Sectorwatch: Outsourcing in South America€¦ · Overview 7MA provides Investment Banking &...
Transcript of Sectorwatch: Outsourcing in South America€¦ · Overview 7MA provides Investment Banking &...
Sectorwatch:Outsourcing in South AmericaFebruary 2019
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Outsourcing in South AmericaFebruary 2019 Sector Dashboard [4]
Public Basket Performance [5]
Operational Metrics [7]
Valuation Comparison [10]
Recent Deals [13]
Appendix [15]
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.
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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
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Dashboard
Operating Metrics
Valuation
4.4%
15.3%
35.9%
0% 10% 20% 30% 40% 50%
Median LTM Rev. Growth %
Median LTM EBITDA Margin %
Median LTM GP Margin %
3.2x
20.4x
26.9x
53.6x
0x 15x 30x 45x 60x
Median TEV / LTM Revenue
Median TEV / LTM EBITDA
Median TEV / LTM EBIT
Median Price / LTM Earnings
Revenue Growth
-0.14 1 - year revenue growth compared to revenue growth
average for last 3 years
Pricing / Gross Margin Momentum
0.3% 1 - year gross profit % compared to gross profit %
average for last 3 years
Profitability
-0.9% 1 - year EBITDA % compared to EBITDA % average for
last 3 years
Current revenue growth rate is less than the average of the last 3 years, indicating
that the market may be flattening or declining
Current gross profit margin exceeds the average of the last 3 years gross profit
margin by this amount, indicating supplier pricing power
Current EBITDA margin is less than the average of the last 3 years EBITDA
margins, which may signal further consolidation
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Public Basket
Company TEV $mLTM Rev
$m
Rev Growth
YoY GP %EBITDA
%TEV / Rev X
TEV / EBITDA
X # FTEsRev / FTE $k
Endava plc 1,224 309 0% 34% 14% 4.0 27.6 4,819 64
Sonda S.A. 1,689 1,153 -5% 18% 11% 1.4 13.1 17,000 68
Globant S.A. 2,396 498 29% 38% 16% 4.8 29.5 6,753 74
Cognizant Technology Solutions Corporation 37,240 16,125 9% 39% 20% 2.4 11.3 281,600 57
Average 10,637 4,521 8% 32% 15% 3.1 20.4 77,543 66
Median 2,043 825 4% 36% 15% 3.2 20.4 11,877 66
share price as of 04Feb19
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Public Basket Valuation Trends
Public EBITDA Multiples over Time
Public Revenue Multiples over Time 14.2x
2.7x
0x
5x
10x
15x
20x
25x
May-1
4
Aug-1
4
Nov-1
4
Feb-1
5
May-1
5
Aug-1
5
Nov-1
5
Feb-1
6
May-1
6
Aug-1
6
Nov-1
6
Feb-1
7
May-1
7
Aug-1
7
Nov-1
7
Feb-1
8
May-1
8
Aug-1
8
Nov-1
8
Feb-1
9
TEV/EBITDA - Median TEV/Revenue - Median
TEV/EBITDA - Average TEV/Revenue - Average
0x
1x
2x
3x
4x
May-1
4
Aug-1
4
Nov-1
4
Feb-1
5
May-1
5
Aug-1
5
Nov-1
5
Feb-1
6
May-1
6
Aug-1
6
Nov-1
6
Feb-1
7
May-1
7
Aug-1
7
Nov-1
7
Feb-1
8
May-1
8
Aug-1
8
Nov-1
8
Feb-1
9
TEV/Revenue - Median TEV/Revenue - Average
0x
10x
20x
30x
May-1
4
Aug-1
4
Nov-1
4
Feb-1
5
May-1
5
Aug-1
5
Nov-1
5
Feb-1
6
May-1
6
Aug-1
6
Nov-1
6
Feb-1
7
May-1
7
Aug-1
7
Nov-1
7
Feb-1
8
May-1
8
Aug-1
8
Nov-1
8
Feb-1
9
TEV/EBITDA - Median TEV/EBITDA - Average
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Operational Metrics
LTM Gross Profit Margin % LTM EBITDA %
- 10% 20% 30%
Median
Sonda S.A.
