professional employer organizations are experiencing rapid ......track platform expansion. prismhr...

Insider

Business Services

The BGL Business Services Insider is published by Brown Gibbons Lang & Company, a leading independent investment bank

serving middle market companies throughout the U.S. and internationally.

Spotlight:

The PEO Industry Pulse Professional employer organizations are experiencing rapid growth,

fueled by a vibrant small business market in need of bundled human

resources solutions, with increased regulatory complexity and

emerging technology expected to sustain outsourcing demand. Capital

is flowing into the sector, driving an active M&A market.

In our spotlight survey, we assess the “state of the market”, exploring

recent regulatory developments and growth drivers, as well as

valuation and consolidation trends within the sector. Leading CPEOs

sound off on key issues, including the IRS certification process,

healthcare reform, and the economy in a roundtable forum.

August 2017Brown Gibbons Lang & Company

Chicago One Magnificent Mile 980 N. Michigan Avenue Suite 1880 Chicago, IL 60611

Cleveland One Cleveland Center 1375 East 9th Street Suite 2500 Cleveland, OH 44114

Philadelphia One Liberty Place 1650 Market Street Suite 3600 Philadelphia, PA 19103

bglco.com

Business Services Insider

2


The marketplace for PEO services is large and growing, fueled by a vibrant small business market in need of bundled

human resources solutions, with increased regulatory complexity and emerging technology expected to sustain

outsourcing demand. Capital is flowing into the sector and driving an active M&A market.

Spotlight On:

PEO Industry Pulse

Large Addressable Market

Recent estimates from the National Association of Professional Employer Organizations (NAPEO) size the market at between $136 and $156 billion in gross revenue generated from some 156,000 to 180,000 clients—representing less than 3 percent of U.S. employers utilizing PEO services—underscoring significant room for increased penetration and growth.

Market research firm IBISWorld identifies PEOs as a growth industry, pegging gross revenue at $168 billion in 2017. The sector saw solid growth, with compound annual growth in revenues of 8.7 percent between 2012 and 2017 and is forecasted to grow 2.6 percent annually through 2022.

Public industry participants are reporting strong performance:

• ADP (NasdaqGS: ADP) is reporting outsized growth

in its PEO Services business, ADP TotalSource. In the

company’s F4Q 17 earnings call, ADP reported a

13 percent increase in PEO revenues, outpacing Payroll

growth of 4 percent. Worksite employees grew by

12 percent to top 462,000 in the same period. ADP is

forecasting revenue growth of 11 to 13 percent in its

PEO business in fiscal 2018.

• TriNet Group (NYSE: TNET) has achieved a three-

year revenue CAGR in excess of 20 percent and is

forecasting double-digit growth into 2019. “There’s

plenty of market out there,” TriNet CEO Burton

Goldfield told attendees at the J.P. Morgan Global

Technology, Media, and Telecom Conference held in

May 2017. “They’re about 3 percent penetrated right

now into the bundled HR services business. Within that

55 million who go to work in those small businesses,

we believe about 27 million are addressable from

TriNet’s products and services.”

• Insperity (NYSE: NSP) estimates only 4 million of

an addressable market of 71 million employees are

currently served through a co-employment model.

The company is continuing on a path of double-digit

growth, reporting record results in 2Q 17 with gains of

12.5 percent and 30 percent in revenue and adjusted

EBITDA for the quarter. Year-to-date, revenue

increased 11 percent over the 2016 period. This positive

momentum builds on 13 percent revenue growth for

the full year 2016 and 10.3 percent growth forecasted

for 2017.

Commenting on the demand outlook, Goldfield added, “I believe the pendulum for the PEO construct, which involves a transfer of liability, is strong right now because of the changes in the legal and regulatory environment and the uncertainty. I also believe the market has options as it relates to technology…as well as exceptional service models.”

Regulatory

Increased regulation of the PEO industry is strengthening the credibility of existing players and presenting formidable barriers to entry. The enactment of federal legislation in 2014 through the passage of the Small Business Efficiency Act (SBEA) provided a national industry framework for certification and acceptance.

In July 2016, the IRS began accepting applications for the voluntary program for persons to apply to become Certified Professional Employer Organizations (CPEOs). Key highlights of the new certification program include:

• Reporting Requirements: The IRS will provide

necessary reporting and recordkeeping rules and

procedures, including rules that require the CPEO to

track and report the “commencement or termination” of

a service agreement with a customer.

• Bonding: A CPEO must maintain a $50,000 bond, or,

if greater, a bond in an amount that is equal to five

percent of the CPEO’s federal employment tax liabilities

for the previous year (not to exceed $1 million).

SOURCE: NAPEO, IBISWorld, S&P Capital IQ, PitchBook, Company Filings, and public data.


3


• Annual Audits: A CPEO must prepare and provide the

IRS with annual independent financial statement audits

prepared by a CPA.

• Quarterly CPA Attestations on Employment Taxes:

A CPEO must provide quarterly assertions to the

IRS regarding payment of all employment taxes,

accompanied by an examination level attestation by an

independent CPA with respect to each such assertion.

• Annual Fee: The CPEO must pay an annual fee of up to

$1,000 per year to be (and remain) certified.

• List of CPEOs will be published: The IRS will publish a

list of all CPEOs, as well as a list of those PEOs whose

certification has been revoked or suspended.

• CPEO Sole Liability: The CPEO assumes sole liability for

the collection and remission of the federal payroll taxes

with respect to wages paid by the CPEO to worksite

employees.

While opinions from industry executives are mixed concerning the benefits of the new IRS certification, there is consensus that government backing will provide added credibility and increased awareness to support the sector’s continued positive growth trajectory. “Obviously, having federal recognition and legislation in place will add legitimacy to the industry as a whole, and especially to those who choose to get and maintain certification,” observed Brian Fayak, chief executive officer at Nextep and a participant in our roundtable (Page 15 of Business Services Insider). “That being said, the industry has been around for over 30 years so the bigger impact will probably be the awareness that it is driving across the business community and specifically the investment community.” CPEOs point to competitive advantages of certification, citing added credibility and the ability to win more customers. Small PEOs that choose to forego certification may be disadvantaged in competitive situations with certified firms, said some insiders. “Certified PEOs will try to use their certification to their advantage as they market their services…I also believe that PEO brokers and others who shape public opinion about PEOs will recommend that companies looking to use PEOs select from the group of certified PEOs,” commented roundtable contributor John Allen, president and chief operating officer of G&A Partners. “As such, being certified is almost a right of passage.”

Technology Technology is both an opportunity and a threat in today’s rapidly evolving market. PEOs are investing in leading-edge technology, HR specialty software and services, and mobile solutions to increase productivity and profitability of operations.

• In April 2017, PrismHR announced it was bringing

in Summit Partners as a new capital partner to fast-

track platform expansion. PrismHR is enhancing its

platform and tools to improve the end user experience,

announcing the release of Employee Self Service 2 in

June 2017 with more robust data analytics and mobile

optimization features. The company is converting

some on-premises clients into the cloud and converting

Summit clients to the Prism platform. Accel-KKR, the

former majority equity holder, retained a minority

interest in the company. Since Accel-KKR’s investment,

PrismHR increased its user base by 94 percent, resulting

in 50 percent growth in worksite employees.

• Darwin continues to invest in its PEO technology

platform with mobile-friendly enhancements and

employee self-service options among key features.

• TriNet Group (NYSE: TNET) unveiled in June 2017

its “next generation” HRM solution to track payroll,

benefits, time and attendance, reporting, and other HR

functions in a single, unified platform.

• Insperity (NYSE: NSP) announced in its F1Q 17 earnings

call that it will be launching upgrades to its technology

platform this summer to provide clients with a robust

HCM user experience expected to have a “dramatic

affect on its mid-market business”.

• New PEO technology platforms like WorkLogic are

entering the market.



4


Spotlight On:

PEO Industry Pulse

Similarly, technology is increasingly being used to solve and eliminate SMB HR services problems through disruptors such as Justworks and Namely, who are among a number of new entrants that have attracted significant amounts of recently raised capital to fund expansion. Justworks has raised more than $57 million to date, including $33 million in a Series C round led by Redpoint Ventures in March 2016, with participation from Bain Capital Ventures, Thrive Capital, and Index Ventures. Justworks’ technology platform serves to automate payroll, payments, HR, and benefits administration for small business customers. “With our model, we empower businesses with accessible, affordable benefits, seamless payroll, and frictionless compliance,” said Isaac Oates, Justworks’ founder and CEO.

Namely raised $50 million in a Series D financing this January bringing its total funding to more than $168 million. Altimeter Capital Management and Scale Venture Partners co-led the January raise with Sequoia Capital, Matrix Partners, Four Rivers Group, and True Ventures among the participating investors. Namely has reportedly been an acquisition target, recently rejecting an offer from Google, and is on a path to go public, reported TechCrunch. Calling Namely the “leading HR platform for mid-sized companies everywhere,” Stacey Bishop, a partner at Scale Venture Partners, told TechCrunch, “They’ve made HR a differentiator for their clients—providing the best possible experience for employers and employees alike. We are thrilled to partner with Namely as they continue to transform the industry.”

Accelerating Acquisition Activity

The M&A market continues to remain active as strategics seek acquisitions for new market growth and synergies and private equity funds look to back high-quality companies as platforms to pursue acquisition growth strategies.

Financial sponsors continue to be attracted to the sector’s secular growth, large addressable market, and tech-enabled delivery model, with fragmentation presenting the opportunity to execute buy-and-build platforms. Notable recent platform buys include, in 2016, Questco (Parallel49 Equity), and in 2015, Progressive Employer Management Company (Tenex Capital Management) and CoAdvantage (Morgan Stanley Private Equity).

