Fairmount Partners November News

PACT Times November 2018: News

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 200 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Fairmount Partners represented Artech Information Systems in their acquisition of the Talent & Technology Solutions business unit of CDI Corporation.  Artech is now one of the top-7 largest IT staffing firms in North America that provides workforce solutions, IT consulting, and SOW-project services. Headquartered in Morristown, NJ, Artech employs over 7,800 professionals, maintains over 25 locations across the U.S., Canada, India, and China and is a Tier-1/Preferred Supplier to more than 70 Fortune 500 companies and numerous federal and state government agencies. Headquartered in Philadelphia, PA, CDI Corporation is a privately held, multinational company that provides engineering, information technology, and staffing services to clients in a range of industries including energy, chemical, transportation and financial services.  This is Fairmount Partners fourth transaction with Artech.
  • Fairmount Partners represented TayganPoint Consulting Group, a well-known life sciences consulting boutique based in the greater Philadelphia area, in their acquisition by Grant Thornton LLP.  Founded in 2009, TayganPoint advises global organizations navigating complex transformation management projects, with particular expertise in healthcare and life sciences. TayganPoint has a demonstrated track record of delivering high-impact, execution-oriented results in the fields of business transformation and organizational change, business process improvement, and strategy alignment and execution.  Founded in Chicago in 1924, Grant Thornton is one of the world’s leading organizations of independent audit, tax and advisory firms. Grant Thornton, which has revenues in excess of $1.7 billion and operates 59 offices, works with a broad range of dynamic publicly and privately held companies, government agencies, financial institutions, and civic and religious organizations.

News for Fairmount Partners

PACT Times October 2018: News

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 200 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Fairmount Partners represented Wellspring Pharma Services, a Toronto-based contract development and manufacturing organization owned by Sentinel Capital Partners and Ancor Capital Partners, in its sale to ANI Pharma (NASDAQ: ANIP), an integrated specialty pharmaceutical company.  WellSpring Pharma Services is a unique cGMP compliant contract pharmaceutical manufacturer and packager of tablets, capsules, topical semisolids and non-sterile liquids products.  It also offers pharmaceutical contract manufacturing services to the companies in North America and Europe.
  • Fairmount Partners represented Dynamic Health Strategies, LLC (DHS Group) in their acquisition of Connect, a patient information network and suite of healthcare software and hardware products from Ohio-based Olive (f/k/a CrossChx).
  • Fairmount Partners assisted Altasciences Clinical Research in their acquisition of the preclinical testing business of SNBL U.S.A., subsidiary of Shin Nippon Biomedical Laboratories, the leading preclinical provider in Japan.  The transaction is expected to be completed at the end of September. This acquisition will add comprehensive preclinical safety testing services to Altasciences’ current full-service clinical and bioanalytical offerings. Altasciences Clinical Research is a mid-size CRO that encompasses Algorithme Pharma in Montreal, Quebec, Vince & Associates Clinical Research in Overland Park, Kansas, and Algorithme Pharma USA in Fargo, North Dakota, with an overall company focus on supporting early-stage drug development.
  • Fairmount Partners represented FluidEdge Consulting, a national healthcare management consulting company headquartered in Philadelphia, PA, in their acquisition by CitiusTech, a leading provider of healthcare technology solutions and services.  CitiusTech is backed by General Atlantic, a global private investment firm.  FluidEdge focuses its management consulting services within the operations and IT areas of health plan, life sciences and provider organizations.
  • Fairmount Partners represented acquisition of Argint International, a contract research organization based in Budapest, Hungary with operations across Europe, by Precision for Medicine, part of Precision Medicine Group, a specialized services company supporting next-generation approaches to drug development and commercialization.  The acquisition is part of Precision’s global growth plan; Precision’s European footprint now includes and offices in Edinburgh, Paris, Berlin, Geneva, Budapest, Bucharest, Bratislava, and Belgrade.  Hungary is the 20th country in which Fairmount’s Pharmaceutical Services group has completed a transaction.

