Fairness opinions › Digital / HealthTech › 2025

Accolade acquired by Transcarent: fairness opinion by Morgan Stanley

Announced January 8, 2025 · One-step merger · All cash · DEFM14A filed February 20, 2025

Digital / HealthTech Telemedicine

Enterprise value

$621M

equity $600M

EV / LTM EBITDA

35.5x

EBITDA $17.5M · 4% margin

EV / LTM revenue

1.33x

revenue $468M

DCF discount rate

13.2%–15.2%

Perpetuity growth

Deal terms

ConsiderationAll cash

Price per share$7.03

Premium—

Premium basis—

StructureOne-step merger

Termination fee$19.8M (3.3% of equity)

Reverse termination fee$29.9M

Go-shopNone

Outside date—

FilingDEFM14A · EDGAR index

Implied value per share by method vs. $7.03 offer

Selected companies — AV / CY2025E Revenue $2.80 – $5.40

Selected companies — AV / CY2025E EBITDA $2.45 – $4.05

Precedent transactions — AV / NTM EBITDA $3.10 – $7.65

Discounted cash flow $4.85 – $6.30

Discounted Equity Value Analysis (December Projections) $3.35 – $5.80

Discounted Equity Value Analysis (October Projections - reference only) $6.40 – $10.75

Precedent Transactions - Premiums Paid Analysis $4.20 – $5.60

Historical Trading Range (reference only) $3.08 – $15.36

Broker Price Targets (reference only) $4.40 – $8.30

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 7, 2025 · Fee $14.6M ($12.6M contingent on closing), $2.0M on delivery of the opinion

Discounted cash flow assumptions

Discount rate13.2%–15.2%

BasisWACC estimated using capital asset pricing model

Terminal valuePerpetuity growth

Perpetuity growth3.0%–4.0%

Exit multiple—

Projection periodQ4 FY2025E-FY2035E

Projections usedDecember Projections and December Extrapolations (October Projections run for reference only)

Implied value per share$4.85–$6.30

Unlevered FCF discounted to January 6, 2025 using midyear convention; 25% effective tax rate; implied AV increased by NPV of NOLs and net cash as of November 30, 2024. October Projections DCF (reference only) implied $8.45-$10.95 per share.

Selected public companies (10)

Definitive Healthcare Corp. · Evolent Health, Inc. · GoodRx Holdings, Inc. · Health Catalyst, Inc. · HealthEquity, Inc. · HealthStream Inc. · LifeStance Health Group, Inc. · Phreesia, Inc. · Progyny, Inc. · Teladoc Health, Inc.

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
AV / CY2025E Revenue	0.7x	2.2x	7.3x	0.5x–1.0x	$2.80–$5.40
AV / CY2025E EBITDA	6.5x	10.8x	24.7x	7.0x–12.0x	$2.45–$4.05

Selected precedent transactions (8)

Date	Target	Acquirer	Multiple
2023-09-06	NextGen Healthcare, Inc.	Thoma Bravo	13.8x AV / NTM EBITDA
2022-11-01	Benefitfocus, Inc.	Voya Financial, Inc.	13.3x AV / NTM EBITDA
2022-06-16	LifeWorks Inc.	TELUS Corporation	18.7x AV / NTM EBITDA
2022-04-05	Tivity Health, Inc.	Stone Point Capital	11.6x AV / NTM EBITDA
2020-07-13	Benefytt Technologies, Inc.	Madison Dearborn Partners	10.5x AV / NTM EBITDA
2019-12-20	Care.com, Inc.	IAC, Inc.	23.3x AV / NTM EBITDA
2017-07-24	WebMD Health Corp.	Internet Brands / KKR	11.5x AV / NTM EBITDA
2016-10-21	Everyday Health, Inc.	Ziff Davis, LLC	9.0x AV / NTM EBITDA

Multiple	Low	Median	High	Range applied	Implied per share
AV / NTM EBITDA	9.0x	12.5x	23.3x	9.0x–23.3x	$3.10–$7.65

