equity EBITDAValue SalesSales
NTM
NTM
EBITDA
EBITDA
EV as a multiple of
EV as a multiple of
LTM
NTM
Sales
Sales
LTM
NTM
EBITDA
EBITDA
NTM
Sales
3.7x
2.8x
3.3x
3.1x
2.1x
1.6x
3.0x
3.2x
2.0x
2.2x
4.4x
4.8x
5.9x
6.2x
15.0x
9.3x
15.9x
15.1x
8.8x
10.2x
9.9x
12.4x
9.5x
10.3x
11.2x
14.1x
13.4x
14.3x
2.8x
3.1x
2.1x
3.0x
2.0x
4.4x
5.9x
0.6x
0.6x
3.0x
2.8x
4.1x
3.9x
4.1x
3.9x
5.0x
4.8x
7.7x
7.7x
9.5x
7.9x
12.6x
10.6x
0.6x
2.8x
3.9x
3.9x
4.5x
3.0x
3.2x
1.0x
USD ($mm)
Applications Software
GS:ACIW)
60.88
38.5 $
2,346.7
ACI Worldwide,$Inc.
(NasdaqGS:ACIW)
nc. (NasdaqGS:ADP)
76.97
481.4
37,055.3
Automatic Data$Processing,
Inc. (NasdaqGS:ADP)
DST Systems Inc.
$ (NYSE:DST)
88.76
42.2
3,743.0
National
Services,
n Services, Inc. Fidelity
(NYSE:FIS)
$ Information
50.84
291.1Inc. (NYSE:FIS)
14,801.2
Global Payments
(NYSE:GPN) 71.9
GPN)
$ Inc.
66.91
4,812.2
Intuit Inc. (NasdaqGS:INTU)
$ 73.24
284.9
20,866.3
Paychex, Inc. (NasdaqGS:PAYX)
YX)
$ 42.08
364.2
15,326.0
NYSE:HPQ)
aqGS:MSFT)
RCL)
Systems Software
$ 28.49
1,908.8
Hewlett-Packard Company (NYSE:HPQ)
$ 36.81
8,300.7
Microsoft Corporation (NasdaqGS:MSFT)
$
37.11
Oracle Corporation (NYSE:ORCL)4,497.4
$ 77.57
1,193.5
SAP AG (DB:SAP)
25.3
SPRINGLOGIX CORPORATION
Category
Applications Software
Systems Software
40.0
Weights
30%
70%
54,381.1
305,508.1
166,898.8
92,581.3
$ $60.882,944.5
38,300.1
$ 76.97
$ 88.764,196.1
$ 50.84
18,971.9
$ 66.915,301.4
$ 73.24
20,249.3
$ 42.08
14,862.6
$
$
$
$
1013.6
65,299.1
$
$
196.0
$ 1,054.3
$
38.5 805.9
$
2,346.7
$
2,944.5
$ 1,054.3
11,512.2
481.4
37,055.3 2,411.7
38,300.112,306.3
12,306.3
42.22,649.93,743.0 409.54,196.1 1,983.1
1,983.1
291.15,992.3
14,801.2 1,529.1
18,971.9 6,282.0
6,282.0
71.92,460.94,812.2 516.85,301.4 2,632.7
2,632.7
284.94,231.0
20,866.3 1,437.0
20,249.3 4,557.3
4,557.3
364.22,397.0
15,326.0 1,040.8
14,862.6 2,538.4
2,538.4
$ 112,298.0
$ 13,029.0
$ 109,155.5
$ 316.8
316.8
2,543.1
2,543.1
474.5
474.5
1,922.9
1,922.9
556.1
556.1
1,812.0
1,812.0
1,110.9
1,110.9
$ 13,469.5
28.49
1,908.8 $ 54,381.1 $ 65,299.1 $ 109,155.5 $ 13,469.5
246,211.1
83,433.0
31,828.0
88,596.7
31,850.5
36.81
8,300.7
305,508.1
246,211.1
88,596.7
31,850.5
154,568.8
37,552.0
16,289.0
39,311.3
37.11
4,497.4
166,898.8
154,568.8
39,311.3 19,508.2
19,508.2
94,655.91,193.5
23,013.3
77.57
92,581.3 7,529.3
94,655.924,502.9
24,502.9 8,911.8
8,911.8
25.3
40.0 592.01013.6
164.0
605.1605.1
High
Average
Median
Low
162.5
162.5
522.2
1079.5
Source: CapitalIQ
2728.3
1788.7
1954.9
618.9
Public Comparables
Most Comparable Companies
Financial Metric
Company
Name
Price
Market
Value of
Equity
Shares
Outstanding
Enterprise
Value
NTM
Sales
NTM
EBITDA
EV as a multiple of
NTM
Sales
NTM
EBITDA
316.8
2,543.1
474.5
1,922.9
556.1
1,812.0
1,110.9
2.8x
3.1x
2.1x
3.0x
2.0x
4.4x
5.9x
9.3x
15.1x
8.8x
9.9x
9.5x
11.2x
13.4x
$ 13,469.5
31,850.5
19,508.2
8,911.8
0.6x
2.8x
3.9x
3.9x
4.8x
7.7x
7.9x
10.6x
USD ($mm)
Applications Software
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Intuit Inc. (NasdaqGS:INTU)
Paychex, Inc. (NasdaqGS:PAYX)
$
$
$
$
$
$
$
60.88
76.97
88.76
50.84
66.91
73.24
42.08
38.5
481.4
42.2
291.1
71.9
284.9
364.2
2,346.7
37,055.3
3,743.0
14,801.2
4,812.2
20,866.3
15,326.0
2,944.5
38,300.1
4,196.1
18,971.9
5,301.4
20,249.3
14,862.6
Systems Software
Hewlett-Packard Company (NYSE:HPQ)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
SAP AG (DB:SAP)
$
$
$
$
28.49
36.81
37.11
77.57
1,908.8
8,300.7
4,497.4
1,193.5
54,381.1
305,508.1
166,898.8
92,581.3
65,299.1
246,211.1
154,568.8
94,655.9
SPRINGLOGIX CORPORATION
Company
25.3
40.0
1013.6
1,054.3
12,306.3
1,983.1
6,282.0
2,632.7
4,557.3
2,538.4
$ 109,155.5
88,596.7
39,311.3
24,502.9
605.1
162.5
33
Source: CapitalIQ
Public Comparables
Market Valuation of SpringLogix
Financial Metric
Company
Name
Price
Market