 

Fairmount Partners August News

PACT Times August 2018: News

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 200 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Fairmount Partners represented ETHOS Health Communications, a Pennsylvania-based agency specializing in the interpretation and communication of innovative medical science, in its sale to Precision Medicine Group. The acquisition of ETHOS, which informs physicians, providers and other stakeholders through medical affairs and marketing based scientific content, allows Precision to offer its clients a significantly expanded cadre of doctoral-level science and medical communications specialists. Over its 15+ year operating history, ETHOS has established itself as an authority in understanding and translating the science of medicine into both high-level strategy and tactical execution.

Updates for Fairmount Partners

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 200 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Represented Strata Skin Sciences (Nasdaq: SSKN), a medical technology company focused in dermatology and plastic surgery, in securing $17 million of growth financing from an investor group led by Accelmed Growth Partners, an investment firm focused on value creation for medical device companies and technologies.  The transaction is under contract, pending shareholder approval at a meeting to take place during the quarter ending June 30, 2018.

Team Members News:

  • Matt Carey joined Fairmount Partners as an Analyst.  Prior to joining Fairmount, Matt worked as an analyst for J.P. Morgan in their Private Banking group. In his previous role, Matt helped advise ultra-high net worth families and individuals on investment and portfolio management as well as long-term financial planning. Matt Carey earned his B.A. in Economics, with honors, from the Johns Hopkins University. He is currently a Level III CFA candidate.
  • Peter Born joined Fairmount Partners as a Junior Analyst. Prior to joining Fairmount, Peter worked as an economic research analyst for the Hungarian Delegation in the European Parliament in Brussels, Belgium. There, he conducted a study of the TTIP and TiSA trade agreements and presented his findings to the delegation.  Peter Born earned his B.A. in Political Science with a minor in International Relations from Saint Joseph’s University.
  • Michael Rudderow joined Fairmount Partners as an Analyst.  Prior to joining Fairmount, Michael worked as an analyst with Evergreen Advisors Capital, a boutique investment bank outside of Baltimore.  There, Michael worked on sell-side and buy-side mergers & acquisitions, private placements, and corporate advisory engagements for clients across a variety of industries.  Michael earned his B.B.A. in Finance from The George Washington University.

 

SaaS Valuations and the Metrics that Matter

The software market continues to evolve.  Historically, enterprise software was typically sold as a one-time, perpetual license plus an annual maintenance payment, usually representing 20% of the cost of the license.  The license revenue was typically large-dollar, but lumpy and non-recurring, and sales cycles were long. That said, a real benefit of the model, particularly for earlier stage companies, was that the cash generated from the sale of licenses could be used to fund the business.

Software-as-a-Service, or SaaS, models, which have become ubiquitous since Salesforce.com’s IPO in 2004, take a different approach.  SaaS is sold as a subscription, often monthly.  SaaS providers aren’t able to take advantage of being paid in advance, but the recurring nature of the revenue makes it easy to budget, and the high “flow down” of revenue to EBITDA beyond the company’s breakeven point makes it very profitable.

The inherent advantages of recurring, predicable revenues and the high “flow down” nature of the models naturally result in valuation differences between the two models, with enterprise software companies typically trading for circa 1 to 3x revenue and SaaS companies trading for 3 to 10x revenue. Further, many SaaS companies trade outside that range, both higher and lower.  So the question is, given the wide range of SaaS multiples in the market, what are the key factors distinguishing higher multiple companies from lower?

