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May 2006 

Updata Circuit
    Updata Capital® Financial Technology Mergers & Acquisitions News


IN THIS ISSUE:

 

Equity Market Update

While the Nasdaq Composite has made only modest gains year-to-date 2006, Updata’s Financial Technology Index has increased 15 percent from the beginning of the 2006 and 40 percent from year-ago levels compared to the Nasdaq Composite’s rise of 5 percent and 16 percent, respectively. Nearly all financial technology sectors tracked by Updata have exceeded... read more >>


M&A Market Update

M&A activity in the financial technology markets continued to be strong in Q1 2006 with 39 transactions tracked by Updata, representing an uptick over the 32 deals announced in Q1 2005, although down somewhat from the 44 deals announced in the final quarter of 2005. Misys, Fiserv and Private Business all announced multiple acquisitions… read more >>


FinTech Capital Raising Transactions

Selected venture capital funding and IPO transactions for the most recent quarter, including deal value, when disclosed… read more >>


FinTech Public Company Valuations

Relevant financial data for publicly traded companies organized by the following Fintech subsectors: Banking, Liquidity, Payments, and Financial Software… read more >>

(Please click here for PDF of Valuations)


Selected FinTech News Headlines

A brief collection of recent news developments within the Financial Technology spaceread more >>

 

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Equity Market Update

 

While the Nasdaq Composite has made only modest gains year-to-date 2006, Updata’s Financial Technology Index has increased 15 percent from the beginning of the 2006 and 40 percent from year-ago levels compared to the Nasdaq Composite’s rise of 5 percent and 16 percent, respectively. Nearly all financial technology sectors tracked by Updata have exceeded the broader Nasdaq Composite’s growth rate over the past twelve months with the Liquidity Index leading the pack (136 percent increase), followed by the Updata Banking Index (29 percent), the Payments Index (24 percent) and the Financial Software Index (15 percent). All of the financial technology sectors tracked by Updata had neutral to positive earnings surprises in the most recently announced quarter with the liquidity sector posting the largest earnings surprise over consensus estimates with a median value of $0.07/share.

Figure 1: Updata Financial Technology Index



The IPO markets continue to be less than robust for most private companies seeking liquidity, leaving M&A as the predominant exit strategy. Moreover, the benefits of being privately-held in today’s market environment are evidenced in the recent going-private transactions seen across multiple technology markets, with the financial technology sector being no exception as illustrated by both SunGard and SS&C Technologies opting to go private with the backing of private equity sponsors in 2005. We anticipate this trend to continue over the near term in light of the high costs and challenges faced by publicly held organizations, particularly those with sub $500 million market caps, with more companies pursuing M&A as the preferred path to liquidity.
 

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M&A Market Update

 

M&A activity in the financial technology markets continued to be strong in Q1 2006 with 39 transactions tracked by Updata, representing an uptick over the 32 deals announced in Q1 2005, although down somewhat from the 44 deals announced in the final quarter of 2005. Misys, Fiserv and Private Business all announced multiple acquisitions in the first three months of the year demonstrating a healthy appetite and capacity among buyers for leveraging numerous acquisitions to complement organic growth and drive expansion into new product and market arenas. With their own acquisitions by financial sponsors behind them, SunGard and SS&C continue to be active as acquirers themselves. In March, SunGard announced its acquisition of Dataware Solutions, a provider of compliance software for financial institutions, and SS&C announced its acquisition of Cogent Management, Inc., a provider of hedge fund services. Other private equity sponsored transactions include the acquisition of OpenLink Financial, a provider of energy and financial trading and risk management software solutions, led by TA Associates in a recapitalization with deal value of $100m. A few other transactions of note are highlighted below:

  • Proposed management buyout of TNS, Inc.: In March, the management team of TNS, Inc. offered a proposal to acquire the outstanding shares of the Company for $22 per share, representing a premium of 38% and 6% to the Company’s 5 and 30-day stock price prior to announcement, respectively. The total proposed enterprise value is $614m, representing an LTM EV/Revenue multiple of 2.4x and an LTM EV/EBITDA multiple of 9.2x. TNS is a provider of business critical data communications services to processors of credit card, debit card and ATM transactions.
     