Value of
Equity
Shares
Outstanding
Enterprise
Value
NTM
Sales
NTM
EBITDA
EV as a multiple of
NTM
Sales
NTM
EBITDA
316.8
2,543.1
474.5
1,922.9
556.1
1,812.0
1,110.9
2.8x
3.1x
2.1x
3.0x
2.0x
4.4x
5.9x
9.3x
15.1x
8.8x
9.9x
9.5x
11.2x
13.4x
$ 13,469.5
31,850.5
19,508.2
8,911.8
0.6x
2.8x
3.9x
3.9x
4.8x
7.7x
7.9x
10.6x
USD ($mm)
Applications Software
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Intuit Inc. (NasdaqGS:INTU)
Paychex, Inc. (NasdaqGS:PAYX)
$
$
$
$
$
$
$
60.88
76.97
88.76
50.84
66.91
73.24
42.08
38.5
481.4
42.2
291.1
71.9
284.9
364.2
2,346.7
37,055.3
3,743.0
14,801.2
4,812.2
20,866.3
15,326.0
2,944.5
38,300.1
4,196.1
18,971.9
5,301.4
20,249.3
14,862.6
Systems Software
Hewlett-Packard Company (NYSE:HPQ)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
SAP AG (DB:SAP)
$
$
$
$
28.49
36.81
37.11
77.57
1,908.8
8,300.7
4,497.4
1,193.5
54,381.1
305,508.1
166,898.8
92,581.3
65,299.1
246,211.1
154,568.8
94,655.9
SPRINGLOGIX CORPORATION
Metric
NTM Sales
NTM EBITDA
SpringLogix
605.1
162.5
25.3
Multiple Range
1.0x - 4.1x
6.0x - 10.8x
40.0
Implied EV
$618.9 - 2472.1
$982.9 - 1753.5
1013.6
1,054.3
12,306.3
1,983.1
6,282.0
2,632.7
4,557.3
2,538.4
$ 109,155.5
88,596.7
39,311.3
24,502.9
605.1
162.5
10.8x
8.4x
8.3x
6.0x
1753.5
1360.4
1355.4
982.9
2472.1
1705.4
1913.7
618.9
Source: CapitalIQ
Precedent Transactions
Selection Criteria for Precedent Transactions
Industry sector
Financial profile
Transaction size
Market timing
Deal dynamics
35
Precedent Transactions
Precedent Transactions Analysis
Acquirer
Target
Deal Player
Date
Misys plc
CDC Software Corporation
Lawson Software, Inc.
Epicor Software Corporation
Works Applications Co., Ltd.
MYOB Holdings Pty Limited
Geac Computer Corporation Limited
COA Solutions Ltd.
CODA Ltd.
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Strategic
Strategic
6/1/2012
4/11/2012
7/5/2011
5/13/2011
3/15/2011
1/12/2009
3/14/2006
2/11/2010
3/5/2008
Financial Metric
Percentage Enterprise
LTM
LTM
LTM
Acquired
Value
Sales
EBITDA
EBIT
100% $ 2,226.5 $
669.8 $
129.7 $
79.2
87%
250.5
218.9
21.8
1.5
100%
2081.5
755.2
132.5
76.7
100%
1041.9
453.3
54.4
20.3
100%
249.7
225.2
22.1
16.6
100%
393.0
186.3
71.9
28.2
100%
970.2
443.4
88.0
73.9
100%
165.8
99.2
20.4
100%
260.6
91.6
22.0
15.3
SPRINGLOGIX CORPORATION
Comparables need to be
normalized to adjust for
multiple outliers
36
592.0
LTM
Sales
3.3x
1.1x
2.8x
2.3x
1.1x
2.1x
2.2x
1.7x
2.8x
EV as a multiple of
LTM
LTM
EBITDA
EBIT
17.2x
28.1x
11.5x
167.0x
15.7x
27.1x
19.2x
51.3x
11.3x
15.0x
5.5x
13.9x
11.0x
13.1x
8.1x
11.8x
17.0x
164.0
Source: CapitalIQ
Precedent Transactions
Most Comparable Transactions
Acquirer
Target
Deal Player
Date
Misys plc
CDC Software Corporation
Lawson Software, Inc.
Epicor Software Corporation
Works Applications Co., Ltd.
MYOB Holdings Pty Limited
Geac Computer Corporation Limited
COA Solutions Ltd.
CODA Ltd.
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Strategic
Strategic
6/1/2012
4/11/2012
7/5/2011
5/13/2011
3/15/2011
1/12/2009
3/14/2006
2/11/2010
3/5/2008
SPRINGLOGIX CORPORATION
Acquirer
Financial Metric
Percentage Enterprise
LTM
LTM
LTM
Acquired
Value
Sales
EBITDA
EBIT
100% $ 2,226.5 $
669.8 $
129.7 $
79.2
87%
250.5
218.9
21.8
1.5
100%
2081.5
755.2
132.5
76.7
100%
1041.9
453.3
54.4
20.3
100%
249.7
225.2
22.1
16.6
100%
393.0
186.3
71.9
28.2
100%
970.2
443.4
88.0
73.9
100%
165.8
99.2
20.4
100%
260.6
91.6
22.0
15.3
592.0
Target
LTM
Sales
3.3x
1.1x
2.8x
2.3x
1.1x
2.1x
2.2x
1.7x
2.8x
EV as a multiple of
LTM
LTM
EBITDA
EBIT
17.2x
28.1x
11.5x
167.0x
15.7x
27.1x
19.2x
51.3x
11.3x
15.0x
5.5x
13.9x
11.0x
13.1x
8.1x
11.8x
17.0x
164.0
37
Source: CapitalIQ
Precedent Transactions
Market Valuation of SpringLogix
Acquirer
Target
Deal Player
Date
Misys plc
CDC Software Corporation
Lawson Software, Inc.