We believe that there are several core factors influencing SaaS valuation multiples. Those companies with metrics “to the right” in each of the factors tend to trade at higher valuations. The factors that we pay closest attention to are:

  • Annual Recurring Revenue (“ARR”) Growth and Scale. Growth should be analyzed relative to a company’s peer group. Smaller companies are expected to have larger growth rates than larger companies, and larger companies will generally have higher multiples than smaller companies at similar growth rates.
  • Rule of 40%. Companies with a combination of growth rate and EBITDA margins of 40% or more will generally command premium valuation multiples. Note that the rule holds true for companies at scale (greater than $8 to $10mm in revenue). For smaller companies, the threshold is generally higher.
  • Addressable Market and Moat. Having a unique offering positioning a company as a pioneer and leader in an emerging market segment that has the strong potential of growing to $500 million to $1 billion+ in five to seven years, and a substantial technological lead (two or more years) with a roadmap that maintains future leadership that reduces risk of marginalization and commoditization, strongly positions a company for a premium valuation.
  • Gross Margin; High “Flow Down” Model. Gross margins exceeding 70% indicates an attractive mix of software revenue and services. Beyond break-even, true SaaS companies may flow 50% or more of revenue to EBITDA.
  • Revenue Retention. A revenue retention rate of 100%+ (growth in revenue from existing clients exceeds revenue lost to churn) is a key indicator of the predictability of future cash flows and a strong indicator of ARR growth.
  • Customer Acquisition Cost (“CAC”) Ratio. CAC ratio is a measure of (i) the sales, marketing and other costs to acquire a customer to (ii) the incremental revenue gained during a given period, and a key indicator of the capital required to grow a company. Companies with CAC ratios under 1x have a strong likelihood of receiving a premium valuation providing the aforementioned metrics and characteristics are also solid.

In addition to these six core drivers of valuation multiples for SaaS companies, there are a myriad of company-specific factors that drive premium valuations; these factors are generally “hidden” in the aforementioned “Addressable Market and Moat” and are difficult to benchmark.

Achieving a premium valuation is significantly more difficult than a simple mathematical exercise. Many assume that SaaS companies automatically benefit from viral marketing; this is rare and it takes significant time and investment to scale (four years / $16 mm in equity capital and six years / $25 mm in equity capital to achieve $10 million and $20 million ARR run-rates, respectively). Positioning a company well and developing pressure-tested financial models that highlight a company’s “moat” and ability to grow are essential to achieving premium valuations.

Fairmount Partners Updates for February 2018

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 185 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Chris Kim was promoted to Associate at Fairmount Partners.  Prior to joining Fairmount, Chris worked as an analyst at a Los Angeles based technology-focused boutique investment bank focusing on M&A advisory and growth financings for middle-market and emerging-growth companies.  Chris Kim earned his B.S. in Business Administration, with a concentration in Finance from Boston University.

 

  • Jason Levy was promoted to Associate at Fairmount Partners. Prior to joining Fairmount, Jason worked at Ernst & Young in their Transaction Advisory Services practice. In this capacity, he performed valuation of business enterprises, intangible assets, and equity and debt interests in connection with acquisitions, bankruptcies, litigation, strategic alliances, and divestitures.  Jason Levy earned his B.S. in Finance, with distinction, from the Pennsylvania State University.

 

  • Represented Grand River Aseptic Manufacturing (GRAM), a leading provider of high-quality, sterile parenteral solutions, in the majority investment by Arlington Capital Partners, a private equity firm in the Washington, D.C., area with $1.5 billion of committed capital focused on middle market investment opportunities.  The new partnership will provide funding for GRAM to expand and add capacity to meet the rising demand for parenteral development and manufacturing services.

 

  • Represented pair Networks, Inc., a top-rated, pioneering provider of hosting solutions, in its sale to Liberated Syndication, Inc., the world’s leading podcast hosting network. Founded in 1995 and based in Pittsburgh, Pennsylvania, Pair is one of the world’s longest-established hosting companies. Pair offers a wide array of solutions including managed hosting (dedicated servers), virtual private servers, and WordPress hosting and provides world-class 24×7 on-site customer support.  The combined businesses generated approximately $23 million in revenue and $7 million in EBITDA during 2017.

