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CEE Software Development: M&A Report 2021

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Comprehensive coverage of M&A activity in Software Development (IT Outsourcing) industry in CEE region YTD 2021

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CEE Software Development: M&A Report 2021

  1. 1. CEE software development: M&A report 2021 October 2021 CEE software development: M&A report 2021 October 2021 CEE software development: M&A report 2021 October 2021
  2. 2. CEE Software Development M&A in 2021: Executive Summary 2 Key messages of 2021 YTD Public companies share price is soaring • Peak stock performance for public companies with significant CEE presence (record high revenue y-o-y growth & ~x2 up multiples for leading CEE public companies) as global economy grows & demand for digitalization and IT services surges post Covid-19 suppression M&A activity is on the rise, on track to x2 • More deals in 1H 2021 than during the entire year of 2020, which guarantees a record M&A count in FY 2021 for the CEE region Multiples’ inflation • High demand for inorganic growth in addition to record high public companies’ performance drives purchase multiples for private companies. It is sellers’ market now Trend for consolidation • Most mid to large companies have hundreds or thousands of open positions. There is a war for talent out there and we see significant double digit increase in salaries for engineers • In such a market, stronger players might demonstrate extraordinary performance while weaker companies might struggle M&A / IPO play • Well funded CEE companies, who are preparing for IPO/liquidity events, continue their vector for expansion through M&A in the CEE region with most deals still in progress, potentially to be announced in the next 3-6 months
  3. 3. 3 -100% 0% 100% 200% 300% 400% 500% 600% Oct, 2018 Mar, 2019 Jul, 2019 Dec, 2019 Apr, 2020 Aug, 2020 Jan, 2021 May, 2021 505% 162% 450% 548% 68% 20% 67% 41% H1 2021* YTD** Since Oct, 2018** Globant 4% 76% 548% [Endava] 54% 146% 505% [Epam] 47% 93% 450% [Grid Dynamics] 22% 233% 162% Alten 22% 95% 68% S&P500 16% 28% 67% Devoteam 14% 29% 41% Cognizant -12% 15% 20% *January 1 – June 30, 2021 **Data as of August 26, 2021 Record stock performance for public companies as market bounces back after Covid-19 (1/2) During 2020-2021, companies with delivery in CEE (Endava, Epam & Grid Dynamics) on average grew faster than those in different geographies Source: Yahoo Finance, AVentures Capital [ ] – companies with significant delivery in CEE Globant Endava Epam Grid Dynamics Alten S&P500 Devoteam Cognizant
  4. 4. Record stock performance for public companies as market bounces back after Covid-19 (2/2) 4 Company 6M y-o-y revenue CAGR, % GM, % EBITDA, % EV/S EV/EBITDA Epam 24% 34% 17% 9.2x 54.7x Grid Dynamics 26% 40% 17% 6.3x Negative Endava 27% 34% 20% 14.1x 80.1x AVERAGE 9.9x 67.4x** MEDIAN 9.2x 67.4x** Globant 32% 38% 15% 8.5x 51.2x Alten 8% 10% 11% 1.5x 18.6x Devoteam 12% 12% 14% 1.1x 9.5x Cognizant 4% 37% 16% 2.1x 11.7x Accenture* 7% 32% 19% 4.1x 22.0x Perficient 14% 38% 14% 4.8x 27.0x Zensar 2% 27% 19% 1.7x 8.5x Wipro 8% 36% 23% 4.6x 20.0x Tech Mahindra 7% 33% 19% 2.2x 12.0x Infosys 13% 34% 28% 6.1x 22.3x AVERAGE 3.7x 20.3x MEDIAN 3.1x 19.3x *As of August 31, 2021 ** Excluding Grid Dynamics negative EBITDA CEE Rest of the world Source: AVentures Capital, Yahoo Finance, WSJ