In February 2017, Atairos increased its equity stake in U.S.-based TriNet Group (NYSE: TNET), purchasing the 25.7 percent interest held by General Atlantic, bringing its ownership position to approximately 28 percent. Commenting on the investment, Atairos CEO Michael Angelakis, said, “We believe TriNet is uniquely positioned to capture emerging opportunities in the growing PEO market and beyond. We look forward to partnering with TriNet and working with our strategic relationships to help scale the business further and fuel TriNet’s next phase of growth.” General Atlantic first invested in TriNet in 2005.

HR Outsourcing (HROI), the regional PEO platform of Clarion Capital, added on with Fortune Financial in December 2015, a move to broaden its footprint which will now service 25,000 WSEs and over 750 clients in 8 states. HROI is considering additional acquisitions, said Clarion Managing Director Jon Haas, commenting on the transaction: “The acquisition of Fortune significantly augments HROI’s existing PEO operations and provides the combined company with a scalable platform for continued expansion.”

National PEOs are looking to increase scale and market penetration. Private equity-backed Oasis Outsourcing, a platform of Stone Point Capital since 2014, has completed four strategic add-ons resulting in double-digit worksite employee growth. Add-ons include Diversified Human Resources, previously backed by Caltius Equity Partners, in July 2017; CEP, Inc., the controlling shareholder of Fortune Industries, Inc. (OTCMKTS: FDVF) in September 2016, and A1HR and Doherty Employer Services, in December 2015.

Oasis now serves more than 7,500 clients and 230,000 WSEs nationwide, which is up from 4,700 SMBs and 160,000 WSEs at the time of Stone Point’s acquisition. In July 2017, Kelso & Company acquired a significant minority equity stake in the company. Oasis has a history of private equity backing, counting HIG Capital, Nautic Capital, and Altaris Capital among its former investors.

We expect the sector will continue to attract private equity interest in the coming quarters, fueled by a strong capital markets environment and a sense of urgency for funds to deploy capital. Sponsors will be in active pursuit of new platforms and accretive tuck-in acquisitions to accelerate growth.



5

Spotlight On:


PEO Industry Pulse

On a scale of 1 to 5 (with 5 being the highest) please rate

the importance of each of the following aspects of a PEO’s

value proposition:

Utilizing a roundtable survey comprised of leading CEOs, consultants, and investors in the space, we explore the value proposition of the PEO model, the PEO industry itself, and the current valuations of PEOs. Recent regulatory developments and growth drivers, as well as valuation and consolidation trends are examined.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Strategic HR

Cost

Administrative Relief

Risk Sharing

ACA Compliance

Benefits Administration

Payroll Tax Management

Unemployment Tax Management

Health Insurance

Workers Compensation Insurance

Risk Management

HR Services

Payroll

HR Tools

Technology

1 2 3 4 5

• Technology

• Administrative Relief

• HR Services

• Health Insurance

• Benefits Administration

MOST IMPORTANT• Risk Sharing

• Unemployment Tax Management

• Strategic HR

LESS IMPORTANT

Survey findings underscore the growing demand for innovative technology in HRO services, with 94 percent of respondents assigning Technology an importance rating of 4 or 5. More than half (52 percent) assigned a rating of 5. This compares to only 67 percent (4 or 5 rating) and 39 percent (5 rating) in our 2015 survey.

ACA Compliance fell from a top-ranked PEO service, with only 26 percent of respondents assigning a 5 rating, down from 50 percent in our 2015 survey.

PEO VALUE PROPOSITION

“These are all of highest importance, but the sum is greater than of all of these parts.”

Indicate the most important aspects of a PEO’s value proposition:

INNOVATIVETECHNOLOGY

COMPLIANCEBENEFITS

ADMINISTRATION

ONE-STOPSOLUTION

TRUST

COSTSAVINGS

TIME SAVINGS

5


6


On a scale of 1 to 5 (with 5 being the highest) please rank

the following client employee sizes in terms of fitting

within the PEO model:

On a scale of 1 to 5 (with 5 being the highest) please

rank the desirability of a PEO also offering the following

additional non-PEO services:

What do you believe is the appropriate average

administrative fee for a high-quality PEO service model?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

200+

100 - 200

50 -100

25 - 50

25 or less

1 2 3 4 5

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Financial Software

Reporting

Labor Management

Time and Attendance

Staffing

HRIS Tools

Recruiting

ASO

Payroll Only

1 2 3 4 5

8%

54%

27%

12%

< $1,000

$1,000 to $1,250

$1,250 to $1,500

$1,500 +

• 25-50 employees

MOST IMPORTANT• 200+ employees

LESS IMPORTANT

• Reporting

• Time and Attendance

• HRIS Tools

• ASO

MOST IMPORTANT

• Staffing

• Financial Software

• Payroll Only

LESS IMPORTANT

Consistent with our 2015 survey findings, client employee size of 25-50 was identied as the primary target PEO market with more than 70 percent of participant responses (rating of 5), followed by approximately 50 percent for 25 or less.

The majority (54 percent) of survey respondents believe administrative fees should fall within a range of $1,000 to $1,250 for high-quality PEOs.

HRIS Tools moved up in ranking, receiving a 4 or 5 rating by 64 percent of executives surveyed. This contrasts with only 41 percent 2015.

PEO VALUE PROPOSITION

6


7

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

ESAC �Future

Market Awareness

Long-Term Sales

Short-Term Sales

Industry Penetration

1 2 3 4 5

Spotlight On:


PEO Industry Pulse


the significance the new IRS certification will have on the

following:

Survey findings were mixed. While some executives anticipate the new IRS certification will stimulate awareness and expand industry penetration, others believe the impact on sales will be limited, particularly in the short term. The majority concur that the IRS certification will not affect the future of ESAC.

Assuming the current penetration of the PEO industry is

5-7% of the SMB market, on a scale of 1 - 5 (with 5 being the

highest) please rank the likelihood that PEO penetration in

the next 5 years can reach the following levels:

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Over 25%

25%

20%

15%

10%

1 2 3 4 5

Executives remain bullish on the PEO model, with a majority of respondents anticipating continued growth and market expansion over the next five years. Sixty-nine percent of respondents surveyed believe PEO penetration could reach 10 percent of the SMB market (4 or 5 rating), followed by a more optimistic 31 percent who project as high as 15 percent penetration.

What are the limiters of growth in a largely untapped market? Survey participants shared their observations:

PEO INDUSTRY

“PEOs are still too unknown as a business model.”

“I don’t see a huge impact from CPEO happening. Most of the high quality operators were already ESAC certified. I do think it will prevent some lower quality

operators from sticking around.”

“Too many low quality providers holding back growth. Large players are still swallowing acquisitions,

causing churn.”

7


8

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Portal / Website

Mobile Access

Reporting


Company Strength

Roadmap

User Interface

Client Interface

Time and Attendance

Client On Boarding

Implementation

Cost Effectiveness

Functionality

1 2 3 4 5



each of the following PEO markets in terms of further

penetration opportunity:


the importance of each of the following in evaluating a

PEO technology platform:

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Northeast (NY, NJ, CN, MA, PA)

Midwest (IL, IN, WI, MI, MO, KY, IA)

Texas

West (OR, WA, UT, CO)

California

Southeast (GA, NC, SC, TN, AL)

Florida

1 2 3 4 5

• Midwest

• Northeast

• Southeast

HIGHEST• Florida

• California

• West

LOWER

• Functionality

• Portal / Website

• Client Interface

• Reporting

MOST IMPORTANT

• Roadmap

• Company Strength

LESS IMPORTANT

Florida received the lowest ranking (1 or 2 ranking) for a second time by nearly half of participants surveyed (46 percent). One survey participant characterized the market as “cut-throat”, suggesting less opportunity for additional penetration.

PEO INDUSTRY

8


9

Spotlight On:


PEO Industry Pulse


the significance of each of the following issues that the

PEO industry faces:

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Market Awareness

Sustainability of U.S. Economy

Non PEO Competition (Zenefits, ADP, Paychex, Workday)

Health Insurance Markets

Heath Care Reform

Workers Compensation Markets

Technology

Regulation

1 2 3 4 5

• Health Insurance Markets

• Regulation

• Technology

• Market Awareness

MOST IMPORTANT• Non-PEO Competition

• Sustainability of the U.S. Economy

LESS IMPORTANT

PEO INDUSTRY

On a scale of 1 to 5 (with 5 being the highest) please

rank the quality of each of the following PEO technology

platforms:

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Heartland / Ovation

Millennium

Workday

Oracle/PeopleSoft

PayPlus

SaaShr

Darwin

PrismHR (HRP)

1 2 3 4 5

PrismHR, SaaShr, Oracle/Peoplesoft, and Workday were among the companies receiving high rankings for their technology platforms. Heartland/Ovation and Millenium received lower rankings.

“The sustainability of the U.S. economy is most certainly a factor in the short term. While PEOs may lose revenue on same store sales as in 2009, new business may grow during down economic times

to offset the loss in existing customer base payroll. When the economy would rebound, given the client

retention rate within the PEO industry, I believe subsequent industry revenues will be stronger than

prior to an economic dip.”

Despite the tepid recovery and growing predictions of a near-term recession, the health of the U.S. economy was not identified as a key issue by a majority of executives surveyed. Less than 10 percent of respondents (7 percent) believe it is an issue of high importance (5 rating), compared to 22 percent in 2015.

