Benefitfocus acquired by Voya Financial: fairness opinion by Barclays
Announced November 1, 2022 · One-step merger · All cash ·
DEFM14A filed December 19, 2022
Digital / HealthTech Payer Solutions
Enterprise value
$570M
EV / LTM EBITDA
11.6x
EBITDA $49.0M · 19% margin
EV / LTM revenue
2.25x
revenue $253M
DCF discount rate
11.0%–13.0%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$10.50
Premium—
Premium basis—
StructureOne-step merger
Termination fee$14.0M
Reverse termination fee—
Go-shopNone
Outside date—
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $10.50 offer
Selected companies — EV / CY2023E Adj. EBITDA $5.97 – $8.58
Precedent transactions — EV / LTM EBITDA $6.87 – $10.03
Discounted cash flow $7.63 – $11.09
Illustrative Future Share Price Analysis (NTM EBITDA @ 12/31/2024) $7.13 – $9.46
Illustrative Future Share Price Analysis (NTM EBITDA @ 12/31/2025) $8.58 – $10.83
Discounted Cash Flow Analysis of Alternative Case 1 $11.06 – $15.35
Equity Research Target Prices Review $6.00 – $10.00
Precedent Transactions Premium Paid Analysis (1-Day Price) $8.81 – $10.93
Precedent Transactions Premium Paid Analysis (30-Day Average Price) $7.95 – $9.86
Historical Share Price Analysis $5.69 – $13.06
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Barclays to the target board
Delivered November 2, 2022 · Fee $12.1M ($11.1M contingent on closing), $1.0M on delivery of the opinion
Discounted cash flow assumptions
Discount rate11.0%–13.0%
Basisafter-tax WACC of Benefitfocus
Terminal valueExit multiple
Perpetuity growth—
Exit multiple9.5x–11.5x LTM Adj. EBITDA
Projection periodQ4 2022E-2026E
Projections usedManagement Case (plus Company NOL Projections)
Implied value per share$7.63–$11.09
Mid-year convention; subtracted estimated net debt of $(143.0) million as of 9/30/2022 and Preferred Stock liquidation value of $80.0 million; added PV of post-2026 tax savings from NOLs; fully diluted shares of 34.4m common, 4.2m RSUs/PRSUs, 0.1m options at $13.53 WAEP.
Selected public companies (1)
Alight Solutions LLC
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2022E Revenue | 2.5x | 2.5x | 2.5x | — | — |
| EV / CY2023E Revenue | 2.3x | 2.3x | 2.3x | — | — |
| EV / CY2022E Adj. EBITDA | 11.7x | 11.7x | 11.7x | — | — |
| EV / CY2023E Adj. EBITDA | 10.3x | 10.3x | 10.3x | 9.0x–11.0x | $5.97–$8.58 |
Selected precedent transactions (12)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2022-10-03 | bswift LLC | Francisco Partners, LP | — |
| 2022-06-21 | Convey Health Solutions Holdings, Inc. | TPG, Inc. | 15.7x EV/EBITDA LTM |
| 2022-06-16 | LifeWorks Holdings, Inc. | Telus Corp | 15.7x EV/EBITDA LTM |
| 2022-01-05 | Castlight Health, Inc. | Vera Whole Health, Inc. | 20.9x EV/EBITDA LTM |
| 2021-12-01 | Businessolver.com, Inc. | Stone Point Capital LLC | — |
| 2021-04-04 | Benefit Express Services, LLC | Wex, Inc. | — |
| 2021-01-25 | Alight Solutions LLC | Foley Trasimene Acquisition Corp. | 13.3x EV/EBITDA LTM |
| 2020-10-27 | Health Advocate, Inc. | Teleperformance S.A. | 13.9x EV/EBITDA LTM |
| 2020-07-28 | Edifecs, Inc. (51% stake) | TA Associates Management, L.P./Francisco Partners, LP | — |
| 2019-11-25 | Empyrean Capital Partners, LP | Securian Financial Services, Inc. | — |
| 2019-06-27 | WageWorks, Inc. | HealthEquity, Inc. | 10.8x EV/EBITDA LTM |
| 2019-01-17 | Discovery Benefits, Inc. | WEX, Inc. | 21.3x EV/EBITDA LTM |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 2.2x | 3.1x | 4.9x | — | — |
| EV / NTM Revenue | 2.2x | 2.7x | 4.5x | — | — |
| EV / LTM EBITDA | 10.8x | 15.7x | 21.3x | 12.0x–15.0x | $6.87–$10.03 |
| EV / NTM EBITDA | 11.0x | 12.2x | 14.5x | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Illustrative Future Share Price Analysis (NTM EBITDA @ 12/31/2024) | Applied 9.0x-11.0x EV/NTM Adj. EBITDA multiples to Management Case; discounted to present at 15.0% cost of equity. | $7.13–$9.46 |