Endava plc
Globant S.A.
Cognizant Technology
Solutions Corporation
- 10% 20% 30% 40%
Median
Sonda S.A.
Endava plc
Globant S.A.
Cognizant Technology
Solutions Corporation
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Operational Metrics
LTM Revenue Growth %LTM Revenue per
Full Time Employee x 000’s
(10%) - 10% 20% 30%
Median
Sonda S.A.
Cognizant Technology
Solutions Corporation
Globant S.A.
$- $20 $40 $60 $80
Median
Cognizant Technology
Solutions Corporation
Endava plc
Sonda S.A.
Globant S.A.
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Operational Metrics
Accounts Receivable TurnoverAverage Days
Sales Outstanding
0x 2x 4x 6x 8x 10x
Median
Sonda S.A.
Cognizant Technology
Solutions Corporation
Globant S.A.
0 20 40 60 80 100
Median
Globant S.A.
Cognizant
Technology
Solutions
Corporation
Sonda S.A.
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Valuation
TEV / LTM Revenue TEV / LTM EBITDA
0x 1x 2x 3x 4x 5x
Median
Sonda S.A.
Cognizant
Technology Solutions
Corporation
Endava plc
Globant S.A.
0x 10x 20x 30x
Median
Cognizant
Technology
Solutions
Corporation
Sonda S.A.
Endava plc
Globant S.A.
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Valuation
TEV / LTM EBIT Price / LTM Earnings
0x 10x 20x 30x 40x
Median
Cognizant
Technology
Solutions
Corporation
Sonda S.A.
Endava plc
Globant S.A.
0x 20x 40x 60x 80x 100x
Median
Cognizant Technology
Solutions Corporation
Globant S.A.
Endava plc
Sonda S.A.
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Valuation
Historical Valuation Multiples versus Gross Profit
Historical Valuation Multiples versus Revenue Growth Rate
11x 13x 28x 30x
39.0%
17.6%
33.6%
38.2%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
0x
5x
10x
15x
20x
25x
30x
35x
LTM
GP%
EBIT
DA(x
)
EBITDA(x) LTM GP%
11x 13x 28x 30x
8.9%
(4.9%)
-
29.2%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
0x
5x
10x
15x
20x
25x
30x
35x
LTM
RG
R%
EBIT
DA(x
)
EBITDA(x) LTM RGR%
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Recent Transactions
Date Target Buyer / Investor
Total Transaction
Value Target
Revenue TEV /
Revenue TEV /
EBITDA
21Jan19 M2M Solutions S.A. Telsinc Prestacao De Servicos Para Sistemas De Informatica E Comunicacao De Dados Ltda.
11.14 - - -
19Jan19 Worldsense Holdings, Ltd. Loggi Tecnologia LTDA - - - -
17Jan19 Avanxo Colombia Globant S.A. 48.56 - - -
27Dec18 Centercom Global, S.A. de C.V Surge Holdings, Inc. - - - -
24Dec18 Empresa 1 - Sistemas De Automacao E Comercio Ltda. Volaris Group Inc. - - - -
13Dec18 Softbox Sistemas de Informacao Ltda Magazine Luiza S.A. - - - -
9May18 R.J. Participações S.A. Bematech SA - - - -
16Oct18 Avacon Tecnologia da Informação Ltda. Praxio - - - -
4Oct18 Softvision, LLC Cognizant Technology Solutions Corporation - - - -
10Sep18 Machinalis S.r.l MercadoLibre, Inc. - - - -
12Jul18 Global Mind S.A. Dentsu Aegis Network Ltd. - 382.10 - -
22May18 Ability Data Services SA Gigas Hosting, S.A. 3.10 1.87 1.7x -
25Apr18 Affero Lab Bertelsmann SE & Co. KGaA - - - -
19Feb18 Isban Brasil S.A. Banco Santander (Brasil) S.A. 18.80 - - -
19Feb18 Produban Serviços de Informática S.A. Banco Santander (Brasil) S.A. 12.21 - - -
12Jan18 Defenda Consultoria Em Seguranca Da Informacao Ltda Service IT - 0.78 - -
29Dec17 Velocity Partners, LLC Endava Limited (nka:Endava plc) 60.50 34.68 - -
4Dec17 Prodama Ltda Senior Sistemas S.A. - - - -
8Aug17 Concrete Solutions Ltda. Accenture plc - - - -
1Jun17 PointSource, LLC Globant S.A. 28.00 - - -
17Apr17 Jetpdv Soluções Ltda Viasoft Informatica Ltda. - - - -
14Nov16 Difier S.A. Globant S.A. 0.03 - - -
3Apr17 Premier IT Global Services Ltda. Quality Software S.A. 9.95 - - -
25Jan17 InfoSERVER S.A. Wipro Limited 8.71 - - -
1Nov16 Wdev Soluções em Tecnologia S.A. Ebix, Inc. 26.20 11.00 2.4x -
15Dec16 CredibiliT Tecnologia Ltda Claranet Limited - 8.84 - -
31Aug16 ADEXUS S.A. Graña y Montero S.A.A. 4.06 - - -
24Oct16 SPEKTRUM Consultoria e Sistemas Ltda. BCI Consulting S.R.L. - - - -
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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.
