M&A and capital deal sumamry for YE 2019

1. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
CorpDev Options
ERGO’s CorpDev Services Summary
M&A
Advisory
Deal Strategy &
Deal Sourcing
Capital &
Financing
Sourcing
Proactive
Guidance
Buyside
M&A
Post-Close
Enablement
Project
Management
Convertible and
Useful Capital
Partners
Industry
Benchmarks &
Recs
Questions Answered by ERGO.
o What is my valuation?
o What is the impact on valuation of various scenarios?
o What is my non personal guaranteed borrowing capacity?
o What is the cost of capital for my business?
o What acquihires are available?
o What M&A deal opportunities are available?
o Which financing and capital sponsors are the best fit?
o How does my valuation & profitability compare to my competitors?
About ERGO Comps, LLC
ERGO provides CorpDev services for CEO Entreprenuers including deal sourcing,
buyside M&A advisory, and capital financing sourcing. Industry expertise across
the B2B backoffice, compliance, outsourcing, and tech-enabled services for
small to midmarket transactions. Contact ERGO for a compliementy CorpDev
briefing of your options.

2. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
2020 CorpDev Opportunities & Trends
Beyond the cloud solution opportunities include
1 Capitalize on the shift from services to subscription solutions
2 Tech-enabled commands a higher valuation and capital funding
 The initial phase 1 impact of SaaS, digital transformation and embracing
the cloud was the opportunity to change from a pure Services model to
capture additional benefits of the cloud with phase 2 capturing the
impact from emerging technologies. Examples includes
o BpaaS industry models
o Professional Services vs. Subscription Solution models
o The “Everything-as-a-Service” economy
 The forecast for 2020 builds upon the previous 2 years positive deal
trends with an increase for AI and FinTech while Internet Services and
Professional Services deal count are flat or minimally decreasing YoY.
Capitalizing on the “As-a-Service” Economy
Trends Deal Briefing Recap by Year
2020 – Service providers evolve into recurring subscription solution providers
2019 – Leveraging AI, RPA, bots, and emerging tech capabilities; tech-enabled
firms capture the deals
2018 – Shift to the cloud and rise of digital transformation
2017 – Adoption of “Moneyball” analytics, and application of analytics
2016 – The power of apps
marketplaces and network effects
2012 – Proliferation of SaaS

3. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
2019 M&A CorpDev Deals Recap by B2B Industry
Industry categories with the most acqusition deals for companies with USA
headquarters1
as of December 1st
2019
4,909 acqusitions across the USA 2019, versus 4300 per year avg. over the past decade.
 Multiple alternatives to traditional M&A acquisitions exist, but still represent a
minority of deal transactions.
1 Source: Crunchbase, excludes mobile, credit, fraud, leasing, lending, video streaming, college,
education, transportation, B2C, shopping. Overlap across categories exists. This data is not
intended to be exhaustive but merely an illustrative snapshot.
Industry Categories 2019 YTD* Total 2010 - 2019* Avg Per year
Information Technology 678 4577 509
Consulting 271 1784 198
Marketing 194 1286 143
SaaS 192 1041 116
Internet 187 1998 222
Advertising 178 1759 195
Insurance 174 1393 155
Information Services 94 852 95
Cloud Computing 68 545 61
Human Resources 66 418 46
Finance 61 705 78
FinTech 53 374 42
CRM 53 399 44
B2B 50 207 23
Social Media 43 719 80
Recruiting 40 240 27
Staffing Agency 36 202 22
Accounting 29 159 18
Public Relations 21 261 29
Sales 18 89 10
Small and medium business 13 121 13
Outsourcing 9 124 14
Digital Marketing 3 207 23
LeadGeneration 3 63 7
M&A Deals since 2010 4,909 38,910 4,323
M&A By Type 2019* total Avg Per year
MBO (Management Buyout) 4 58 6
Acquihire 15 253 28
LBO 421 2,800 311
M&A 4,428 31,737 3,526

4. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
Acqusition Deal Stats by Industry
 Financial and Internet represent the industries with the greatest deals2
2
*As of December 1st
2019
Overlap exits
Excludes Credit, Leasing, Fraud, Collection, Lending, Streaming, Bitcoin, Voip, Exchanges, Education, Delivery,
Consumer , Commerce and Shopping, Transporation
Acqui # Acqui # Acqui # Acqui # Acqui # Acqui # Acqui # Acqui # Acqui # Acqui # Acqui # Acqui #
Industry Category Groups 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* total Avg
AI 12 17 15 29 37 66 71 92 134 141 614 68
Administrative Services 23 31 25 29 34 59 91 119 135 111 657 73
Advertising 106 156 117 132 206 207 248 260 254 188 1874 208
Financial Services 168 245 257 263 363 479 627 696 742 568 4408 490
Internet Services 373 442 441 446 485 529 616 524 549 485 4890 543
Professional Services 62 79 89 53 93 129 167 217 271 213 1373 153
Sales & Marketing 197 261 232 243 307 370 480 509 522 391 3512 390

5. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
2019 Capital Funding Deals Recap by B2B Industry
Capital Funding Top 10 Funded B2B Categories for companies with USA
headquarters3
as of December 1st
2019
Funding over the past few years continues to trend positively propelled by emering new
technologies beyond the cloud across industries, but forecast below for 2019 the
funding amount across North America compared to 2017 and 2018
 In 2019, more than 7,846 firms funded ($213B captial invested) versus 11,229
firms funded in 2018 for a total of $234B compared to 10,849 deals in 2017 for
$184B
 203 USA startups founded in 2019 with funding YTD
Greater number of deals and continuing positive trend increase for AI, and Financial
while Internet Services and Professional Services deal count are flat or minimally
decreasing over the past period.
3
Source: Crunchbase, excludes mobile, credit, fraud, leasing, lending, video streaming,
college, education, transportation, B2C, shopping. Overlap across categories exists. This
data is not intended to be exhaustive but merely an illustrative snapshot.
Most #
Funded Categories
# of Firms
Funded Capital Funded $
1 Information Technology 751 $19,717,718,590
2 Internet 555 $13,137,611,213
3 SaaS 504 $8,936,745,564
4 FinTech 250 $83,691,637,502
5 Finance 206 $12,640,296,528
6 Marketing 154 $4,388,259,264
7 Advertising 148 $3,318,249,111
8 Human Resources 132 $2,208,268,613
9 Information Services 129 $3,436,261,239
10 B2B 118 $1,125,350,304
11 Cloud Computing 114 $3,637,603,705
12 Insurance 83 $2,851,523,682
13 Recruiting 70 $1,188,390,206
14 Consulting 60 $158,545,608
15 Small and medium business 53 $2,408,986,306
16 Sales 43 $1,005,422,000
17 Accounting 23 $306,380,000
18 Staffing Agency 15 $90,937,485
19 LeadGeneration 9 $99,448,213
20 Outsourcing 2 $770,000,000

6. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
Model Comparables
Business Models Have Changed
BPaaS versus traditional models comparables
Model Type Services Outsourcing BPaaS
Business
Model
Nonrecurring project-
based services
Outsourced functional
services based on cost
savings via “Lift and
Shift” staffing model
Managed solutions
delivered via the cloud for
transaction processing
and recurring services
Contract
Length
Project based 1 to 3 years 3+ years
Rev/FTE $200k <$100k >$200k
Recurring
Revenues
<10% 20% to 60% >65%
Gross Profit
Margin
25% to 45% 35% to 55% >65%
Valuation
(Revenue)
<1X 2X >2X
Source: Based on private company award winning top performers.
Business models have changed.
 Tech-enablement is changing how work gets done as top performers have
meaninfully higher Rev and Profits per FTE than competitors
 “Everyting-as-a-Service” is shifting the customer-employer relationship to a
different set of values, deliverables, and SLAs.
 Where work gets done is changing to include more on-demand via a virtual
tech-enabled workforce outside tradiontal FTE employment
 Insitutional investors continue to value long-term contracts, defensabile
market positions, and models with 10X opportunity
Fundamentals have changed.
 Strategics value NLTV over CAC
 Focus on double digit growth and profitability
 Industry solutions command a premium price
Deal stats and drivers have changed.
 Maximizing Enterprise Value requires not only spending more than competitors
(link), but having a better model that demonstrates better profitability and
return
 Tech-enabled multiples outperform traditional services and outsourcing

7. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
Deal Multiple Analysis Based on SG&A Spend
 Companies with a higher SG&A were on average larger and commanded
a higher multiple
Know the Value of Your Practice
The value of your practice depends on your internal capabilities, financial measures (size,
scalability, profitability, Quality of Earnings, Customers, & Assets), as well as your industry
comparables; and it also depends on your external options to Grow, Buy, Sell, License, or Divest.
M&A Subscale Deals Multiple <$25m Revenue Valuation
.2x 0.5 1.0 1.5 2.0 2.5
Staffing Consulting Recurring Solutions Outsourcing AaS
Valuation Impact Analysis Based on Size
 Impact of subscale versus scaled status on EV: 30% discount for scaled private versus
public comparables, with 40% discount for subscaled with significant earnout and terms
differences
 Impact of recurring solutions on EV at scale: <1x EV/Revenue multiple for project non-
recurring versus >2x for recurring outsourcing/subscription with 12 month contract at
scale with a premium for tech-enabled >2.5x
 Impact of scaled acquisitions on EV: EV lift of 1.3x for acquisition of recurring solutions
beyond acquired revenues plus the valuation arbitrage impact

8. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
Model Comparables of Award Winners by Industry
Average Rev/FTE for B2B Industry INC 5000 award winners
Opportunities & Trends
→ Virtual service models are replacing onsite and local vendors
→ Entrepreneurs are less reliant on local vendors, and more often choosing cloud solutions for backoffice & services
infrastructure
→ Star performers are more profitable, earning 65% more per client and 24% more per full-time employee
→ Leaders are bundling services with cloud “As-A-Service” solutions
→ Portfolio expansion “beyond basic services” includes analytics, software, and apps
→ Emergence of alternative models to traditional professional service based Accounting, Consulting, and Staffing
→ Acquisition of emerging leaders by Accounting, Consulting, Staffing, and Outsourcing
Industry 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Avg
Advertising & Marketing 275,344$ 290,484$ 324,995$ 333,491$ 343,520$ 302,417$ 305,372$ 345,153$ 319,824$ 310,227$ 317,931$ 323,631$ 329,684$ 319,988$
Business Products & Services 359,160$ 405,704$ 482,822$ 439,354$ 449,895$ 403,772$ 370,381$ 387,813$ 395,363$ 342,211$ 414,933$ 387,495$ 413,566$ 407,446$
Financial Services 533,639$ 608,156$ 443,526$ 456,945$ 529,840$ 370,955$ 387,875$ 532,238$ 636,770$ 563,822$ 420,753$ 365,358$ 346,504$ 468,826$
Government Services 215,775$ 235,483$ 456,227$ 284,383$ 306,921$ 296,170$ 293,607$ 326,212$ 306,475$ 343,548$ 352,581$ 339,508$ 461,927$ 330,404$
Human Resources 339,863$ 517,339$ 634,748$ 511,514$ 385,259$ 420,087$ 391,678$ 498,680$ 580,804$ 431,589$ 417,367$ 384,617$ 342,930$ 455,294$
Insurance 461,501$ 367,541$ 519,907$ 410,719$ 445,144$ 391,224$ 457,082$ 399,724$ 367,881$ 450,045$ 591,828$ 558,285$ 479,082$ 460,933$
IT Services 237,145$ 219,851$ 242,542$ 229,522$ 270,433$ 298,459$ 278,472$ 271,161$ 264,058$ 269,174$ 256,866$ 265610 324,797$ 261,621$
Media 315,905$ 254,133$ 234,467$ 278,877$ 343,891$ 308,597$ 316,067$ 296,370$ 284,659$ 348,548$ 322,550$ 337,672$ 376,279$ 345,013$

9. ERGO Comps, LLC
O: 281.756.7178
www.ERGOcomps.com
CorpDev Briefing
Why Conduct a CorpDev Briefing with ERGO Checklist
 Determine how current trends impact your options
 Review M&A deal opportunities
 Identify 10X opportunities and ideas to outsmart your
competition
 Compare your current vs future valuation based on various
scenarios
 Model the impact and ROI of various scenarios
 Rank and prioritize deal segments and options
CorpDev Opportunities
Strategy DESCRIPTION
Acquihires Acquire talent by competency and/or geography or industry leaders
Assets Acquire IP, Tech, Brands, and related assets to boost your reach and profitability
Books Acquire customers to facilitate market growth
Industry Leaders Industry solutions includes deeper scope and premium pricing
Solution Leaders Solutions boost recurring revenues
ERGO has in-depth industry coverage areas and will help define and
execute long-term CorpDev strategies.
Briefing
→ For a complete list of deal opportunities, contact
ERGO to schedule your CorpDev briefing.
Buyside Advisory CorpDev Services Partner