  5. 5. 360 CEE, Czech Republic 10 + Aug. 2021 375 Romania 9 + Oct. 2020 400 Poland 8 + Jul. 2021 400 Ukraine 7 + Dec. 2020 + 636 Romania 6 + Nov. 2020 710 Romania 5 + Aug. 2021 1,100 Belarus 4 + Mar. 2021 1,200 Ukraine 3 + May 2021 4,000 CEE 2 + Dec. 2020 + 20,000 CEE 1 + Mar. 2021 Top-10 largest publicly disclosed deals during the last 12 months 5 Target Buyer Target’s # of EE and location Source: AVentures Capital *Ranked by size of delivery in CEE
  6. 6. What most large acquirers seek for… 6 1 Mid-market and/or enterprise clients with long term contracts Above the market average 30+% y-o-y consistent revenue growth Company’s ability to retain and win new large contracts, so most of the revenue is recurring High EBITDA (over 15%) and Gross Margin (over 40%) Founders’ willingness to stay for 2-4 years post acquisition Strong recruitment function able to close positions in the heated market 2 3 4 5 7 6 Distinguished employee culture resulting in solid talent retention Other strategic rationales might play a role depending on an acquirer: type of delivery, technology specialization, industry vertical, business model etc. 8
  7. 7. Vertical capabilities • Acquisition of new verticals or deepening of existing capabilities Deal example: Hitachi – Global Logic, 2021 (acceleration of social infrastructure transformation) Delivery diversification • New delivery geographies to diversify market / political risks • Delivery in new countries/regions enables to tap into talent pool Deal example: Grid Dynamics – Tacit Knowledge, 2021 (UK, US, Mexico, Moldova) Client acquisition • Acquisition of new clients or enhancement of current client profile • Small players can be attractive depending on their client profile Deal example: Accenture – Trivadis, 2021 Scale • Enables companies to bid for larger projects Deal example: Astound Commerce – MarketForce, 2021 We expect established players to continue consolidating a fragmented market Technical / language capabilities • Enhancement of tech teams is faster via M&A than through organic growth Deal example: OSF – Werise, 2021 And key strategic rationales driving M&A roll-on strategy 7 Inorganic growth is a way for established players to expand capabilities, client portfolios and scale
  8. 8. 5 21 22 32 27 30 38 2015 2016 2017 2018 2019 2020 2021* Selected PE funds active in the region A growing number of strategic players active in acquisitions Count of M&A deals announced in Ukraine, Poland, Belarus, Romania in 2015-YTD 2021 Source: AVentures Capital 8 Attractiveness of the software development outsourcing industry persists Despite low M&A activity in Belarus, there were more deals during 9 months of 2021 in CEE than during any other year Many more deals are in progress to be announced in the next 3 - 6 months Result: consistently high M&A activity in the region in 2019 - 2021 *YTD
  9. 9. Industry leaders expand through M&A, pursuing IPO / exit play At least 5 well-funded CEE players with revenue from US$50M to US$100M+ are expanding through M&A with the aim of IPO / exit play Our insights into recent private companies deals demonstrate that implied EV / Revenue lies in 1x-2.0x range and EV / EBITDA in 6.0x-15.0x range. There are, however, exceptions with transactions at higher multiples 9 Examples Public companies receive highest multiples with some reaching x5-11 EV / Revenue and up to x80 EV / EBITDA vs multiples we observe with private companies. Thus, public companies have stronger financial incentives to pursue M&A Germany Argentine Merged from: Krakow Note: “Ukraine / Belarus” or “Lviv” – main delivery locations Belarus / Russia Russia / Ukraine / Poland / Argentine Lviv Ukraine / Belarus / Poland / Spain Germany Netherlands / Ukraine / Germany Lviv Germany Moldova / UK / Mexico / USA Czech Republic