Fairmount Partners News: Fall 2017

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 185 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Represented New England Research Institutes (NERI), a global, privately-held specialty Contract Research Organization providing customized clinical trial solutions and patient registry services to pharmaceutical, biotechnology, biomaterial and medical device companies, in its acquisition by HealthCore, Inc., the wholly-owned, independently operating health outcomes research subsidiary of Anthem (NYSE: ANTM).  Since its founding in 1986, NERI has earned widespread recognition for its scientific credibility, efficiency, and expertise in conducting clinical trials in a variety of medical specialties.  With over $85 billion in revenue, Anthem is one of the largest healthcare companies in the world.

 

  • Represented BioBridges, a Career Portfolio® Management company providing integrated services to the life sciences community, in its acquisition by The Adecco Group (VTX: ADEN) the world’s leading provider of workforce solutions.  Founded in 2005 and headquartered outside Boston, BioBridges is widely respected in the life sciences arena, managing the careers of highly skilled professionals who have extensive experience in the biotech, pharmaceutical and medical device industries.  The Adecco Group, based near Zurich, Switzerland, is the largest staffing firm in the world with annual revenue of over €28 billion, and a Fortune Global 500 company.

 

News for Fairmount Partners

August 2017: News

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 185 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Represented ThreeWire®, the global leader in clinical trial recruitment and direct-to-patient marketing, in its acquisition by WIRB-Copernicus Group® (WCG™), the world’s leading provider of solutions that measurably improve the quality and efficiency of clinical research.   ThreeWire® uses a systematic, patient-focused approach to help biopharmaceutical and medical device companies and clinical research organizations achieve their clinical trial enrollment and retention goals.  Having screened over 2 million patients in more than 25 countries, ThreeWire’s disciplined, proven approach consistently produces measurable, predictable results for its U.S. and overseas clients.
  • Represented Altasciences Company, Inc., a leading early phase contract research organization (CRO), in its acquisition by Audax Private Equity in partnership with Altasciences management. Audax acquired Altasciences from Kilmer Capital Partners, a private equity firm based in Toronto, Canada.  Altasciences, headquartered in Laval, Quebec, encompasses Algorithme Pharma, Vince & Associates Clinical Research, and Algorithme Pharma USA.  Altasciences offers expertise in the execution of a wide range of New Drug Application (NDA) enabling clinical trials and support services including data management, biostatistics, medical writing, and bioanalysis.

 

Fairmount Partners Spring News

Fairmount is the most active M&A firm based in the Mid-Atlantic, with a national and international practice.  Since 2003, the firm has completed more than 185 transactions throughout North and South America, Europe, Asia and Australia.   Fairmount specializes in advising middle-market companies on sell-side, buy-side and capital placement transactions, and provides fairness opinions and strategic advice in the transaction context.

