Phase Forward acquired by Oracle: fairness opinion by Thomas Weisel Partners
Announced April 16, 2010 · One-step merger · All cash ·
DEFM14A filed May 24, 2010
Digital / HealthTech Pharma / Life Sciences Software
Enterprise value
$685M
EV / LTM EBITDA
11.6x
EBITDA $58.8M · 24% margin
EV / LTM revenue
2.78x
revenue $246M
DCF discount rate
12.0%–13.0%
Exit multiple
Deal terms
ConsiderationAll cash
Price per share$17.00
Premium29.6%
Premium basisone day prior to the date of the TWP opinion
StructureOne-step merger
Termination fee$24.7M (3.3% of equity)
Reverse termination fee—
Go-shopNone
Outside dateJanuary 15, 2011
FilingDEFM14A · EDGAR index
Implied value per share by method vs. $17.00 offer
Selected companies — EV / Revenue (average implied across 2010E and 2011E) $16.37 – $23.91
Selected companies — EV / Adjusted EBITDA (average implied across 2010E and 2011E) $19.17 – $20.50
Selected companies — EV / Adjusted EBIT (average implied across 2010E and 2011E) $16.97 – $19.45
Selected companies — Equity Value / Adjusted Net Income (average implied across 2010E and 2011E) $16.72 – $18.26
Selected companies — Equity Value / Adjusted Net Income / Growth Rate (average implied across 2010E and 2011E) $14.99 – $17.68
Precedent transactions — EV / Revenue (average implied across LTM and NTM) $13.13 – $16.17
Precedent transactions — EV / Adjusted EBITDA (average implied across LTM and NTM) $16.33 – $19.96
Precedent transactions — EV / Adjusted EBIT (average implied across LTM and NTM) $14.75 – $18.04
Precedent transactions — Equity Value / Adjusted Net Income (average implied across LTM and NTM) $11.31 – $16.12
Discounted cash flow $15.71 – $18.23
Latest Twelve Months Trading Analysis $10.18 – $17.04
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Thomas Weisel Partners to the target board
Delivered April 15, 2010 · Fee $7.6M, $0.8M on delivery of the opinion
Discounted cash flow assumptions
Discount rate12.0%–13.0%
Basisestimated weighted average cost of capital, based on beta provided by MSCI Barra risk models for the comparable company group and for Phase Forward
Terminal valueExit multiple
Perpetuity growth—
Exit multiple7.0x–8.5x Adjusted EBITDA (2015E terminal)
Projection period2010E-2015E
Projections usedPhase Forward management forecasts
Implied value per share$15.71–$18.23
Cash flows projected through 2014 and terminal values discounted to present value; enterprise values reduced by estimated net debt and divided by fully-diluted shares. $17.00 merger consideration is within the range.
Selected public companies (13)
Allscripts-Misys Healthcare Solutions (MDRX) · athenahealth, Inc. (ATHN) · Blackboard Inc. (BBBB) · Cerner Corporation (CERN) · Computer Programs and Systems, Inc. (CPSI) · DealerTrack Holdings, Inc. (TRAK) · DemandTec, Inc. (DMAN) · Eclipsys Corporation (ECLP) · Medidata Solutions, Inc. (MDSO) · Quality Systems, Inc. (QSII) · Synchronoss Technologies, Inc. (SNCR) · Taleo Corporation (TLEO) · The Ultimate Software Group, Inc. (ULTI)
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / CY2010E Revenue | 2.4x | 3.9x | 4.3x | 2.4x–3.9x | — |
| EV / CY2011E Revenue | 2.2x | 3.3x | 3.6x | 2.2x–3.3x | — |
| EV / Revenue (average implied across 2010E and 2011E) | — | — | — | — | $16.37–$23.91 |
| EV / CY2010E Adjusted EBITDA | 12.6x | 13.6x | 19.0x | 12.6x–13.6x | — |
| EV / CY2011E Adjusted EBITDA | 10.1x | 11.0x | 15.1x | 10.1x–11.0x | — |
| EV / Adjusted EBITDA (average implied across 2010E and 2011E) | — | — | — | — | $19.17–$20.50 |
| EV / CY2010E Adjusted EBIT | 15.2x | 17.9x | 21.4x | 15.2x–17.9x | — |
| EV / CY2011E Adjusted EBIT | 12.2x | 14.4x | 17.0x | 12.2x–14.4x | — |
