Accelrys acquired by Dassault Systèmes SA: fairness opinion by Morgan Stanley
Announced January 30, 2014 · Tender offer · All cash ·
SC 14D9 filed February 13, 2014
Digital / HealthTech Payer Solutions
Enterprise value
$750M
equity $749M
EV / LTM EBITDA
16.3x
EBITDA $46.0M · 22% margin
EV / LTM revenue
3.55x
revenue $211M
DCF discount rate
8.3%–9.4%
Perpetuity growth
Deal terms
ConsiderationAll cash
Price per share$12.50
Premium28.6%
Premium basisclosing price of $9.72 on January 29, 2014 (last full trading day prior to board meeting)
StructureTender offer
Termination fee$25.0M (3.3% of equity)
Reverse termination fee—
Go-shopNone
Outside date—
FilingSC 14D9 · EDGAR index
Implied value per share by method vs. $12.50 offer
Selected companies — Aggregate Value / Estimated 2014 Revenue (Management Case A) $10.25 – $13.55
Selected companies — Aggregate Value / Estimated 2014 EBITDA (Management Case A) $9.88 – $13.46
Selected companies — Price / Estimated 2014 EPS (Management Case A) $6.52 – $9.77
Selected companies — Aggregate Value / Estimated 2014 Revenue (Management Case B) $9.85 – $12.99
Selected companies — Aggregate Value / Estimated 2014 EBITDA (Management Case B) $8.20 – $11.07
Selected companies — Price / Estimated 2014 EPS (Management Case B) $5.00 – $7.51
Precedent transactions — Aggregate Value / Estimated NTM Revenue (Management Case A) $5.76 – $15.20
Precedent transactions — Aggregate Value / Estimated NTM Revenue (Management Case B) $5.55 – $14.56
Precedent transactions — Premium to 1-Day Prior Closing Share Price $11.18 – $14.58
Precedent transactions — Premium to 30-Day Average Closing Share Price $11.25 – $15.65
Precedent transactions — Premium to Last Twelve Month High Closing Share Price $9.51 – $13.21
Discounted cash flow $6.52 – $13.04
Historical Trading Range Analysis $7.98 – $10.57
Equity Research Price Target Analysis $9.75 – $13.00
Discounted Equity Value Analysis $5.19 – $11.71
Illustrative Leveraged Buyout Analysis $8.14 – $13.04
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Morgan Stanley to the target board
Delivered January 29, 2014 · Fee $9.3M ($7.8M contingent on closing)
Discounted cash flow assumptions
Discount rate8.3%–9.4%
BasisAccelrys' estimated cost of equity
Terminal valuePerpetuity growth
Perpetuity growth1.0%–3.0%
Exit multiple—
Projection period2014E-2023E
Projections usedManagement Case A and Management Case B; projections through 2016 from management, 2017-2023 extrapolated by Morgan Stanley and approved by Accelrys management
Implied value per share$6.52–$13.04
Management Case A implied $9.58 - $13.04 per share; Management Case B implied $6.52 - $8.69 per share. Values discounted to December 31, 2013.
Selected public companies (9)
Agilent Technologies, Inc. · PerkinElmer, Inc. · Thermo Fisher Scientific Inc. · Waters Corporation · Actuate Corporation · MicroStrategy Incorporated · Pegasystems Inc. · Progress Software Corporation · The Sage Group plc
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Aggregate Value / Estimated 2014 Revenue (Management Case A) | — | — | — | 2.5x–3.5x | $10.25–$13.55 |
| Aggregate Value / Estimated 2014 EBITDA (Management Case A) | — | — | — | 11.0x–16.0x | $9.88–$13.46 |
| Price / Estimated 2014 EPS (Management Case A) | — | — | — | 15.0x–22.5x | $6.52–$9.77 |
| Aggregate Value / Estimated 2014 Revenue (Management Case B) | — | — | — | 2.5x–3.5x | $9.85–$12.99 |
| Aggregate Value / Estimated 2014 EBITDA (Management Case B) | — | — | — | 11.0x–16.0x | $8.20–$11.07 |
| Price / Estimated 2014 EPS (Management Case B) | — | — | — | 15.0x–22.5x | $5.00–$7.51 |
Selected precedent transactions (24)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2011-04 | Activant Solutions Inc. | Apax Partners, L.P. | — |
| 2012-01 | Convio, Inc. | Blackbaud, Inc. | — |
| 2012-08 | Deltek, Inc. | Thoma Bravo, LLC | — |
| 2011-12 | DemandTec, Inc. | International Business Machines Corporation | — |
| 2010-06 | DivX, Inc. | Sonic Solutions | — |
| 2011-04 | Epicor Software Corporation | Apax Partners Worldwide LLP | — |
| 2009-11 | i2 Technologies, Inc. | JDA Software Group, Inc. | — |
| 2008-07 | ILOG S.A. | International Business Machines Corporation | — |
| 2010-03 | Infogroup Inc. | CCMP Capital Advisors, LLC | — |
| 2009-01 | Interwoven, Inc. | Autonomy Corporation plc | — |
| 2013-06 | Keynote Systems, Inc. | Thoma Bravo, LLC | — |
| 2011-11 | Magma Design Automation, Inc. | Synopsys, Inc. | — |
| 2011-04 | MKS Inc. | Parametric Technology Corporation | — |
| 2012-07 | MModal Inc. | One Equity Partners LLC | — |
| 2008-05 | Moldflow Corporation | Autodesk, Inc. | — |
| 2009-07 | MSC.Software Corporation | Symphony Technology Group, LLC | — |
| 2010-04 | Phase Forward Inc. | Oracle Corporation | — |
| 2011-08 | Renaissance Learning, Inc. | Permira Funds | — |