  • CheckFree acquisition of PhoneCharge: In January, CheckFree announced its acquisition of PhoneCharge, a provider of telephone and Internet-based bill payment services for $100m in cash, representing an estimated 4x LTM multiple. CheckFree’s acquisition of PhoneCharge is on the heels of Fiserv’s acquisition of BillMatrix, a provider of expedited electronic bill payment services which provides billers with an outsourced payment solution, in August of 2005 for $350m in cash.
     
  • Sage Group Plc acquisition of Verus Financial Management: The UK-based provider of accounting and business management software solutions announced in January its acquisition of Verus Financial Management, a merchant services business specializing in credit card and check processing for small and medium-sized businesses. The acquisition is expected to expand Sage’s offering for the small and medium sized business (SME) market by adding increased automation of SME’s business processes and linking payment processing services with accounting software. The $323m cash transaction represented an LTM EV/Revenue multiple of 5.0x and an LTM EV/EBITDA multiple of 15.4x.
Updata continues to see increased activity both from strategic and financial buyers. We expect the robust pace of M&A to continue throughout the year particularly for those companies attractive to private equity sponsors. The private equity sponsors are clearly competing with strategics on price for high quality platform opportunities. In the current market, CheckFree, Fiserv, Metavante, Fidelity and First Data not only are competing with each other for transactions but also with the deep pockets of Carlyle, Thoma Cressey, TA Associates and numerous others. The private equity influence will continue to positively the impact pace and value of M&A transactions in the Financial Technology sector.
 

 

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FinTech Capital Raising Transactions
 

Announce Date (2006) Company Investors Value($mm) Fintech Sector (Notes)
29-Mar I4 Commerce Azure Capital Partners, GRP Partners, Crosspoint Venture Partners, Kingdom Capital $27 Payment Processing / Outsourcing, Online Payments
24-Mar Clayton Holdings Initial Public Offering $128 Analytics/Consulting/Outsourcing
28-Mar Zopa Ltd. Benchmark Capital, Wellington Partners $15 Online Lending
16-Mar OneChicago Interactive Brokers NA Liquidity
14-Mar NYMEX Holdings, Inc. General Atlantic LLC $160 Liquidity
10-Mar ClaimForce Inc. Origin Ventures NA Finance/Insurance/Real Estate Services
22-Feb Prosper Marketplace Fidelity Ventures, Accel Partners, Benchmark Capital, Omidyar Network $12 Lending / Mortgage / Real Estate Solutions, P2P Lending Solutions
20-Feb Bolero International Apax Partners, Baring Private Equity Asia NA Banking Solutions, Internet Trade Finance
17-Feb FinancialContent N/A - Private Placement $1 Banking Solutions, Content Solution Provider (Sale of secured convertible note)
15-Feb Business Events Carmel Ventures, Gemini Capital, Individuals $13 Business Intelligence
10-Feb NASDAQ Public - Secondary Offering $556 Global Securities Exchanges, Equities
7-Feb Custom House Great Hill Partners NA Diversified Fis, Foreign Exchange Services (Acquisition Financing)
7-Feb Multi Commodity Exchange of India (sub. Of Financial Technologies India) Fidelity International $49 Global Securities Exchanges, Commidity Futures (Acquisition of 9% interest)
6-Feb Finance Express Automotive Finance Corporation (sub. of ADESA) NA Specialty Finance, Online Auto Finance Solutions (Acquisition of 15% interest)
2-Feb Titan Trading Analytics Private Placement - Undisclosed $1 Investment Solutions, Trading Technology
30-Jan Axentis Eastward Capital, JP Morgan Partners, Key Venture Partners, Sierra Ventures $9 Other, Compliance Management Solutions
27-Jan Parcxmart Technologies Heartland Payment Systems NA Electronic Payments Software / Hardware, Small Value Payments (Strategic Investment)
26-Jan ClusterSeven Quester $4 Operation Risk, Control and Compliance for Financial Institutions
26-Jan Pay By Touch Plainfield Asset Management, Scout Capital, Quince Associates, Global Trust Partners $60 Payment Processing / Outsourcing, Merchant Processing
23-Jan Private Business Bank of America (Credit Facility) $18 Banking Solutions, Core Bank Processing
17-Jan ClariFI TL Ventures $4 Investment Solutions, Portfolio Strategy Solutions
16-Jan Aconite The Capital Fund $1 Electronic Payments Software / Hardware, Smart Cards
10-Jan QuIC Financial Technologies Ventures West, GrowthWorks, Springbank, JMI Equity $10 Investment Solutions, Enterprise Risk Management
9-Jan Redfin Madrona Venture Group $1 Lending / Mortgage / Real Estate Solutions, Real Estate Solutions
3-Jan NewRiver Pequot Capital, West Side Investments, Lazard Freres and William Blair New World Ventures $21 Banking Solutions, Compliance
3-Jan Webpay International 3i Group $24 Payment Processing / Outsourcing, Internet Payments

