BGL Business Services Insider Aug 17

August 2017
Business Services Brown Gibbons Lang

& Company
Spotlight: Chicago
One Magnificent Mile
The PEO Industry Pulse 980 N. Michigan Avenue
Suite 1880
Professional employer organizations are experiencing rapid growth, Chicago, IL 60611
fueled by a vibrant small business market in need of bundled human
resources solutions, with increased regulatory complexity and Cleveland
One Cleveland Center
emerging technology expected to sustain outsourcing demand. Capital 1375 East 9th Street
is flowing into the sector, driving an active M&A market. Suite 2500
Cleveland, OH 44114
In our spotlight survey, we assess the “state of the market”, exploring

Philadelphia
recent regulatory developments and growth drivers, as well as One Liberty Place
valuation and consolidation trends within the sector. Leading CPEOs 1650 Market Street
Suite 3600
sound off on key issues, including the IRS certification process, Philadelphia, PA 19103
healthcare reform, and the economy in a roundtable forum.
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Spotlight On:
PEO Industry Pulse
The marketplace for PEO services is large and growing, fueled by a vibrant small business market in need of bundled
human resources solutions, with increased regulatory complexity and emerging technology expected to sustain
outsourcing demand. Capital is flowing into the sector and driving an active M&A market.
Large Addressable Market • Insperity (NYSE: NSP) estimates only 4 million of

an addressable market of 71 million employees are
Recent estimates from the National Association of currently served through a co-employment model.
Professional Employer Organizations (NAPEO) size the The company is continuing on a path of double-digit
market at between $136 and $156 billion in gross revenue growth, reporting record results in 2Q 17 with gains of
generated from some 156,000 to 180,000 clients—
12.5 percent and 30 percent in revenue and adjusted
representing less than 3 percent of U.S. employers utilizing
EBITDA for the quarter. Year-to-date, revenue
PEO services—underscoring significant room for increased
increased 11 percent over the 2016 period. This positive
penetration and growth.
momentum builds on 13 percent revenue growth for
Market research firm IBISWorld identifies PEOs as a growth the full year 2016 and 10.3 percent growth forecasted
industry, pegging gross revenue at $168 billion in 2017. The for 2017.
sector saw solid growth, with compound annual growth Commenting on the demand outlook, Goldfield added, “I
in revenues of 8.7 percent between 2012 and 2017 and is believe the pendulum for the PEO construct, which involves
forecasted to grow 2.6 percent annually through 2022. a transfer of liability, is strong right now because of the
changes in the legal and regulatory environment and the
Public industry participants are reporting strong performance: uncertainty. I also believe the market has options as it relates
to technology…as well as exceptional service models.”
• ADP (NasdaqGS: ADP) is reporting outsized growth
in its PEO Services business, ADP TotalSource. In the
Regulatory
company’s F4Q 17 earnings call, ADP reported a
13 percent increase in PEO revenues, outpacing Payroll
Increased regulation of the PEO industry is strengthening
growth of 4 percent. Worksite employees grew by the credibility of existing players and presenting
12 percent to top 462,000 in the same period. ADP is formidable barriers to entry. The enactment of federal
forecasting revenue growth of 11 to 13 percent in its legislation in 2014 through the passage of the Small
PEO business in fiscal 2018. Business Efficiency Act (SBEA) provided a national
• TriNet Group (NYSE: TNET) has achieved a three- industry framework for certification and acceptance.
year revenue CAGR in excess of 20 percent and is
In July 2016, the IRS began accepting applications for
forecasting double-digit growth into 2019. “There’s
the voluntary program for persons to apply to become
plenty of market out there,” TriNet CEO Burton
Certified Professional Employer Organizations (CPEOs).
Goldfield told attendees at the J.P. Morgan Global Key highlights of the new certification program include:
Technology, Media, and Telecom Conference held in
May 2017. “They’re about 3 percent penetrated right • Reporting Requirements: The IRS will provide
now into the bundled HR services business. Within that necessary reporting and recordkeeping rules and
55 million who go to work in those small businesses, procedures, including rules that require the CPEO to
we believe about 27 million are addressable from track and report the “commencement or termination” of
TriNet’s products and services.” a service agreement with a customer.
• Bonding: A CPEO must maintain a $50,000 bond, or,
if greater, a bond in an amount that is equal to five
percent of the CPEO’s federal employment tax liabilities
for the previous year (not to exceed $1 million).
SOURCE: NAPEO, IBISWorld, S&P Capital IQ, PitchBook, Company Filings, and public data.
2
• Annual Audits: A CPEO must prepare and provide the Technology

IRS with annual independent financial statement audits
prepared by a CPA. Technology is both an opportunity and a threat in today’s
rapidly evolving market. PEOs are investing in leading-
• Quarterly CPA Attestations on Employment Taxes:
edge technology, HR specialty software and services, and
A CPEO must provide quarterly assertions to the mobile solutions to increase productivity and profitability
IRS regarding payment of all employment taxes, of operations.
accompanied by an examination level attestation by an
independent CPA with respect to each such assertion. • In April 2017, PrismHR announced it was bringing
• Annual Fee: The CPEO must pay an annual fee of up to in Summit Partners as a new capital partner to fast-
$1,000 per year to be (and remain) certified. track platform expansion. PrismHR is enhancing its
platform and tools to improve the end user experience,
• List of CPEOs will be published: The IRS will publish a
announcing the release of Employee Self Service 2 in
list of all CPEOs, as well as a list of those PEOs whose
June 2017 with more robust data analytics and mobile
certification has been revoked or suspended.
optimization features. The company is converting
• CPEO Sole Liability: The CPEO assumes sole liability for
some on-premises clients into the cloud and converting
the collection and remission of the federal payroll taxes
Summit clients to the Prism platform. Accel-KKR, the
with respect to wages paid by the CPEO to worksite
former majority equity holder, retained a minority
employees.
interest in the company. Since Accel-KKR’s investment,
While opinions from industry executives are mixed PrismHR increased its user base by 94 percent, resulting
concerning the benefits of the new IRS certification, in 50 percent growth in worksite employees.
there is consensus that government backing will provide • Darwin continues to invest in its PEO technology
added credibility and increased awareness to support the platform with mobile-friendly enhancements and
sector’s continued positive growth trajectory. “Obviously,
employee self-service options among key features.
having federal recognition and legislation in place will
add legitimacy to the industry as a whole, and especially • TriNet Group (NYSE: TNET) unveiled in June 2017
to those who choose to get and maintain certification,” its “next generation” HRM solution to track payroll,
observed Brian Fayak, chief executive officer at Nextep and benefits, time and attendance, reporting, and other HR
a participant in our roundtable (Page 15 of Business Services functions in a single, unified platform.
Insider). “That being said, the industry has been around for
• Insperity (NYSE: NSP) announced in its F1Q 17 earnings
over 30 years so the bigger impact will probably be the
call that it will be launching upgrades to its technology
awareness that it is driving across the business community
platform this summer to provide clients with a robust
and specifically the investment community.”
HCM user experience expected to have a “dramatic
CPEOs point to competitive advantages of certification, affect on its mid-market business”.
citing added credibility and the ability to win more • New PEO technology platforms like WorkLogic are
customers. Small PEOs that choose to forego certification entering the market.
may be disadvantaged in competitive situations with
certified firms, said some insiders. “Certified PEOs will try
to use their certification to their advantage as they market
their services…I also believe that PEO brokers and others
who shape public opinion about PEOs will recommend that
companies looking to use PEOs select from the group of
certified PEOs,” commented roundtable contributor John
Allen, president and chief operating officer of G&A Partners.
“As such, being certified is almost a right of passage.”
3
Spotlight On:
PEO Industry Pulse
Similarly, technology is increasingly being used to In February 2017, Atairos increased its equity stake in
solve and eliminate SMB HR services problems through U.S.-based TriNet Group (NYSE: TNET), purchasing the
disruptors such as Justworks and Namely, who are 25.7 percent interest held by General Atlantic, bringing
among a number of new entrants that have attracted its ownership position to approximately 28 percent.
significant amounts of recently raised capital to fund Commenting on the investment, Atairos CEO Michael
expansion. Justworks has raised more than $57 million Angelakis, said, “We believe TriNet is uniquely positioned
to date, including $33 million in a Series C round led by to capture emerging opportunities in the growing PEO
Redpoint Ventures in March 2016, with participation from market and beyond. We look forward to partnering with
Bain Capital Ventures, Thrive Capital, and Index Ventures. TriNet and working with our strategic relationships to help
Justworks’ technology platform serves to automate scale the business further and fuel TriNet’s next phase of
payroll, payments, HR, and benefits administration for growth.” General Atlantic first invested in TriNet in 2005.
small business customers. “With our model, we empower
businesses with accessible, affordable benefits, seamless HR Outsourcing (HROI), the regional PEO platform
payroll, and frictionless compliance,” said Isaac Oates, of Clarion Capital, added on with Fortune Financial in
Justworks’ founder and CEO. December 2015, a move to broaden its footprint which
will now service 25,000 WSEs and over 750 clients in 8
Namely raised $50 million in a Series D financing this states. HROI is considering additional acquisitions, said
January bringing its total funding to more than Clarion Managing Director Jon Haas, commenting on
$168 million. Altimeter Capital Management and Scale the transaction: “The acquisition of Fortune significantly
Venture Partners co-led the January raise with Sequoia augments HROI’s existing PEO operations and provides the
Capital, Matrix Partners, Four Rivers Group, and True combined company with a scalable platform for continued
Ventures among the participating investors. Namely has expansion.”
reportedly been an acquisition target, recently rejecting an
offer from Google, and is on a path to go public, reported National PEOs are looking to increase scale and market
TechCrunch. Calling Namely the “leading HR platform penetration. Private equity-backed Oasis Outsourcing, a
for mid-sized companies everywhere,” Stacey Bishop, platform of Stone Point Capital since 2014, has completed
a partner at Scale Venture Partners, told TechCrunch, four strategic add-ons resulting in double-digit worksite
“They’ve made HR a differentiator for their clients— employee growth. Add-ons include Diversified Human
providing the best possible experience for employers and Resources, previously backed by Caltius Equity Partners, in
employees alike. We are thrilled to partner with Namely as July 2017; CEP, Inc., the controlling shareholder of Fortune
they continue to transform the industry.” Industries, Inc. (OTCMKTS: FDVF) in September 2016, and
A1HR and Doherty Employer Services, in December 2015.
Accelerating Acquisition Activity
Oasis now serves more than 7,500 clients and 230,000
The M&A market continues to remain active as strategics WSEs nationwide, which is up from 4,700 SMBs and
seek acquisitions for new market growth and synergies and 160,000 WSEs at the time of Stone Point’s acquisition. In
private equity funds look to back high-quality companies July 2017, Kelso & Company acquired a significant minority
as platforms to pursue acquisition growth strategies. equity stake in the company. Oasis has a history of private
equity backing, counting HIG Capital, Nautic Capital, and
Financial sponsors continue to be attracted to the sector’s Altaris Capital among its former investors.
secular growth, large addressable market, and tech-
enabled delivery model, with fragmentation presenting the We expect the sector will continue to attract private equity
opportunity to execute buy-and-build platforms. Notable interest in the coming quarters, fueled by a strong capital
recent platform buys include, in 2016, Questco (Parallel49 markets environment and a sense of urgency for funds to
Equity), and in 2015, Progressive Employer Management deploy capital. Sponsors will be in active pursuit of new
Company (Tenex Capital Management) and CoAdvantage platforms and accretive tuck-in acquisitions to accelerate
(Morgan Stanley Private Equity). growth.
4
Spotlight On:
PEO Industry Pulse
Utilizing a roundtable survey comprised of leading CEOs, consultants, and investors in the space, we explore
the value proposition of the PEO model, the PEO industry itself, and the current valuations of PEOs. Recent
regulatory developments and growth drivers, as well as valuation and consolidation trends are examined.
PEO VALUE PROPOSITION
On a scale of 1 to 5 (with 5 being the highest) please rate MOST IMPORTANT LESS IMPORTANT
the importance of each of the following aspects of a PEO’s • Technology • Risk Sharing
value proposition: • Administrative Relief • Unemployment Tax
• HR Services Management
Technology
HR Tools
• Health Insurance • Strategic HR
Payroll
HR Services • Benefits Administration
Risk Management
Workers Compensation Insurance
Health Insurance
Survey findings underscore the growing demand for
Unemployment Tax Management innovative technology in HRO services, with 94 percent of
Payroll Tax Management respondents assigning Technology an importance rating of
Benefits Administration
4 or 5. More than half (52 percent) assigned a rating of 5.
ACA Compliance
Risk Sharing This compares to only 67 percent (4 or 5 rating) and
Administrative Relief 39 percent (5 rating) in our 2015 survey.
Cost
Strategic HR
ACA Compliance fell from a top-ranked PEO service, with
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
only 26 percent of respondents assigning a 5 rating, down
from 50 percent in our 2015 survey.
Indicate the most important aspects of a PEO’s value proposition:

TIME
SAVINGS
INNOVATIVE ONE-STOP
“These are all of highest importance, but the sum is TECHNOLOGY SOLUTION
greater than of all of these parts.” COMPLIANCE
BENEFITS
ADMINISTRATION
TRUST
COST
SAVINGS
5 5
PEO VALUE PROPOSITION

On a scale of 1 to 5 (with 5 being the highest) please rank MOST IMPORTANT LESS IMPORTANT
the following client employee sizes in terms of fitting • 25-50 employees • 200+ employees
within the PEO model:
25 or less
Consistent with our 2015 survey findings, client
employee size of 25-50 was identied as the primary
25 - 50 target PEO market with more than 70 percent of
participant responses (rating of 5), followed by
50 -100 approximately 50 percent for 25 or less.
100 - 200
200+
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
On a scale of 1 to 5 (with 5 being the highest) please MOST IMPORTANT LESS IMPORTANT
rank the desirability of a PEO also offering the following • Reporting • Staffing
additional non-PEO services: • Time and Attendance • Financial Software
• HRIS Tools • Payroll Only
Payroll Only
• ASO
ASO
Recruiting
HRIS Tools HRIS Tools moved up in ranking, receiving a 4 or 5

Staffing rating by 64 percent of executives surveyed. This
Time and Attendance contrasts with only 41 percent 2015.
Labor Management
Reporting
Financial Software
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
What do you believe is the appropriate average The majority (54 percent) of survey respondents
administrative fee for a high-quality PEO service model? believe administrative fees should fall within a range
of $1,000 to $1,250 for high-quality PEOs.
12% 8%
< $1,000
$1,000 to $1,250
27% $1,250 to $1,500
$1,500 +
54%
6 6
Spotlight On:
PEO Industry Pulse
PEO INDUSTRY
Assuming the current penetration of the PEO industry is Executives remain bullish on the PEO model, with a
5-7% of the SMB market, on a scale of 1 - 5 (with 5 being the majority of respondents anticipating continued growth
and market expansion over the next five years. Sixty-
highest) please rank the likelihood that PEO penetration in
nine percent of respondents surveyed believe PEO
the next 5 years can reach the following levels:
penetration could reach 10 percent of the SMB market
(4 or 5 rating), followed by a more optimistic 31 percent
who project as high as 15 percent penetration.
10%
What are the limiters of growth in a largely untapped

15%
market? Survey participants shared their observations:
20%
“PEOs are still too unknown as a business model.”

25%
Over 25%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% “Too many low quality providers holding back growth.
1 2 3 4 5 Large players are still swallowing acquisitions,
causing churn.”
On a scale of 1 to 5 (with 5 being the highest) please rank Survey findings were mixed. While some executives
the significance the new IRS certification will have on the anticipate the new IRS certification will stimulate
awareness and expand industry penetration, others
following:
believe the impact on sales will be limited, particularly
in the short term. The majority concur that the IRS
Industry Penetration certification will not affect the future of ESAC.
Short-Term Sales
“I don’t see a huge impact from CPEO happening.

Long-Term Sales
Most of the high quality operators were already ESAC
certified. I do think it will prevent some lower quality
Market Awareness operators from sticking around.”
ESAC F
uture
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
7 7
PEO INDUSTRY
On a scale of 1 to 5 (with 5 being the highest) please rank HIGHEST LOWER
each of the following PEO markets in terms of further
• Midwest • Florida
penetration opportunity:
• Northeast • California
• Southeast • West
Florida
Southeast (GA, NC, SC, TN, AL)

Florida received the lowest ranking (1 or 2 ranking)
California for a second time by nearly half of participants
surveyed (46 percent). One survey participant
West (OR, WA, UT, CO) characterized the market as “cut-throat”, suggesting
less opportunity for additional penetration.
Texas
Midwest (IL, IN, WI, MI, MO, KY, IA)
Northeast (NY, NJ, CN, MA, PA)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
the importance of each of the following in evaluating a • Functionality • Roadmap
PEO technology platform: • Portal / Website • Company Strength
• Client Interface
Functionality
• Reporting
Cost Effectiveness
Implementation
Client On Boarding
Time and Attendance
Client Interface
User Interface
Roadmap
Company Strength
Reporting
Mobile Access
Portal / Website
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
8 8
Spotlight On:
PEO Industry Pulse
PEO INDUSTRY
On a scale of 1 to 5 (with 5 being the highest) please PrismHR, SaaShr, Oracle/Peoplesoft, and Workday were
rank the quality of each of the following PEO technology among the companies receiving high rankings for their
technology platforms. Heartland/Ovation and Millenium
platforms:
received lower rankings.
PrismHR (HRP)
Darwin
SaaShr
PayPlus
Oracle/PeopleSoft
Workday
Millennium
Heartland / Ovation
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
the significance of each of the following issues that the • Health Insurance Markets • Non-PEO Competition
PEO industry faces: • Regulation • Sustainability of the U.S.
• Technology Economy
• Market Awareness
Regulation
Technology Despite the tepid recovery and growing predictions of a