  10. 10. Salaries inflation for Software Engineers in CEE 10 $700 $1 830 $600 $800 $1 900 $590 $2 000 $3 255 $2 700 $2 200 $3 820 $2 500 $3 610 $4 330 $3 125 $4 000 $5 120 $3 500 Ukraine Poland Belarus Middle SE Middle SE Middle SE Senior SE Senior SE Senior SE '20 '20 '20 '20 '20 '20 '20 '20 '20 '21 '21 '21 '21 '21 '21 '21 '21 '21 Junior SE Junior SE Junior SE Source: dou.ua, salaries.dev.by, mycompanypolska.pl, AVentures Capital On average the salary of the Software Engineer in CEE grew by at least 10% since June 2020. Biggest inflation is seen in Poland and Ukraine for Senior tech talent Amid surging demand for SoftDev services, the salaries of engineers continue to climb with the most significant increase for senior tech talent. Most of the mid to large companies have hundreds of open positions Net salaries, US$
  11. 11. Selected CEE Top-50 Largest IT service players with delivery in CEE An increasing number of companies cross the US$25m in revenue mark. Out of 55* largest IT service companies, 11 make over US$100m in revenue and another 7 exceed the US$ 200 mark Estimated annual revenue, US$ 25-50 m 50-100 m 100-200 m >200 m Illustrative * Includes companies with significant presence in CEE
  12. 12. Appendix 1: deals table 2015 – YTD 2021
  13. 13. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2021 Astound Commerce 1200 (2021) - RLH Equity Partners 2021 Intellica Group 40 (2021) - Digicode 2021 CN Group 360 (2021) - Ciklum 2021 Polyteda Cloud 32 (2021) - Silvaco 2021 Tacit Knowledge 180 (2021) - Grid Dynamics 2021 GlobalLogic 15868 (2021) 9600 Hitachi 2021 X1 54 (2021) - Globaldev Group 2021 Cloudfresh 50 (2021) - InSoft Partners 2021 MarketForce 50 (2021) - Astound Commerce 2021 IdeaSoft 85 (2021) - Sigma Software 2020 Archer Software 125 (2021) - Cprime, Alten 2020 S-PRO 160 (2021) - SARS Capital 2020 Daxx 400 (2021) - Grid Dynamics 2020 Ciklum 3120 (2021) - Recognize Partners 2019 Aducera 200 (2020) - Beetroot 2019 Grid Dynamics 1200 (2020) - IPO UKRAINE* (1/3) One can estimate a range for deal value with indicative median annual revenue per engineer of US$40-60K and deal range of x1-2 EV / Revenue 13 *Deals include companies with significant presence in Ukraine both on sell side and buy side
  14. 14. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2019 Acceptic 150 (2020) - Yael Group 2019 Rozdoum 40 (2020) - InSoft Software 2019 Rademade 60 (2020) - InSoft Software 2019 Logicify 20 (2020) - DataArt 2019 Ciklum 3800 (2020) - Dragon Capital, AVentures Capital 2019 Dynamo Development 40 (2020) - SeriesOne 2019 Luxoft 12900 (2019) 2000 DXC Technology 2018 Adyax 350 (2018) - Smile 2018 CoreValue 385 (2018) - IT Kontrakt (Avenga) 2018 Intellias 1220 (2018) - Horizon Capital 2018 Applikey 160 (2019) - SSA 2018 DataArt 2500 (2018) - Da Vinci Capital 2018 WebCodium 12 (2019) - Apriorit 2018 GlobalLogic 12000 (2019) 960 Partners Group 2017 Stanfy 20 (2017) - IntellectSoft UKRAINE (2/3) 14
  15. 15. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2017 GlobalLogic 12000 (2019) - CPPIB 2017 IntroPro 500 (2017) 28 Luxoft 2017 Grossum 57 (2017) - The APP Solutions 2017 Grid Dynamics 1000 (2018) 118 ASL 2016 Lohika 700 (2016) - Altran 2016 CoreValue 385 (2018) - InSoft Capital, AVentures Capital 2015 Ciklum 3500 (2019) - Soros Funds UKRAINE (3/3) 15