| EV / Adjusted EBIT (average implied across 2010E and 2011E) | — | — | — | — | $16.97–$19.45 |
| Equity Value / CY2010E Adjusted Net Income | 27.2x | 31.7x | 33.5x | 27.2x–31.7x | — |
| Equity Value / CY2011E Adjusted Net Income | 23.4x | 24.0x | 28.4x | 23.4x–24.0x | — |
| Equity Value / Adjusted Net Income (average implied across 2010E and 2011E) | — | — | — | — | $16.72–$18.26 |
| Equity Value / CY2010E Adjusted Net Income / Growth Rate | 1.4x | 1.6x | 1.7x | 1.4x–1.6x | — |
| Equity Value / CY2011E Adjusted Net Income / Growth Rate | 1.1x | 1.3x | 1.5x | 1.1x–1.3x | — |
| Equity Value / Adjusted Net Income / Growth Rate (average implied across 2010E and 2011E) | — | — | — | — | $14.99–$17.68 |
Selected precedent transactions (30)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2009-07-28 | SPSS, Inc. | IBM Corporation | — |
| 2009-07-13 | IDS Scheer AG | Software AG | — |
| 2009-06-04 | Wind River Systems | Intel Corporation | — |
| 2009-01-22 | Interwoven, Inc. | Autonomy Corporation plc | — |
| 2008-10-08 | MessageLabs | Symantec Corporation | — |
| 2008-09-21 | Secure Computing Corporation | McAfee, Inc. | — |
| 2008-04-11 | The Trizetto Group, Inc. | Apax Partners | — |
| 2008-03-18 | Allscripts (54.5% stake) | Misys PLC | — |
| 2008-03-17 | BladeLogic | BMC Software | — |
| 2008-01-08 | Fast Search & Transfer ASA | Microsoft Corporation | — |
| 2007-07-23 | Opsware Inc. | Hewlett-Packard Company | — |
| 2007-12-18 | Visicu Inc. | Philips Electronics | — |
| 2007-06-11 | Telelogic | IBM Corporation | — |
| 2007-05-15 | Agile Software Corporation | Oracle Corporation | — |
| 2007-04-05 | webMethods, Inc. | Software AG | — |
| 2007-03-05 | SafeNet, Inc. | Vector Capital | — |
| 2007-03-02 | Dendrite International, Inc. | CEGEDIM S.A. | — |
| 2007-02-12 | Witness Systems, Inc. | Verint Systems Inc. | — |
| 2007-01-29 | Altiris, Inc. | Symantec Corporation | — |
| 2006-11-20 | Protect Data AB | Check Point Software Technologies Ltd. | — |
| 2006-11-06 | Per-Se Technologies, Inc. | McKesson Corporation | — |
| 2006-11-02 | Stellent, Inc. | Oracle Corporation | — |
| 2006-08-31 | Intergraph Corporation | Hellman & Friedman / Texas Pacific Group / JMI Equity | — |
| 2006-08-23 | Internet Security Systems, Inc. | IBM Corporation | — |
| 2006-08-08 | Emdeon Practice Services, Inc. | Sage Software plc | — |
| 2006-08-04 | Hummingbird Ltd. | Open Text Corporation | — |
| 2006-05-15 | SSA Global Technologies Inc. | Infor Global Solutions | — |
| 2006-04-27 | NetIQ Corporation | AttachmateWRQ | — |
| 2006-03-02 | MatrixOne, Inc. | Dassault Systemes | — |
| 2006-01-19 | Lifeline Systems, Inc. | Koninklijke Philips Electronics N.V. | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 2.0x | 2.7x | 4.2x | 2.0x–2.7x | — |
| EV / NTM Revenue | 1.8x | 2.3x | 3.7x | 1.8x–2.3x | — |
| EV / Revenue (average implied across LTM and NTM) | — | — | — | — | $13.13–$16.17 |
| EV / LTM Adjusted EBITDA | 11.4x | 14.3x | 18.0x | 11.4x–14.3x | — |
| EV / NTM Adjusted EBITDA | 10.7x | 13.8x | 16.7x | 10.7x–13.8x | — |
| EV / Adjusted EBITDA (average implied across LTM and NTM) | — | — | — | — | $16.33–$19.96 |
| EV / LTM Adjusted EBIT | 13.8x | 18.6x | 24.1x | 13.8x–18.6x | — |
| EV / NTM Adjusted EBIT | 14.0x | 17.2x | 19.8x | 14.0x–17.2x | — |
| EV / Adjusted EBIT (average implied across LTM and NTM) | — | — | — | — | $14.75–$18.04 |
| Equity Value / LTM Adjusted Net Income | 21.4x | 31.5x | 38.2x | 21.4x–31.5x | — |
| Equity Value / NTM Adjusted Net Income | 19.5x | 27.2x | 31.4x | 19.5x–27.2x | — |