Epicor Software Corporation
Works Applications Co., Ltd.
MYOB Holdings Pty Limited
Geac Computer Corporation Limited
COA Solutions Ltd.
CODA Ltd.
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Strategic
Strategic
6/1/2012
4/11/2012
7/5/2011
5/13/2011
3/15/2011
1/12/2009
3/14/2006
2/11/2010
3/5/2008
Financial Metric
Percentage Enterprise
LTM
LTM
LTM
Acquired
Value
Sales
EBITDA
EBIT
100% $ 2,226.5 $
669.8 $
129.7 $
79.2
87%
250.5
218.9
21.8
1.5
100%
2081.5
755.2
132.5
76.7
100%
1041.9
453.3
54.4
20.3
100%
249.7
225.2
22.1
16.6
100%
393.0
186.3
71.9
28.2
100%
970.2
443.4
88.0
73.9
100%
165.8
99.2
20.4
100%
260.6
91.6
22.0
15.3
SPRINGLOGIX CORPORATION
592.0
High
Average
Median
Low
Metric
LTM Sales
LTM EBITDA
38
SpringLogix
592.0
164.0
Multiple Range
1,1x - 2.8x
8.1x - 11.8x
EV as a multiple of
LTM
LTM
EBITDA
EBIT
17.2x
28.1x
11.5x
167.0x
15.7x
27.1x
19.2x
51.3x
11.3x
15.0x
5.5x
13.9x
11.0x
13.1x
8.1x
11.8x
17.0x
164.0
Implied EV
$656.4 - 1683.9
$1333.1 - 1942.3
LTM
Sales
3.3x
1.1x
2.8x
2.3x
1.1x
2.1x
2.2x
1.7x
2.8x
1683.9
1060.5
989.6
656.4
1,942.3
1,764.1
1,852.8
1,333.1
Source: CapitalIQ
167.0x
53.0x
16.0x
13.1x
SPLX will be experiencing significant changes in their business line to transition to SaaS and
adapt to current market conditions
Public Comparables valuation benchmarks SpringLogix within the software industry
Comparable companies based on industry, financial profile, business model, geography, and
customer allowed for comparable financial metrics
Weighing system between application software and systems software allows for most
comparable multiples
Precedent Transactions valuation considers both strategic and financial buyers from previous
M&A deals
39
Leveraged Buyout
Overview
Toggles
Purchase Price Scenario
Financing Scenario
4
3
50% D/P
1
Sources:
Revolving Line of Credit
Term Loan A
Term Loan B
Cash on Hand
Sponsor Equity Contribution
$1,815
Uses:
Purchase SpringLogix Equity
Retire Existing Debt
Transaction Fees
Financing Fees
1690
54
35
36
Total Uses
Ck
Purchase Price Scenario
40
60% D/P
2
302
302
302
80
827
Total Sources
$1,815
-
Price
$25.34
$31.68
$38.01
$42.24
67% Premium
70% D/P
Equity Value
$1,014
$1,267
$1,520
$1,690
70% D/P
3
364
427
427
427
80
469
c364
364
80
649
$1,822
$1,830
1690
54
35
44
1690
54
35
51
$1,822
-
Enterprise Value
$896
$1,149
$1,402
$1,572
Ran 12 different
purchase price/leverage
scenarios
$1,830
-
1
2
3
4
Leveraged Buyout
Debt Schedule
Consolidated Debt Schedule
USD ($mm)
2014E
Forward Treasury Yield
Cash Flow from Operations
Cash Flow from Investing Activities
Cash Available for Debt Service
Mandatory Payments
Cash from Balance Sheet
Cash Available for Optional Payments
Cash Min.
20
2015E
2016E
2017E
2018E
0.13%
0.38%
0.78%
1.20%
1.75%
2.10%
75
(52)
23
98
(52)
47
128
(53)
75
122
(5)
117
130
(5)
125
139
(5)
134
(47)
72
48
(47)
(0)
(47)
0
28
(47)
0
70
(68)
(0)
56
(68)
0
66
Cash minimum set to $20mm, providing a conservative cushion for unexpected expenses
Debt priced using online research, debt comps, and Mergers & Inquisitions guides
41
2019E
Leveraged Buyout
Credit Ratings
Credit Ratings
"Out of the Box"
Leverage Ratios:
Debt/EBITDA
Debt/(EBITDA-Capex)
Net Debt/EBITDA
Debt to Capital
Coverage Ratios:
Cash Coverage
Interest Coverage
(EBITDA-Capex)/Int.
(EBIT-Capex)/Int.