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FinTech Public Company Valuations

 

($ in millions, except prices)
  Market Value Financial Data

Enterprise Value as a Multiple of

Company Price
4/26/06
% of 52
Week Hi
Market
Cap
Enterprise
Value (1)
LTM
Revenue
MRQ Rev.
Growth YoY
LTM EBITDA
Margin
Revenues EBITDA (2)
LTM CY2006 LTM CY2006

Selected Banking Software Companies
Carreker Corp. $6.03 78.8% $149.6 $125.4 $115.4 -7.3% 10.0% 1.1x 1.1x 10.8x NA
CheckFree Corp. $51.82 90.8% $4,849.8 $4,534.5 $825.9 16.2% 32.5% 5.5x 4.8x 16.9x 14.7x
Chordiant Software Inc. $3.29 92.4% $270.5 $229.3 $84.6 4.1% NM 2.7x 2.4x NM 66.5x
Corillian Corp. $3.50 85.0% $157.1 $143.3 $49.2 4.6% 6.7% 2.9x 2.6x 43.6x 23.6x
Digital Insight Corp. $35.42 92.7% $1,271.6 $1,157.0 $214.0 15.9% 24.6% 5.4x 4.8x 22.0x 16.3x
Fair Isaac Corp. $40.40 83.4% $2,675.2 $2,755.4 $805.9 3.7% 30.0% 3.4x 3.1x 11.4x 10.6x
Fidelity National Information Services Inc.  (4) $38.79 87.1% $7,416.6 $9,836.6 $3,865.0

NA

25.7% 2.5x 2.4x 9.9x 8.8x
Fiserv Inc. $45.23 96.5% $8,388.8 $8,799.7 $4,059.5 11.6% 22.8% 2.2x 2.1x 9.5x 9.2x
Jack Henry & Associates Inc. $23.09 97.1% $2,162.1 $2,146.2 $562.8 9.7% 30.4% 3.8x 3.3x 12.6x 10.7x
John H. Harland Co. $42.21 93.6% $1,181.0 $1,439.4 $982.9 21.9% 22.0% 1.5x 1.4x 6.7x 6.1x
Misys PLC $3.75 80.4% $1,842.6 $2,365.4 $1,677.6 10.0% 17.1% 1.4x 1.4x 8.2x 11.2x
Online Resources Corp. $12.54 89.6% $346.0 $290.1 $60.5 38.3% 23.1% 4.8x 4.0x 20.7x 16.0x
Open Solutions Inc.(5) $27.79 92.2% $704.4 $1,144.1 $408.2 216.4% 62.7% 2.8x 3.0x NM 13.8x
S1 Corp. $5.04 86.0% $354.6 $237.3 $204.1 -65.2% -2.1% 1.2x 1.2x NM 55.8x
Mean 89.0% 26.7% 23.5% 3.1x 2.7x 13.2x 12.8x
Median 90.2% 12.7% 23.1% 2.8x 2.5x 11.4x 13.8x
  Market Value Financial Data