| Equity Value / Adjusted Net Income (average implied across LTM and NTM) | — | — | — | — | $11.31–$16.12 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Premiums Paid Analysis | Reviewed premiums in the 28 public-company acquisitions among the 30 comparable transactions: 1-day premiums 1st quartile 17.1%, median 22.5%, mean 25.0%, 3rd quartile 35.8%; 1-week 17.4%/23.6%/25.4%/38.3%; 1-month 16.5%/27.2%/30.0%/40.3%. Merger implied premiums were 29.6%, 29.1% and 29.4% for one day, one week and one month prior to the opinion date. | — |
| Latest Twelve Months Trading Analysis | Illustrative review of Phase Forward trading history over the last year: highest closing price $17.04, low $10.18, average $14.00 per share. | $10.18–$17.04 |
Fee of up to approximately $7.6 million, of which $750,000 was payable upon delivery of the fairness opinion and the remainder payable only upon closing of the merger; expense reimbursement and indemnity also provided.
3,000+ healthcare deal-level valuation multiples
The Valuation database includes financial details for more than 3,000 healthcare M&A transactions, private and public, with deal-level multiples, categorized by segment, type, and year.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $280M | $322M | $354M | $390M | $429M | 11.2% |
| Revenue growth | 13.8% | 15.0% | 10.0% | 10.0% | 10.0% | |
| EBITDA | $70.2M | $80.8M | $88.8M | $96.8M | $105M | 10.6% |
| EBITDA growth | 19.4% | 15.1% | 9.9% | 9.0% | 8.5% | |
| EBITDA margin | 25% | 25% | 25% | 25% | 24% | |
| Implied EV / EBITDA | 9.8x | 8.5x | 7.7x | 7.1x | 6.5x |
Year-1 growth is against LTM at announcement ($246M revenue, $58.8M EBITDA); later years are year over year.
Phase Forward management prepared projections of revenue, gross profit, operating expense, Adjusted EBITDA (excluding FAS 123R stock compensation), Adjusted EBIT and unlevered Free Cash Flow for fiscal years 2010 through 2015, which were provided to the Special Committee, the board and TWP. FY2010 projections were prepared in January 2010 and updated in February and April 2010; FY2011-2015 projections were prepared in April 2010 in connection with the financial analysis of the proposed merger. TWP used these 2010-2015 forecasts in its discounted cash flow and comparable company analyses; specific dollar figures were not reproduced in the sliced sections.
Process notes
Single fairness opinion from Thomas Weisel Partners (TWP) to the Phase Forward board of directors; TWP had been retained in April 2009 as exclusive financial advisor for a possible sale. A Special Committee was involved in monitoring negotiations with Oracle but the opinion was delivered to the full board. TWP contacted Company A, C, D, E and F at Phase Forward's request to gauge interest in an acquisition. Termination fee of $24.7 million equals 3.25% of aggregate purchase price as negotiated; separate expense reimbursement cap of $4 million if stockholder approval fails (credited against the termination fee). Directors and executive officers holding ~6.51% of shares signed voting agreements with Oracle. TWP disclosed prior relationships: underwriter for Phase Forward's IPO and secondary offerings, and advisor on the Clarix and Maaguzi acquisitions.
Other Digital / HealthTech fairness opinions
- HealthGrades / Vestar Capital Partners 2010 · 17.0x EV/EBITDA
- Symyx Technologies / Accelrys 2010 · 10.1x EV/EBITDA
- Eclipsys / Allscripts-Misys Healthcare Solutions 2010 · 14.9x EV/EBITDA
- Greenway Medical Technologies / Vista Equity Partners 2013 · 33.9x EV/EBITDA
- Accelrys / Dassault Systèmes SA 2014 · 16.3x EV/EBITDA
- Merge Healthcare / IBM Watson Health 2015 · 19.5x EV/EBITDA
All Digital / HealthTech opinions → · Thomas Weisel Partners opinions