7.81x
8.16x
7.25x
74.7%
FYE 2014
FYE 2015
FYE 2016
FYE 2017
FYE 2018
FYE 2019
7.16x
10.42x
7.04x
70.5%
5.71x
7.70x
5.61x
66.3%
4.70x
6.12x
4.61x
61.2%
3.80x
3.87x
3.72x
54.6%
3.20x
3.26x
3.12x
47.7%
2.54x
2.59x
2.47x
40.1%
3.16x
2.96x
2.17x
1.98x
3.81x
3.62x
2.82x
2.63x
4.19x
4.00x
3.21x
3.03x
4.61x
4.42x
4.52x
4.33x
4.84x
4.65x
4.74x
4.55x
5.54x
5.34x
5.44x
5.23x
Ratings are useful for potential creditors to fund and price debt used in the LBO
Out of the Box leverage is relatively high, but strong free cash flow projections allow
SpringLogix to quickly pay down the debt load
Cash coverage ratios are strong due to the SaaS business improvements
42
Leveraged Buyout
Sponsor Returns Schedule
Sponsor Returns Schedule
USD ($mm)
FYE 2014
FYE 2015
FYE 2016
FYE 2017
FYE 2018
FYE 2019
166
1,572
200
1,896
227
2,152
250
2,372
257
2,446
271
2,573
20
1,186
20
1,139
20
1,064
20
948
20
823
20
689
406
777
1,108
1,444
1,643
1,905
Cash-on-Cash Return
0.87x
1.66x
2.36x
3.08x
3.50x
4.06x
(469)
406
-13%
(469)
777
29%
(469)
1,108
33%
(469)
1,444
32%
(469)
1,643
29%
(469)
1,905
26%
Yes
Yes
Yes
Yes
Purchase Multiple
9.58x
Exit Multiple
EBITDA
Implied Enterprise Value at Exit
9.50x
Plus: Cash
Less: Debt
Implied Equity Value at Exit
Investment Criteria
Investment Decision
No
Conservative exit multiple of 9.50x given industry trends and our other valuation analyses
43
Leveraged Buyout
Sensitivity Analysis
Transaction Values for 25% Price Premium
Debt-to-Purchase Price
50%
60%
70%
30.00% 1,307.7 1,413.7 1,520.8
IRR
27.50% 1,374.4 1,476.2 1,578.9
HURDLE
25.00% 1,451.0 1,547.8 1,645.6
RATE
22.50% 1,539.1 1,630.2 1,722.3
20.00% 1,640.7 1,725.3 1,810.8
Given the inherent risks and upside, our analysis implies an enterprise value of $1.6B
44
Valuation Conclusion
Recommended Bid for SpringLogix
Buyer vs. Sellers Perspective
Valuation
Methodology
Discounted Cash Flow
Public Comparables
Precedent Transactions
Leveraged Buyout
Enterprise Value
EBITDA Multiple
High
High
Low
Low
2,299 $
1,664
14.0x
10.1x
1,754 $
983
10.7x
6.0x
1,942 $
1,333
11.8x
8.1x
1,999 $
1,473
12.2x
9.0x
46
Transfer Pricing
Overview
After Jacket Tech acquired SpringLogix in 2002, it branded all products under the European
SpringLogix trademark
Management has recently discovered an issue and seeks to determine the relevant transfer
pricing to the European operation for trademark rights
Analysis of comparable companies, based on industry, royalty base, and independent licensees,
has yielded a median royalty rate of 3.00% of revenues that we believe can be applied to
SpringLogix payments from the US to Europe
47
Transfer Pricing
Comparable Pricing Analysis
Finalized Comparables
Licensor
Licensee
Industry
Computers: Software
Computers: Software
Computers: Cloud Computing
Computers: Services
Computers: Software
Revenue
Revenue
Revenue
Revenue
Revenue
Computers: Software
Revenue
Royalty Rate
3.50%
1.00%
3.50%
2.70%
3.00%
3.00%
Given a list of potential comparable royalty rates, we determined five of the agreements to be
most comparable
When selecting comps, we decided to include only those with a revenue royalty base, those in a
similar industry to SpringLogix, and ensured that the Licensor and Licensee were independent
parties
Our estimated royalty rate for SpringLogix is the median of our finalized list of comparable
transactions
48
Transfer Pricing
Projected Income Statements - U.S.
United States P&L
USD ($mm)
License
Maintenance
Service
SaaS Subscription
SaaS Service
Total Revenue
YoY Growth
Royalty Expenses
SaaS-related Expenses
Base Expenses
Total Expenses
Net Pre-Tax Synergies
EBITDA
Depreciation
EBIT
Taxes
NOPLAT
40%
SaaS Acquisition
Base Capex
49
2014E
104
220
25
18
7
374
27.7%
58.8%
6.7%
4.9%
2.0%
100.0%
2015E
98
216
24
38
15
391
25.1%
55.2%
6.1%
9.7%
3.9%
100.0%
2016E
94
212
24
88
35
453
4.62%
(11)
(18)
(247)
(277)
-66.0%
97
(3)
94
26.0%
-0.8%
25.2%
(37.78)
57
28
3
(12)
(38)
(242)
(292)
18
117
(3)
114
-61.8%
4.6%
29.9%
-0.8%
29.2%
(45.66)
68
7.5%
0.8%
28
3
20.7%
46.8%
5.3%
19.5%
7.8%
100.0%
0.8%
20.7%
44.8%
5.0%
21.1%
8.5%
100.0%
15.77%
(14)
(89)
(237)
(340)
18
131
(3)
128
-52.3%
4.0%
29.0%
-0.7%
28.3%
(51.36)
77
7.2%
2017E
96
208
23
98
39
464
28
4
2018E
98
204
23
108
43
476
2.50%
(14)
(99)
(223)
(336)
18
146
(3)
143
-48.0%
3.9%
31.5%
-0.6%
30.9%
(57.32)
86
20.7%
42.9%
4.8%
22.6%
9.0%
100.0%
2019E
101
201
23
117
47
488
2.50%
(14)
(109)
(220)
(343)
18
151
(3)
148
-46.2%
3.8%
31.7%
-0.6%
31.1%
(59.21)
89
20.7%
41.2%
4.7%
23.9%
9.6%
100.0%
2.50%
(15)
(118)
(214)
(346)
18
160
(3)
157
-43.9%
3.7%
32.7%
-0.6%
32.1%
(62.64)
94
6.2%
0.9%
0.6%
0.6%
0.6%
Transfer Pricing
Projected Income Statements - Europe
Europe P&L
USD ($mm)
License
Maintenance
Service
SaaS Subscription
SaaS Service
Royalty Income
Total Revenue
YoY Growth
SaaS-related Expenses
Base Expenses
Total Expenses
Net Pre-Tax Synergies