  16. 16. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2021 Skyrise.tech 80 (2021) - Etteplan 2021 Evertop 50 (2021) 1 TenderHut 2021 Polidea 70 (2021) - Snowflake 2021 ValueLogic 80 (2021) - Software Mind 2021 SNP Poland 400 (2021) - All for One Group 2021 Ammeon 200 (2021) intive 2021 Pro4People 18 (2021) Star 2021 PolSource 308 (2021) - EPAM Systems 2021 Software Mind 160 (2021) 30 Enterprise Investors 2021 Delv Global 13 (2021) - Vox Financial Partners 2021 Veracomp 257 (2021) - Exclusive Networks 2020 Maise n/a - ITMagination 2020 Cervi Robotics n/a - Dronehub 2020 Craftware 86 (2021) - BlueSoft (Orange) 2020 Sage Group PLC 177 (2021) 91 Mid Europa Partners 2020 Codewise 158 (2021) 36 CentralNic 2020 SimplicITy 42 (2021) - Ricoh POLAND* (1/4) 16 *Deals include companies with significant presence in Poland both on sell side and buy side
  17. 17. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2020 Meelogic 300 (2020) - GlobalLogic 2019 Core Services n/a - Astek Group 2019 Prosoftlab 14 (2019) - Astek Group 2019 7ninjas 12 (2019) Netguru 2019 Olsoft n/a - TenderHut 2019 Javeo Software 25 (2019) - TenderHut 2019 BlueSoft 650 (2019) 50 Orange Polska 2019 Sevenval 200 (2019) - Avenga 2018 ORBA 90 (2018) - Lingaro 2018 Bitcraft 41 (2018) Netguru 2018 Intive 1600 (2018) 100 Mid Europa Partners 2018 ORBA 80 (2019) - Lingaro 2018 Fast White Cat 100 (2019) 0.6 SARE S.A. 2018 Order of Code 15 (2019) - TenderHut 2018 Appchance 37 (2019) 0.3 R22 2018 Nexelem n/a - Virtus Lab 2018 Goyello 120 (2018) - Aspire Systems POLAND (2/4) 17
  18. 18. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2018 Solid Brain 200 (2018) - IT Kontrakt 2018 GSW Technologies n/a - TenderHut Group 2017 ReeWise 11 (2019) - Exadel 2017 itWORKS n/a - Euvic, 3S Group 2017 Coders Center 75 (2017) - SoftServe 2017 iNTENCE 100 (2017) - Intive 2017 IT Kontrakt 1300 (2016) 33 Oaktree Capital / Cornerstone Partners 2017 FDV Solutions 100 (2017) - Intive 2017 Sensinum 16 (2017) - Virtus Lab 2017 Qburst Poland n/a - TenderHut 2017 LIT n/a - TenderHut 2017 Edisonda 30 (2017) - Grant Thornton Poland 2017 Vorm n/a - Netguru 2016 AKME Software n/a - Exadel 2016 SMT, BLStream, Kupferwerk merged into Intive 1200 (2016) - Enterprise Investors 2016 DCC Labs 70 (2016) 7 SeaChange POLAND (3/4) 18
  19. 19. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2016 Grand Parade 200 (2016) 16.6 William Hill 2016 Operations of Ericpol in Poland and Ukraine 2300 (2016) - Ericsson 2016 Sigmapoint 12 (2019) - Grand Parade 2016 LemonTea n/a - TenderHut 2016 REC Global 500 (2016) - GlobalLogic 2016 ProService 350 (2016) - Oaktree Capital / Cornerstone Partners 2016 Ardeo 14 (2019) 0.05 Venture Inc 2016 Outbox 250 (2021) - PwC 2015 SMT Software 700 (2015) 38 Enterprise Investors 2015 El Passion Next 59 (2019) - Daftcode POLAND (4/4) 19
  20. 20. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2021 Zipper Studios n/a - Fortech Group 2021 Software Development Europe 150 (2021) - 3Pillar Global 2021 ITPrepared 50(2021) 0.7 Bittnet (BNET) 2021 Relation1 n/a - OSF Digital 2021 CoreBuild and Core Technology Services 20 (2021) - Wirtek 2021 Tellence 145 (2021) - Orion 2021 Trivadis 710 (2021) - Accenture 2021 Paladin Group n/a - OSF Digital 2021 Werise 44 (2021) - OSF Digital 2021 Adept Group n/a - OSF Digital 2021 LEVVEL LLC 172 (2021) - Endava 2021 Pet Minuta 157 (2021) - Endava 2021 Gemini Solutions 119 (2021) - ThoughtWorks 2020 SoftOne Romania 45 (2020) - Orosimo Software 2020 Cognetik n/a - Brillio 2020 Tremend Software Consulting 375 (2021) 4.2 EBRD ROMANIA* (1/4) 20 *Deals include companies with significant presence in Romania both on sell side and buy side