near-term recession, the health of the U.S. economy was
Workers Compensation Markets
not identified as a key issue by a majority of executives
Heath Care Reform surveyed. Less than 10 percent of respondents
(7 percent) believe it is an issue of high importance
Health Insurance Markets (5 rating), compared to 22 percent in 2015.
Non PEO Competition
(Zenefits, ADP, Paychex, Workday)
Sustainability of U.S. Economy
“The sustainability of the U.S. economy is most
Market Awareness certainly a factor in the short term. While PEOs may
lose revenue on same store sales as in 2009, new
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
business may grow during down economic times
1 2 3 4 5
to offset the loss in existing customer base payroll.
When the economy would rebound, given the client
retention rate within the PEO industry, I believe
subsequent industry revenues will be stronger than
prior to an economic dip.”
9 9
PEO VALUATION
When valuing a PEO, please rate on a scale of 1 to 5 (with 5 MOST IMPORTANT LESS IMPORTANT
being the highest) the importance of each of the following • Client Retention • Historical Growth Rate
factors: • Quality of Client Portfolio • Geographic Locations
Size
• Average Gross Profit per • Industries Served
Historical Growth Rate WSE
• Average WSE Wage
Future Growth Potenal • Quality of Earnings
Earnings
• Risk Management
• Earnings
Quality of Earnings
Quality of Client Porolio • Management Team
Industries Served
• Productivity of Sales
Client Retenon
Engine
Geographic Locaons
Management Team
Producvity of Sales Engine
Quality of HR Services • Clients (client retention and quality of book)
Technology Plaorm moved up in ranking above financial measures.*
Risk Management
WC Program
• Earnings quality was identified as the primary
Health Insurance Program financial measure in valuation. Gross profit and
Average WSE Wage margin (per WSE and FTE) and EBITDA size and
Average Administrave Fee per WSE trajectory were frequently cited as key metrics.
Average Gross Profit per WSE
• Growth, growth, growth! Future growth continues
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
to outweigh historical performance.
1 2 3 4 5
• Management remains essential to the value

equation, supported by an effective sales
organization.
• The sales engine is a critical driver of growth.
*Combined 4 and 5 ratings.
For a high quality PEO, please indicate the appropriate Administrative fees are the core component of
% of Gross Profit that each of the following components profitability for leading PEOs. Nearly 90 percent of
should represent: company executives expect admin fees to account for
50 percent or more of PEO gross profit.
Admin Fees
Workers Comp
10% or less
25-50%
SUTA 50-75%
75-100%
Other
Commissions
Other
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
10 10
Spotlight On:
PEO Industry Pulse
PEO VALUATION
For each of the following hypothetical PEOs, please select the appropriate adjusted EBITDA multiple
for valuation purposes:
PEO Valuation Metrics

Size 5,000 WSEs 10,000 WSEs 50,000 WSEs 100,000 WSEs
Annual Growth 0% 5% 10% 15%
Average Administrative Fee per WSE $750 $1,000 $1,250 $750
Average Gross Profit per WSE $1,000 $1,200 $1,500 $1,200
Average EBITDA per WSE $300 $400 $500 $400
0% 0%
6% 5% 5%
5-6x 11%
11% 11%
7-8x 18% 32%
8-9x 5-6x
44% 5-6x
7-8x
47%
7-8x
9-10x 8-9x
8-9x
21% 21%
10x+ 9-10x
44%
9-10x
76%
32% 16%
5-6x 7-9x 8-10x+ 9-10x+
Size matters according to PEO executives surveyed, illustrated by these valuation ranges. Insiders point to lower
valuations for small PEOs, citing EBITDA multiples below 5x (3x-4x).
Historical Valuation Trends
EBITDA Multiple
Valuations have moderated 18.0x
but still remain at historical 16.0x

16.2x
high levels. Median Value

15.4x
15.1x
14.0x
14.8x
5-year: 13.9x
14.7x
14.5x
14.4x
14.1x
14.0x
14.0x
13.9x
13.9x
13.6x
The LTM median composite

13.2x
13.1x
13.0x
13.0x
12.0x
12.5x
10-year: 11.6x
12.3x
11.9x
of 14.6x exceeds the median

11.6x
11.6x
11.5x
11.4x
11.3x
11.3x
11.1x
11.0x
10.0x
10.5x
10.5x
value over the last 5 years

10.2x
9.6x
9.4x
9.1x
9.0x
8.0x
(13.9x) and 10 years (11.6x).
8.3x
8.2x
8.1x
7.9x
6.0x
6.9x
6.6x
5.7x
4.0x
2.0x
0.0x
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
*Median Values
BGL PEO Composite Index: ADP, BBSI, NSP, TNET, PAYX
Source: S&P Capital IQ.
11 11
PEO VALUATION
Please indicate the appropriate EBITDA multiple valuation Survey findings revealed significant variability. The valuation
range for the following PEOs in the current market: range of 8-10x received the highest number of responses,
which challenges current public market valuations.
EBITDA Multiples of Public PEOs
20.2x
ADP ADP 19.4x
17.7x
14.8x
Paychex
Paychex 14.3x
13.4x
6-8x
LTM
8-10x 13.5x
Insperity
Insperity 10.6x 2017E
10-12x
9.2x
2018E
12x+
Barrett Business Services 14.0x
Barrett Business Services NA0.0x
NA
0.0x
TriNet 14.6x
TriNet 14.5x
12.8x
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
NA: Denotes data not available for forecast period.

As of 8/1/2017.
Relative Valuation Trends
20.0x
The PEO value proposition

16.0x
is observed in public market
valuations, which for high-
EBITDA Multiple
quality PEOs, have risen to 12.0x

historic levels.
8.0x
4.0x
0.0x
4Q 14 1Q 15 2Q 15 3Q 15 4Q 15 1Q 16 2Q 16 3Q 16 4Q 16 1Q 17 2Q 17
ADP 15.2x 14.6x 13.1x 15.7x 16.4x 17.2x 16.9x 15.3x 17.2x 16.5x 16.2x
Paychex 14.4x 15.3x 14.4x 14.0x 15.3x 15.5x 16.7x 15.9x 16.5x 15.6x 14.7x
TriNet 15.3x 17.5x 13.3x 10.6x 13.9x 10.2x 15.4x 13.9x 14.4x 14.7x 14.1x
Insperity 9.8x 14.9x 12.2x 9.8x 9.9x 8.9x 13.0x 12.3x 12.0x 14.0x 10.8x
Barrett Business Services NM NM NM NM 8.3x 5.6x 7.7x 10.8x 12.2x 10.7x 14.5x
*Post-TriNet IPO
12 12
Spotlight On:
PEO Industry Pulse
PEO VALUATION
Please rate on a scale of 1 to 5 (with 5 being the highest) New investors are entering the industry with significant capital
the factors below that have driven the increase in PEO to fund organic and inorganic growth, which has contributed to
multiple expansion. More than 80 percent (rating of 4 or 5) of
valuations over the past two years:
surveyed executives attribute the rise in PEO valuations to recent
investor interest in the sector.
Public PEOs are being rewarded with lofty valuations, with multiples
Improvement in U.S. Economy at or near historic highs, another driver behind current valuation
trends.
Investor Interest in Sector
Healthcare Reform
Performance of Leading PEOs
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
1 2 3 4 5
Over the next 12 months, do you believe that PEO While insiders maintain an optimistic outlook, they have tempered
valuations will: their value expectations. Sixty-five percent of companies surveyed
expect valuations will rise over the next 12 months, which is down
100% from 79 percent in our 2015 survey. Less than 20 percent expect
90%
valuations to decline.
80%
70%
60%
50% Yes
No
40%
30%
20%
10%
0%
Remain at the Same Level Increase Decline
13 13
PEO VALUATION
SELECTED INVESTMENT ACTIVITY INVOLVING PEOS
DATE TARGET ACQUIRER DEAL STATS
Jul-17 Minority equity stake
Jul-17
May-17
Enterprise Value (EV): $1.99B*

Feb-17 EV/EBITDA: 13.1x
*25.7 percent stake
Feb-17
Jan-17
CEP, Inc.
Enterprise Value (EV): $32.2M
Sep-16 EV/EBITDA: 5.8x
Enterprise Value (EV): $15M

Aug-16 EV/EBITDA: 4.3x
Jul-16
Jul-16
May-16
Dec-15
Dec-15
Dec-15
Oct-15

Oct-15
EV/EBITDA: 10.0x

Sep-15 EV/EBITDA: 7.5x
SOURCE: S&P Capital IQ, PitchBook, Company Filings, and public data.
14 14
Spotlight On:
PEO Industry Pulse
profile
JOHN
ALLEN
Founded in 1995, Houston-based G&A Partners is a full-service CPEO offering a comprehensive
suite of outsourced HR solutions, including HR support, risk management, and recruitment; benefits
administration; and payroll, including time and attendance, payroll processing, and reporting.
John Allen is a co-founder and serves as President and COO responsible for overseeing daily
operations of the company and is heavily involved in the strategic outlook and growth of the firm.
BRIAN
FAYAK
Brian Fayak founded Nextep in 1997 “with a dream of doing it differently”, leaving behind a
successful career at Staff Leasing, a publicly-traded PEO. The Oklahoma City-based CPEO offers
a comprehensive suite of human resources services including HR, benefits, payroll, and risk and
compliance, focusing on small and medium-sized businesses. Nextep was among the first to achieve
Certified PEO recognition from the IRS.
“My goal was to give my clients the best of both worlds: the benefits and state-of-the-art technology that large companies have
to offer, and the personal service and flexibility that smaller companies deliver. We’ve grown over the years, and we’ll continue
to grow, but I’ve never lost sight of that dream. It’s still what I’m passionate about today.”
BRUCE
LEON
Tandem HR, a Chicago-based CPEO, offers customized solutions associated with human resources,
benefits, payroll, tax administration, regulatory compliance, and risk management to businesses of all
sizes. Bruce Leon is the founder and CEO of Tandem HR, started in 1998, along with sister companies
Benefits Solutions Group (1997) and Alliance Workplace Solutions (2006). His professional career in
human resources spans more than 25 years.
“As Tandem HR is about to celebrate its 20th anniversary in the PEO industry, we are very humbled and honored to be one of
the first few PEOs to be certified by the IRS.”
15 15
PEO Industry Pulse