| Illustrative Future Share Price Analysis (NTM EBITDA @ 12/31/2025) | Applied 9.0x-11.0x EV/NTM Adj. EBITDA multiples to Management Case; discounted to present at 15.0% cost of equity. | $8.58–$10.83 |
| Discounted Cash Flow Analysis of Alternative Case 1 | Same methodology as primary DCF (9.5x-11.5x LTM Adj. EBITDA exit multiples; 11.0%-13.0% after-tax discount rates) using Alternative Case 1 cash flows; $10.50 was below this range. | $11.06–$15.35 |
| Equity Research Target Prices Review | One-year forward price targets from three equity research firms covering Benefitfocus as of October 31, 2022. | $6.00–$10.00 |
| Precedent Transactions Premium Paid Analysis (1-Day Price) | Reviewed premiums paid in 50 diversified industry M&A transactions with target equity value between $100.0 million and $1.5 billion from March 12, 2019 to July 21, 2022; applied 25.0%-55.0% premium range to the October 31, 2022 closing price. | $8.81–$10.93 |
| Precedent Transactions Premium Paid Analysis (30-Day Average Price) | Applied 25.0%-55.0% premium range to the 30-trading day VWAP of Common Stock ending October 31, 2022. | $7.95–$9.86 |
| Historical Share Price Analysis | 52-week period from November 1, 2021 to October 31, 2022; closing prices ranged from $5.69 to $13.06 per share. | $5.69–$13.06 |
$1.0 million Opinion Fee payable upon delivery of opinion, not contingent on conclusion or consummation; approximately $11.11 million additional payable upon completion of the Merger (against which the Opinion Fee and $250,000 of previously earned advisory fees are credited). Aggregate fees invoiced by Barclays to Benefitfocus for advisory services in past two years approximately $3.25 million.
3,000+ healthcare deal-level valuation multiples
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Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | CAGR |
|---|---|---|---|---|---|
| Revenue | $246M | $260M | $281M | $309M | 7.9% |
| Revenue growth | -2.8% | 5.7% | 8.1% | 10.0% | |
| EBITDA | $50.0M | $55.0M | $62.0M | $74.0M | 14.0% |
| EBITDA growth | 2.0% | 10.0% | 12.7% | 19.4% | |
| EBITDA margin | 20% | 21% | 22% | 24% | |
| Implied EV / EBITDA | 11.4x | 10.4x | 9.2x | 7.7x |
Year-1 growth is against LTM at announcement ($253M revenue, $49.0M EBITDA); later years are year over year.
Barclays used the Management Case prepared by Benefitfocus management, covering the last quarter of fiscal 2022 and fiscal years 2023 through 2026, along with Company NOL Projections for future utilization of net operating losses. An Alternative Case 1 was also prepared and used in a supplemental DCF (as an informational reference), which produced higher implied values ($11.06-$15.35) than the Management Case DCF. Headline revenue/EBITDA figures were not disclosed in the sliced sections; Adj. EBITDA was the principal valuation metric.
Process notes
Single financial advisor to the target (Barclays); Perella Weinberg Partners LP acted as financial advisor to Voya but did not deliver an opinion disclosed here. Opinion given orally on November 1, 2022 and confirmed in writing November 2, 2022; addresses only fairness of the $10.50 per share Common Stock consideration to holders of Common Stock (excluding Excluded Shares) and expressly not the Preferred Stock consideration. Selected comparable company analysis used only one comparable company (Alight Solutions LLC). BG and Indaba, holding ~23.4% of voting power, entered Support Agreements. Termination fee negotiated down from Voya's proposed 4%-of-equity-value / $15.0 million to $14.0 million.
Other Digital / HealthTech fairness opinions
- SOC Telemed / Patient Square Capital 2022
- Castlight Health / Vera Whole Health 2022 · 30.4x EV/EBITDA
- Vocera Communications / StrykerCorp. 2022 · 52.3x EV/EBITDA
- NextGen Healthcare / Thoma Bravo 2023 · 16.1x EV/EBITDA
- Tabula Rasa HealthCare / Nautic Partners / ExactCare Pharmacy 2023 · 27.1x EV/EBITDA
- Cerner / Oracle 2021 · 15.2x EV/EBITDA