Enterprise Value as a Multiple of

Company Price
4/26/06
% of 52
Week Hi
Market
Cap
Enterprise
Value (1)
LTM
Revenue
MRQ Rev.
Growth YoY
LTM EBITDA
Margin
Revenues EBITDA (2)
LTM CY2006 LTM CY2006

Selected Liquidity Companies
Chicago Mercantile Exchange Holdings Inc. $468.75 93.0% $16,394.1 $15,490.3 $977.3 28.3% 60.7% 15.9x 13.9x 26.1x NA
Investment Technology Group Inc. $53.38 93.6% $2,291.0 $2,030.0 $408.2 25.1% 31.7% 5.0x 3.7x 15.7x NA
Knight Capital Group Inc. $16.96 97.4% $1,740.7 $1,510.1 $634.6 8.5% 19.8% 2.4x 2.0x 12.0x 12.7x
LaBranche & Co. Inc. $15.13 84.5% $924.5 $981.7 $340.2 33.0% 18.6% 2.9x 2.2x 15.5x 8.0x
Nasdaq Stock Market Inc. $38.83 83.1% $4,756.7 $5,699.5 $879.9 54.4% 14.4% 6.5x 3.9x 45.0x NA
NYFIX Inc. $6.75 83.9% $227.2 $218.6 $81.7 38.2% 7.6% 2.7x 2.6x 35.3x NA
Mean 89.3% 31.2% 25.5% 3.9x 2.9x 20.9x 10.4x
Median 88.8% 30.7% 19.2% 3.9x 3.2x 20.9x 10.4x
  Market Value Financial Data

Enterprise Value as a Multiple of

Company Price
4/26/06
% of 52
Week Hi
Market
Cap
Enterprise
Value (1)
LTM
Revenue
MRQ Rev.
Growth YoY
LTM EBITDA
Margin
Revenues EBITDA (2)
LTM CY2006 LTM CY2006

Selected Payments Companies
Alliance Data Systems Corp. $55.90 98.1% $4,606.2 $4,920.8 $1,552.5 21.7% 23.3% 3.2x 2.7x 13.6x 10.9x
Bottomline Technologies Inc. $11.96 64.2% $274.8 $185.9 $101.6 9.0% 9.9% 1.8x 1.7x 18.5x 13.6x
CheckFree Corp. $51.82 90.8% $4,849.8 $4,534.5 $825.9 16.2% 32.5% 5.5x 4.8x 16.9x 14.7x
Ebix Inc. $21.00 93.3% $65.5 $61.6 $24.1 7.9% 24.8% 2.6x NA 10.3x NA
eFunds Corp. $26.45 96.3% $1,263.1 $1,289.1 $501.7 5.8% 22.9% 2.6x 2.2x 11.2x 9.4x
Fidelity National Information Services Inc. $38.79 87.1% $7,416.6 $9,836.6 $3,865.0 NA 25.7% 2.5x 2.4x 9.9x 8.8x
First Data Corp. $46.99 96.1% $36,295.1 $40,212.6 $10,537.6 2.9% 28.3% 3.8x 3.4x 13.5x 11.6x
Fundtech Ltd. $12.58 96.0% $199.4 $158.9 $74.5 11.8% 13.8% 2.1x 1.9x 15.5x NA
Global Payments Inc. $48.62 88.8% $4,020.3 $3,890.3 $847.3 16.5% 26.4% 4.6x 4.0x 17.4x 14.9x
iPayment Inc. $43.17 99.6% $788.2 $887.4 $702.7 80.4% 14.9% 1.3x 1.2x 8.5x 8.2x
Online Resources Corp. $12.54 89.6% $346.0 $290.1 $60.5 38.3% 23.1% 4.8x 4.0x 20.7x 16.0x
Tier Technologies Inc. $7.00 71.3% $137.0 $80.2 $147.6 21.9% 9.1% 0.5x 0.5x 6.0x 8.9x
Total System Services Inc. $20.33 80.7% $4,011.0 $3,779.1 $1,602.9 37.0% 27.3% 2.4x 2.3x 8.6x 8.1x
Transaction Systems Architects Inc. $39.18 98.6% $1,489.9 $1,333.1 $317.7 5.5% 19.7% 4.2x 3.7x 21.3x NA
Trintech Group PLC $3.85 70.0% $59.7 $24.3 $52.2 -24.7% NM 0.5x NA NM NA
Mean 88.0% 17.9% 21.6% 2.8x 2.7x 13.7x 11.4x
Median 90.8% 14.0% 23.2% 2.6x 2.4x 13.5x 10.9x
  Market Value Financial Data

