Clearsight Monitor

Professional Services Industry Update

October 2011

Professional Services Sector Coverage:

Business Consulting IT Services Offshore Outsourcing Staffing
Clearsight Advisors I 1650 Tysons Blvd, Suite 220 I Mclean, VA I 22102 I P: 703-672-3100 I www.clearsightadvisors.com

Unparalleled Industry Experience

Clearsight has worked on many of the most high profile M&A transactions in the Professional Services industry

has been acquired by

has been acquired by

has acquired substantially all of the North American assets of

has been acquired by

has been acquired by

Sellside Advisor

Sellside Advisor

Buyside Advisor

Sellside Advisor

Sellside Advisor

has been acquired by

has been acquired by

has been acquired by

has been acquired by

has been recapitalized by

Sellside Advisor

Sellside Advisor

Sellside Advisor

Sellside Advisor

Financial Advisor

Note: Select transaction were completed by Clearsight team members while at previous firms.

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Clearsight Index Performance

While the Professional Services index was relatively flat for 1H 2011, market prices have seen declines and extreme volatility since July 2011
130

120

110

100

90 Business Consulting Index IT Services Index 70 Offshore Outsourcing Index Staffing Index 60 S&P 500
The Staffing Index has declined the most over the past year.

80

50

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Market Perspective
Equity prices and valuations across the professional services industry and broader S&P have seen
pressure over the past couple months due to increasing U.S. recession worries and Europe debt and banking troubles The staffing index, which outperformed the broader market during the pull out of the recession, has seen
the largest decline over the past year

The professional services industry has recently seen an up-tick in M&A activity (both in terms of volume
and scale) Transactions of note include PwCs acquisition of PRTM, TDS acquisitions of OneNeck, Genpacts
acquisition of Headstrong, Randstads acquisition of Spherion and Citi Ventures acquisition of Ness Technologies Buyers from adjacent sectors (telecom, software) and the resurgence of international buyers (India, China, Japan) are helping drive activity and valuation levels

Based on recent M&A announcements across the professional services industry, we remain convinced
that the public market valuation levels are not representative of the prevailing M&A valuation multiples

Private equity firms continue to sit on nearly a trillion dollar stockpile of un-invested capital, and are
increasingly investing in professional services companies given the belief that the sector is entering a new investment cycle

The highest quality companies (market leadership position, growth, etc.) are commanding premium
values similar to the recent market peak in 2007
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Current Sector Valuation Levels

Mean NFY Enterprise Value (EV) / Revenue Multiples
Business Consulting Companies IT Services Companies Offshore Outsourcing Companies Staffing Companies 0.0x 0.3x 0.5x 1.0x 1.5x 2.0x 2.5x 3.0x 0.7x 2.7x 0.9x

Mean NFY Enterprise Value (EV) / EBITDA Multiples

Business Consulting Companies IT Services Companies Offshore Outsourcing Companies Staffing Companies 0.0x 2.0x 4.0x 6.0x 6.6x 8.0x 10.0x 12.0x 14.0x 6.1x 11.7x 6.9x

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Public Company Valuation Metrics

Valuation Metrics
EV/ Revenue NCY NCY+1 Select Business Consulting Companies CBIZ, Inc. CRA International Inc. FTI Consulting, Inc. Huron Consulting Group Inc. ICF International Inc. Navigant Consulting Inc. Resources Connection Inc. Overall Mean Select IT Services Companies Accenture plc Cap Gemini S.A. CGI Group, Inc. CIBER, Inc. Computer Sciences Corporation Logica PLC Perficient Inc. Sapient Corp. The Hackett Group, Inc. Virtusa Corp. Overall Mean 0.8x 0.6x 1.4x 1.5x 0.5x 0.9x 0.5x 0.9x 0.8x 0.6x 1.3x 1.3x 0.5x 0.8x 0.5x 0.8x EV/ EBITDA NCY NCY+1 7.2x 5.2x 8.1x 8.5x 5.6x 6.7x 6.7x 6.9x 6.8x 4.7x 7.1x 7.2x 5.0x 5.8x 4.8x 5.9x $ Equity Value 333.4 238.4 1,447.4 685.3 395.4 448.3 430.2 568.3

Size
Enterprise Value $ 601.0 189.5 2,145.6 937.0 456.1 654.2 285.3 752.7 NCY Revenue $ 740.1 311.5 1,525.7 634.7 842.1 763.6 569.8 769.6 NCY EBITDA $ 83.3 36.4 265.5 110.0 81.6 97.9 42.8 102.5

Profitability
EBITDA % NCY NCY+1 11.3% 11.7% 17.4% 17.3% 9.7% 12.8% 7.5% 12.5% 11.5% 12.3% 18.5% 18.6% 9.8% 13.8% 9.4% 13.4%