EBITDA
Depreciation
EBIT
Taxes
NOPLAT
12.50%
SaaS Acquisition
Base Capex
50
2014E
55
149
13
12
5
11
245
22.5%
60.7%
5.3%
5.0%
2.0%
4.6%
100.0%
2015E
52
144
12
25
10
12
255
20.3%
56.5%
4.7%
10.0%
4.0%
4.6%
100.0%
2016E
49
139
12
59
24
14
296
3.97%
(12)
(165)
(177)
-67.2%
68
(2)
66
27.7%
-0.8%
26.9%
(8.26)
58
19
2
(26)
(159)
(185)
12
82
(2)
80
-62.3%
4.7%
32.3%
-0.8%
31.5%
(10.06)
70
0.9%
19
2
16.4%
47.0%
4.1%
19.9%
8.0%
4.6%
100.0%
15.85%
(59)
(153)
(212)
12
95
(2)
93
-51.8%
4.1%
32.2%
-0.7%
31.5%
(11.64)
81
0.8%
2017E
50
134
11
66
27
14
301
19
2
16.4%
44.4%
3.6%
22.0%
8.8%
4.6%
100.0%
2.02%
(67)
(143)
(210)
12
103
(2)
101
16.4%
41.9%
3.6%
23.9%
9.5%
4.6%
100.0%
2019E
52
125
11
80
32
15
314
2.02%
(74)
(139)
(213)
-47.4%
12
106
(2)
104
4.0%
34.3%
-0.7%
33.6%
(12.68)
89
0.7%
2018E
51
129
11
73
29
14
308
-45.2%
3.9%
34.6%
-0.7%
34.0%
(13.06)
91
0.7%
16.4%
39.8%
3.5%
25.4%
10.2%
4.7%
100.0%
2.02%
(80)
(134)
(214)
12
111
(2)
109
-42.7%
3.8%
35.5%
-0.6%
34.8%
(13.66)
96
0.7%
0.7%
Transfer Pricing
DCF Valuation with Royalties
Discounted Cash Flow Model
USD ($mm)
2014E
51
2016E
2017E
2018E
2019E
Total Revenue
619
646
749
766
784
802
Total Expenses
Total Synergies
EBITDA
(454)
166
(477)
30
200
(552)
30
227
(546)
30
250
(556)
30
257
(561)
30
271
Depreciation
EBIT
(5)
161
(5)
195
(5)
222
(5)
245
(5)
252
(5)
266
Consolidated NOPLAT
114
139
159
175
180
190
5
3
(52)
71
5
6
(52)
98
5
20
(53)
131
5
0
(5)
175
5
3
(5)
183
5
2
(5)
192
1.093
65
1.195
82
1.306
100
1.427
123
1.560
117
1.705
112
Discount Factor
Discounted FCF
2015E
Terminal
Value
1629
9.14%
9.30%
1913
2,229
316
After layering in royalties, our target valuation increased by $316mm to $2.2B from
$1.9B
The marginal increase in WACC was not enough to offset the increase in NOPLAT
due to the lower corporate tax rate in Ireland, leading to an increase in our overall
valuation
WACC
52
7.29%
8.29%
9.29%
10.29%
11.29%
0.85%
3,143
2,591
2,198
1,902
1,673
Royalty Rate
1.85%
2.85%
3,166
3,190
2,611
2,631
2,214
2,231
1,917
1,932
1,686
1,699
3.85%
3,213
2,650
2,248
1,946
1,712
4.85%
3,237
2,670
2,265
1,961
1,725
SpringLogix Corp must consider both the benefits and risks of implementing a high and low
royalty rate
53
VII. Conclusion
54
Recommendations
Key Questions
Analysis
Recommendation
SpringLogix
Valuation
Transfer Pricing
Analysis
Considered both
strategic & financial
buyers as potential
bidders
Implementation of
transfer pricing boosts
SpringLogix valuation
Acquire SpringLogix for $42.95 per share and implement turnaround plan with
management changes and SaaS growth strategy
Transfer pricing will increase valuation by $316M
55
Potential Acquisition of
Strategic Analysis and Valuation
VIII. Appendix
57
Appendix
Presentation Slides:
Executive Summary
Company Overview
Industry Overview
Economic Overview
Deliverable 1: SpringLogix Valuation
Valuation Summary
Valuation Assumptions U.S.
Valuation Assumptions Europe
Valuation Assumptions NWC
Valuation Assumptions B/S
Discounted Cash Flow
Discounted Cash Flow WACC
Discounted Cash Flow Model
Public Comparables
Public Comparables Analysis
Precedent Transactions
Precedent Transactions Analysis
Sell-side Valuation Overview
Leveraged Buyout
Leveraged Buyout Debt Schedule
Leveraged Buyout Returns Schedule
Buy-side vs. Sell-side
58
Market Valuation
Normalizing Public Comps
Normalizing Precedents
LBO Valuation
Revolving Line of Credit
Term Loan A
Term Loan B
Deferred Financing Fee Schedule
Public Comparables
Normalizing Comparable Companies
Financial Metric
Company
Name
Price
Market
Value of
Equity
Shares
Outstanding
Enterprise
Value
NTM
Sales
NTM
EBITDA
EV as a multiple of
NTM
Sales
NTM
EBITDA
316.8
2,543.1
474.5
1,922.9
556.1
1,812.0
1,110.9
2.8x
3.1x
2.1x
3.0x
2.0x
4.4x
5.9x
9.3x
15.1x
8.8x
9.9x
9.5x
11.2x
13.4x
$ 13,469.5
31,850.5
19,508.2
8,911.8
0.6x
2.8x
3.9x
3.9x
4.8x
7.7x
7.9x
10.6x
USD ($mm)
Applications Software
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Intuit Inc. (NasdaqGS:INTU)
Paychex, Inc. (NasdaqGS:PAYX)
$
$
$
$
$
$
$
60.88
76.97
88.76
50.84
66.91
73.24
42.08
38.5
481.4
42.2
291.1
71.9
284.9
364.2
2,346.7
37,055.3
3,743.0
14,801.2
4,812.2
20,866.3
15,326.0
2,944.5
38,300.1
4,196.1
18,971.9
5,301.4
20,249.3
14,862.6
Systems Software
Hewlett-Packard Company (NYSE:HPQ)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
SAP AG (DB:SAP)
$
$
$
$
28.49
36.81
37.11
77.57
1,908.8
8,300.7
4,497.4
1,193.5
54,381.1
305,508.1
166,898.8
92,581.3
65,299.1
246,211.1
154,568.8
94,655.9
SPRINGLOGIX CORPORATION
Company
59
25.3
40.0
1013.6
1,054.3
12,306.3
1,983.1
6,282.0
2,632.7
4,557.3
2,538.4
$ 109,155.5
88,596.7
39,311.3
24,502.9
605.1
162.5
Strategic Reasons
Financial Reasons
Precedent Transactions
Normalizing Comparable Transactions
Acquirer
Target
Deal Player
Date
Misys plc
CDC Software Corporation
Lawson Software, Inc.