9


10


When valuing a PEO, please rate on a scale of 1 to 5 (with 5

being the highest) the importance of each of the following

factors:

For a high quality PEO, please indicate the appropriate

% of Gross Profit that each of the following components

should represent:

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Average Gross Profit per WSEAverage Administra�ve Fee per WSE

Average WSE WageHealth Insurance Program

WC ProgramRisk Management

Technology Pla�ormQuality of HR Services

Produc�vity of Sales EngineManagement Team

Geographic Loca�onsClient Reten�on

Industries ServedQuality of Client Por�olio

Quality of EarningsEarnings

Future Growth Poten�alHistorical Growth Rate

Size

1 2 3 4 5

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Commissions

SUTA

Workers Comp

Admin Fees

10% or less

25-50%

50-75%

75-100%

Other

• Client Retention

• Quality of Client Portfolio

• Average Gross Profit per WSE

• Quality of Earnings

• Earnings

• Management Team

• Productivity of Sales Engine

MOST IMPORTANT

• Historical Growth Rate

• Geographic Locations

• Industries Served

• Average WSE Wage

• Risk Management

LESS IMPORTANT

• Clients (client retention and quality of book) moved up in ranking above financial measures.*

• Earnings quality was identified as the primary financial measure in valuation. Gross profit and margin (per WSE and FTE) and EBITDA size and trajectory were frequently cited as key metrics.

• Growth, growth, growth! Future growth continues to outweigh historical performance.

• Management remains essential to the value equation, supported by an effective sales organization.

• The sales engine is a critical driver of growth.

*Combined 4 and 5 ratings.

Administrative fees are the core component of profitability for leading PEOs. Nearly 90 percent of company executives expect admin fees to account for 50 percent or more of PEO gross profit.

PEO VALUATION

10


11

Spotlight On:


PEO Industry Pulse

For each of the following hypothetical PEOs, please select the appropriate adjusted EBITDA multiple for valuation purposes:

SizeAnnual Growth Average Administrative Fee per WSEAverage Gross Pro�t per WSEAverage EBITDA per WSE

5-6x

7-8x

8-9x

9-10x

10x+

5,000 WSEs0%

$750

$1,000$300

5,000 WSEs0%

$750

$1,000$300

10,000 WSEs5%

$1,000

$1,200$400

50,000 WSEs10%

$1,250

$1,500$500

100,000 WSEs15%$750

$1,200$400

76%

18%

6%

0%

5-6x

7-8x

8-9x

9-10x

11%

44%

44%

0%

5-6x

7-8x

8-9x

9-10x

5%

11%

21%

32%

32%

5%

11%

21%

16%

47%

5-6x 7-9x 8-10x+ 9-10x+

Historical Valuation Trends

Valuations have moderated

but still remain at historical

high levels.

The LTM median composite

of 14.6x exceeds the median

value over the last 5 years

(13.9x) and 10 years (11.6x).

PEO VALUATION

PEO Valuation Metrics

Size matters according to PEO executives surveyed, illustrated by these valuation ranges. Insiders point to lower valuations for small PEOs, citing EBITDA multiples below 5x (3x-4x).

Source: S&P Capital IQ.

*Median ValuesBGL PEO Composite Index: ADP, BBSI, NSP, TNET, PAYX

EBITDA Multiple

10-year: 11.6x

5-year: 13.9x

Median Value

11.0

x10

.5x

11.3

x9.

6x7.

9x 8.1x

8.2x

6.6x

5.7x

6.9x

8.3x 9.

1x 9.4x

11.1

x13

.0x

13.1

x11

.6x

10.5

x9.

0x11

.3x

11.6

x11

.5x

11.9

x11

.4x 12

.5x

13.0

x 14.1

x16

.2x

14.0

x13

.6x

14.0

x14

.8x

15.1

x13

.2x

12.3

x 13.9

x10

.2x

15.4

x13

.9x

14.4

x14

.7x

14.5

x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

11


12


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

TriNet

Barrett Business Services

Insperity

Paychex

ADP

6-8x

8-10x

10-12x

12x+

Please indicate the appropriate EBITDA multiple valuation

range for the following PEOs in the current market:

Survey findings revealed significant variability. The valuation range of 8-10x received the highest number of responses, which challenges current public market valuations.

The PEO value proposition

is observed in public market

valuations, which for high-

quality PEOs, have risen to

historic levels.

PEO VALUATION

EBITDA Multiples of Public PEOs


*Median ValuesBGL PEO Composite Index: ADP, BBSI, NSP, TNET, PAYX

EBITDA Multiple

10-year: 11.6x

5-year: 13.9x

Median Value

11.0

x10

.5x

11.3

x9.

6x7.

9x 8.1x

8.2x

6.6x

5.7x

6.9x

8.3x 9.

1x 9.4x

11.1

x13

.0x

13.1

x11

.6x

10.5

x9.

0x11

.3x

11.6

x11

.5x

11.9

x11

.4x 12

.5x

13.0

x 14.1

x16

.2x

14.0

x13

.6x

14.0

x14

.8x

15.1

x13

.2x

12.3

x 13.9

x10

.2x

15.4

x13

.9x

14.4

x14

.7x

14.5

x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

NA: Denotes data not available for forecast period.Source: S&P Capital IQ.As of 8/1/2017.

12.8x

0.0x

9.2x

13.4x

17.7x

14.5x

0.0x

10.6x

14.3x

19.4x20.2x

14.6x

14.0x

13.5x

14.8x

TriNet

Barrett Business Services

Insperity

Paychex

ADP

LTM

2017E

2018E

NANA


EBIT

DA

Mul

tipl

e

*Post-TriNet IPO

4Q 14 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17

ADP 15.2x 14.6x 13.1x 15.7x 16.4x 17.2x 16.9x 15.3x 17.2x 16.5x 16.2x

Paychex 14.4x 15.3x 14.4x 14.0x 15.3x 15.5x 16.7x 15.9x 16.5x 15.6x 14.7x

TriNet 15.3x 17.5x 13.3x 10.6x 13.9x 10.2x 15.4x 13.9x 14.4x 14.7x 14.1x

Insperity 9.8x 14.9x 12.2x 9.8x 9.9x 8.9x 13.0x 12.3x 12.0x 14.0x 10.8x

Barrett Business Services NM NM NM NM 8.3x 5.6x 7.7x 10.8x 12.2x 10.7x 14.5x

0.0x

4.0x

8.0x

12.0x

16.0x

20.0x

Relative Valuation Trends

12


13

Spotlight On:


PEO Industry Pulse

Please rate on a scale of 1 to 5 (with 5 being the highest)

the factors below that have driven the increase in PEO

valuations over the past two years:

Over the next 12 months, do you believe that PEO

valuations will:

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Performance of Leading PEOs

Healthcare Reform

Investor Interest in Sector

Improvement in U.S. Economy

1 2 3 4 5

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Remain at the Same Level Increase Decline

Yes

No

While insiders maintain an optimistic outlook, they have tempered their value expectations. Sixty-five percent of companies surveyed expect valuations will rise over the next 12 months, which is down from 79 percent in our 2015 survey. Less than 20 percent expect valuations to decline.

New investors are entering the industry with significant capital to fund organic and inorganic growth, which has contributed to multiple expansion. More than 80 percent (rating of 4 or 5) of surveyed executives attribute the rise in PEO valuations to recent investor interest in the sector.

Public PEOs are being rewarded with lofty valuations, with multiples at or near historic highs, another driver behind current valuation trends.

PEO VALUATION

13


14


PEO VALUATION

SOURCE: S&P Capital IQ, PitchBook, Company Filings, and public data.

SELECTED INVESTMENT ACTIVITY INVOLVING PEOS

May-17

DATE DEAL STATSTARGET ACQUIRER

Feb-17

Feb-17

Jan-17

Sep-16

Aug-16

Jul-16

Jul-16

May-16

Dec-15

Dec-15

Dec-15

Oct-15

Oct-15

Sep-15

Enterprise Value (EV): $235MEV/EBITDA: 10.0x


Enterprise Value (EV): $32.2MEV/EBITDA: 5.8x

CEP, Inc.


Enterprise Value (EV): $1.99B*EV/EBITDA: 13.1x

*25.7 percent stake

Jul-17

Jul-17 Minority equity stake

14


15

Spotlight On:


PEO Industry Pulse

profile

Founded in 1995, Houston-based G&A Partners is a full-service CPEO offering a comprehensive suite of outsourced HR solutions, including HR support, risk management, and recruitment; benefits administration; and payroll, including time and attendance, payroll processing, and reporting.

John Allen is a co-founder and serves as President and COO responsible for overseeing daily operations of the company and is heavily involved in the strategic outlook and growth of the firm.

Brian Fayak founded Nextep in 1997 “with a dream of doing it differently”, leaving behind a successful career at Staff Leasing, a publicly-traded PEO. The Oklahoma City-based CPEO offers a comprehensive suite of human resources services including HR, benefits, payroll, and risk and compliance, focusing on small and medium-sized businesses. Nextep was among the first to achieve Certified PEO recognition from the IRS.

“My goal was to give my clients the best of both worlds: the benefits and state-of-the-art technology that large companies have to offer, and the personal service and flexibility that smaller companies deliver. We’ve grown over the years, and we’ll continue to grow, but I’ve never lost sight of that dream. It’s still what I’m passionate about today.”

JOHNALLEN

Tandem HR, a Chicago-based CPEO, offers customized solutions associated with human resources, benefits, payroll, tax administration, regulatory compliance, and risk management to businesses of all sizes. Bruce Leon is the founder and CEO of Tandem HR, started in 1998, along with sister companies Benefits Solutions Group (1997) and Alliance Workplace Solutions (2006). His professional career in human resources spans more than 25 years.

“As Tandem HR is about to celebrate its 20th anniversary in the PEO industry, we are very humbled and honored to be one of the first few PEOs to be certified by the IRS.”

BRIANFAYAK

BRUCELEON

15


16

Q What impact will the new IRS certification program have on industry penetration?

