Market Update

Tax Policy, Gridlock, and Infotech. Our November 2017 Market Update

November 2017

Dear Clients and Friends,

Our latest report is found below. It contains an update on the m&a deals, values, and trends in the dozen+ segments of the information technology industry that we follow and sometimes lead. 

This week the news is filled with conflicting reports about the purported benefits and drawbacks of the GOP proposal to reform the US income tax code. Predictably, people who may benefit tend to like the proposal (e.g. banks, large multi-nationals, and many in the top 10%); and those who could be harmed denigrate it (e.g. the housing industry and people in high-tax states). Many middle-income Americans are confused; and deficit hawks are conflicted.

Republicans tout expected trickle-down benefits for employment, investment, jobs, profit and eventually the national debt. Democrats are skeptical about the trickle-down benefits; assert that any benefits to middle-income Americans are ephemeral – as deductions are either limited (e.g., mortgage interest) or eliminated (e.g., state and local taxes); and bemoan another effort to pass significant legislation without their input.

Some people like – and others hate – that the “carried interest” loophole remains intact. Others like – or hate – that the bill does little to discourage exporting jobs. Some are concerned about the fairness of taxing smaller accounting firms, law firms, investment banks(!) and other “personal service” firms at higher rates than manufacturing ones – and at the lack of clarity regarding tax rates for software and other information technology firms that are organized as LLCs and Subchapter “S” companies  – which describes many of the businesses that we advise.

We’re not tax experts. But we recognize that the US tax code has helped this country become an entrepreneurial mecca.  It influences the willingness and ability of entrepreneurs to start businesses, hire, invest, expand, import and export. We agree that the code could use some serious updating. Our fervent hope is that, well before hell freezes over, leaders of both parties will come together in a bipartisan manner to address these issues and actually get something done. Gridlock helps no one.

You can see more about m&a values and trends in information technology below. As you will see, the market (and our pipeline) remain strong.  We are hopeful that Congress won’t mess it up. Some of the more interesting transactions this past month include:

  • Siris Capital Group (New York, NY) agreed to acquire Intralinks for $1.8bn,
  • First Data (NYSE:FDC) agreed to acquire BluePay for $760mm,
  • Intercontinental Exchange (NYSE:ICE) agreed to acquire BondPoint from Virtu Financial for $400mm,
  • E*Trade Financial Corporation (NASDAQ:ETFC) agreed to acquire Trust Company of America (TCA) for $275mm,
  • Fintrax Group agreed to acquire Planet Payment (NASDAQ:PLPM) for $220mm, implying an enterprise value of $249mm, valuing the company at an implied 4.7x LTM revenue and 20.5x LTM EBITDA.

Please see our November Market Update below.

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