Epicor Software Corporation
Works Applications Co., Ltd.
MYOB Holdings Pty Limited
Geac Computer Corporation Limited
COA Solutions Ltd.
CODA Ltd.
Financial
Financial
Financial
Financial
Financial
Financial
Financial
Strategic
Strategic
6/1/2012
4/11/2012
7/5/2011
5/13/2011
3/15/2011
1/12/2009
3/14/2006
2/11/2010
3/5/2008
Financial Metric
Percentage Enterprise
LTM
LTM
LTM
Acquired
Value
Sales
EBITDA
EBIT
100% $ 2,226.5 $
669.8 $
129.7 $
79.2
87%
250.5
218.9
21.8
1.5
100%
2081.5
755.2
132.5
76.7
100%
1041.9
453.3
54.4
20.3
100%
249.7
225.2
22.1
16.6
100%
393.0
186.3
71.9
28.2
100%
970.2
443.4
88.0
73.9
100%
165.8
99.2
20.4
100%
260.6
91.6
22.0
15.3
SPRINGLOGIX CORPORATION
Acquirer
60
592.0
Target
LTM
Sales
3.3x
1.1x
2.8x
2.3x
1.1x
2.1x
2.2x
1.7x
2.8x
EV as a multiple of
LTM
LTM
EBITDA
EBIT
17.2x
28.1x
11.5x
167.0x
15.7x
27.1x
19.2x
51.3x
11.3x
15.0x
5.5x
13.9x
11.0x
13.1x
8.1x
11.8x
17.0x
164.0
Strategic Reason
Financial Reasons
Low EBITDA
Source: CapitalIQ
61
2015E
2016E
2017E
2018E
2019E
Operating Activities:
Net Income
Depreciation
Amortization of Deferred Financing Fees
62
5
5
82
5
5
97
5
5
111
5
5
116
5
5
127
5
5
(Increase)/Decrease in Receivables
(Increase)/Decrease in Prepaids
(Increase)/Decrease in OCA
Increase/(Decrease) in Payables
Increase/(Decrease) in Accruals
Increase/(Decrease) in Deferred Rev.
Increase/(Decrease) in OCL
(2)
(1)
(1)
0
2
4
0
(4)
(1)
(1)
1
3
7
2
(15)
(5)
(5)
2
9
27
6
(2)
0
(1)
(0)
(1)
5
(0)
(3)
(1)
(1)
0
1
5
1
(3)
(0)
(1)
0
1
5
0
75
98
128
122
130
139
Investing Activities:
Base Capital Expenditures
R&D Investments
Capital Asset Divestments
(5)
(47)
-
(5)
(47)
-
(6)
(47)
-
(52)
(52)
(53)
(5)
(5)
(5)
Financing Activities:
Principal Pay-down
Debt Issued
Equity Issued
Dividends
(95)
-
(47)
-
(75)
-
(117)
-
(125)
-
(134)
-
(95)
(47)
(75)
(117)
(125)
(134)
(72)
92
20
0
20
20
(0)
20
20
0
20
20
20
20
(5)
(5)
-
(5)
-
20
20
500
427
3.00%
8
0.25%
Yes
Beginning Balance
Drawdown/(Repayment)
Ending Balance
Effective Interest Rate
Interest Expense
Commitment Expense
427
(48)
379
379
0
379
379
(28)
351
351
(70)
282
282
(56)
225
225
(66)
159
3.13%
13
0.30
3.38%
13
0.30
3.78%
14
0.37
4.20%
13
0.55
4.75%
12
0.69
5.10%
10
0.85
Priced at T + 300 bps, with 25 bps commitment fee for unfunded portion
62
427
4.50%
8
Yes
Amortization Schedule
10%
10%
10%
10%
15%
15%
Beginning Balance
Mandatory Amortization
Optional Sweep
Ending Balance
427
(43)
384
384
(43)
342
342
(43)
299
299
(43)
256
256
(64)
192
192
(64)
128
4.63%
19
4.88%
18
5.28%
17
5.70%
16
6.25%
14
6.60%
11
Roughly even amortization schedule (typical of TLa), with loan life of 8 calendar years
63
427
4.75%
10
Yes
Amortization Schedule
Beginning Balance
Mandatory Amortization
Optional Sweep
Ending Balance
Effective Interest Rate
Interest Expense
1%
1%
1%
1%
1%
1%
427
(4)
423
423
(4)
418
418
(4)
414
414
(4)
410
410
(4)
406
406
(4)
401
4.88%
21
5.13%
22
5.53%
23
5.95%
25
6.50%
27
6.85%
28
Nominal amortization schedule (typical of TLb), with loan life of 10 calendar years
64
FYE 2014
FYE 2015
FYE 2016
FYE 2017
FYE 2018
FYE 2019
51
5
46
46
5
41
41
5
36
36
5
31
31
5
26
26
5
20
10.00%
Financing fees (4% of debt issued in transaction) capitalized on the balance sheet
Amortized and recognized as non-cash interest expense at a rate of (1/L); where L = Life of
longest loan term financed
65
Disadvantages of SaaS
66
Public Comparables
Public Comparables Analysis
Financial Metric
Company
Name
Price