roundtable
Q What impact will the new IRS certification program have Leon, Tandem HR. The advantages are (1) credibility, (2) succession
on industry penetration? in taxation, and (3) credibility. The disadvantages to those not
certified will be (1) credibility, (2) credibility, and (3) credibility!
Allen, G&A Partners. I think the common belief is that the IRS
certification will in some way legitimize the industry and allow us Allen, G&A Partners. I’m not sure if certified PEOs will have much
to increase market penetration. However, the verification in and of of an advantage. All PEOs will be able to point to the fact that the
itself will do nothing. It will only matter if NAPEO and participating federal government recognizes PEOs, regardless of certification,
PEOs get the word out. The IRS will do nothing to promote our brand. so a small business should not be concerned about regulatory
We have to do that and use the certification as a way to convince approval. I do believe that the certified PEOs will try to use their
a skeptical business world that what we do has real value and the certification to their advantage as they market their services,
backing of federal and state governments. especially in competitive situations with non-certified firms. I also
believe that PEO brokers and others who shape public opinion
Fayak, Nextep. We believe that it will have a material impact on about PEOs will recommend that companies looking to use PEOs
the growth and penetration of our industry. That was one of the select from the group of certified PEOs. As such, being certified
primary reasons why we decided to be one of the trail blazers to get is almost a right of passage. It gets you on a list of “approved”
certified first. Obviously, having federal recognition and legislation vendors, but does nothing to make your organization “best in
in place will add credibility and legitimacy to the industry as a class.”
whole, and especially to those who choose to get and maintain
certification. That being said, the industry has been around for over Q What will be the short-term sales impact for PEOs that
30 years so the bigger impact will probably be the awareness that receive certification versus those that don’t?
it is driving across the business community and specifically the
investment community. The combined effect of added credibility Leon, Tandem HR. We are seeing larger sales. We had 7 new deals in
and awareness should drive new growth for all of us. 2017 of over 100 employees.
Leon, Tandem HR. I believe that while the actual benefits are Allen, G&A Partners. I expect little short-term impact. We were one
limited, the recognition by the IRS gives the PEO industry that final of the first PEOs certified by the IRS. We issued a press release
acceptance that makes our solution not just credible, but preferred. announcing our certification. I’m not aware of a single telephone call
We have had record sales so far in 2017. we received from a client, prospect, or trusted advisor as a result.
Over time, I would imagine that the certification may give us a leg
Q What key advantages will CPEOs have once certified, and up on local competitors who are not certified. More importantly,
what disadvantages will those that do not get certification our sales associates can point to the certification and the SBEA
be facing? legislation to show that what we do is legitimate and valuable.
Fayak, Nextep. We felt strongly that we needed to be in the first

group of PEOs to get certified because we knew that the publicly
traded PEOs in the industry would also rush to be the first. We also
feel that PEOs that are certified will win more customers than PEOs
that are not certified.
WHAT IMPACT WILL THE NEW IRS The industry has been around for over 30 years so the bigger impact will
CERTIFICATION PROGRAM HAVE ON probably be the awareness that it is driving across the business community
INDUSTRY PENETRATION? and specifically the investment community. The combined effect of added
credibility and awareness should drive new growth for all of us.
- Brian Fayak, Nextep
16
16
roundtable
Q What will be the short-term sales impact for PEOs that Q How will the IRS certification program affect the future
receive certification versus those that don’t? (continued) of ESAC?
Fayak, Nextep. As mentioned in my previous response, the biggest Fayak, Nextep. I cannot speak for my peers in the industry. I can only
impact will be their ability to compete with the group of CPEOs. speak for Nextep, and we plan to remain committed to ESAC and the
While the industry has been around for more than 30 years, there certification program they have diligently worked to provide to our
is still fear, questions, apprehension, and concern around the whole industry for the last 20+ years. We view the combined certification
concept of co-employment. This certification will not erase all of as the gold standard in our industry.
that from the mind of buyers, but it will certainly ease it, and in some
competitive situations where the playing field may otherwise be Leon, Tandem HR. The ESAC question is a large one. We support ESAC
level, being a CPEO or not should be the deciding factor. and have been a founding member for almost 20 years. However,
the value to us is diminished unless they figure out a new value
Q Will the certification be viewed differently by different proposition.
PEO client industry verticals, and if so, which ones?
Allen, G&A Partners. I don’t think IRS certification will impact ESAC
Allen, G&A Partners. Over the years, we have received push back much. The IRS does not guarantee that its certified PEOs will make
from prospects doing business with the federal government. The payroll and meet their obligations. ESAC does. The IRS provides
certification should change that. I would imagine it may change virtually no services to the certified PEO community. ESAC does. In
perceptions in the white collar space too, albeit not too dramatically. my opinion, ESAC certification means far more than IRS certification.
I see little impact to blue and gray collar firms. ESAC just doesn’t have the name recognition that the IRS has and
never will.
Fayak, Nextep. I suppose that all comes down to how the CPEO
chooses to position the certification, but generally speaking, I Q If ObamaCare is repealed, what would the impact be on
believe it will vary more based on persona than industry. Obviously, the PEO industry?
heavily regulated industries such as banking and finance may place
higher importance to the certification than a roofing business in the Leon, Tandem HR. ObamaCare repeal could open up more
construction industry, but there are detail-oriented, compliance- opportunities, but let’s wait and see the details.
minded people in every business and in every industry that are
going to want and need the peace of mind that a CPEO can bring. Allen, G&A Partners. ObamaCare was a big boon to the PEO industry.
It forced businesses to think outside the box and look for new
Leon, Tandem HR. I’d like to think Health Carriers and Workers solutions. Many found the answers they were looking for in the
Compensation will give preferred treatment. We will let you know. product and service offerings of PEOs. If the law is repealed in its
entirety, some businesses will no longer feel compelled to offer
health insurance, and PEOs will lose business. If it is repealed in part
or replaced by something else, then the demand for innovative and
cost-effective solutions may remain. I believe ObamaCare created an
increase in PEO awareness that won’t go away because of changes
or the elimination of the legislation.
WHAT KEY ADVANTAGES WILL CPEOs HAVE ONCE The advantages are (1) credibility, (2) succession in taxation,
CERTIFIED, AND WHAT DISADVANTAGES WILL THOSE and (3) credibility. The disadvantages to those not certified
THAT DO NOT GET CERTIFICATION BE FACING? will be (1) credibility, (2) credibility, and (3) credibility!
- Bruce Leon, Tandem HR
17
PEO Industry Pulse

roundtable
Q If ObamaCare is repealed, what would the impact be on Fayak, Nextep. Well, I am not an economist. I’m an avid consumer
the PEO industry? (continued) of the news and mass media which would be my primary source
for information on this topic. I’m not sure that I would be the most
Fayak, Nextep. It seems that at some level there will be legislative reliable source for an opinion on the future growth of our economy
changes to the Affordable Care Act. The question is, will it be a as a whole, but I can say that our clients are hiring, growing, and
repeal or a revision. The current draft appears to be more of a seem to be optimistic about the near and mid-term outlook of
revision than a repeal, albeit with some significant revisions. All of their businesses. As for a recession, we would definitely feel the
that being said, the reality is the Affordable Care Act, at some level, impact of a lasting recession on our existing book of business. The
will have lasting impacts regardless of any revisions that may occur. combined effect of client attrition and workforce downsizing is hard
More importantly, health care and the process of purchasing and to outrun. That being said, in economic lows businesses are more
managing employer-sponsored benefit programs was confusing and receptive to learn about new ways to help their business run more
painful for the SMB space before ACA, it is confusing and painful cost effectively, more efficiently, and to help improve employee
after ACA, and it will continue to be confusing and painful for many productivity and engagement. In a moderate recession, PEOs have a
years to come. ObamaCare or no ObamaCare, health insurance is better chance than not to maintain or shrink only slightly.
one piece of a very robust value proposition that a CPEO provides.
At the end of the day, we make the complex, confusing, and Leon, Tandem HR. I’d like to think we will see slower but still positive
sometimes painful process of being an employer simple. growth through all of 2018. Then we could have a minor hiccup.
Either way, with only 4 percent penetration of PEOs in small to
Q How much longer do you believe growth in the U.S. mid-sized businesses in the Midwest, and a projected market of
economy will continue, and what impact do you think a mild 25 percent or more, I believe we will do well whichever way the
recession would have on the PEO industry? market moves.
Allen, G&A Partners. Houston went through its own recession

about two years ago when the price of oil plummeted. We are not
anxious to see the national economy falter, but it inevitably will.
That’s just the way it works. The question is when, right? The new
administration is certainly pro-business and will do all in their power
to light a fire in an economy that has never fully recovered. In my
opinion, the economy has been dragging for some time, and the
stock market has risen to record heights based on the expectation
that at some point the economy would really take off. I’d like to think
the economy will have a spurt before the next recession, but I am
uncertain and not particularly bullish. That said, we are aggressively
growing our business through organic sales and strategic
acquisitions, so we are banking on at least a stable economy over
the next four years.
IF OBAMACARE IS REPEALED, WHAT I believe ObamaCare created an increase in PEO awareness that won’t go
WOULD THE IMPACT BE ON THE PEO away because of changes or the elimination of the legislation.
INDUSTRY?
- John Allen, G&A Partners
18
18
Overall M&A Activity
Mergers & Acquisitions Activity
Middle Market M&A Activity Private Equity Transaction Activity

