Castlight Health acquired by Vera Whole Health: fairness opinion by William Blair
Deal terms
Opinion of William Blair to the target board
Discounted cash flow assumptions
Included present value of potential tax savings from utilization of Castlight's federal net operating losses ($50-$57 million); added net cash as of September 30, 2021 and divided by total diluted shares outstanding as of September 30, 2021 using the treasury stock method.
Selected public companies (7)
Allscripts Healthcare Solutions, Inc. · Benefitfocus, Inc. · Computer Programs & Systems, Inc. · Evolent Health, Inc. · HealthEquity, Inc. · HealthStream, Inc. · NextGen Healthcare, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2021E Revenue (consensus estimates) | 1.8x | 2.2x | 5.8x | — | — |
| EV / CY2022E Revenue (consensus estimates) | 1.8x | 2.3x | 5.2x | — | — |
Selected precedent transactions (7)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2021-01 | Alight Solutions | Foley Trasimene Acquisition Corp. | — |
| 2021-01 | Change Healthcare | OptumInsight | — |
| 2020-07 | Benefytt Technologies | MDP | — |
| 2019-11 | Accent | HMS Holdings | — |
| 2019-06 | WageWorks | HealthEquity | — |
| 2019-01 | Discovery Benefits | WEX | — |
| 2017-02 | Aon's Benefits Administration and Business Processing Outsourcing Business | Blackstone | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 1.9x | 2.9x | 5.3x | — | — |
| EV / CY+1 Revenue | 1.8x | 2.6x | 3.7x | — | — |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| M&A Premiums Paid Analysis | Reviewed 361 acquisitions of North American publicly traded companies announced since January 1, 2010 across all industries in which 100% of target equity was acquired with equity values between $250 million and $500 million; compared premium percentiles to premiums implied by the $2.05 Offer Price at one day (26.5%), one week (35.8%), one month (42.4%), 60 days (30.6%), 90 days (22.0%), 180 days (-12.0%), 270 days (16.5%) and 365 days (57.7%) prior to January 3, 2022. | — |
| Implied Transaction Multiples (Castlight at Offer Price) | Offer Price of $2.05 implied EV/CY2021E revenue of 2.18x (consensus) and 2.19x (management forecast); EV/CY2022E revenue of 2.11x (consensus) and 2.38x (management forecast); EV/LTM revenue of 2.14x. | — |
Letter agreement dated February 16, 2021. $1,250,000 fairness opinion fee payable upon delivery of the opinion; approximately $5,938,000 total fee, less the $1,250,000 opinion fee, payable upon consummation of the Merger. No portion contingent on the conclusions reached. Within the past two years William Blair served as financial advisor to Vera on its sale to a CD&R affiliate, receiving a fee of approximately $3.1 million.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $128M | $138M | $189M | $244M | $289M | 22.6% |
| Revenue growth | -8.2% | 7.9% | 36.7% | 29.2% | 18.6% | |
| EBITDA | $-4.0M | $-1.6M | $24.4M | $54.2M | $78.2M | — |
| EBITDA growth | -140.0% | — | — | 122.1% | 44.3% | |
| EBITDA margin | -3% | -1% | 13% | 22% | 27% | |
| Implied EV / EBITDA | — | — | 12.5x | 5.6x | 3.9x |
Year-1 growth is against LTM at announcement ($140M revenue, $10.0M EBITDA); later years are year over year.
William Blair used internal business, operating and financial forecasts of Castlight for fiscal years ending December 31, 2021 through December 31, 2026, prepared by Castlight senior management and provided to William Blair on December 20, 2021 (the "Forecasts"). The Forecasts included estimates of potentially realizable existing federal net operating loss carryforwards expected to be utilized by Castlight, with the present value of related tax savings estimated at $50-$57 million. No specific annual revenue or EBITDA figures were disclosed in the summarized sections.
Process notes
Other Digital / HealthTech fairness opinions
- Benefitfocus / Voya Financial 2022 · 11.6x EV/EBITDA
- SOC Telemed / Patient Square Capital 2022
- 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
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