Market
Value of
Equity
Shares
Outstanding
Enterprise
Value
LTM
Sales
LTM
EBITDA
EV as a multiple of
NTM
Sales
NTM
EBITDA
LTM
Sales
LTM
EBITDA
NTM
Sales
NTM
EBITDA
316.8
2,543.1
474.5
1,922.9
556.1
1,812.0
1,110.9
3.7x
3.3x
1.6x
3.2x
2.2x
4.8x
6.2x
15.0x
15.9x
10.2x
12.4x
10.3x
14.1x
14.3x
2.8x
3.1x
2.1x
3.0x
2.0x
4.4x
5.9x
9.3x
15.1x
8.8x
9.9x
9.5x
11.2x
13.4x
$ 13,469.5
31,850.5
19,508.2
8,911.8
0.6x
3.0x
4.1x
4.1x
5.0x
7.7x
9.5x
12.6x
0.6x
2.8x
3.9x
3.9x
4.8x
7.7x
7.9x
10.6x
4.5x
3.0x
3.2x
1.0x
12.0x
8.8x
8.4x
6.0x
USD ($mm)
Applications Software
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Intuit Inc. (NasdaqGS:INTU)
Paychex, Inc. (NasdaqGS:PAYX)
$
$
$
$
$
$
$
60.88
76.97
88.76
50.84
66.91
73.24
42.08
38.5
481.4
42.2
291.1
71.9
284.9
364.2
2,346.7
37,055.3
3,743.0
14,801.2
4,812.2
20,866.3
15,326.0
2,944.5
38,300.1
4,196.1
18,971.9
5,301.4
20,249.3
14,862.6
Systems Software
Hewlett-Packard Company (NYSE:HPQ)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
SAP AG (DB:SAP)
$
$
$
$
28.49
36.81
37.11
77.57
1,908.8
8,300.7
4,497.4
1,193.5
54,381.1
305,508.1
166,898.8
92,581.3
65,299.1
246,211.1
154,568.8
94,655.9
SPRINGLOGIX CORPORATION
25.3
40.0
Category
Applications Software
Systems Software
Weights
30%
70%
67
1013.6
805.9
11,512.2
2,649.9
5,992.3
2,460.9
4,231.0
2,397.0
$ 112,298.0
83,433.0
37,552.0
23,013.3
196.0
2,411.7
409.5
1,529.1
516.8
1,437.0
1,040.8
$ 13,029.0
31,828.0
16,289.0
7,529.3
592.0
164.0
1,054.3
12,306.3
1,983.1
6,282.0
2,632.7
4,557.3
2,538.4
$ 109,155.5
88,596.7
39,311.3
24,502.9
605.1
High
Average
Median
Low
Implied EV using "High" multiples
Implied EV using "Average" multiples
Implied EV using "Median" multiples
Implied EV using "Low" multiples
Comparables need to be
normalized to adjust for
multiple outliers
162.5
2806.9
2224.6
2728.3
1943.0
Based valuation
primarily
on
1849.5
1646.9
1788.7
1422.8
1682.0
1954.9
1371.7
NTM2054.5
EBITDA
multiples
522.2
1079.5
618.9
982.9
because we expect significant
changes to be made in the next
twelve months for SpringLogix
Source: CapitalIQ
Public Comparables
Public Comparables Analysis
Financial Metric
Company
Name
Price
Market
Value of
Equity
Shares
Outstanding
Enterprise
Value
LTM
Sales
LTM
EBITDA
EV as a multiple of
NTM
Sales
NTM
EBITDA
LTM
Sales
LTM
EBITDA
NTM
Sales
NTM
EBITDA
316.8
2,543.1
474.5
1,922.9
556.1
1,812.0
1,110.9
3.7x
3.3x
1.6x
3.2x
2.2x
4.8x
6.2x
15.0x
15.9x
10.2x
12.4x
10.3x
14.1x
14.3x
2.8x
3.1x
2.1x
3.0x
2.0x
4.4x
5.9x
9.3x
15.1x
8.8x
9.9x
9.5x
11.2x
13.4x
$ 13,469.5
31,850.5
19,508.2
8,911.8
0.6x
3.0x
4.1x
4.1x
5.0x
7.7x
9.5x
12.6x
0.6x
2.8x
3.9x
3.9x
4.8x
7.7x
7.9x
10.6x
4.5x
3.0x
3.2x
1.0x
12.0x
8.8x
8.4x
6.0x
USD ($mm)
Applications Software
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Intuit Inc. (NasdaqGS:INTU)
Paychex, Inc. (NasdaqGS:PAYX)
$
$
$
$
$
$
$
60.88
76.97
88.76
50.84
66.91
73.24
42.08
38.5
481.4
42.2
291.1
71.9
284.9
364.2
2,346.7
37,055.3
3,743.0
14,801.2
4,812.2
20,866.3
15,326.0
2,944.5
38,300.1
4,196.1
18,971.9
5,301.4
20,249.3
14,862.6
Systems Software
Hewlett-Packard Company (NYSE:HPQ)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
SAP AG (DB:SAP)
$
$
$
$
28.49
36.81
37.11
77.57
1,908.8
8,300.7
4,497.4
1,193.5
54,381.1
305,508.1
166,898.8
92,581.3
65,299.1
246,211.1
154,568.8
94,655.9
SPRINGLOGIX CORPORATION
Company
68
25.3
40.0
Category
Applications Software
Systems Software
Weights
30%
70%
1013.6
Strategic Reason
805.9