| 2012-11 | Retalix Ltd. | NCR Corporation | — |
| 2008-09 | Secure Computing Corporation | McAfee, Inc. | — |
| 2010-06 | SonicWALL, Inc. | Investor Group | — |
| 2010-08 | Unica Corporation | International Business Machines Corporation | — |
| 2009-05 | Vignette Corporation | Open Text Corporation | — |
| 2013-05 | Websense, Inc. | Vista Equity Partners | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Aggregate Value / Estimated NTM Revenue (Management Case A) | — | — | — | 1.2x–4.0x | $5.76–$15.20 |
| Aggregate Value / Estimated NTM Revenue (Management Case B) | — | — | — | 1.2x–4.0x | $5.55–$14.56 |
| Premium to 1-Day Prior Closing Share Price | — | — | — | 0.1x–0.5x | $11.18–$14.58 |
| Premium to 30-Day Average Closing Share Price | — | — | — | 0.1x–0.6x | $11.25–$15.65 |
| Premium to Last Twelve Month High Closing Share Price | — | — | — | -0.1x–0.3x | $9.51–$13.21 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Historical Trading Range Analysis | Closing price ranges ending January 29, 2014: last 1 month $9.51-$10.57; last 3 months $8.84-$10.57; last 6 months $8.72-$10.57; last 12 months $7.98-$10.57. Stock closed at $9.72 on January 29, 2014; $12.50 offer represented a 28.6% premium to that close, 27.8% to 30-day average, 31.7% to 60-day average, and 18.3% to the LTM high close. | $7.98–$10.57 |
| Equity Research Price Target Analysis | Undiscounted one-year forward analyst price targets ranged from $9.75 to $13.00 per share, with a median of $11.50. | $9.75–$13.00 |
| Discounted Equity Value Analysis | Applied P/E multiples of 15.0x-22.5x to CY2015 and CY2016 EPS estimates, discounted at 8.3% (cost of equity). Management Case A implied $7.10-$11.71; Management Case B implied $5.19-$8.81. | $5.19–$11.71 |
| Illustrative Leveraged Buyout Analysis | Assumed January 1, 2014 transaction, 6.5x total debt / LTM pro forma EBITDA, exit at December 31, 2018 at 10.0x-13.0x LTM pro forma EBITDA, and sponsor IRR target of 15%-25%. Management Case A implied $9.23-$13.04; Management Case B implied $8.14-$11.05. | $8.14–$13.04 |
Filing states a fee of $9,347,386 for services, $7,847,386 of which is contingent upon consummation of the Offer (filing erroneously writes 'million' after the dollar figures). Morgan Stanley previously represented Dassault Systèmes SA in its 1996 IPO and in two 2005-2006 acquisitions; no services for either party in the two years prior to the opinion.
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Management projections
| Projection year | Year 1 | Year 2 | CAGR |
|---|---|---|---|
| Revenue | $234M | $263M | 12.4% |
| Revenue growth | 10.9% | 12.4% | |
| EBITDA | $53.0M | $63.0M | 18.9% |
| EBITDA growth | 15.2% | 18.9% | |
| EBITDA margin | 23% | 24% | |
| Implied EV / EBITDA | 14.2x | 11.9x |
Year-1 growth is against LTM at announcement ($211M revenue, $46.0M EBITDA); later years are year over year.
Morgan Stanley used two sets of management-prepared forecasts, referred to as management Case A and management Case B, covering calendar years 2014 and 2015 for the comparables analysis and projections through 2016 for the DCF and LBO analyses. For years 2017 through 2023, Morgan Stanley extrapolated the 2016 management estimates based on 2016 growth and margin performance to reach a steady-state margin and growth profile by 2023; these extrapolations were approved for use by Accelrys management. A street case was also used for estimated next-twelve-months revenue in the precedent transactions analysis. Specific revenue and EBITDA dollar figures were not disclosed in the sliced sections.
Process notes
Two-step tender offer/merger; Morgan Stanley was the sole financial advisor to the Accelrys Board, delivering an oral opinion on January 29, 2014 confirmed in writing. The sale process involved multiple bidders (Dassault Systèmes SA plus Companies A-H); Dassault initially indicated $11.50, then $12.25 conditioned on exclusivity, with Accelrys countering at $13.00 before settling at $12.50. Dassault's financial advisor was Foros. The $25 million termination fee equals approximately 3.34% of equity value at the offer price; there is no reverse termination fee. No go-shop was ultimately described in the final terms despite being requested during negotiations. The filing's fee disclosure contains a typographical error ('$9,347,386 million').
Other Digital / HealthTech fairness opinions
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- Greenway Medical Technologies / Vista Equity Partners 2013 · 33.9x EV/EBITDA
- Press Ganey Holdings / EQT 2016 · 16.1x EV/EBITDA
- Everyday Health / Ziff Davis 2016 · 10.3x EV/EBITDA
- Imprivata / Thoma Bravo 2016
- WebMD / Internet Brands 2017 · 11.9x EV/EBITDA
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