Growth
Revenue Growth % NCY NCY+1 1.0% 8.4% 8.9% 5.0% 10.1% 8.5% 9.3% 7.3% 4.4% 5.5% 7.2% 10.8% 9.9% 6.5% 10.6% 7.9%

1.1x 0.4x 1.4x 0.2x 0.3x 0.4x 0.9x 1.1x 0.5x 1.0x 0.7x

1.0x 0.4x 1.3x 0.2x 0.3x 0.4x 0.8x 0.9x 0.5x 0.8x 0.7x

6.9x 4.1x 7.3x 7.0x 2.7x 5.2x 6.0x 9.2x 4.9x 8.1x 6.1x

6.3x 3.7x 6.7x 4.6x 2.4x 4.7x 4.9x 7.4x 4.1x 5.6x 5.0x

$ 33,168.4 5,333.6 5,020.0 207.2 4,432.9 2,081.6 258.0 1,394.1 139.7 362.0 $ 5,239.7

$ 28,374.3 5,064.7 5,963.0 242.5 5,672.9 2,769.0 245.5 1,159.3 121.9 264.6 $ 4,987.8

$ 26,017.5 13,554.6 4,385.6 1,098.5 16,312.7 6,332.0 261.9 1,037.0 222.5 265.5 $ 6,948.8

$ 4,096.7 1,241.6 815.1 34.9 2,068.3 536.3 40.7 126.4 24.9 32.8 $ 901.8

15.7% 9.2% 18.6% 3.2% 12.7% 8.5% 15.5% 12.2% 11.2% 12.3% 11.9%

15.9% 9.8% 19.0% 4.5% 14.3% 8.9% 16.9% 12.7% 12.5% 14.1% 12.9%

9.2% 16.2% 10.7% 2.5% 2.5% 9.7% 21.8% 20.1% 10.5% 28.0% 13.1%

8.1% 4.9% 6.9% 7.0% 2.2% 3.8% 13.6% 19.0% 8.4% 26.1% 10.0%

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Public Company Valuation Metrics

Valuation Metrics
EV/ Revenue NCY NCY+1 Offshore Outsourcing Companies Cognizant Technology Solutions Corp. Exlservice Holdings, Inc. Genpact Ltd. HCL Technologies Ltd. Infosys Ltd. Syntel, Inc. Tata Consultancy Services Limited Wipro Ltd. Overall Mean Select Staffing Companies Adecco S.A. CDI Corp. Computer Task Group Inc. Hays plc Hudson Highland Group Inc. Kelly Services, Inc. Kforce Inc. Korn/Ferry International ManpowerGroup On Assignment Inc. Randstad Holding NV Robert Half International Inc. TrueBlue, Inc. Overall Mean 2.7x 2.0x 2.3x 1.5x 3.7x 2.4x 4.4x 2.1x 2.6x 2.2x 1.6x 1.9x 1.2x 3.2x 2.1x 3.6x 1.9x 2.2x EV/ EBITDA NCY NCY+1 13.0x 12.1x 12.1x 8.8x 12.1x 10.2x 15.1x 10.4x 11.7x 10.7x 9.3x 10.3x 7.2x 10.5x 8.5x 12.5x 8.9x 9.7x Equity Value $ 18,553.3 766.3 3,524.9 5,901.9 28,560.3 1,791.5 43,789.0 17,132.1 $ 15,002.4

Size
Enterprise Value $ 16,283.9 720.5 3,565.1 5,876.5 24,860.5 1,496.9 42,581.0 15,890.9 $ 13,909.4 NCY Revenue $ 6,065.4 355.8 1,581.0 3,872.6 6,701.4 632.8 9,661.7 7,512.6 $ 4,547.9 NCY EBITDA $ 1,250.9 59.4 294.8 669.0 2,062.9 146.8 2,825.2 1,525.5 $ 1,104.3

Profitability
EBITDA % NCY NCY+1 20.6% 16.7% 18.6% 17.3% 30.8% 23.2% 29.2% 20.3% 22.1% 20.6% 17.3% 18.4% 17.0% 29.9% 24.3% 28.7% 21.0% 22.2%

Growth
Revenue Growth % NCY NCY+1 32.1% 40.8% 25.6% 27.5% 16.9% 18.9% 21.9% 13.0% 24.6% 22.2% 25.3% 18.7% 24.5% 17.7% 15.3% 22.4% 13.0% 19.9%