Allen, G&A Partners. I think the common belief is that the IRS certification will in some way legitimize the industry and allow us to increase market penetration. However, the verification in and of itself will do nothing. It will only matter if NAPEO and participating PEOs get the word out. The IRS will do nothing to promote our brand. We have to do that and use the certification as a way to convince a skeptical business world that what we do has real value and the backing of federal and state governments.

Fayak, Nextep. We believe that it will have a material impact on the growth and penetration of our industry. That was one of the primary reasons why we decided to be one of the trail blazers to get certified first. Obviously, having federal recognition and legislation in place will add credibility and legitimacy to the industry as a whole, and especially to those who choose to get and maintain certification. That being said, the industry has been around for over 30 years so the bigger impact will probably be the awareness that it is driving across the business community and specifically the investment community. The combined effect of added credibility and awareness should drive new growth for all of us.

Leon, Tandem HR. I believe that while the actual benefits are limited, the recognition by the IRS gives the PEO industry that final acceptance that makes our solution not just credible, but preferred. We have had record sales so far in 2017.

Q What key advantages will CPEOs have once certified, and what disadvantages will those that do not get certification be facing?

Fayak, Nextep. We felt strongly that we needed to be in the first group of PEOs to get certified because we knew that the publicly traded PEOs in the industry would also rush to be the first. We also feel that PEOs that are certified will win more customers than PEOs that are not certified.

Leon, Tandem HR. The advantages are (1) credibility, (2) succession in taxation, and (3) credibility. The disadvantages to those not certified will be (1) credibility, (2) credibility, and (3) credibility!

Allen, G&A Partners. I’m not sure if certified PEOs will have much of an advantage. All PEOs will be able to point to the fact that the federal government recognizes PEOs, regardless of certification, so a small business should not be concerned about regulatory approval. I do believe that the certified PEOs will try to use their certification to their advantage as they market their services, especially in competitive situations with non-certified firms. I also believe that PEO brokers and others who shape public opinion about PEOs will recommend that companies looking to use PEOs select from the group of certified PEOs. As such, being certified is almost a right of passage. It gets you on a list of “approved” vendors, but does nothing to make your organization “best in class.”

Q What will be the short-term sales impact for PEOs that receive certification versus those that don’t?

Leon, Tandem HR. We are seeing larger sales. We had 7 new deals in 2017 of over 100 employees.

Allen, G&A Partners. I expect little short-term impact. We were one of the first PEOs certified by the IRS. We issued a press release announcing our certification. I’m not aware of a single telephone call we received from a client, prospect, or trusted advisor as a result. Over time, I would imagine that the certification may give us a leg up on local competitors who are not certified. More importantly, our sales associates can point to the certification and the SBEA legislation to show that what we do is legitimate and valuable.

PEO Industry Pulse

WHAT IMPACT WILL THE NEW IRS CERTIFICATION PROGRAM HAVE ON INDUSTRY PENETRATION?

The industry has been around for over 30 years so the bigger impact will probably be the awareness that it is driving across the business community and specifically the investment community. The combined effect of added credibility and awareness should drive new growth for all of us. - Brian Fayak, Nextep

roundtable

16


17

Q What will be the short-term sales impact for PEOs that receive certification versus those that don’t? (continued)

Fayak, Nextep. As mentioned in my previous response, the biggest impact will be their ability to compete with the group of CPEOs. While the industry has been around for more than 30 years, there is still fear, questions, apprehension, and concern around the whole concept of co-employment. This certification will not erase all of that from the mind of buyers, but it will certainly ease it, and in some competitive situations where the playing field may otherwise be level, being a CPEO or not should be the deciding factor.

Q Will the certification be viewed differently by different PEO client industry verticals, and if so, which ones?

Allen, G&A Partners. Over the years, we have received push back from prospects doing business with the federal government. The certification should change that. I would imagine it may change perceptions in the white collar space too, albeit not too dramatically. I see little impact to blue and gray collar firms.

Fayak, Nextep. I suppose that all comes down to how the CPEO chooses to position the certification, but generally speaking, I believe it will vary more based on persona than industry. Obviously, heavily regulated industries such as banking and finance may place higher importance to the certification than a roofing business in the construction industry, but there are detail-oriented, compliance-minded people in every business and in every industry that are going to want and need the peace of mind that a CPEO can bring.

Leon, Tandem HR. I’d like to think Health Carriers and Workers Compensation will give preferred treatment. We will let you know.

Q How will the IRS certification program affect the future of ESAC?

Fayak, Nextep. I cannot speak for my peers in the industry. I can only speak for Nextep, and we plan to remain committed to ESAC and the certification program they have diligently worked to provide to our industry for the last 20+ years. We view the combined certification as the gold standard in our industry.

Leon, Tandem HR. The ESAC question is a large one. We support ESAC and have been a founding member for almost 20 years. However, the value to us is diminished unless they figure out a new value proposition.

Allen, G&A Partners. I don’t think IRS certification will impact ESAC much. The IRS does not guarantee that its certified PEOs will make payroll and meet their obligations. ESAC does. The IRS provides virtually no services to the certified PEO community. ESAC does. In my opinion, ESAC certification means far more than IRS certification. ESAC just doesn’t have the name recognition that the IRS has and never will.

Q If ObamaCare is repealed, what would the impact be on the PEO industry?

Leon, Tandem HR. ObamaCare repeal could open up more opportunities, but let’s wait and see the details.

Allen, G&A Partners. ObamaCare was a big boon to the PEO industry. It forced businesses to think outside the box and look for new solutions. Many found the answers they were looking for in the product and service offerings of PEOs. If the law is repealed in its entirety, some businesses will no longer feel compelled to offer health insurance, and PEOs will lose business. If it is repealed in part or replaced by something else, then the demand for innovative and cost-effective solutions may remain. I believe ObamaCare created an increase in PEO awareness that won’t go away because of changes or the elimination of the legislation.

WHAT KEY ADVANTAGES WILL CPEOs HAVE ONCE CERTIFIED, AND WHAT DISADVANTAGES WILL THOSE THAT DO NOT GET CERTIFICATION BE FACING?

The advantages are (1) credibility, (2) succession in taxation, and (3) credibility. The disadvantages to those not certified will be (1) credibility, (2) credibility, and (3) credibility! - Bruce Leon, Tandem HR

roundtable


18

Q If ObamaCare is repealed, what would the impact be on the PEO industry? (continued)

Fayak, Nextep. It seems that at some level there will be legislative changes to the Affordable Care Act. The question is, will it be a repeal or a revision. The current draft appears to be more of a revision than a repeal, albeit with some significant revisions. All of that being said, the reality is the Affordable Care Act, at some level, will have lasting impacts regardless of any revisions that may occur. More importantly, health care and the process of purchasing and managing employer-sponsored benefit programs was confusing and painful for the SMB space before ACA, it is confusing and painful after ACA, and it will continue to be confusing and painful for many years to come. ObamaCare or no ObamaCare, health insurance is one piece of a very robust value proposition that a CPEO provides. At the end of the day, we make the complex, confusing, and sometimes painful process of being an employer simple.

Q How much longer do you believe growth in the U.S. economy will continue, and what impact do you think a mild recession would have on the PEO industry?

Allen, G&A Partners. Houston went through its own recession about two years ago when the price of oil plummeted. We are not anxious to see the national economy falter, but it inevitably will. That’s just the way it works. The question is when, right? The new administration is certainly pro-business and will do all in their power to light a fire in an economy that has never fully recovered. In my opinion, the economy has been dragging for some time, and the stock market has risen to record heights based on the expectation that at some point the economy would really take off. I’d like to think the economy will have a spurt before the next recession, but I am uncertain and not particularly bullish. That said, we are aggressively growing our business through organic sales and strategic acquisitions, so we are banking on at least a stable economy over the next four years.

Fayak, Nextep. Well, I am not an economist. I’m an avid consumer of the news and mass media which would be my primary source for information on this topic. I’m not sure that I would be the most reliable source for an opinion on the future growth of our economy as a whole, but I can say that our clients are hiring, growing, and seem to be optimistic about the near and mid-term outlook of their businesses. As for a recession, we would definitely feel the impact of a lasting recession on our existing book of business. The combined effect of client attrition and workforce downsizing is hard to outrun. That being said, in economic lows businesses are more receptive to learn about new ways to help their business run more cost effectively, more efficiently, and to help improve employee productivity and engagement. In a moderate recession, PEOs have a better chance than not to maintain or shrink only slightly.

Leon, Tandem HR. I’d like to think we will see slower but still positive growth through all of 2018. Then we could have a minor hiccup. Either way, with only 4 percent penetration of PEOs in small to mid-sized businesses in the Midwest, and a projected market of 25 percent or more, I believe we will do well whichever way the market moves.

PEO Industry Pulse

IF OBAMACARE IS REPEALED, WHAT WOULD THE IMPACT BE ON THE PEO INDUSTRY?

I believe ObamaCare created an increase in PEO awareness that won’t go away because of changes or the elimination of the legislation.

- John Allen, G&A Partners

roundtable

18

Middle Market M&A Activity Private Equity Transaction Activity

Mergers & Acquisitions Activity

Trends in Valuation

Acquisition Financing Trends

Total Leverage Equity Contribution

SOURCE: Standard & Poors LCD.

*NA: Data not reported due to limited number of observations for period. *NA: Data not reported due to limited number of observations for period.SOURCE: Standard & Poors LCD.

SOURCE: Standard & Poors LCD.

Transactions with Strategic Buyers Transactions with Financial Buyers

Transaction Count by Deal Size

Middle market enterprise values between $25 million and $500 million. Middle market enterprise values between $25 million and $500 million.

EBIT

DA

Mul

tiple

Tota

l Deb

t to

EBIT

DA

EBIT

DA

Mul

tiple

Equi

ty C

ontr

ibut

ion

(%)

Middle Market M&A Activity

SOURCE: PitchBook.SOURCE: S&P Capital IQ.Based on announced deals, where the primary location of the target is in the United States.Middle market enterprise values between $25 million and $500 million.