Transaction Count by Deal Size
800 $80 3,500
Transaction Value ($ in billions)

700 $70 3,000
Number of Transactions
70
600 $60
68
73
2,500
77
69
61
60
79
53
500 $50
82
77
51
54
2,000
60
53
63
355
44
63
68
63
49
400 $40
46
328
334
58
43
305
66
63
307
54
67
53
310
283
50
39
270
59
61
58
65
255
1,500
286
258
40
271
62
42
248
261
239
36
55
300 $30
161 42
234
230
268
233
226
227
240
211
233
211
214
234
188
219
222
145 32
208
204
207
214
197
1,000
114 113 19
176
207
120 26
96 111 35
207
200 $20
168
191
58 91 19
250
240
235
232
231
228
228
227
500
217
210
100 $10
199
199
192
189
183
176
166
164
163
161
161
160
156
154
151
148
148
147
145
141
141
137
134
132
131
125
122
120
119
107
106
100
97
0 $0 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017* 1H 1H
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2 2016 2017
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Under $25M $25M-$100M $100M-$500M $500M-$1B $1B-$2.5B $2.5B+
$25M-$50M $50M-$250M $250M-$500M Trans Value
Based on announced deals, where the primary location of the target is in the United States. NOTE: Buyout activity only
Middle market enterprise values between $25 million and $500 million. SOURCE: S&P Capital IQ. *Through June 30, 2017 SOURCE: PitchBook.
Trends in Valuation
Transactions with Strategic Buyers Transactions with Financial Buyers
12.0x 12.0x
11.0x 11.0x
11.4x
EBITDA Multiple
10.0x 10.0x
10.3x
EBITDA Multiple
10.2x
10.1x
10.1x
10.0x
9.9x
9.9x
9.9x
9.9x
9.8x
9.8x
9.7x
9.7x
9.0x
9.5x
9.0x
9.5x
9.4x
9.4x
9.4x
9.2x
9.2x
9.1x
9.1x
9.1x
9.1x
8.9x
8.7x
8.7x
8.7x
8.7x
8.7x
8.7x
8.6x
8.5x
8.5x
8.0x
8.5x
8.0x
8.5x
8.4x
8.3x
8.2x
8.2x
8.2x
8.2x
8.2x
8.1x
8.0x
8.0x
8.0x
7.7x
7.7x
7.7x
7.6x
7.6x
7.6x
7.5x
7.0x 7.0x
7.4x
7.4x
7.2x
7.1x
7.0x
6.8x
6.6x
6.5x
6.0x 6.0x
6.3x
NA*
NA*
NA*
NA*
NA*
NA*
NA*
NA*
5.0x 5.0x
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17
<$250 million $250-$499 million $500 million+ <$250 million $250-$499 million $500 million+
*NA: Data not reported due to limited number of observations for period. SOURCE: Standard & Poors LCD. *NA: Data not reported due to limited number of observations for period.
Acquisition Financing Trends

Total Leverage Equity Contribution
6.0x
55%
5.4x
5.0x
50% 51%
4.8x 4.7x 4.8x 4.7x 4.8x
4.7x
Equity Contribution (%)
4.5x
Total Debt to EBITDA
4.0x 4.3x 47%

4.1x 4.1x 45% 46%
3.6x 43% 44%
3.0x 42%
40% 41%
40% 40%
38%
2.0x 37%
35%
35%
1.0x 30%
0.0x 25%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Jun-17
Middle market enterprise values between $25 million and $500 million. SOURCE: Standard & Poors LCD. Middle market enterprise values between $25 million and $500 million. SOURCE: Standard & Poors LCD.
19
Business Services M&A Activity
PROFESSIONAL EMPLOYER ORGANIZATIONS AND In January 2017, Asure Software (NasdaqCM: ASUR)
HUMAN RESOURCES OUTSOURCING completed the acquisition of Personnel Management
Systems, Inc. (PMSI), a Seattle-based PEO serving the
In May 2017, Avitus Group completed the acquisition of
SMB market. The company operates a full-service HR
The Growth Company, a provider of human resources,
outsourcing model offering solutions in the following areas:
training, and organizational strategy services serving
employment, group benefits, management resources,
Alaska and the Pacific Northwest. The company services
policy and procedures, HR administration, wage and salary
more than 3,500 organizations across diverse industries.
issues, employee relations, training and development,
The Growth Company was founded in 1978. “This merger
safety and drug programs, and recruiting. PMSI is one of the
adds The Growth Company’s extensive experience in
largest providers of HR services in the Pacific Northwest.
human resources to Avitus Group’s suite of professional
Commenting on the transaction, Asure Software CEO Pat
business services,” said Avitus CEO Willie Chrans. “It’s
Goepel, said, “PMSI enhances our software and service
strength adding to strength, which helps our clients, the
offering, and with their expertise, we will successfully roll
business community, and the overall economy in Alaska
this service out nationwide. By adding a valued service such
and beyond.” The transaction follows the purchase of
as HR Outsourcing for small to medium sized companies,
HRnovations in July 2016, based in Washington State,
we are positioning Asure for important growth and
which expanded Avitus’ West Coast presence.
expansion, which will be accretive to our P&L.”
In February 2017, Atairos acquired a 25.7 percent equity BGL’s Business Services team served as the exclusive
stake in TriNet Group (NYSE: TNET) for $442.3 million, financial advisor to PMSI in the transaction.
equating to an implied enterprise value multiple of
EBITDA of 13.1x. Atairos CEO Michael Angelakis joined In July 2017, Oasis Outsourcing acquired DHR Services
TriNet’s Board of Directors in connection with the Holdings, LLC from Caltius Equity Partners, a move
transaction. The ownership stake represents the remaining to expand its geographic reach in the Western U.S.
interest held by General Atlantic, which first invested in Caltius exited its seven-year investment in the sale. DHR
TriNet in 2005, bringing Atairos’ ownership position to represents the fourth add-on for Oasis in the last two
28.3 percent. years. Oasis was acquired Stone Point Capital in 2014,
with participation from management.
Historical Business Services M&A Activity