Outsourcing in South AmericaFebruary 2019
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Public Basket
Endava plc
Endava plc provides technology services for clients in theconsumer products, healthcare, logistics, and retail verticals inEurope, Latin America, and the United States. It offers strategy,creative and user experience, insights through data, mobile andInternet of Things, architecture, smart automation, softwareengineering, test automation and engineering, continuousdelivery, cloud, applications management, and smart deskservices across the digital evolution, agile transformation, andautomation solution areas. The company was founded in 2000and is headquartered in London, United Kingdom.
Date Key Development Headline6/29/18 Endava Seeks Acquisitions
0x
2x
4x
6x
8x
10x
Revenue Multiples - Endava plc
TEV/Revenue Average
0x
10x
20x
30x
40x
50xEBITDA Multiples - Endava plc
TEV/EBITDA Average
0x
20x
40x
60x
80x
P/E Multiples - Endava plc
P/E Average
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Public Basket
Sonda S.A.
Sonda S.A., together with its subsidiaries, provides informationtechnology (IT) solutions in Latin America, Chile, Brazil, Mexico,Argentina, Colombia, Costa Rica, Ecuador, Panama, Peru, andUruguayThe IT Services business provides IT outsourcing,system projects and integration, managed device, infrastructuresupport, datacenter and cloud computing, consulting andprofessional, SONDA Utility, and BPO services. The SoftwareApplications business offers application services, such asapplication management, implementation and consultancy,functional support, application outsourcing, and technicalsupport services; cross market solutions comprising financialmanagement and accounting, customer management and care,asset management, business intelligence, content management,process management, financial control, logistical control, andforeign trade management tools; and tax and accountingmanagement, financial and logistical control, and foreign tradesolutions, as well as various application services for financialsocial security, building, manufacture, retail services, basicservices, mining, energy, natural resources, government, publicinstitutions, transportation, and health sectors. Sonda S.A. wasfounded in 1974 and is headquartered in Santiago, Chile.
Date Key Development Headline1/21/19 Sonda S.A. (SNSE:SONDA) acquired M2M Solutions S.A. on for
BRL 42 million.
7/11/18 An unknown buyer acquired an unknown stake in Sonda S.A. (SNSE:SONDA) from Emilio Santelices.
0.0x
0.5x
1.0x
1.5x
2.0xRevenue Multiples - Sonda S.A.
TEV/Revenue Average
0x
5x
10x
15x
20xEBITDA Multiples - Sonda S.A.
TEV/EBITDA Average
0x
20x
40x
60x
80x
P/E Multiples - Sonda S.A.
P/E Average
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Public Basket
Globant S.A.