NOTE: Buyout activity only*Through June 30, 2017

38%

35%

46%

51%

47%

43%

41% 40%

37%

44%42%

40%

25%

30%

35%

40%

45%

50%

55%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17

4.8x

5.4x

4.1x

3.6x

4.1x4.3x

4.5x4.7x 4.7x 4.8x 4.7x 4.8x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17

119

148

125

151

106 14

115

614

510

713

214

811

458 97 96 13

110

012

214

113

412

0 166

163

154

137

160

164 23

514

716

119

219

916

1 217

231

250

232

227

240

228

183

199

210

228

176

189

207 21

921

4 240

207 22

221

1 268

191 20

7 233

113

9112

011

119

714

5 161 23

420

416

823

022

621

417

6 211

188

307

208 22

7 248 28

623

325

5 328 35

528

327

0 305

334

261 27

125

8 310

234

23965

6659

6362

67 6363

3658

4319

1926 35

4032

4258

6155

63 6853

4254 50

6939

4660

7949

8273

7060 53

77 6854

77 5161

44 53

$0

$10

$20

$30

$40

$50

$60

$70

$80

0

100

200

300

400

500

600

700

800

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Transaction Value ($ in billions)

Num

ber o

f Tra

nsac

tions

$25M-$50M $50M-$250M $250M-$500M Trans Value

7.2x

8.3x

6.5x 6.6x

6.3x

8.2x

8.1x 8.

5x

8.2x

8.0x 8.0x

7.4x 7.

7x

7.7x

9.1x

8.7x

7.6x

8.5x

9.9x

9.4x

7.5x

8.5x

9.1x

8.7x

8.7x

9.9x

10.1

x

9.9x

9.9x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17

<$250 million $250-$499 million $500 million+

8.2x

6.8x 7.

1x

9.8x

8.0x

7.6x 7.7x

8.6x 8.7x 9.

2x

7.4x

7.0x

8.7x

9.4x

8.4x

7.6x

9.2x 9.

5x

8.9x

8.7x

10.1

x

11.4

x

9.4x10

.0x

9.1x

10.2

x

8.2x

9.5x 9.

7x

9.7x

8.5x

9.1x

9.8x 10

.3x

8.2x

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17

<$250 million $250-$499 million $500 million+

NA

*

NA

*

NA

*

NA

*

NA

*

NA

*

NA

*N

A*

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 1H2016

1H2017

Under $25M $25M-$100M $100M-$500M $500M-$1B $1B-$2.5B $2.5B+

Overall M&A Activity


19

Business Services M&A Activity

PROFESSIONAL EMPLOYER ORGANIZATIONS AND HUMAN RESOURCES OUTSOURCING

In May 2017, Avitus Group completed the acquisition of

The Growth Company, a provider of human resources,

training, and organizational strategy services serving

Alaska and the Pacific Northwest. The company services

more than 3,500 organizations across diverse industries.

The Growth Company was founded in 1978. “This merger

adds The Growth Company’s extensive experience in

human resources to Avitus Group’s suite of professional

business services,” said Avitus CEO Willie Chrans. “It’s

strength adding to strength, which helps our clients, the

business community, and the overall economy in Alaska

and beyond.” The transaction follows the purchase of

HRnovations in July 2016, based in Washington State,

which expanded Avitus’ West Coast presence.

In February 2017, Atairos acquired a 25.7 percent equity

stake in TriNet Group (NYSE: TNET) for $442.3 million,

equating to an implied enterprise value multiple of

EBITDA of 13.1x. Atairos CEO Michael Angelakis joined

TriNet’s Board of Directors in connection with the

transaction. The ownership stake represents the remaining

interest held by General Atlantic, which first invested in

TriNet in 2005, bringing Atairos’ ownership position to

28.3 percent.

In January 2017, Asure Software (NasdaqCM: ASUR)

completed the acquisition of Personnel Management

Systems, Inc. (PMSI), a Seattle-based PEO serving the

SMB market. The company operates a full-service HR

outsourcing model offering solutions in the following areas:

employment, group benefits, management resources,

policy and procedures, HR administration, wage and salary

issues, employee relations, training and development,

safety and drug programs, and recruiting. PMSI is one of the

largest providers of HR services in the Pacific Northwest.

Commenting on the transaction, Asure Software CEO Pat

Goepel, said, “PMSI enhances our software and service

offering, and with their expertise, we will successfully roll

this service out nationwide. By adding a valued service such

as HR Outsourcing for small to medium sized companies,

we are positioning Asure for important growth and

expansion, which will be accretive to our P&L.”

BGL’s Business Services team served as the exclusive

financial advisor to PMSI in the transaction.

In July 2017, Oasis Outsourcing acquired DHR Services

Holdings, LLC from Caltius Equity Partners, a move

to expand its geographic reach in the Western U.S.

Caltius exited its seven-year investment in the sale. DHR

represents the fourth add-on for Oasis in the last two

years. Oasis was acquired Stone Point Capital in 2014,

with participation from management.

SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.

20


Source: S&P Capital IQ, mergermarket, PitchBook, and BGL Research.

Historical Business Services M&A Activity

Based on announced deals, where the primary location of the target is in the United States.

Quarterly M&A Activity by Sector

0

15

30

45

60

4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q

2011 2012 2013 2014 2015 2016 2017

Num

ber o

f Tra

nsac

tion

s

PEO Payroll Benefits Administration HR Technology Staffing


with them to expand Artech’s regional footprint. We are

excited about the potential to offer the Tech-Pro team’s

skills and capabilities in IT solutions, Staffing, and MSP/

VMS relationships to our clients.” New Jersey-based

Artech provides workforce solutions, IT consulting, and

SOW-project services. The company employs more than

7,200 professionals from over 25 locations across the

United States, India, and China.

PAYROLL & PAYROLL PROCESSING

In January 2017, Asure Software (NasdaqCM: ASUR)

completed the purchase of Payroll Specialties NW, Inc.

(PSNW), a move to expand its footprint in the Northwest

U.S. The transaction was valued at $3.46 million. Eugene,

Oregon-based PSNW is a provider of Asure’s human capital

management (HCM) solution to small- and mid-sized

businesses in the region. As part of a larger organization,

PSNW clients will benefit from Asure’s comprehensive

suite of products, including HCM software, Time & Labor

Management, and Agile Workplace solution. Asure Software

CEO Pat Goepel commented on the transaction: “We are

delighted to be adding PSNW as an extension of Asure

Software. We are also excited to have PSNW President

Shawn Gregg to continue as a business development leader

at Asure, helping to grow and acquire Service Bureau

Organizations to sell our leading HCM solution. With this

acquisition, we look to leverage PSNW’s small business

experience and solution nationally, which we believe will be

accretive to our overall earnings.” Transaction Multiple: 2.1x

Revenue

In December 2016, Strategy Execution Partners, LLC and

OAE Software, LLC (d/b/a StratEx) received a minority

investment from Halyard Capital to accelerate expansion

initiatives. StratEx provides HCM software solutions for

small and mid-sized businesses to manage their HR needs,

from applicant tracking and time and attendance to

payroll, benefits, and performance management. Many of

StratEx’s customers are in the restaurant, hospitality, and

retail industries. “We’re going to aggressively grow,” said

StratEx CEO Adam Ochstein, in a Crain’s interview. “We

have about a dozen sales reps. I want to grow the sales

team, development team, and service team.” The company

has experienced rapid growth since its inception in 2005,

doubling its employee base to about 90 in 2016 and expects

to exceed 150 in the next 12 months, Crain’s reported.

The transaction follows the September 2016 purchase

of CEP, Inc., the controlling shareholder of Fortune

Industries, Inc. (OTCMKTS: FDVF). Brentwood,

Tennessee-based Fortune Industries is comprised of three

companies: Century II located in Tennessee; Employer

Solutions, with offices in Arizona, Colorado, and Utah;

and Professional Staff Management located in Indiana.

The businesses provide human resource consulting and

management, employee training and development, workers

compensation and risk management, payroll, and benefits

administration services to more than 600 small- and

medium-sized businesses in 47 states. The transaction

adds more than 14,000 worksite employees to the Oasis

platform.

Commenting on the transaction, Oasis CEO Mark Perlberg,

said: “The addition of Fortune Industries to the Oasis family

continues our trend of strategic acquisitions as part of our

growth strategy. The inclusion of Century II, Professional

Staff Management, and Employer Solutions Group is

significant in Oasis’ strategy to increase our geographic

footprint and cost-efficient client offerings. This acquisition

also gives us the opportunity to welcome an experienced

and talented team of Fortune Industries professionals to

the Oasis organization.”

BGL’s Business Services team served as the exclusive

financial advisor to Fortune Industries in the transaction.

STAFFING

In January 2017, Artech Information Systems acquired

information technology solutions provider Tech-Pro,

located in Minneapolis, Minnesota, a move that will expand

its service footprint in the Midwest. Tech-Pro provides IT,

engineering, and business strategy support to clients that

include start-up businesses to Fortune 1000 organizations.

The company employs 295 people.

Artech CEO, Ranjini Poddar commented on the partnership:

“We are extremely excited to welcome the Tech-Pro team

to Artech. With over 26 years of experience in the staffing

industry, the Tech-Pro team is sure to have a positive

impact on our clients and consultants.” Ajay Poddar,

Artech’s Executive Vice President, added, “We are pleased

to have an experienced management and delivery team

in the Twin Cities region and look forward to working



21

http://www.asuresoftware.com/management-team/

Jonathan Barnes, Partner of Halyard Capital, commented,

“This investment is reflective of Halyard’s continued focus

on opportunities in the HCM space. In StratEx, we found a

business with a proprietary platform that provides a broad

suite of SaaS-based applications that help automate and

streamline the HCM workflow in a regulatory-compliant

fashion. The company is quickly gaining market share, and

we hope to accelerate its growth with additional investment

in products, capabilities, and people.”