  21. 21. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2020 Zenitech 209 (2021) - Sovereign Capital 2020 Whyttest 74 (2021) - Testronic 2020 Comtrade Digital Services 316 (2021) - Endava 2020 3Pillar Global 1052 (2021) - CIP Capital 2020 Tiempo Development 280 (2021) - 3Pillar Global 2020 Isthmus Software 118 (2021) - 3Pillar Global 2020 Citymesh 58 (2021) - Cegeka 2020 iQuest Group 660 (2021) - Nagarro Holding 2020 Udev 6 (2021) - Zitec 2020 Metro Systems Romania S.R.L 1300 (2021) - Wipro 2020 Cyber Smart Defense 12 (2021) - Stefanini 2020 Quantic Lab 218 (2021) 5.6 Embracer Group 2020 PitechPlus 222 (2021) - Webhelp 2020 Accesa 636 (2021) - Ratiodata 2019 Successyou 25 (2020) - OSF Global 2019 Blueleaf 13 (2020) - OSF Global ROMANIA (2/4) 21
  22. 22. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2019 Soul Ecommerce 15 (2020) - OSF Global 2019 Vauban 266 (2020) - GFI 2019 PitechPlus 240 (2020) - Webhelp 2019 Architected Business Solutions 32 (2020) - Totalsoft 2019 BeeSpeed 100 (2020) - ZF 2019 UCMS Romania 14 (2020) - AROBS 2018 iQuest 580 (2019) - Allgeier 2018 BSS-ONE Dueenne 80 (2018) 0.8 Right of Reply 2018 648 Group n/a - Tremend 2018 SAS Grup n/a - Arobs Transilvania 2018 CoSo 10 (2018) 1 Arobs Transilvania 2018 OSF Global 900 (2019) - HSBC, BDC Capital, Salesforce Ventures 2018 Softvision 2850 (2018) 478 Cognizant 2018 Architected Business Solutions 50 (2018) - Logo Software 2018 Dendrio Solutions 52 (2021) 5.7 Crescendo International 2018 SkyShield Magyarorszag n/a - Arobs Transilvania ROMANIA (3/4) 22
  23. 23. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2017 MindMagnet 24 (2019) - Pitech Plus 2017 It Six 140 (2019) - QuEST 2017 Zitec 160 (2017) 2 eMAG 2016 ISDC 300 (2016) - Endava 2016 Software Paradigms International n/a - Softvision 2016 LaunchPodium n/a - Qualitance 2016 Kepler-Rominfo 250 (2016) - Alten 2016 Inotec Plus n/a - Zitec 2016 TotalSoft 400 (2016) 30 Logo Software ROMANIA (4/4) 23
  24. 24. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2021 White-Hat 73 (2021) - EPAM Systems 2021 CORE SE 91 (2021) - EPAM Systems 2021 Just-BI 55 (2021) - EPAM Systems 2021 Exadel 1100(2021) - Sun Capital 2020 Ricston 31 (2021) - EPAM Systems 2020 Deltix 80 (2020) - EPAM Systems 2019 Naya Technologies 76 (2020) - EPAM Systems 2019 Competentum Group 80 (2020) - EPAM Systems 2019 Test IO 283 (2020) 17.3 EPAM Systems 2019 OCSICO ~90 (2020) - ScienceSoft 2018 Solbegsoft 250 (2018) - Helmes 2018 Itransition 2000 (2018) - Baring Vostok 2018 Continuum n/a - EPAM Systems 2018 TH_NK 120 (2019) - EPAM Systems 2017 Softline 3500 (2019) 9 Zubr Capital BELARUS* (1/2) 24 *Deals include companies with significant presence in Romania both on sell side and buy side
  25. 25. Year Target Est. # of employees Transaction Value, US$ mln Buyer 2017 Cactussoft 111 (2019) - Litussoft 2017 PointSource 76 (2017) - Globant 2016 Softline 3500 (2019) 36 Da Vinci Capital 2016 Dextrys 300 (2019) - EPAM Systems 2015 NavigationArts 90 (2019) - EPAM Systems 2015 Alliance Global Services 1100 (2015) 45 EPAM Systems BELARUS (2/2) 25
  26. 26. Appendix 2: consolidation / IPO way of the largest CEE players