11,512.2
2,649.9
5,992.3
2,460.9
4,231.0
2,397.0
$ 112,298.0
83,433.0
37,552.0
23,013.3
196.0
2,411.7
409.5
1,529.1
516.8
1,437.0
1,040.8
$ 13,029.0
31,828.0
16,289.0
7,529.3
592.0
164.0
1,054.3
12,306.3
1,983.1
6,282.0
2,632.7
4,557.3
2,538.4
$ 109,155.5
88,596.7
39,311.3
24,502.9
605.1
High
Average
Median
Low
Implied EV using "High" multiples
Implied EV using "Average" multiples
Implied EV using "Median" multiples
Implied EV using "Low" multiples
162.5
Financial Reasons
2806.9
1849.5
2054.5
522.2
2224.6
1646.9
1682.0
1079.5
2728.3
1788.7
1954.9
618.9
1943.0
1422.8
1371.7
982.9
Source: CapitalIQ
Public Comparables
Public Comparables Analysis
Financial Metric
Company
Name
Price
Market
Value of
Equity
Shares
Outstanding
Enterprise
Value
LTM
Sales
LTM
EBITDA
EV as a multiple of
NTM
Sales
NTM
EBITDA
LTM
Sales
LTM
EBITDA
NTM
Sales
NTM
EBITDA
316.8
2,543.1
474.5
1,922.9
556.1
1,812.0
1,110.9
3.7x
3.3x
1.6x
3.2x
2.2x
4.8x
6.2x
15.0x
15.9x
10.2x
12.4x
10.3x
14.1x
14.3x
2.8x
3.1x
2.1x
3.0x
2.0x
4.4x
5.9x
9.3x
15.1x
8.8x
9.9x
9.5x
11.2x
13.4x
$ 13,469.5
31,850.5
19,508.2
8,911.8
0.6x
3.0x
4.1x
4.1x
5.0x
7.7x
9.5x
12.6x
0.6x
2.8x
3.9x
3.9x
4.8x
7.7x
7.9x
10.6x
Normalized
Averaged
Weighted Multiples
Averaged
Weighted
Multiples
4.3x
13.3x
4.1x
4.7x
13.6x
4.5x
3.0x
9.8x
2.8x
3.1x
10.0x
3.0x
3.4x
9.8x
3.5x
10.3x
3.2x
0.9x
6.6x
1.0x
10.8x
12.0x
8.4x
8.8x
8.3x
8.4x
6.0x
USD ($mm)
Applications Software
ACI Worldwide, Inc. (NasdaqGS:ACIW)
Automatic Data Processing, Inc. (NasdaqGS:ADP)
DST Systems Inc. (NYSE:DST)
Fidelity National Information Services, Inc. (NYSE:FIS)
Global Payments Inc. (NYSE:GPN)
Intuit Inc. (NasdaqGS:INTU)
Paychex, Inc. (NasdaqGS:PAYX)
$
$
$
$
$
$
$
60.88
76.97
88.76
50.84
66.91
73.24
42.08
38.5
481.4
42.2
291.1
71.9
284.9
364.2
2,346.7
37,055.3
3,743.0
14,801.2
4,812.2
20,866.3
15,326.0
2,944.5
38,300.1
4,196.1
18,971.9
5,301.4
20,249.3
14,862.6
Systems Software
Hewlett-Packard Company (NYSE:HPQ)
Microsoft Corporation (NasdaqGS:MSFT)
Oracle Corporation (NYSE:ORCL)
SAP AG (DB:SAP)
$
$
$
$
28.49
36.81
37.11
77.57
1,908.8
8,300.7
4,497.4
1,193.5
54,381.1
305,508.1
166,898.8
92,581.3
65,299.1
246,211.1
154,568.8
94,655.9
SPRINGLOGIX CORPORATION
25.3
40.0
Category
Applications Software
Systems Software
Weights
30%
70%
1013.6
69
SpringLogix
592.0
164.0
605.1
162.5
Multiple Range
0.9x - 4.3x
6.6x - 13.3x
1.0x - 4.1x
6.0x - 10.8x
805.9
11,512.2
2,649.9
5,992.3
2,460.9
4,231.0
2,397.0
$ 112,298.0
83,433.0
37,552.0
23,013.3
196.0
2,411.7
409.5
1,529.1
516.8
1,437.0
1,040.8
$ 13,029.0
31,828.0
16,289.0
7,529.3
592.0
High
High
Average Average
Median Median
Low
Low
Metric
LTM Sales
LTM EBITDA
NTM Sales
NTM EBITDA
164.0
1,054.3
12,306.3
1,983.1
6,282.0
2,632.7
4,557.3
2,538.4
$ 109,155.5
88,596.7
39,311.3
24,502.9
605.1
162.5
Implied
usingmultiples
"High" multiples
Implied EV
using EV
"High"
Implied
using "Average"
Implied EV
using EV
"Average"
multiplesmultiples
Implied
using "Median"
Implied EV
using EV
"Median"
multiplesmultiples
Implied
using
"Low" multiples
Implied EV
using EV
"Low"
multiples
Implied EV
$522.2 - 2555.7
$1079.5 - 2182.4
$618.9 - 2472.1
$982.9 - 1753.5
2555.7
2806.9
1763.5
1849.5
2026.0
2054.5
522.2
522.2
2182.4
2224.6
1609.3
1646.9
1599.1
1682.0
1079.5
1079.5
2472.1
2728.3
1705.4
1788.7
1913.7
1954.9
618.9
618.9
1753.5
1943.0
1360.4
1422.8
1355.4
1371.7
982.9
982.9
Turnaround Strategy
Investment Committees Turnaround Plan for SpringLogix
70