HR TECHNOLOGY

In May 2017, Asure Software (NasdaqCM: ASUR)

acquired iSystems from Silver Oak Services Partners

in a transaction valued at $76.7 million. The buy adds a

leader in HCM technology and will expand Asure’s Service

Bureau community. Through its platform Evolution HCM,

South Burlington, Vermont-based iSystems provides

payroll, tax management, and HR software combined with

comprehensive back-end service bureau tools to more

than 75,000 companies and 1.5 million end users across

the U.S.

“We are continuing to compete in a much larger

market. With the acquisition of iSystems, our strategy

of partnering with the customer base of service bureau

organizations and helping them grow continues,” said

Asure Software CEO Pat Goepel. “By scaling with Asure

we will be able to offer the iSystems client base an

exceptional experience, with an innovative approach

to human capital management. We see this acquisition

accretive to our overall P&L.” Transaction Multiples: 6.0x

Revenue and 96.6x EBITDA

In May 2017, SaaS payroll and HR provider Electronic

Commerce Inc. (ECI) acquired cfactor Works Inc.

renaming the combined business Vibe HCM. The

acquisition of cfactor’s platform Vibe HCM is expected to

create an end-to-end human capital management solution

for middle-market businesses as well as a growing roster

of enterprise-level customers, the company said.

Todd Tyler of ECI will lead Vibe HCM as CEO and Cary

Schuler, founder and CEO of cfactor Works, will serve in

the role of senior vice president of marketing.

“Combining ECI and cfactor Works is exciting news for

the HCM marketplace because Vibe HCM will be able to

offer one unified platform that delivers on employers’ HR

transactional needs as well as their strategic employee

engagement initiatives,” said Todd Tyler. “We look forward

to working with Cary and the talented cfactor Works

team to leverage the complementary strengths of our

organizations.”

“With Vibe products, cfactor has approached the HCM

space from the perspective of developing easy-to-use

HR technology designed to uniquely engage, enhance

productivity, and deliver value to each and every

employee,” said Schuler. “We are excited about the

opportunity joining forces with ECI presents to set a new

standard with a highly differentiated technology solution for

the HCM marketplace.”

In April 2017, Summit Partners acquired a majority stake in

PrismHR, a provider of HCM software for small and medium-

sized businesses. Accel-KKR, an investor since 2014, will

retain a minority equity stake in the company. PrismHR

supplies professional employer organizations (PEOs)

and administrative service organizations (ASOs) with

SaaS solutions for applicant tracking, mobile capabilities,

benefits enrollment, integrated time support, and enhanced

extensibility, servicing more than 80,000 organizations.

Under Accel-KKR’s ownership, PrismHR experienced a

nearly three-fold increase in both revenue and employee

count, with annual revenue growing by 59 percent in 2016.

PrismHR CEO Gary Noke said he can “see a straight path

past $100 million in revenue”, reported Axios. PrismHR’s

current run rate exceeds $35 million, according to Axios, up

from $7 million in 2014.

“As the human resources function increases in complexity,

the demand from small and medium-sized businesses for

outsourced HR solutions continues to grow,” said Noke.

“PrismHR offers one of the most extensive and flexible

platforms available to HROs. Our partnership with Summit

will enable us to accelerate the development and expansion

of this platform to meet the growing demands of our clients

and their end customers.”

“PrismHR’s recent growth has been remarkable, and we

believe the company is well positioned to continue this

impressive trend,” said Scott Collins, Managing Director at

Summit Partners. “The company’s cloud-based software

allows HROs to service their small and medium-sized




22

https://my.pitchbook.com/profile/10097-11/investor/profile

https://www.summitpartners.com/team/scott-collins

In December 2016, Mercer LLC, a subsidiary of Marsh &

McLennan Companies (NYSE: MMC), acquired Thomsons

Online Benefits Limited, a provider of SaaS-based

employee benefits and employee engagement software.

The company’s Darwin™ platform, which has over 1 million

users worldwide, provides solutions for employee benefits

design, broking, communications, and administration

services including employee engagement, managing risk,

controlling costs, and streamlining benefits administration.

“The combination of Thomsons’ Darwin™ technology with

Mercer aligns to the growing demand from multinational

employers to offer a common yet locally tailored employee

benefits platform that delivers the latest in creative

engagement, modern design, analytic insights, and

administrative efficiency and support,” said Julio Portalatin,

President and CEO of Mercer. “The acquisition also drives

future growth in local markets across the world where

Thomsons and Mercer are already well established by

putting technology at the heart of addressing employer and

employee needs.”

Thomsons was backed by ABRY Partners and Veronis

Suhler Stevenson, which acquired the company in 2013.

In November 2016, Marsh & McLennan Agency LLC (MMA)

completed the acquisition of Benefits Resource Group. The

Independence, Ohio-based employee benefits consulting

firm offers medical, life, and disability insurance to midsize

employers in Ohio. MMA is the middle market agency

subsidiary of Marsh & McLennan Companies (NYSE: MMC).

“Benefits Resource Group’s talented and experienced

employee benefits professionals are a welcome addition

to MMA’s Midwest region,” said Jeff Lightner, president

and CEO of MMA-Midwest. “With BRG, we enhance our

employee benefits presence and leadership in the Ohio

market.”




23

customers with a more seamless, sophisticated solution—

and positions PrismHR to capitalize on the tremendous

opportunity in human resources technology and services.”

BENEFITS ADMINISTRATION

In May 2017, The Blackstone Group L.P. (NYSE: BX)

completed the acquisition of Aon plc’s (NYSE:AON)

technology-enabled benefits and human resources

platform for $4.8 billion, comprised of $4.3 billion in

cash and $500 million in an earnout contingent on

future performance. Business lines include benefits

administration, HRO administration, and cloud services.

The benefits administration platform is one of the largest

in the United States, serving approximately 15 percent of

the U.S. workforce across more than 1,400 companies.

By the numbers, it is reported to be the largest provider

in the large-enterprise market for health and welfare and

defined benefits administration, and in the top three for

defined contribution, according to ISG estimates. The HR

Outsourcing business includes nearly 40 large enterprise

clients and 1.6 million employees, which are supported on

ERP platforms (35 percent) and SaaS technologies (65

percent), ISG reported.

Commenting on the investment, Peter Wallace, a Senior

Managing Director at Blackstone, said, “We are excited to

acquire a world-class leader of scale in health, retirement,

and HR services, providing critical human resources and

benefits administration services to millions of employees

and their families throughout the United States and

Canada. Blackstone sees tremendous opportunity for

investing in leading businesses within the technology-

enabled services sector, where we believe there is a

significant opportunity to accelerate future growth. We

look forward to working with the excellent management

team to continue to invest in and grow the company.”

Blackstone Managing Director David Kestnbaum, added,

“Through this investment and partnership, we will

seek to leverage our global relationships, operational

support, and strong capital base to accelerate growth

in the business. We are pleased to invest in this market

leading business that provides an important suite of

services to a broad range of blue-chip clients. Our focus

will be on ensuring continued delivery of best-in-class

services to clients, while also innovating new service lines

and strategies to expand the company’s capabilities.”

Transaction Multiples: 2.1x Revenue and 12.1x EBITDA

https://www.thomsons.com/

https://www.thomsons.com/

Industry Valuations



BGL Business Services indices de�ned on Page 19.SOURCE: S&P Capital IQ.

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217

EV/EBITDA 11.7x 13.0x 15.3x 13.6x 15.2x 16.9x 17.5x 16.2x 16.1x 18.0x 18.4x 16.9x 15.1x 17.4x 17.4x 17.1x 19.0x 17.1x 18.7x 19.2xEV/Revenue 4.0x 4.6x 4.8x 4.6x 7.4x 7.4x 6.2x 5.3x 4.9x 6.2x 5.4x 5.2x 4.8x 5.3x 4.9x 5.3x 5.6x 4.7x 5.1x 5.1x

1.0x

3.0x

5.0x

7.0x

9.0x

4.0x

8.0x

12.0x

16.0x

20.0x

24.0x

28.0x

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217


2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

0.0x

4.0x

8.0x

12.0x

16.0x

20.0x

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217


0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

0.0x

4.0x

8.0x

12.0x

16.0x

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217


0.0x

0.2x

0.4x

0.6x

0.8x

1.0x

0.0x

3.0x

6.0x

9.0x

12.0x

15.0x

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217


0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

0.0x

4.0x

8.0x

12.0x

16.0x

20.0x

Q312

Q412

Q113

Q213

Q313

Q413

Q114

Q214

Q314

Q414

Q115

Q215

Q315

Q415

Q116

Q216

Q316

Q416

Q117

Q217


0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

0.0x

3.0x

6.0x

9.0x

12.0x

15.0x

Payroll & Payroll Processing

HR Technology

Professional Employer Organizations

Insurance BrokerageStaffing


24

Industry Valuations



NOTE: Figures in bold and italic type were excluded from median and mean calculation.(1) As of 8/1/2017.(2) Market Capitalization is the aggregate value of a �rm's outstanding common stock.(3) Enterprise Value is the total value of a �rm (including all debt and equity).Source: S&P Capital IQ.