Other analyses

Analysis	Summary	Implied per share
Discounted Equity Value Analysis (December Projections)	Applied 7.0x-13.0x NTM EBITDA multiples to FY ending February 28, 2027 EBITDA to derive aggregate value as of February 28, 2026, added estimated net cash, divided by fully diluted shares, discounted to January 6, 2025 at 14.2% cost of equity.	$3.35–$5.80
Discounted Equity Value Analysis (October Projections - reference only)	Applied 8.0x-14.0x NTM EBITDA multiples to October Projections FY2027 EBITDA, discounted at 14.2%; reference only, not part of fairness analysis.	$6.40–$10.75
Precedent Transactions - Premiums Paid Analysis	All-cash transactions with global public targets over $100 million aggregate value since 2000 through December 31, 2024; 25th percentile premium range 20.0%-30.0% and 75th percentile 50.0%-60.0%. Applied representative premia range of 20.0%-60.0% to Accolade's January 6, 2025 closing price.	$4.20–$5.60
Historical Trading Range (reference only)	52-week period ending January 6, 2025: intraday low $3.08 (November 4, 2024) and high $15.36 (January 10, 2024). 6-month period: low $3.08 and high $4.55 (August 23, 2024).	$3.08–$15.36
Broker Price Targets (reference only)	Analyst price targets published on or before January 6, 2025 ranged $5.00-$9.50 undiscounted; discounted at 14.2% cost of equity to $4.40-$8.30 per share.	$4.40–$8.30

Fee of approximately $14,600,000; $2,000,000 paid following delivery of the opinion, remainder contingent on consummation of the merger. No other fees received from Accolade or Parent in prior two years.

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	Year 5	CAGR
Revenue	$465M	$504M	$547M	$592M	$639M	8.3%
Revenue growth	-0.5%	8.5%	8.4%	8.2%	8.0%
EBITDA	$22.2M	$42.8M	$54.9M	$74.6M	$92.7M	42.9%
EBITDA growth	26.9%	92.8%	28.3%	35.9%	24.3%
EBITDA margin	5%	8%	10%	13%	15%
Implied EV / EBITDA	28.0x	14.5x	11.3x	8.3x	6.7x

Year-1 growth is against LTM at announcement ($468M revenue, $17.5M EBITDA); later years are year over year.

Accolade management prepared two sets of unaudited standalone forecasts covering Q4 FY2025 through FY2030 (fiscal year ends in February): the October Projections (prepared October 2024 and shared with bidders) and the lower December Projections (prepared December 2024), with Morgan Stanley extrapolations through FY2035. The December Projections show revenue of $465.0M in FY2026 growing to $639.3M in FY2030 (extrapolated to $888.7M in FY2035) with Adjusted EBITDA of $22.2M in FY2026 rising to $92.7M in FY2030 ($151.1M in FY2035) and unlevered free cash flow of $3.1M in FY2026 to $44.7M in FY2030. The October Projections were higher (FY2026 revenue $494.8M / EBITDA $35.5M; FY2030 revenue $829.7M / EBITDA $179.6M) but the Accolade Board deemed them unachievable and directed Morgan Stanley to rely on the December Projections for its opinion.

Process notes

Single fairness opinion, delivered by Morgan Stanley to the Accolade Board on January 7, 2025 (merger agreement signed January 8, 2025). A Special Committee of the Accolade Board was involved in negotiations, but the opinion was delivered to the full board. Accolade termination fee of $19,800,000 (approximately 3.3% of equity value) and a Parent reverse termination fee of $29,950,000 payable on financing failure or failure of antitrust clearance; damages caps mirror these amounts. Parent financing was via a concurrent stock purchase agreement (equity financing) rather than an equity commitment letter. Negotiation history shows an initial $7.03 offer and Accolade counterproposals of $8.50 and $7.50 per share; final price was $7.03. Analyses based on the October Projections (DCF $8.45-$10.95; discounted equity value $6.40-$10.75) were presented for reference only and were not part of the fairness analysis.

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