Quarterly M&A Activity by Sector
60
Number of Transactions
45
30
15
0
4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
2011 2012 2013 2014 2015 2016 2017
PEO Payroll Benefits Administration HR Technology Staffing
Based on announced deals, where the primary location of the target is in the United States.
Source: S&P Capital IQ, mergermarket, PitchBook, and BGL Research.
SOURCE: S&P Capital IQ, PitchBook, Equity Research, Company Filings, and public data.
20
The transaction follows the September 2016 purchase with them to expand Artech’s regional footprint. We are
of CEP, Inc., the controlling shareholder of Fortune excited about the potential to offer the Tech-Pro team’s
Industries, Inc. (OTCMKTS: FDVF). Brentwood, skills and capabilities in IT solutions, Staffing, and MSP/
Tennessee-based Fortune Industries is comprised of three VMS relationships to our clients.” New Jersey-based
companies: Century II located in Tennessee; Employer Artech provides workforce solutions, IT consulting, and
Solutions, with offices in Arizona, Colorado, and Utah; SOW-project services. The company employs more than
and Professional Staff Management located in Indiana. 7,200 professionals from over 25 locations across the
The businesses provide human resource consulting and United States, India, and China.
management, employee training and development, workers
compensation and risk management, payroll, and benefits PAYROLL & PAYROLL PROCESSING
administration services to more than 600 small- and
medium-sized businesses in 47 states. The transaction In January 2017, Asure Software (NasdaqCM: ASUR)
adds more than 14,000 worksite employees to the Oasis completed the purchase of Payroll Specialties NW, Inc.
platform. (PSNW), a move to expand its footprint in the Northwest
U.S. The transaction was valued at $3.46 million. Eugene,
Commenting on the transaction, Oasis CEO Mark Perlberg, Oregon-based PSNW is a provider of Asure’s human capital
said: “The addition of Fortune Industries to the Oasis family management (HCM) solution to small- and mid-sized
continues our trend of strategic acquisitions as part of our businesses in the region. As part of a larger organization,
growth strategy. The inclusion of Century II, Professional PSNW clients will benefit from Asure’s comprehensive
Staff Management, and Employer Solutions Group is suite of products, including HCM software, Time & Labor
significant in Oasis’ strategy to increase our geographic Management, and Agile Workplace solution. Asure Software
footprint and cost-efficient client offerings. This acquisition CEO Pat Goepel commented on the transaction: “We are
also gives us the opportunity to welcome an experienced delighted to be adding PSNW as an extension of Asure
and talented team of Fortune Industries professionals to Software. We are also excited to have PSNW President
the Oasis organization.” Shawn Gregg to continue as a business development leader
at Asure, helping to grow and acquire Service Bureau
BGL’s Business Services team served as the exclusive Organizations to sell our leading HCM solution. With this
financial advisor to Fortune Industries in the transaction. acquisition, we look to leverage PSNW’s small business
experience and solution nationally, which we believe will be
STAFFING accretive to our overall earnings.” Transaction Multiple: 2.1x
Revenue
In January 2017, Artech Information Systems acquired
information technology solutions provider Tech-Pro, In December 2016, Strategy Execution Partners, LLC and
located in Minneapolis, Minnesota, a move that will expand OAE Software, LLC (d/b/a StratEx) received a minority
its service footprint in the Midwest. Tech-Pro provides IT, investment from Halyard Capital to accelerate expansion
engineering, and business strategy support to clients that initiatives. StratEx provides HCM software solutions for
include start-up businesses to Fortune 1000 organizations. small and mid-sized businesses to manage their HR needs,
The company employs 295 people. from applicant tracking and time and attendance to
payroll, benefits, and performance management. Many of
Artech CEO, Ranjini Poddar commented on the partnership: StratEx’s customers are in the restaurant, hospitality, and
“We are extremely excited to welcome the Tech-Pro team retail industries. “We’re going to aggressively grow,” said
to Artech. With over 26 years of experience in the staffing StratEx CEO Adam Ochstein, in a Crain’s interview. “We
industry, the Tech-Pro team is sure to have a positive have about a dozen sales reps. I want to grow the sales
impact on our clients and consultants.” Ajay Poddar, team, development team, and service team.” The company
Artech’s Executive Vice President, added, “We are pleased has experienced rapid growth since its inception in 2005,
to have an experienced management and delivery team doubling its employee base to about 90 in 2016 and expects
in the Twin Cities region and look forward to working to exceed 150 in the next 12 months, Crain’s reported.
21
Jonathan Barnes, Partner of Halyard Capital, commented, offer one unified platform that delivers on employers’ HR
“This investment is reflective of Halyard’s continued focus transactional needs as well as their strategic employee
on opportunities in the HCM space. In StratEx, we found a engagement initiatives,” said Todd Tyler. “We look forward
business with a proprietary platform that provides a broad to working with Cary and the talented cfactor Works
suite of SaaS-based applications that help automate and team to leverage the complementary strengths of our
streamline the HCM workflow in a regulatory-compliant organizations.”
fashion. The company is quickly gaining market share, and
we hope to accelerate its growth with additional investment “With Vibe products, cfactor has approached the HCM
in products, capabilities, and people.” space from the perspective of developing easy-to-use
HR technology designed to uniquely engage, enhance
HR TECHNOLOGY productivity, and deliver value to each and every
employee,” said Schuler. “We are excited about the
In May 2017, Asure Software (NasdaqCM: ASUR) opportunity joining forces with ECI presents to set a new
acquired iSystems from Silver Oak Services Partners standard with a highly differentiated technology solution for
in a transaction valued at $76.7 million. The buy adds a the HCM marketplace.”
leader in HCM technology and will expand Asure’s Service
Bureau community. Through its platform Evolution HCM, In April 2017, Summit Partners acquired a majority stake in
South Burlington, Vermont-based iSystems provides PrismHR, a provider of HCM software for small and medium-
payroll, tax management, and HR software combined with sized businesses. Accel-KKR, an investor since 2014, will
comprehensive back-end service bureau tools to more retain a minority equity stake in the company. PrismHR
than 75,000 companies and 1.5 million end users across supplies professional employer organizations (PEOs)
the U.S. and administrative service organizations (ASOs) with
SaaS solutions for applicant tracking, mobile capabilities,
“We are continuing to compete in a much larger benefits enrollment, integrated time support, and enhanced
market. With the acquisition of iSystems, our strategy extensibility, servicing more than 80,000 organizations.
of partnering with the customer base of service bureau Under Accel-KKR’s ownership, PrismHR experienced a
organizations and helping them grow continues,” said nearly three-fold increase in both revenue and employee
Asure Software CEO Pat Goepel. “By scaling with Asure count, with annual revenue growing by 59 percent in 2016.
we will be able to offer the iSystems client base an PrismHR CEO Gary Noke said he can “see a straight path
exceptional experience, with an innovative approach past $100 million in revenue”, reported Axios. PrismHR’s
to human capital management. We see this acquisition current run rate exceeds $35 million, according to Axios, up
accretive to our overall P&L.” Transaction Multiples: 6.0x from $7 million in 2014.
Revenue and 96.6x EBITDA
“As the human resources function increases in complexity,
In May 2017, SaaS payroll and HR provider Electronic the demand from small and medium-sized businesses for
Commerce Inc. (ECI) acquired cfactor Works Inc. outsourced HR solutions continues to grow,” said Noke.
renaming the combined business Vibe HCM. The “PrismHR offers one of the most extensive and flexible
acquisition of cfactor’s platform Vibe HCM is expected to platforms available to HROs. Our partnership with Summit
create an end-to-end human capital management solution will enable us to accelerate the development and expansion
for middle-market businesses as well as a growing roster of this platform to meet the growing demands of our clients
of enterprise-level customers, the company said. and their end customers.”
Todd Tyler of ECI will lead Vibe HCM as CEO and Cary “PrismHR’s recent growth has been remarkable, and we
Schuler, founder and CEO of cfactor Works, will serve in believe the company is well positioned to continue this
the role of senior vice president of marketing. impressive trend,” said Scott Collins, Managing Director at
Summit Partners. “The company’s cloud-based software
“Combining ECI and cfactor Works is exciting news for allows HROs to service their small and medium-sized
the HCM marketplace because Vibe HCM will be able to
22
customers with a more seamless, sophisticated solution— In December 2016, Mercer LLC, a subsidiary of Marsh &
and positions PrismHR to capitalize on the tremendous McLennan Companies (NYSE: MMC), acquired Thomsons
opportunity in human resources technology and services.” Online Benefits Limited, a provider of SaaS-based
employee benefits and employee engagement software.
BENEFITS ADMINISTRATION The company’s Darwin™ platform, which has over 1 million
users worldwide, provides solutions for employee benefits
In May 2017, The Blackstone Group L.P. (NYSE: BX)
design, broking, communications, and administration
completed the acquisition of Aon plc’s (NYSE:AON)
services including employee engagement, managing risk,
technology-enabled benefits and human resources
controlling costs, and streamlining benefits administration.
platform for $4.8 billion, comprised of $4.3 billion in
cash and $500 million in an earnout contingent on
“The combination of Thomsons’ Darwin™ technology with
future performance. Business lines include benefits
Mercer aligns to the growing demand from multinational
administration, HRO administration, and cloud services.
employers to offer a common yet locally tailored employee
The benefits administration platform is one of the largest
benefits platform that delivers the latest in creative
in the United States, serving approximately 15 percent of
engagement, modern design, analytic insights, and
the U.S. workforce across more than 1,400 companies.
administrative efficiency and support,” said Julio Portalatin,
By the numbers, it is reported to be the largest provider
President and CEO of Mercer. “The acquisition also drives
in the large-enterprise market for health and welfare and
future growth in local markets across the world where
defined benefits administration, and in the top three for
Thomsons and Mercer are already well established by
defined contribution, according to ISG estimates. The HR
putting technology at the heart of addressing employer and
Outsourcing business includes nearly 40 large enterprise
employee needs.”
clients and 1.6 million employees, which are supported on
ERP platforms (35 percent) and SaaS technologies (65
Thomsons was backed by ABRY Partners and Veronis
percent), ISG reported.
Suhler Stevenson, which acquired the company in 2013.
Commenting on the investment, Peter Wallace, a Senior

In November 2016, Marsh & McLennan Agency LLC (MMA)
Managing Director at Blackstone, said, “We are excited to
completed the acquisition of Benefits Resource Group. The
acquire a world-class leader of scale in health, retirement,
Independence, Ohio-based employee benefits consulting
and HR services, providing critical human resources and
firm offers medical, life, and disability insurance to midsize
benefits administration services to millions of employees
employers in Ohio. MMA is the middle market agency
and their families throughout the United States and
subsidiary of Marsh & McLennan Companies (NYSE: MMC).
Canada. Blackstone sees tremendous opportunity for
investing in leading businesses within the technology-
“Benefits Resource Group’s talented and experienced
enabled services sector, where we believe there is a
employee benefits professionals are a welcome addition
significant opportunity to accelerate future growth. We
to MMA’s Midwest region,” said Jeff Lightner, president
look forward to working with the excellent management
and CEO of MMA-Midwest. “With BRG, we enhance our
team to continue to invest in and grow the company.”
employee benefits presence and leadership in the Ohio
market.”
Blackstone Managing Director David Kestnbaum, added,
“Through this investment and partnership, we will
seek to leverage our global relationships, operational
support, and strong capital base to accelerate growth
in the business. We are pleased to invest in this market
leading business that provides an important suite of
services to a broad range of blue-chip clients. Our focus
will be on ensuring continued delivery of best-in-class
services to clients, while also innovating new service lines
and strategies to expand the company’s capabilities.”
Transaction Multiples: 2.1x Revenue and 12.1x EBITDA
23
Industry Valuations
Professional Employer Organizations Payroll & Payroll Processing

20.0x 2.5x
20.0x 7.0x
16.0x 2.0x
16.0x 6.0x
12.0x 1.5x
12.0x 5.0x
8.0x 1.0x
8.0x 4.0x
4.0x 0.5x
4.0x 3.0x
0.0x 0.0x 0.0x 2.0x

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
12 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17 12 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17
EV/EBITDA 11.9x 11.4x 12.5x 13.0x 14.1x 16.2x 14.0x 13.6x 14.0x 14.8x 15.1x 13.2x 12.3x 13.9x 10.2x 15.4x 13.9x 14.4x 14.7x 14.5x EV/EBITDA 12.2x 11.5x 12.8x 12.8x 14.0x 15.5x 14.7x 13.8x 15.8x 15.2x 15.3x 15.5x 15.7x 17.6x 18.3x 18.5x 19.4x 17.2x 16.5x 16.2x
EV/Revenue 1.5x 1.6x 1.8x 1.8x 2.0x 2.4x 1.3x 1.2x 1.1x 1.3x 1.3x 0.9x 0.6x 0.7x 0.5x 0.6x 0.6x 0.7x 0.7x 0.8x
EV/Revenue 4.1x 4.2x 4.6x 3.7x 4.2x 5.0x 5.1x 4.7x 5.2x 5.5x 5.7x 6.0x 5.6x 6.0x 6.2x 6.0x 6.0x 6.3x 6.2x 6.4x
Beneﬁts Administration HR Technology