($ in millions, except per share data) Current % of Market Enterprise Total Debt/ TTMCompany Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDA

STAFFING

Adecco Group AG Switzerland SWX: ADEN $76.35 94.6% $13,001.5 $13,921.0 0.5x 10.2x 1.7x $24,707.0 18.8% 5.3%

ManpowerGroup Inc. United States NYSE: MAN 106.49 89.0% 7,143.2 7,548.1 0.4x 9.2x 1.1x 19,976.3 16.8% 4.1%

Robert Half International Inc. United States NYSE: RHI 45.12 88.5% 5,738.3 5,479.1 1.1x 9.3x 0.0x 5,199.4 41.1% 11.4%

On Assignment, Inc. United States NYSE: ASGN 48.87 88.0% 2,581.2 3,142.0 1.2x 11.8x 2.2x 2,530.1 32.3% 10.5%

PageGroup plc United Kingdom LSE: PAGE 6.56 97.3% 2,026.9 1,904.3 1.2x 13.2x 0.0x 1,476.8 51.9% 9.1%

Korn/Ferry International United States NYSE: KFY 33.68 93.4% 1,918.1 1,763.4 1.1x 9.6x 1.4x 1,565.5 27.0% 11.7%

AMN Healthcare Services, Inc. United States NYSE: AMN 36.25 80.6% 1,736.4 2,061.0 1.1x 9.1x 1.6x 1,929.4 32.6% 11.8%

Kelly Services, Inc. United States NasdaqGS:KELY.A 22.91 92.8% 875.2 829.2 0.2x 8.9x 0.0x 5,217.4 17.3% 1.8%

TrueBlue, Inc. United States NYSE: TBI 22.20 77.4% 834.5 916.5 0.4x 6.6x 0.8x 2,610.4 25.1% 5.3%

Brunel International N.V. Netherlands ENXTAM: BRNL 15.32 68.5% 772.7 597.2 0.6x 18.4x 0.0x 934.1 21.1% 3.3%

Kforce Inc. United States NASDAQ: KFRC 19.05 70.7% 480.7 613.7 0.5x 8.2x 1.7x 1,336.8 30.4% 5.6%

Resources Connection, Inc. United States NASDAQ: RECN 13.50 68.2% 403.2 388.9 0.7x 9.3x 1.1x 583.4 37.9% 7.2%

Heidrick & Struggles International, Inc. United States NASDAQ: HSII 18.60 68.6% 349.4 291.2 0.5x 5.2x 0.0x 595.6 31.5% 9.3%

CDI Corp. United States NYSE: CDI 8.20 85.0% 154.1 161.6 0.2x NM NM 818.4 18.7% -1.0%

Median $22.56 86.5% $1,305.8 $1,339.9 0.6x 9.3x 1.1x $1,747.5 28.7% 6.4%

Mean $33.79 83.0% $2,715.4 $2,829.8 0.7x 9.9x 0.9x $4,962.9 28.7% 6.8%

PEO

Automatic Data Processing, Inc. United States NasdaqGS:ADP $116.78 95.9% $52,248.6 $51,470.6 4.2x 20.2x 0.8x $12,379.8 43.1% 20.6%

Paychex, Inc. United States NasdaqGS:PAYX 56.82 90.1% 20,420.9 20,097.5 6.4x 14.7x 0.0x 3,151.3 70.8% 43.4%

TriNet Group, Inc. United States NYSE:TNET 40.39 97.1% 2,802.5 3,009.4 0.9x 14.6x 2.1x 3,189.7 16.5% 6.4%

Insperity, Inc. United States NYSE:NSP 89.00 95.0% 1,855.3 1,715.9 0.6x 14.3x 0.8x 3,109.8 16.7% 4.1%

Barrett Business Services, Inc. United States NasdaqGS:BBSI 55.04 82.2% 399.1 384.3 0.4x 13.9x 0.2x 859.6 59.9% 3.2%

Median $56.82 95.0% $2,802.5 $3,009.4 0.9x 14.6x 0.8x $3,151.3 43.1% 6.4%

Mean $71.61 92.1% $15,545.3 $15,335.5 2.5x 15.5x 0.8x $4,538.0 41.4% 15.5%

PAYROLL & PAYROLL PROCESSING

Automatic Data Processing, Inc. United States NasdaqGS:ADP $116.78 95.9% $52,248.6 $51,470.6 4.2x 20.2x 0.8x $12,379.8 43.1% 20.6%

Intuit Inc. United States NasdaqGS:INTU 137.43 95.6% 35,211.9 34,118.9 6.7x 21.6x 0.3x 5,089.0 84.6% 31.0%

Paychex, Inc. United States NasdaqGS:PAYX 56.82 90.1% 20,420.9 20,097.5 6.4x 14.7x 0.0x 3,151.3 70.8% 43.4%

The Sage Group plc United Kingdom LSE:SGE 9.02 84.5% 9,740.6 10,187.1 4.5x 15.7x 1.3x 2,160.3 93.3% 28.7%

The Ultimate Software Group, Inc. United States NasdaqGS:ULTI 226.99 97.2% 6,746.1 6,670.9 7.8x 104.6x 0.2x 860.7 61.7% 7.4%

Paycom Software, Inc. United States NYSE:PAYC 71.19 96.7% 4,230.6 4,169.2 10.9x 56.4x 0.5x 382.9 84.9% 19.3%

Paylocity Holding Corporation United States NasdaqGS:PCTY 46.47 93.6% 2,393.7 2,292.2 8.1x 138.2x 0.0x 283.8 58.6% 5.8%

Median $116.78 95.6% $20,420.9 $20,097.5 6.4x 20.2x 0.3x $3,151.3 70.8% 28.7%

Mean $109.41 92.7% $24,873.6 $24,509.0 5.9x 35.3x 0.5x $4,728.2 70.7% 26.2%


Aon plc United Kingdom NYSE: AON $139.59 98.8% $36,599.8 $42,401.8 3.6x 17.1x 2.5x $11,710.0 40.8% 21.1%

Willis Towers Watson Public Limited Company United Kingdom NasdaqGS:WLTW 149.62 99.1% 20,227.5 23,600.5 3.0x 15.5x 2.7x 7,862.0 41.0% 19.4%

SS&C Technologies Holdings, Inc. United States NasdaqGS:SSNC 38.69 96.2% 7,893.1 10,101.8 6.3x 17.4x 4.0x 1,602.9 46.7% 36.2%

Benefitfocus, Inc. United States NasdaqGM:BNFT 35.25 78.4% 1,094.3 1,145.1 4.7x NM NM 242.7 49.3% -5.4%

Morneau Shepell Inc. Canada TSX:MSI 16.67 95.8% 896.8 1,100.2 2.3x 15.2x 2.8x 450.8 33.2% 15.1%

CBIZ, Inc. United States NYSE: CBZ 15.00 94.3% 802.7 1,014.2 1.2x 11.0x 2.3x 817.1 12.6% 11.3%

Castlight Health, Inc. United States NYSE: CSLT 4.35 79.1% 567.7 464.5 4.4x NM 0.0x 106.7 68.6% -47.2%

Median $35.25 95.8% $1,094.3 $1,145.1 3.6x 15.5x 2.6x $817.1 41.0% 15.1%

Mean $57.02 91.7% $9,726.0 $11,404.0 3.6x 15.2x 2.4x $3,256.0 41.8% 7.2%

INSURANCE BROKERAGE

Marsh & McLennan Companies, Inc. United States NYSE: MMC $78.76 97.2% $40,366.5 $45,122.5 3.3x 14.0x 1.7x $13,497.0 43.6% 23.9%

Aon plc United Kingdom NYSE: AON 139.59 98.8% 36,599.8 42,401.8 3.6x 17.1x 2.5x 11,710.0 40.8% 21.1%

Willis Towers Watson Public Limited Company United Kingdom NasdaqGS:WLTW 149.62 99.1% 20,227.5 23,600.5 3.0x 15.5x 2.7x 7,862.0 41.0% 19.4%

Arthur J. Gallagher & Co. United States NYSE: AJG 59.19 99.2% 10,663.9 13,254.2 2.3x 14.9x 3.5x 5,784.7 28.8% 15.3%

Erie Indemnity Company United States NasdaqGS: ERIE 128.42 99.4% 6,715.1 6,548.0 4.0x 21.2x 0.2x 1,645.9 30.3% 18.4%

Brown & Brown, Inc. United States NYSE: BRO 44.59 97.4% 6,242.6 6,597.5 3.7x 11.5x 1.7x 1,804.1 46.8% 31.8%

CorVel Corporation United States NasdaqGS: CRVL 47.90 96.8% 898.4 863.3 1.6x 12.2x 0.0x 527.8 20.5% 13.4%

Median $78.76 98.8% $10,663.9 $13,254.2 3.3x 14.9x 1.7x $5,784.7 40.8% 19.4%

Mean $92.58 98.3% $17,387.7 $19,769.7 3.1x 15.2x 1.8x $6,118.8 36.0% 20.5%

HR TECHNOLOGY

Oracle Corporation United States ORCL $50.16 96.7% $207,496.0 $199,713.0 5.3x 13.6x 3.9x $37,728.0 58.5% 38.9%

SAP SE Germany SAP 106.89 94.0% 128,145.8 130,116.3 4.8x 19.1x 1.2x 26,427.8 69.5% 24.9%

Workday, Inc. United States WDAY 103.51 97.0% 21,426.6 19,852.3 11.7x NM NM 1,701.6 69.9% -14.2%

The Sage Group plc United Kingdom LSE:SGE 9.02 84.5% 9,740.6 10,187.1 4.5x 15.7x 1.3x 2,160.3 93.3% 28.7%

The Ultimate Software Group, Inc. United States ULTI 226.99 97.2% 6,746.1 6,670.9 7.8x 104.6x 0.2x 860.7 61.7% 7.4%

SEEK Limited Australia ASX: SEK 13.73 93.2% 4,788.3 5,395.3 7.0x 19.9x 2.7x 703.1 95.4% 34.4%

WageWorks, Inc. United States NYSE: WAGE 65.45 81.3% 2,587.9 2,224.9 5.1x 25.7x 2.8x 434.9 62.9% 19.9%

Cornerstone OnDemand, Inc. United States CSOD 40.04 83.9% 2,275.1 2,225.5 5.1x NM NM 435.4 68.3% -9.6%

Callidus Software Inc. United States NasdaqGM: CALD 24.70 96.3% 1,602.3 1,419.1 6.6x NM 0.0x 216.5 61.7% -3.5%

Benefitfocus, Inc. United States BNFT 35.25 78.4% 1,094.3 1,145.1 4.7x NM NM 242.7 49.3% -5.4%

HealthStream, Inc. United States NasdaqGS: HSTM 23.03 73.0% 734.4 618.7 2.6x 26.1x 0.0x 238.5 56.5% 9.9%

DHI Group, Inc. United States NYSE: DHX 2.20 26.1% 110.9 157.4 0.7x 4.0x 1.8x 215.6 85.8% 18.3%

Median $37.65 88.9% $3,688.1 $3,810.4 5.1x 19.5x 1.3x 569.2 65.6% 14.1%

Mean $58.41 83.5% $32,229.0 $31,643.8 5.5x 28.6x 1.5x $5,947.1 69.4% 12.5%

TTM MarginsEnterprise Value / TTM

25

Industry Valuations

Sector Performance


26

Source: S&P Capital IQ.As of 8/1/2017.

