Fairness opinions › Digital / HealthTech › 2016

Everyday Health acquired by Ziff Davis: fairness opinion by Qatalyst Partners

Announced October 24, 2016 · Tender offer · All cash · SC 14D9 filed November 2, 2016

Digital / HealthTech Content / Consumer

Enterprise value

$465M

EV / LTM EBITDA

10.3x

EBITDA $45.0M · 18% margin

EV / LTM revenue

1.82x

revenue $256M

DCF discount rate

8.0%–12.5%

Exit multiple

Deal terms

ConsiderationAll cash

Price per share—

Premium—

Premium basis—

StructureTender offer

Termination fee$15.2M

Reverse termination fee—

Go-shopNone

Outside date—

FilingSC 14D9 · EDGAR index

Implied value per share by method

Selected companies — EV / CY2017E Adjusted EBITDA Excluding Capitalized Expenses (September 2016 Projections) $4.51 – $7.47

Selected companies — EV / CY2017E Adjusted EBITDA Excluding Capitalized Expenses (Analyst Projections) $5.94 – $9.41

Precedent transactions — EV / LTM Adjusted EBITDA Excluding Capitalized Expenses (12 months ended 6/30/2016, Analyst Projections) $3.06 – $6.23

Precedent transactions — EV / NTM Adjusted EBITDA Excluding Capitalized Expenses (12 months ending 6/30/2017, Analyst Projections) $4.95 – $7.39

Discounted cash flow $7.26 – $13.31

Ranges as disclosed in the banker’s summary of analyses.

Opinion of Qatalyst Partners to the target board

Delivered October 21, 2016 · Fee $9.0M ($6.4M contingent on closing), $2.5M on delivery of the opinion

Discounted cash flow assumptions

Discount rate8.0%–12.5%

BasisEstimated weighted average cost of capital for Everyday Health

Terminal valueExit multiple

Perpetuity growth—

Exit multiple6.5x–10.5x Fully-diluted enterprise value / next-twelve-months estimated Adjusted EBITDA Excluding Capitalized Expenses (applied to CY2021 Adjusted EBITDA Excluding Capitalized Expenses)

Projection period2016E-2021E

Projections usedSeptember 2016 Projections (Everyday Health management; 2021E is a management extrapolation)

Implied value per share$7.26–$13.31

Present value as of September 30, 2016. Subtracted estimated net debt as of September 30, 2016; applied an approximately 22% dilution factor for future equity compensation grants; divided by fully-diluted shares outstanding as of October 3, 2016 (treasury stock method).

Selected public companies (6)

Bankrate, Inc. · DHI Group, Inc. · IAC/InterActiveCorp · QuinStreet, Inc. · TechTarget, Inc. · WebMD Health Corp.

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / CY2017E Adjusted EBITDA Excluding Capitalized Expenses (September 2016 Projections)	—	8.2x	—	7.0x–10.0x	$4.51–$7.47
EV / CY2017E Adjusted EBITDA Excluding Capitalized Expenses (Analyst Projections)	—	8.2x	—	7.0x–10.0x	$5.94–$9.41

Selected precedent transactions (4)

Date	Target	Acquirer	Multiple
2016-08-09	Monster Worldwide, Inc.	Randstad North America, Inc.	—
2016-07-25	Yahoo Holdings, Inc. (sale of the operating business of Yahoo! Inc.)	Verizon Communications Inc.	—
2015-05-12	AOL Inc.	Verizon Communications Inc.	—
2012-10-22	Ancestry.com Inc.	Permira Advisers LLC	—

Multiple	Low	Median	High	Range applied	Implied per share
EV / LTM Adjusted EBITDA Excluding Capitalized Expenses (12 months ended 6/30/2016, Analyst Projections)	—	—	—	7.0x–11.0x	$3.06–$6.23
EV / NTM Adjusted EBITDA Excluding Capitalized Expenses (12 months ending 6/30/2017, Analyst Projections)	—	—	—	7.5x–10.0x	$4.95–$7.39

Engagement letter dated April 11, 2015. Fee of approximately $9.0 million, of which $100,000 has been paid, $2.5 million became payable upon delivery of the opinion (regardless of conclusion), and the remaining portion payable upon consummation of the Offer. Expense reimbursement and indemnity also provided. No material relationship with Everyday Health, j2, Parent or Purchaser generating compensation in the prior two years.

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	Year 5	CAGR
Revenue	$286M	$325M	$359M	$395M	$434M	11.0%
Revenue growth	11.7%	13.6%	10.5%	10.0%	9.9%
EBITDA	$53.0M	$67.0M	$77.0M	$89.0M	$98.0M	16.6%
EBITDA growth	17.8%	26.4%	14.9%	15.6%	10.1%
EBITDA margin	19%	21%	21%	23%	23%
Implied EV / EBITDA	8.8x	6.9x	6.0x	5.2x	4.7x

Year-1 growth is against LTM at announcement ($256M revenue, $45.0M EBITDA); later years are year over year.

Qatalyst relied on the September 2016 Projections prepared by Everyday Health management (2016E-2021E, with 2021E a management extrapolation): revenue of $256M in 2016E rising to $434M in 2021E; Adjusted EBITDA of $45M in 2016E rising to $98M in 2021E; Adjusted EBITDA excluding capitalized expenses of $28M to $75M; and unlevered free cash flow of $15M in 2016E to $35M in 2021E. Earlier Initial 2016 Projections (2016E-2018E revenue $267M/$314M/$373M; Adjusted EBITDA $51M/$70M/$96M) and July 2016 Projections (revenue $260M/$312M/$371M; Adjusted EBITDA $48M/$67M/$96M) were deemed outdated and were not considered by the board on October 21, 2016. Qatalyst also used consensus third-party research analyst estimates ("Analyst Projections") in its selected companies and selected transactions analyses.

Process notes

Tender offer with Tender Agreements from seven directors/officers (Wolin, McCormick, Golden, Kornwasser, Evan, Potter, Wienbar). Sale process included an unsolicited $8.00/share indication of interest in March 2016 from a consortium ("Consortium A") comprising a private digital health company and two financial sponsors, which the board declined. Three sets of management projections (Initial 2016, July 2016, September 2016); the board relied on the September 2016 Projections. Qatalyst Partners was the sole financial advisor and delivered its opinion to the Everyday Health Board on October 21, 2016. Filing is a SC 14D-9; offer price not restated in the sliced sections.

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Athenahealth / Veritas Capital / Evergreen Coast Capital 2018 · 15.5x EV/EBITDA
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All Digital / HealthTech opinions → · Qatalyst Partners opinions