16.0x 5.0x 28.0x 9.0x
24.0x
4.0x
12.0x 7.0x
20.0x
3.0x
8.0x 16.0x 5.0x
2.0x
12.0x
4.0x 3.0x
1.0x
8.0x
4.0x 1.0x
0.0x 0.0x Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
12 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17 12 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17
EV/Revenue 2.1x 2.1x 2.0x 2.1x 2.5x 2.6x 2.6x 2.6x 2.6x 2.7x 2.8x 2.8x 2.6x 2.9x 2.9x 3.4x 3.5x 3.0x 2.7x 3.5x EV/Revenue 4.0x 4.6x 4.8x 4.6x 7.4x 7.4x 6.2x 5.3x 4.9x 6.2x 5.4x 5.2x 4.8x 5.3x 4.9x 5.3x 5.6x 4.7x 5.1x 5.1x
Stafﬁng Insurance Brokerage

15.0x 1.0x 15.0x 3.5x
3.0x
12.0x 0.8x 12.0x
2.5x
9.0x 0.6x 9.0x

2.0x
1.5x
6.0x 0.4x 6.0x
1.0x
3.0x 0.2x 3.0x

0.5x
0.0x 0.0x 0.0x 0.0x

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
12 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17 12 12 13 13 13 13 14 14 14 14 15 15 15 15 16 16 16 16 17 17
EV/Revenue 0.5x 0.5x 0.6x 0.6x 0.7x 0.7x 0.7x 0.7x 0.6x 0.6x 0.6x 0.7x 0.6x 0.7x 0.6x 0.5x 0.5x 0.6x 0.6x 0.6x EV/Revenue 1.8x 1.9x 2.0x 2.1x 2.3x 2.4x 2.4x 2.5x 2.4x 2.5x 2.4x 2.6x 2.4x 2.5x 2.9x 3.1x 3.0x 2.9x 3.2x 3.4x
BGL Business Services indices defined on Page 19.

SOURCE: S&P Capital IQ.
24
Industry Valuations
($ in millions, except per share data) Current % of Market Enterprise Enterprise Value / TTM Total Debt/ TTM TTM Margins
Company Name Country Ticker Stock Price (1) 52W High Capitalization (2) Value (3) Revenue EBITDA EBITDA Revenue Gross EBITDA
STAFFING
Adecco Group AG Switzerland SWX: ADEN $76.35 94.6% $13,001.5 $13,921.0 0.5x 10.2x 1.7x $24,707.0 18.8% 5.3%
ManpowerGroup Inc. United States NYSE: MAN 106.49 89.0% 7,143.2 7,548.1 0.4x 9.2x 1.1x 19,976.3 16.8% 4.1%
Robert Half International Inc. United States NYSE: RHI 45.12 88.5% 5,738.3 5,479.1 1.1x 9.3x 0.0x 5,199.4 41.1% 11.4%
On Assignment, Inc. United States NYSE: ASGN 48.87 88.0% 2,581.2 3,142.0 1.2x 11.8x 2.2x 2,530.1 32.3% 10.5%
PageGroup plc United Kingdom LSE: PAGE 6.56 97.3% 2,026.9 1,904.3 1.2x 13.2x 0.0x 1,476.8 51.9% 9.1%
Korn/Ferry International United States NYSE: KFY 33.68 93.4% 1,918.1 1,763.4 1.1x 9.6x 1.4x 1,565.5 27.0% 11.7%
AMN Healthcare Services, Inc. United States NYSE: AMN 36.25 80.6% 1,736.4 2,061.0 1.1x 9.1x 1.6x 1,929.4 32.6% 11.8%
Kelly Services, Inc. United States NasdaqGS:KELY.A 22.91 92.8% 875.2 829.2 0.2x 8.9x 0.0x 5,217.4 17.3% 1.8%
TrueBlue, Inc. United States NYSE: TBI 22.20 77.4% 834.5 916.5 0.4x 6.6x 0.8x 2,610.4 25.1% 5.3%
Brunel International N.V. Netherlands ENXTAM: BRNL 15.32 68.5% 772.7 597.2 0.6x 18.4x 0.0x 934.1 21.1% 3.3%
Kforce Inc. United States NASDAQ: KFRC 19.05 70.7% 480.7 613.7 0.5x 8.2x 1.7x 1,336.8 30.4% 5.6%
Resources Connection, Inc. United States NASDAQ: RECN 13.50 68.2% 403.2 388.9 0.7x 9.3x 1.1x 583.4 37.9% 7.2%
Heidrick & Struggles International, Inc. United States NASDAQ: HSII 18.60 68.6% 349.4 291.2 0.5x 5.2x 0.0x 595.6 31.5% 9.3%
CDI Corp. United States NYSE: CDI 8.20 85.0% 154.1 161.6 0.2x NM NM 818.4 18.7% -1.0%
Median $22.56 86.5% $1,305.8 $1,339.9 0.6x 9.3x 1.1x $1,747.5 28.7% 6.4%
Mean $33.79 83.0% $2,715.4 $2,829.8 0.7x 9.9x 0.9x $4,962.9 28.7% 6.8%
PEO
Automatic Data Processing, Inc. United States NasdaqGS:ADP $116.78 95.9% $52,248.6 $51,470.6 4.2x 20.2x 0.8x $12,379.8 43.1% 20.6%
Paychex, Inc. United States NasdaqGS:PAYX 56.82 90.1% 20,420.9 20,097.5 6.4x 14.7x 0.0x 3,151.3 70.8% 43.4%
TriNet Group, Inc. United States NYSE:TNET 40.39 97.1% 2,802.5 3,009.4 0.9x 14.6x 2.1x 3,189.7 16.5% 6.4%
Insperity, Inc. United States NYSE:NSP 89.00 95.0% 1,855.3 1,715.9 0.6x 14.3x 0.8x 3,109.8 16.7% 4.1%
Barrett Business Services, Inc. United States NasdaqGS:BBSI 55.04 82.2% 399.1 384.3 0.4x 13.9x 0.2x 859.6 59.9% 3.2%
Median $56.82 95.0% $2,802.5 $3,009.4 0.9x 14.6x 0.8x $3,151.3 43.1% 6.4%
Mean $71.61 92.1% $15,545.3 $15,335.5 2.5x 15.5x 0.8x $4,538.0 41.4% 15.5%
PAYROLL & PAYROLL PROCESSING
Automatic Data Processing, Inc. United States NasdaqGS:ADP $116.78 95.9% $52,248.6 $51,470.6 4.2x 20.2x 0.8x $12,379.8 43.1% 20.6%
Intuit Inc. United States NasdaqGS:INTU 137.43 95.6% 35,211.9 34,118.9 6.7x 21.6x 0.3x 5,089.0 84.6% 31.0%
Paychex, Inc. United States NasdaqGS:PAYX 56.82 90.1% 20,420.9 20,097.5 6.4x 14.7x 0.0x 3,151.3 70.8% 43.4%
The Sage Group plc United Kingdom LSE:SGE 9.02 84.5% 9,740.6 10,187.1 4.5x 15.7x 1.3x 2,160.3 93.3% 28.7%
The Ultimate Software Group, Inc. United States NasdaqGS:ULTI 226.99 97.2% 6,746.1 6,670.9 7.8x 104.6x 0.2x 860.7 61.7% 7.4%
Paycom Software, Inc. United States NYSE:PAYC 71.19 96.7% 4,230.6 4,169.2 10.9x 56.4x 0.5x 382.9 84.9% 19.3%
Paylocity Holding Corporation United States NasdaqGS:PCTY 46.47 93.6% 2,393.7 2,292.2 8.1x 138.2x 0.0x 283.8 58.6% 5.8%
Median $116.78 95.6% $20,420.9 $20,097.5 6.4x 20.2x 0.3x $3,151.3 70.8% 28.7%
Mean $109.41 92.7% $24,873.6 $24,509.0 5.9x 35.3x 0.5x $4,728.2 70.7% 26.2%
Aon plc United Kingdom NYSE: AON $139.59 98.8% $36,599.8 $42,401.8 3.6x 17.1x 2.5x $11,710.0 40.8% 21.1%
Willis Towers Watson Public Limited Company United Kingdom NasdaqGS:WLTW 149.62 99.1% 20,227.5 23,600.5 3.0x 15.5x 2.7x 7,862.0 41.0% 19.4%
SS&C Technologies Holdings, Inc. United States NasdaqGS:SSNC 38.69 96.2% 7,893.1 10,101.8 6.3x 17.4x 4.0x 1,602.9 46.7% 36.2%
Benefitfocus, Inc. United States NasdaqGM:BNFT 35.25 78.4% 1,094.3 1,145.1 4.7x NM NM 242.7 49.3% -5.4%
Morneau Shepell Inc. Canada TSX:MSI 16.67 95.8% 896.8 1,100.2 2.3x 15.2x 2.8x 450.8 33.2% 15.1%
CBIZ, Inc. United States NYSE: CBZ 15.00 94.3% 802.7 1,014.2 1.2x 11.0x 2.3x 817.1 12.6% 11.3%
Castlight Health, Inc. United States NYSE: CSLT 4.35 79.1% 567.7 464.5 4.4x NM 0.0x 106.7 68.6% -47.2%
Median $35.25 95.8% $1,094.3 $1,145.1 3.6x 15.5x 2.6x $817.1 41.0% 15.1%
Mean $57.02 91.7% $9,726.0 $11,404.0 3.6x 15.2x 2.4x $3,256.0 41.8% 7.2%
INSURANCE BROKERAGE
Marsh & McLennan Companies, Inc. United States NYSE: MMC $78.76 97.2% $40,366.5 $45,122.5 3.3x 14.0x 1.7x $13,497.0 43.6% 23.9%
Aon plc United Kingdom NYSE: AON 139.59 98.8% 36,599.8 42,401.8 3.6x 17.1x 2.5x 11,710.0 40.8% 21.1%
Willis Towers Watson Public Limited Company United Kingdom NasdaqGS:WLTW 149.62 99.1% 20,227.5 23,600.5 3.0x 15.5x 2.7x 7,862.0 41.0% 19.4%
Arthur J. Gallagher & Co. United States NYSE: AJG 59.19 99.2% 10,663.9 13,254.2 2.3x 14.9x 3.5x 5,784.7 28.8% 15.3%
Erie Indemnity Company United States NasdaqGS: ERIE 128.42 99.4% 6,715.1 6,548.0 4.0x 21.2x 0.2x 1,645.9 30.3% 18.4%
Brown & Brown, Inc. United States NYSE: BRO 44.59 97.4% 6,242.6 6,597.5 3.7x 11.5x 1.7x 1,804.1 46.8% 31.8%
CorVel Corporation United States NasdaqGS: CRVL 47.90 96.8% 898.4 863.3 1.6x 12.2x 0.0x 527.8 20.5% 13.4%
Median $78.76 98.8% $10,663.9 $13,254.2 3.3x 14.9x 1.7x $5,784.7 40.8% 19.4%
Mean $92.58 98.3% $17,387.7 $19,769.7 3.1x 15.2x 1.8x $6,118.8 36.0% 20.5%
HR TECHNOLOGY
Oracle Corporation United States ORCL $50.16 96.7% $207,496.0 $199,713.0 5.3x 13.6x 3.9x $37,728.0 58.5% 38.9%
SAP SE Germany SAP 106.89 94.0% 128,145.8 130,116.3 4.8x 19.1x 1.2x 26,427.8 69.5% 24.9%
Workday, Inc. United States WDAY 103.51 97.0% 21,426.6 19,852.3 11.7x NM NM 1,701.6 69.9% -14.2%
The Sage Group plc United Kingdom LSE:SGE 9.02 84.5% 9,740.6 10,187.1 4.5x 15.7x 1.3x 2,160.3 93.3% 28.7%
The Ultimate Software Group, Inc. United States ULTI 226.99 97.2% 6,746.1 6,670.9 7.8x 104.6x 0.2x 860.7 61.7% 7.4%
SEEK Limited Australia ASX: SEK 13.73 93.2% 4,788.3 5,395.3 7.0x 19.9x 2.7x 703.1 95.4% 34.4%
WageWorks, Inc. United States NYSE: WAGE 65.45 81.3% 2,587.9 2,224.9 5.1x 25.7x 2.8x 434.9 62.9% 19.9%
Cornerstone OnDemand, Inc. United States CSOD 40.04 83.9% 2,275.1 2,225.5 5.1x NM NM 435.4 68.3% -9.6%
Callidus Software Inc. United States NasdaqGM: CALD 24.70 96.3% 1,602.3 1,419.1 6.6x NM 0.0x 216.5 61.7% -3.5%
Benefitfocus, Inc. United States BNFT 35.25 78.4% 1,094.3 1,145.1 4.7x NM NM 242.7 49.3% -5.4%
HealthStream, Inc. United States NasdaqGS: HSTM 23.03 73.0% 734.4 618.7 2.6x 26.1x 0.0x 238.5 56.5% 9.9%
DHI Group, Inc. United States NYSE: DHX 2.20 26.1% 110.9 157.4 0.7x 4.0x 1.8x 215.6 85.8% 18.3%
Median $37.65 88.9% $3,688.1 $3,810.4 5.1x 19.5x 1.3x 569.2 65.6% 14.1%
Mean $58.41 83.5% $32,229.0 $31,643.8 5.5x 28.6x 1.5x $5,947.1 69.4% 12.5%
NOTE: Figures in bold and italic type were excluded from median and mean calculation.
(1) As of 8/1/2017.
(2) Market Capitalization is the aggregate value of a firm's outstanding common stock.
(3) Enterprise Value is the total value of a firm (including all debt and equity).
25
Industry Valuations
Sector Performance
Sector
140%
126% 127%
120% 110%
104%
100% 92%
80%
69%
56% 55%
60% 51%
44%
40% 30% 31%