Enterprise Value as a Multiple of

Company Price
4/26/06
% of 52
Week Hi
Market
Cap
Enterprise
Value (1)
LTM
Revenue
MRQ Rev.
Growth YoY
LTM EBITDA
Margin
Revenues EBITDA (2)
LTM CY2006 LTM CY2006

Selected Financial Software Companies
Advent Software Inc. $30.46 91.8% $1,010.2 $846.8 $169.0 10.2% 14.5% 5.0x 4.8x 34.7x 26.9x
Automatic Data Processing Inc. $45.40 94.4% $26,436.4 $24,939.7 $8,725.8 13.2% 22.1% 2.9x 2.6x 12.9x 11.3x
BISYS Group Inc. (5) $14.87 92.4% $1,792.7 $2,030.0 $851.3 NA NM 2.4x 2.1x NM 10.8x
Corillian Corp. $3.50 85.0% $157.1 $143.3 $49.2 4.6% 6.7% 2.9x 2.6x 43.6x 23.6x
Digital Insight Corp. $35.42 92.7% $1,271.6 $1,157.0 $214.0 15.9% 24.6% 5.4x 4.8x 22.0x 16.3x
DST Systems Inc. $61.96 99.0% $4,622.2 $5,932.2 $2,515.1 -2.0% 20.2% 2.4x 3.7x 12.0x 12.4x
Fair Isaac Corp. $40.40 83.4% $2,675.2 $2,755.4 $805.9 3.7% 30.0% 3.4x 3.1x 11.4x 10.6x
Fiserv Inc. $45.23 96.5% $8,388.8 $8,799.7 $4,059.5 11.6% 22.8% 2.2x 2.1x 9.5x 9.2x
Jack Henry & Associates Inc. $23.09 97.1% $2,162.1 $2,146.2 $562.8 9.7% 30.4% 3.8x 3.3x 12.6x 10.7x
Linedata Services $28.48 96.0% $325.6 $360.6 $147.0 4.3% 23.3% 2.5x 1.9x 10.5x 9.0x
Misys PLC $3.75 80.4% $1,842.6 $2,365.4 $1,677.6 10.0% 17.1% 1.4x 1.4x 8.2x 11.2x
Online Resources Corp. $12.54 89.6% $346.0 $290.1 $60.5 38.3% 23.1% 4.8x 4.0x 20.7x 16.0x
Open Solutions Inc. $27.79 92.2% $704.4 $1,144.1 $408.2 216.4% 62.7% 2.8x 3.0x 4.5x 13.8x
S1 Corp. $5.04 86.0% $354.6 $237.3 $204.1 -65.2% -2.1% 1.2x 1.2x