Market

Sector

8%11%

24%27%

7%

18%21%

18%25%

20%

31%23%

44%51%

56%

30%

10%

55%

104%110%

126%

69%

92%

127%

0%

20%

40%

60%

80%

100%

120%

140%

ProfessionalEmployer

Organizations

Payroll & PayrollProcessing

BenefitsAdministration

HR Technology Staffing InsuranceBrokerage

YTD 1 Year 3 Year 5 Year

10%

17%14%

23%29%

46%

80%

118%

0%

20%

40%

60%

80%

100%

120%

140%

S&P 500 Nasdaq

YTD 1 Year 3 Year 5 Year

• Dedicated team of senior and junior level bankers focused on the PEO sector

• Deep industry knowledge and extensive transaction experience

• Middle market-focused with comprehensive suite of advisory and capital raising services tailored to small-, mid-, and large-scale PEOs

• Exclusive advisor on the buy- and sell-side in the largest PEO transactions currently pending and closed during the last two years

• Vast network of relationships and transaction experience with strategics and private equity groups active in the industry

• Complimentary valuation analysis utilizing proprietary financial modeling tools

• Senior Advisors augment industry knowledge and extend

industry network and contacts

Global Business Services

Unparalleled Commitment to the PEO Industry

Deep & Broad Industry Knowledge and Experience

Relationships with Key PEO Industry Participants

Dedicated Team

One Cleveland Center 1375 East 9th Street

Suite 2500Cleveland, OH 44114

p. 216.241.2800

CLEVELAND

One Magnificent Mile980 N. Michigan Avenue

Suite 1880Chicago, IL 60611p. 312.658.1600

CHICAGOContacts

• Leads BGL’s Business Services

practice

• Over 37 years of corporate

finance experience encompassing

hundreds of M&A and capital raising

transactions

• Former President of Hampton

Advisors, an advisory and consulting

firm focused on the HRO industry

• Former Chief Administrative Officer

at Gevity HR, a large public HRO,

responsible for strategy, budgeting,

corporate development, legal, HR,

investor relations, and compliance

• Former Managing Director at

Dresner Partners, a middle market

investment bank in Chicago

• Began career as a Corporate Partner at McDermott Will & Emery

• B.S., summa cum laude, University of Illinois

• J.D., Harno Fellow, magna cum laude, University of Illinois

• M.M., Honors, Kellogg School of Management at Northwestern

University

CLIFFORD SLADNICKManaging Director

Group Head

EDUCATION

SAGAR JANVEJAVice President

• B.A., University of Michigan

• M.B.A., McDonough School of

Business, Georgetown University

EDUCATION

JACOB SWARTZAnalyst

PROFESSIONAL EXPERIENCE

JESS HUNGERAssociate

ROBERT KENTManaging Director

Financial Sponsor Coverage

PROFESSIONAL EXPERIENCE PROFESSIONAL EXPERIENCE PROFESSIONAL EXPERIENCE PROFESSIONAL EXPERIENCE

• Leads BGL’s Financial Sponsor

Coverage practice

• Over 20 years of M&A and

corporate finance experience

• Former Managing Director in the

Financial Sponsors Group at Stifel

Investment Banking

• Investment banking positions at

Banc of America Securities LLC in

San Francisco and Charlotte and

at Brown Brothers Harriman in

New York

• Supports client engagements through

financial analysis, valuation, due

diligence, negotiation, communication,

and other advisory services within

BGL’s Business Services Practice

• More than 10 years of corporate

finance and capital markets experience

• Former Vice President in the

Investment Banking & Capital Markets

Group at Aon Securities, Inc.

• Former Senior Associate in the

Mergers & Acquisitions Group at

Scott-Macon, Ltd., a middle market

investment bank in New York

• Former Associate in the Global

Mergers & Acquisitions Group at Banc

of America Securities LLC in New York

EDUCATION

• A.B., Princeton University

• Diploma in Accounting and

Finance from the London School of

Economics

• M.B.A., Darden School of Business

at the University of Virginia

• Chartered Financial Analyst

• Performs due diligence, financial

analysis, valuation, and industry

research within BGL’s Business

Services Practice

• Experience with more than a dozen

HR Technology and PEO clients over

the past two years

• Three years corporate finance and

capital markets experience

• Former Analyst with KeyBanc

Capital Markets in Cleveland,

focused on mergers and acquisitions

and capital raises

• Performs due diligence, financial

analysis, valuation, and industry and

company research within BGL’s

Business Services Practice

• Prior experience as an intern with

BGL, working with the Business

Services, Consumer, and Healthcare

teams and focused on mergers and

acquisitions, equity and debt raises,

and fairness opinions

EDUCATION EDUCATION

• B.S., magna cum laude,

Fisher College of Business at

Ohio State University

• B.S., Finance Honors, magna cum

laude, Driehaus College of Business

at DePaul University

One Liberty Place 1650 Market Street

Suite 3600Philadelphia, PA 19103

p. 610.941.2765

PHILADELPHIA

The information contained in this publication was derived from proprietary research conducted by a division or owned or affiliated entity of Brown Gibbons Lang & Company LLC. Any projections, estimates or other forward-looking statements contained in this publication involve numerous and significant subjective assumptions and are subject to risks, contingencies, and uncertainties that are outside of our control, which could and likely will cause actual results to differ materially. We do not expect to, and assume no obligation to update or otherwise revise this publication or any information contained herein. Neither Brown Gibbons Lang & Company LLC, nor any of its officers, directors, employees, affiliates, agents or representatives makes any representation or warranty, expressed or implied, as to the accuracy, completeness or fitness of any information contained in this publication, and no legal liability is assumed or is to be implied against any of the aforementioned with respect thereto. This publication does not constitute the giving of investment advice, nor a part of any advice on investment decisions and nothing in this publication is intended to be a recommendation of a specific security or company, nor is any of the information contained herein intended to constitute an analysis of any company or security reasonably sufficient to form the basis for any investment decision. Brown Gibbons Lang & Company LLC, its affiliates and their officers, directors, employees or affiliates, or members of their families, may have a beneficial interest in the securities of a specific company mentioned in this publication and may purchase or sell such securities in the open market or otherwise. Nothing contained in this publication constitutes an offer to buy or sell or the solicitation of an offer to buy or sell any security.


For questions about content and circulation, please contact editor, Rebecca Dickenscheidt, at [email protected] or 312-513-7476.

Focus Areas Representative Expertise

• Independent investment banking advisory firm focused on the middle market

• Senior bankers with significant experience and tenure; partners average over 20 years of experience

• Offices in Chicago, Cleveland, and Philadelphia

• Founding member and exclusive U.S. partner of Global M&A Partners, Ltd., the world’s leading partnership of investment banking firms focusing on middle market transactions

• Deep industry experience across core sectors of focus, including: Business Services, Consumer, Environmental & Industrial Services, Healthcare & Life Sciences, Industrials, and Real Estate

Who We Are

Sell-Side Advisory

Acquisitions & Divestitures

Public & Private Mergers

Special Committee Advice

Strategic Partnerships & Joint Ventures

Fairness Opinions & Fair Value Opinions

All Tranches of

Debt & Equity Capital for:

Growth

Acquisitions

Recapitalizations

Dividends

General Financial & Strategic Advice

Balance Sheet

Restructurings

Sales of Non-Core Assets or Businesses

§363 Auctions

Comprehensive Capabilities

M&A A D V I S O R Y P R I V A T E P L A C E M E N T S

Leading Independent Firm

Primary Research

Industry Benchmarking

Operating Advisor Network

White Papers

Industry Surveys

F I N A N C I A L A D V I S O R Y R E S E A R C H

• Professional Employer Organizations

• Human Resources Outsourcing

• Payroll & Payments Processing

• SaaS Human Resources Technology

• Technology Outsourcing

• Financial Technology

• Health & Benefits Administration

• Insurance Brokerage & Benefits Administration

• Professional Services


Selected Completed Transactions

acquired by

acquired byacquired by

acquired by

a portfolio company of

acquired by


entered into a strategicpartnership with

acquired

acquired by

acquired by

acquired

HR America

acquired by


comprised of

Valuation analysiscompleted for

in support of astrategic alternatives analysis

Valuation analysiscompleted for

in support of astrategic alternatives analysis

acquired by

BGL ContactsClifford M. SladnickManaging [email protected]

professional employer organizations are experiencing rapid ......track platform expansion. prismhr...

Documents