27%
21% 24% 25% 23%
18% 20% 18%
20% 11% 10%
8% 7%
0%
Professional Payroll & Payroll Benefits HR Technology Staffing Insurance
Employer Processing Administration Brokerage
Organizations
YTD 1 Year 3 Year 5 Year
Market
140%
118%
120%
100%
80%
80%
60%
46%
40%
29%
23%
17%
20% 14%
10%
0%
S&P 500 Nasdaq
YTD 1 Year 3 Year 5 Year

As of 8/1/2017.
26
Global Business Services
Unparalleled Commitment to the PEO Industry
Deep & Broad Industry Relationships with Key PEO Industry Participants
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CLIFFORD SLADNICK ROBERT KENT SAGAR JANVEJA JESS HUNGER JACOB SWARTZ
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and other advisory services within Services Practice Business Services Practice
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BGL’s Business Services Practice
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teams and focused on mergers and
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Dresner Partners, a middle market Mergers & Acquisitions Group at Banc
investment bank in Chicago of America Securities LLC in New York
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EDUCATION EDUCATION EDUCATION EDUCATION EDUCATION
• B.S., summa cum laude, University • A.B., Princeton University • B.A., University of Michigan • B.S., magna cum laude, • B.S., Finance Honors, magna cum
of Illinois Fisher College of Business at laude, Driehaus College of Business
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• J.D., Harno Fellow, magna cum Ohio State University at DePaul University
Finance from the London School of Business, Georgetown University
laude, University of Illinois
Economics
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or 312-513-7476. offer to buy or sell any security.
Selected Completed Transactions
comprised of
acquired by
acquired
acquired by acquired by
acquired by
a portfolio company of
acquired by
entered into a strategic acquired by acquired by

partnership with acquired by
Valuation analysis Valuation analysis

completed for completed for
acquired by
acquired
in support of a in support of a
HR America strategic alternatives analysis strategic alternatives analysis
BGL Contacts
Clifford M. Sladnick
Managing Director
312.658.4779
csladnick@bglco.com

BGL Business Services Insider Aug 17

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BGL Business Services Insider Aug 17

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August 2017

Business Services Brown Gibbons Lang

In our spotlight survey, we assess the “state of the market”, exploring

Large Addressable Market • Insperity (NYSE: NSP) estimates only 4 million of

• Annual Audits: A CPEO must prepare and provide the Technology

PEO VALUE PROPOSITION

Indicate the most important aspects of a PEO’s value proposition:

PEO VALUE PROPOSITION

HRIS Tools HRIS Tools moved up in ranking, receiving a 4 or 5

What are the limiters of growth in a largely untapped

“PEOs are still too unknown as a business model.”

“I don’t see a huge impact from CPEO happening.

Southeast (GA, NC, SC, TN, AL)

Midwest (IL, IN, WI, MI, MO, KY, IA)

Northeast (NY, NJ, CN, MA, PA)

Technology Despite the tepid recovery and growing predictions of a

• Management remains essential to the value

PEO Valuation Metrics

5-6x 7-9x 8-10x+ 9-10x+

Historical Valuation Trends

but still remain at historical 16.0x

high levels. Median Value

The LTM median composite

of 14.6x exceeds the median

value over the last 5 years

Source: S&P Capital IQ.

EBITDA Multiples of Public PEOs

NA: Denotes data not available for forecast period.

Relative Valuation Trends

The PEO value proposition

quality PEOs, have risen to 12.0x

Investor Interest in Sector

Performance of Leading PEOs

DATE TARGET ACQUIRER DEAL STATS

Jul-17 Minority equity stake

Enterprise Value (EV): $1.99B*

Enterprise Value (EV): $15M

Enterprise Value (EV): $235M

Enterprise Value (EV): $93M

PEO Industry Pulse

Fayak, Nextep. We felt strongly that we needed to be in the first

PEO Industry Pulse

Allen, G&A Partners. Houston went through its own recession

Overall M&A Activity

Mergers & Acquisitions Activity

Middle Market M&A Activity Private Equity Transaction Activity

800 $80 3,500

Transaction Value ($ in billions)

Transactions with Strategic Buyers Transactions with Financial Buyers

Acquisition Financing Trends

4.0x 4.3x 47%

Business Services M&A Activity

Historical Business Services M&A Activity

PEO Payroll Benefits Administration HR Technology Staffing

Business Services M&A Activity

Business Services M&A Activity

Business Services M&A Activity

Commenting on the investment, Peter Wallace, a Senior

Relative Valuation Trends

Professional Employer Organizations Payroll & Payroll Processing

0.0x 0.0x 0.0x 2.0x

Beneﬁts Administration HR Technology

8.0x 16.0x 5.0x