  • Represented Artech Information Systems LLC, a provider of workforce solutions, IT consulting, and SOW-project services, in its acquisition of Tech-Pro, Inc., a Minneapolis, MN-based information technology solutions company.  Artech is a minority- and women-owned business enterprise (MWBE) headquartered in Morristown, NJ.  Artech employs over 7,200 professionals and maintains over 25 locations across the U.S., India, and China. Artech was founded in 1992 and today is a Tier-1/Preferred Supplier to more than 70 Fortune 500 companies and numerous federal and state government agencies.
  • Represented Teletronics Technology Corporation (“TTC”) “in a process that culminated in an announced sale for $233 mllion in cash to Curtiss-Wright Corporation (NYSE: CW),  a global innovative company that delivers highly engineered, critical function products and services to the commercial, industrial, defense and energy markets. TTC, a private company, is a leading designer and manufacturer of high-technology data acquisition and comprehensive flight test instrumentation systems for critical aerospace and defense applications. The acquired business will operate within Curtiss-Wright’s Defense segment, and completion of the transaction is expected in January, pending government approval.
  • Represented Collaborative Consulting, LLC in its sale to CGI Group Inc. (NYSE: GIB) (TSX: GIB.A).  Collaborative brings skills, experience and deep relationships in high-growth, in-demand IT services that improve usability, functionality and performance of digital technology and information management systems for its clients.  With a head office in Boston, MA and nearly 400 professionals, Collaborative generates annualized revenue of approximately $76 million.
  • Represented GroundLink in its acquisition by Marcou Transportation Group (“MTG”), the parent company of Dav El | BostonCoach.  GroundLink is a tech-enabled provider of executive black car service in major cities throughout the world. GroundLink has offices in North America and Europe, with its headquarters in New York, NY.  Dav El│BostonCoach is the largest privately owned chauffeured transportation company in the world. Marcou Transportation acquired GroundLink and software provider to the limousine industry, Limo Anywhere, to help MTG finalize its direct on-demand product for the corporate travel space.
  • Represented QS Pharma, a pharmaceutical contract development and manufacturing organization (CDMO) based in Philadelphia, in their sale to Quotient Clinical, an early phase drug development services company based in Nottingham, UK.  QS Pharma was owned by Charles River Laboratories (NYSE: CRL) who acquired the business as part of its 2016 acquisition of WIL Research.  Founded in 2002, QS Pharma specializes in the formulation development, analytical lab services, and manufacturing of small molecule drug products, from the early stages of development through to product commercialization.  Fairmount previously sold three businesses to Charles River Labs.
  • Represented Infusion, a global software engineering, design and digital strategy firm that delivers digital business transformation for the enterprise with strong Microsoft technology expertise, in their sale to Avanade, the leading provider of innovative digital and cloud services, business solutions and design-led experiences delivered through the power of people and the Microsoft ecosystem. Infusion, a major global software engineering and digital strategy firm, has 600 employees globally with offices in New York, Raleigh, Houston and London, and innovation centers in Toronto and in Wroclaw and Krakow, Poland, which expands Avanade’s operations in Europe. In addition to financial services companies, Infusion also serves clients in the oil & gas, retail, healthcare, education, and travel & leisure industries. “Infusion selected Fairmount Partners as its investment banking advisor because of the quality and depth of its historical relationships with firms like ours. The unique complexities of our successful transaction with Avanade/Accenture required a very strong investment banking team. Fairmount provided that and supported our Infusion team superbly throughout the entire process,” remarked DeBorah Brill, Co-Founder of Infusion.

News from Fairmount Partners

Fairmount Partners is an independent investment banking firm focused on serving the needs of middle market and emerging growth companies.  We provide a complete range of investment banking and capital advisory services for our clients including merger and acquisition advisory, financing advisory, fairness opinions and valuations and strategic corporate development advisory services.

  • Represented Teletronics Technology Corporation (“TTC”) “in a process that culminated in an announced sale for $233 mllion in cash to Curtiss-Wright Corporation (NYSE: CW),  a global innovative company that delivers highly engineered, critical function products and services to the commercial, industrial, defense and energy markets. TTC, a private company, is a leading designer and manufacturer of high-technology data acquisition and comprehensive flight test instrumentation systems for critical aerospace and defense applications. The acquired business will operate within Curtiss-Wright’s Defense segment, and completion of the transaction is expected in January, pending government approval.
  • Represented Electro-Science Laboratories, Inc. and a U.K.-based its affiliate  a leader in electronic packaging materials, in a process that resulted in the sale of ESL for $75 million tby Ferro Corporation (NYSE:FOE), a leading global functional coatings and color solutions company. ESL is a privately held company headquartered in King of Prussia, Pennsylvania.  Agmet Limited, the affiliate, is based in Reading, England.
  • In December, Nick Lopez joined Fairmount Partners as an analyst.  Prior to joining Fairmount, Mr. Lopez worked as an analyst at a boutique investment bank in the New York City area focused on  M&A advisory to middle-market technology and IT Services companies.  Mr. Lopez earned his B.S. in Finance with a minor in Economics and his M.B.A. with a concentration in Finance from St. Thomas Aquinas College. During this time, he was a full-scholarship basketball player and Scholar Athlete of the Year for the East Coast Conference two consecutive years.