  27. 27. Revenue US$ 557m (TTM) US$ 155m (Q3 FY21) EBITDA US$ 87m (TTM) US$ 32m (Q3 FY21) Revenue CAGR, 2015-20 33% y-o-y # of engineers 8,127 (Q3 FY21) Delivery geography, Q3 FY21 North America: 29%, Europe: 25%, United Kingdom: 43%, Rest of the world 3% Revenue % by vertical Payments and financial services: 53%, tech, media and comm-s: 27%, other 20% (Q3 FY21) 2014 2015 2016 2018 2014. Alpheus Solutions (DE/UK) 2015. PSTECH (RS); Nickel Fish Design (US) 2016. ISDC (RO, BG) 2018. Velocity Partners (AR, UY, CO, VE) 2018. IPO on NYSE. 2019 2019. Intuitus Limited (Scotland); Exozet (DE) Acquisitions PE / IPO funds attracted 2020 2020. Comtrade Digital Services (SI, RS, BA) 2021 2021. Pet Minuta (HR, US); LEVVEL LLC (US, MX) 2018. IPO on NYSE
  28. 28. Revenue US$ 3 bn (TTM) US$ 881m (Q2 FY21) EBITDA US$ 512m (TTM) US$ 146m (Q2 FY21) Revenue CAGR, 2015-2020 24% y-o-y # of engineers 42,800 (Q2 FY21) Delivery geography North America: 59.8%, Europe: 33.0%, CIS: 4.3%, APAC: 2.9% Revenue % by vertical, Q2 FY21 Business Information & Media: 18%, financial services: 22%, software & hi- tech: 18%, travel & consumer: 20%, healthcare: 10%, emerging 12%; PE / IPO funds attracted Acquisitions 2003 2004 2006 2008 2009 2010 2012 2010. VTB Capital 2006. Vested Development Inc. (RU) 2003. Lintec Project (BY) 2004. Fathom Technology (HU) 2008. B2BITS Corp. (US/UA); Plus Micro (KZ) 2009. Rodmon Systems (US/BY) 2007. Spline Software (UA) 2010. Instant Information (US/BY) 2012. Thoughtcorp (CA); Empathy Lab (US) 2012. IPO on NYSE. 2006. Siguler Guff (US) 2007 2008. Renaissance Investment Management; Da Vinci Capital; Euroventures Capital 2012. IPO on NYSE 1/2 * *to be continued on the next slide
  29. 29. Delivery geography North America: 59.8%, Europe: 33.0%, CIS: 4.3%, APAC: 2.9% Revenue % by vertical, Q2 FY21 Business Information & Media: 18%, financial services: 22%, software & hi- tech: 18%, travel & consumer: 20%, healthcare: 10%, emerging 12%; # of engineers 42,800 (Q2 FY21) Revenue US$ 3 bn (TTM) US$ 881m (Q2 FY21) Revenue CAGR, 2015-2020 24% y-o-y EBITDA US$ 512m (TTM) US$ 146m (Q2 FY21) Acquisitions 2014 2015 2016 2014. NetSoft (US); Great Fridays (US); Ozsoft (AM); GGA Software Services (RU); Joint Technology Development (CN); 2015. NavigationArts (US); Alliance Global Services (US) 2016. Dextrys (CN); InfomatiX (HU) 2018. Continuum (US); TH_NK (UK) 2012. IPO on NYSE. 2018 2019 2019. NAYS (ISR); Competentum Group (RU, BY); test IO (US, DE, UA) 2020 2020. Ricston (MA, UK, ES) 2021 2021. Just-BI (NL); White-Hat (ISR); CORE SE (DE); Seven4N (CO); PolSource (PL, US) 2/2
  30. 30. Revenue US$ 143m (TTM) US$ 47.7m (Q2 FY21) EBITDA* US$ -2.1m (TTM) US$ 2.5m (Q2 FY21) Revenue CAGR, 2015-20 22% y-o-y # of engineers 2,510 (Q2 FY21) Delivery geography Russia, Ukraine, Poland, US Revenue % by vertical, Q2 FY21 Tech, media, and telecom: 34%, retail: 27%, finance: 9%, CPG/Manufacturing: 20%, other: 10% 2016 2016. ASL acquires Grid Dynamics 2019. Raised US$15M from BGV 2019. Acquired by ChaSerg Technology, a shell NASDAQ company 2020. IPO on NASDAQ via spin-off with a MCAP of US$ 600m March, 2020. Grid Dynamics listed on NASDAQ 2019 2015 2015. Raised US$1.5M Series B from BGV 2020 PE / IPO funds attracted Acquisitions 2020. Daxx (UA) 2021 2021. Tacit Knowledge (UK) 2015. Qubell/Tonomi (US) *based on self reported Non GAAP EBITDA