Globant S.A., a technology services company, provides servicesrelated to application development, testing, infrastructuremanagement, and application maintenance worldwide. Thecompany offers machine learning, pattern recognition, naturallanguage understanding, future of organizations, customerinsight, behavioral change, product innovation, design thinking,product management discovery and delivery, and productcoaching services. It also provides process appraisal,automated, process evolution, delivery management, agileconsultancy, management consulting, user experience, visualand service, industrial design, mobile engineering, fastprototyping, and mobile and product strategy services. Inaddition, the company offers game engineering andexperience, digital platform, virtual and augmented reality,graphics engineering, 3D and 2D art, e-Sports, dataarchitecture, data science, distributed platform, data integration,data visualization, and blockchain services. Globant S.A. wasfounded in 2003 and is based in Luxembourg City,Luxembourg.
Date Key Development Headline1/17/19 Globant S.A. (NYSE:GLOB) entered into a binding agreement to
acquire Avanxo Colombia for $48.6 million.
2/15/18 Globant Mulls Acquisitions
0x
2x
4x
6x
8xRevenue Multiples - Globant S.A.
TEV/Revenue Average
0x
10x
20x
30x
40x
50xEBITDA Multiples - Globant S.A.
TEV/EBITDA Average
0x
20x
40x
60x
80xP/E Multiples - Globant S.A.
P/E Average
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Public Basket
Cognizant Technology Solutions Corporation
Cognizant Technology Solutions Corporation, a professionalservices company, provides consulting and technology, andoutsourcing services worldwide. The company operatesthrough four segments: Financial Services; Healthcare; Productsand Resources; and Communications, Media and Technology. Itoffers business, process, operations, and technology consultingservices; application design and development, and systemsintegration services; application testing, consulting, andengineering services; and enterprise information managementservices. The company was founded in 1994 and isheadquartered in Teaneck, New Jersey.
Date Key Development Headline1/22/19 Cognizant Technology Solutions Corporation (NasdaqGS:CTSH)
agreed to acquire Oy Samlink AB from Posti Group Oyj, AktiaBank p.l.c. (HLSE:AKTIA), Oma Säästöpankki Oyj (HLSE:OMASP), Savings Bank Group, Svenska Handelsbanken AB (publ), Asset Management Arm, POP Pankkiliitto osk and other minority shareholders.
12/10/18 Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) agreed to acquire Mustache LLC.
12/4/18 Cognizant Technology Intends To Seek Acquisitions
10/3/18 Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) entered into a definitive agreement to acquire Softvision, LLC from Tower Arch Capital.
9/17/18 Cognizant Technology Solutions Corporation (NasdaqGS:CTSH) entered into agreement to acquire Advanced Technology Group, Inc.
0x
2x
4x
6xRevenue Multiples - Cognizant Technology
Solutions Corporation
TEV/Revenue Average
0x
10x
20x
30xEBITDA Multiples - Cognizant Technology
Solutions Corporation
TEV/EBITDA Average
0x
10x
20x
30x
40x
50xP/E Multiples - Cognizant Technology
Solutions Corporation
P/E Average
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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.
Securities offered through 7M Securities LLC.
CONTACT INFO
Leroy Davis, Partner 704.899.5962 [email protected]
Tripp Davis, Partner 704.899.5762 [email protected]
Andy Johnston, Partner 704.899.5961 [email protected]
Ben Lunka, Managing Director 704.496.2995 [email protected]
Jeff Stoecklein, Managing Director 312.796.9330 [email protected]
Mark Landry, Managing Director 561.972.0609 [email protected]
Kristina Sergueeva, Director 704.899.5149 [email protected]
Neil Churman, Director 281.742.9340 [email protected]
John Cooper, Director 704.973.3996 [email protected]
Tim Frye, Director 704.973.3994 [email protected]
Nicholas Prendergast, Financial Analyst 704.973.3995 [email protected]
Ariail Siggins, Marketing Director 704.981.2908 [email protected]
Sydney Larese, Associate 704.973.3998 [email protected]
Marty Johnson, Associate 704.973.3999 [email protected]
Rory Julyan, Associate 704.981.2520 [email protected]
Garth Martin, Associate 704.973.3997 [email protected]
Dennis Fox, Associate 704.706.9168 x 119 [email protected]
Steve Buffington, Associate 704.960.1828 [email protected]