0.3x 0.2x 0.4x 0.3x 0.1x 0.1x 0.4x 0.5x 0.1x 0.5x 0.3x 0.8x 0.3x 0.3x

0.3x 0.2x 0.4x 0.3x 0.1x 0.1x 0.4x 0.5x 0.1x 0.5x 0.3x 0.7x 0.3x 0.3x

6.6x 7.3x 8.0x 7.6x 5.1x 5.2x 7.6x 3.9x 5.0x 6.2x 6.3x 10.1x 6.5x 6.6x

5.6x 6.2x 6.5x 6.3x 3.2x 3.8x 6.2x 3.5x 4.1x 5.5x 5.2x 7.2x 5.0x 5.2x

7,160.5 200.3 187.0 1,588.2 151.2 513.7 409.8 708.6 3,074.0 254.8 5,018.0 3,256.8 567.1 1,776.2

$ 8,951.9 197.8 174.0 1,803.4 126.9 522.2 429.6 440.9 3,289.3 313.1 6,516.8 2,997.4 425.1 $ 2,014.5

$ 29,243.1 1,058.0 393.7 5,390.1 954.2 5,601.3 1,085.3 833.5 22,481.8 585.2 22,827.4 3,791.8 1,292.7 $ 7,349.1

$ 1,362.6 27.0 21.8 237.7 25.0 101.3 56.8 112.7 661.2 50.6 1,039.7 297.0 65.0 $ 312.2

4.7% 2.6% 5.5% 4.4% 2.6% 1.8% 5.2% 13.5% 2.9% 8.7% 4.6% 7.8% 5.0% 5.3%

5.2% 2.8% 6.2% 4.9% 3.8% 2.3% 5.9% 14.3% 3.3% 8.6% 5.0% 9.7% 5.9% 6.0%

16.9% 14.2% 18.8% 15.9% 20.1% 29.8% 9.5% 55.2% 19.2% 33.6% 20.1% 19.4% 12.5% 21.9%

5.1% 6.9% 11.1% 7.0% 8.3% 8.6% 9.0% 6.7% 9.1% 11.9% 9.8% 13.0% 11.5% 9.1%

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Select Consulting / IT Services M&A Deals

Target Buyer Date
9/29/2011

Value
Undisclosed

Description/Rationale
Optimum is an Oracle Platinum Partner that provides management consulting and
systems implementations services around the Oracle enterprise suite with core strengths in human capital management and business intelligence The acquisition further positions KPMG in the Oracle focused IT services arena and also augments its transformation capabilities

6/28/2011

$95 Million 2.6x Revenue 9.5x EBITDA

OneNeck is a provider of hosted application management and managed IT hosting The acquisition is consistent with TDS strategy to offer clients a robust suite of
offerings, including colocation, managed services, hosting, cloud, and solutions deliver services primarily for ERP applications

6/24/2011

Undisclosed

PRTM provides consulting in the areas of operational strategy, supply chain, product

Provides PwC with significant capabilities in the areas of operational strategy,

execution and business model innovation

development, and customer value management

6/10/2011

$330 million 0.6x Revenue 8.2x EBITDA

Ness Technologies, provides information technology (IT) and business services and The company provides services in software product engineering, system integration,
application development and consulting, and software distribution solutions in North America, Europe, Israel, and India

4/6/2011

$550 million 2.4x Revenue

Headstrong is a global provider of comprehensive consulting and IT services with a This transaction immediately positions Genpact/Headstrong to emerge as the global
leader in domain-led services to the capital markets specialized focus in capital markets and healthcare

4/5/2011

Undisclosed

ISA Consulting specializes in helping companies improve their effectiveness and

efficiency through business performance management, business intelligence and data integration services The acquisition of ISA Consulting is part of a broader strategy to expand Ernst & Youngs presence in the performance management and analytics market

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Select IT Staffing M&A Deals

Target Buyer Date
7/21/2011

Value
$730 Million 0.3x Revenue 10.5x EBITDA Undisclosed

Description/Rationale
The transaction makes Randstad will become the third-largest HR services provider in
North America, doubling its presence in the US and reinforcing its leading position in Canada

4/29/2011

Advantec is a PEO that provides comprehensive employment-related services to its The acquisition propels Oasis to be the third largest PEO in the nation, serving more
than 4,000 clients and 110,000 worksite employees diverse client base

4/26/2011

$37 Million

Clovis is one of the largest staffing and recruiting firms for commercial and
The acquisition enables Eliassen Group to increase its presence to nine locations
across the eastern seaboard government clients in Maryland, Virginia, Delaware and Washington, D.C.

2/3/2011

$90 Million

Allegis Group, which is the largest privately owned staffing company in the world,
acquired London based Aston Carter, which is a finance, IT and consulting firm from Baird Capital Partners Europe

12/30/2010 $200 Million 0.2x Revenue

ZeroChaos, a workforce management firm, was sold in December 2010 by AP Capital

Partners to Snow Phipps Group in a transaction valued at more than $200 million

12/3/2010

Undisclosed

Eliassen Group is an IT staffing firm providing services to clients nationwide, but Riverside Partners is a Boston-based private equity firm with a focus on technology
and healthcare investments

particularly in the Northeast

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