  31. 31. Revenue US$ 907m (FY 2018) EBITDA US$ 112m (FY 2018) Revenue CAGR, 2014-18 23% y-o-y # of engineers 12,716 (Dec 2018) Delivery geography Western Europe: 9%, Poland / Romania / Bulgaria: 31%, Ukraine: 28%, Russia: 18%, North America: 9%, APAC & MEA: 6% Revenue % by vertical Financial services: 51%, digital enterprise: 25%, automotive: 25% (3Q 2019) PE / IPO funds attracted Acquisitions 2006 2008 2012 2013 2006. IT Consulting International (US) 2008. ITC Networks (RO) 2013. Freedom OSS (US) 2014. Radius Inc (US); Mecel Populus Suite (SE) 2015. Excelian (UK) 2016. Pelagicore (SE); Symtavision (DE); InSysGroup (US) 2014 2015 2016 2017 2018 2019 2017. derivIT (SG); UnafortiS (CH); IntroPro (UA) 2018. Objective Software (DE); Smashing Ideas (US) 2012. VTB Capital 2013. IPO on NYSE 2019. Acquired by DXC Technologies at ~2x EV / Revenue 2020 2020. CMORE Automotive (DE) 2019. Acquired by DXC Technologies (US)
  32. 32. Revenue US$ 771m (FY2020) Revenue growth, 2019-20 19% y-o-y # of engineers 20,000+ (2021) Delivery geography India, Ukraine, Argentina, Poland, Slovakia, Croatia, USA, Canada, Israel, China Revenue % by vertical, 2018 Media & communications: 30-35%, high tech and commerce: 30%, medical devices and industrial engineering: 20-25% Acquisitions 2000 2006 2008 2009 2010 2011 2013 2016 2000. Founded, investment by New Atlantic Ventures 2006. Westbridge Capital; New Enterprise Associates 2008. Sequoia Capital; New Atlantic Ventures; New Enterprise Associates 2010. Goldman Sachs 2013. Apax Partners acquires GlobalLogic 2017. Canadian Pension Plan Investment Board acquires 48% stake from Apax 2006. Lambent Technologies (IN); Bonus Technology (US/UA) 2009. InterObject (ISR); Cubika (AR) 2011. Rofous Software (IN); Method Incorporated (US/UK) 2016. REC Global (PL) 2021. Acquired by Hitachi at EV/Revenue multiple of 7.9x 2019 2019. Assign (SE); Skookum (US) PE funds attracted 2020.ECS Group (UK); Meelogic (DE/PL) 2017 2021 2021. Acquired by Hitachi 2020 EBITDA US$ 179.5m (FY 2020)
  33. 33. Vertical expertise: Pharmaceuticals, financial services, TMT, Automotive # of engineers 2,500 (2020) Delivery geography Eastern Europe including Poland, Ukraine, Malaysia PE / IPO funds attracted Acquisitions 2012 2017 2018 2019 2018. CoreValue (UA); Solid Brain (PL) 2017. Cornerstone Partners and Oaktree Capital Management acquire IT Kontrakt 2018 - 2019. A series of acquisitions and mergers to form a platform company 2021 2019. IT Kontrakt, Sevenval (DE), CoreValue (UA) and SolidBrain (PL) join forces to form Avenga Formerly IT Kontrakt 2012. WorkService acquires IT Kontrakt Revenue >US$ 125m (FY 2020)
  34. 34. Vertical expertise: Automotive, Financial Services, Consumer Services, Industrial, High Tech, Media & Communications # of engineers ~1,600 (2020) Delivery geography Poland, Ukraine, Asia, US, Germany PE / IPO funds attracted Acquisitions 2012 2014 2015 2017 2019 2017. Investment in FDV Solutions (AR); iNTENCE (DE) 2014. Acquisition Kupferwerk (DE) 2014 - 2019. A series of bolt-on acquisitions. In 2019, acquired by Mid Europa Partners 2012. Enterprise Investors Revenue ~US$ 100m (FY 2020) 2021 2015. Merged with SMT Software (PL) 2019. Acquired by Mid Europa Partners Revenue growth 11% y-o-y (Q1 2020) 2021. Ammeon (IRL)
  35. 35. AVentures Capital: M&A advisory in CEE Software Development Sector
  36. 36. • M&A strategy development & implementation • Sell-side advisory • Buy-side advisory Professional, client-tailored investment banking services: M&A Advisory for IT Services companies in Central Eastern Europe AVentures Capital: what we do 36
  37. 37. What makes us proud A network of 200+ outsourcing companies around the globe Unique vertical focus on IT Services and outstanding sector experience US$ 400m+ in completed transactions in CEE over last few years AVentures advised on some of the landmark deals in CEE SoftDev • M&A team fully focused on Software Development Outsourcing in the CEE region • Vast Software Development sector experience based on both investor and M&A advisor perspectives • Trusted advisor for exits and partnerships in CEE tech sector • On-the-ground analytical support and unmatched execution capabilities • Top-level contacts with the decision makers of over 100 largest Software Development companies in 20+ countries on 4 continents • The advisor of choice for the largest strategic and institutional investors doing M&A deals in CEE Tech 37
  38. 38. Investment banking 38 Investments Minority investor, extensively helping with strategic business tasks Exited 2015 Buy-side advisor to Soros Funds on acquisition of a minority stake Ciklum 2018 Buy-side advisor to a financial investor on majority stake acquisition CoreValue • Ciklum: global market focus with 3,500+ developers across 12 delivery centers in Europe and Asia • AVentures: buy-side adviser and BoD member for 4 years • AVentures fund also coinvested and exited in 2020 • CoreValue: US market focused Salesforce consulting with 400+ developers across delivery centers in Ukraine and Poland • AVentures: buy-side adviser for buy out of the majority stake, minority investor and BoD member for 3 years • AVentures fund also coinvested & exited in 2019 Viseven • 700+ developers, outsourcing and product company • #1 Pharma vertical player from Ukraine • Clients – top pharma companies globally Exited 2020 Sell-side advisor to Daxx during the sale to Grid Dynamics Daxx • Daxx: 500+ team across four delivery centers in Ukraine and Netherlands with US and EU clients across industries • AVentures: sell-side advisor to shareholders
  39. 39. Industry thought leadership Software Development report: Poland, Romania, Ukraine and Belarus DealBook of Ukraine: annual overview of tech investments Recent publications in global media First-of-a-kind industry overview. Comprehensively covers industry metrics, trends and M&A activity in the region “Ukraine is already one of the most competitive IT industry players in the region and is poised to consolidate its position further.” Link to the article “Ukraine is still the best outsourcing destination in Eastern Europe” Link to the article “In year overshadowed by the COVID pandemic Ukraine’s dynamic IT sector has been a rare ray of sunshine” Link to the article “Ukraine's IT Boom Weathers The Pandemic” Link to the article 39 Click to access
  40. 40. Yevgen Sysoyev Managing Partner ys@aventurescapital.com • Technology advisory and investments background • Board Member and investor in a dozen technology product and service companies • INSEAD MBA with distinction, Math and Economics degree Yuliya Sychikova Director yuliya@aventurescapital.com • Tech entrepreneurship and VC background • Investment and operation expertise in IT Service Industry • BA degree in Economics from the University of Pennsylvania Let`s talk? 40 Tetyana Torchylo Investment Intern tetyana.torchylo@aventurescapital .com • (cont.) BA degree in Political Economy from the Duke and Duke Kunshan Universities

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