M&A Year-End Review and 2008 Forecast

8/8/2019 M&A Year-End Review and 2008 Forecast

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www.corumgroup.com

Software M&A YearSoftware M&A Year--end Review andend Review and

Forecast for 2008Forecast for 2008January 29, 2008


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Corum Group Presentation 2

Middle Market Software M&A Specialists

M&A specialists since 1985

Software and IT experts mostly former CEOs

Dominant North American and European presence

200+ transactions completed

$6 billion in wealth created

58% cross-border transactions

Host of Selling Up Selling Outconferences

Sponsor of World Financial Symposiums conferences

Publisher of industry-leading M&A research


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Broad Exposure to Software M&A

Corums information is drawn from

Global M&A engagements Research in the U.S. and Europe

Buyer / client feedback

Education and activities

The last 90 days

Selling Up Selling Out conference series:Boston, Houston, Philadelphia, Toronto, Ottawa, Helsinki, Prague, London, Santa Clara

Merge BriefingBuenos Aires, Montevideo, Santiago, Oslo, Paris

Software Business Conference Santa Clara

Banff Venture Forum Banff, Alberta

Security CEO Roundtable with Milestone Group

World Financial Symposiums October 30, London


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Agenda

1Market Insights

2International Activity & Valuations

3Sector Analysis

4Discussion


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Headlines Tell the Story

Can M&As Best Times Get Better?Wall Street Journal, January 2007

Money is Everywhere But for How Long?Wall Street Journal, January 2007

Stock Surge + Bond Boom = M&A MagicWall Street Journal, April 2007

As Deal Barriers Fall, Takeover Bids MultiplyWall Street Journal, May 2007

M&A The Best Investment Game in TownMoneyextra.com UK, May 2007

Market Pressures Test Resilience of Buyout BoomWall Street Journal, June 2007

Dry-Up in Debt Wont Deter Tech DealsBarrons, September 2007

Dollar Declines on its RivalsWall Street Journal, September 2007

Time to Celebrate; 2007 Breaks M&A RecordWall Street Journal, October 2007

M&A Seen on the Brink After Record 2007Reuters, December 2007

Tech Cos Seen Going M&A Route, Not IPO in2008

Reuters, December 2007

IT Spending Growth Expected to Slow in 08

InformationWeek, December, 2007


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Economic Climate Weakens

Credit crunch tip of the iceberg?

Energy prices drag on economy

Consumer spending down

Corporate earnings down

Recession odds increase

More sellers

Corum Software Peer Group valuations down

But IT sector still strong

In spite of problems, M&A activity for 2008 may exceed 2007


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ACG/Thomson Dealmakers SurveyYear-end 2007

Dealmakers optimistic, but less bullish than six months ago

Expect fewer buyouts in next six months and more distressed sales

Increased likelihood of doing a cross-border deal

Credit issues will be a factor, but private equity to remain viable

Greater balance of buyers and sellers predicted

Optimism that debt markets will improve in 08


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Public Markets Reaching New Heights, then Oops

Dow Jones NASDAQ AIM S&P


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M&A is the Primary Source of Liquidity

In Dollar Volume U.S. dollar volume all industries

Source: Dealogic, IPO Central


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Current M&A Market

Broad Market

2007 M&A up 22% to $4.7 trillionworldwide (all industries)

Europe outpaced U.S. in dealvolume for first time in 5 years

2007 finished strong, although dealvolume and deal size dipped in thesecond half of the year

Technology Market

High tech deals for 2007 totaled $268 billion

Private equity deal volume fell 65%, whileportfolio company activity increased

Strategic buyers remain very active

Consolidation continues across mostsectors

Companies of all sizes continue to beaggressive buyers

Global buyer community expanding Europe, Asia


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Private Equity Credit Impact

Deal volumes by PE down dramatically from 1H07

Funding issues slow deal closings

Uncommitted funds still high $200+ Billion

Pressure to invest strong

Many PE have broad technology portfolios to build on leading to PE-backed

strategic acquisitions by portfolio companies

Sovereign wealth role in supporting large tech investors and banks

Most tech lenders not impacted by mortgage mess

Even with the slowdown, 2008 is poised for another stellar year.


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Strategic Buyers Still Very Active

Fill void left by private equity

Not impacted by credit

Strong cash reserves

Confident in stock market outlook

Actively looking for strategic investments

Business as usual

Strength of non-U.S. buyers (dollar devaluation / public multiples)

Converging markets / new models spur M&A


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Buyer Activity High

Current Examples

Sector Interested Parties

Wireless 14Compliance 13Enterprise Infrastructure 12Storage 12Supply Chain 12Visualization 11

Interested parties range from billion dollar household names to

companies never heard of


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Interest Translating into Deals


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Agenda

1Market Insights


3Sector Analysis

4Discussion


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Global M&A Activity

Cross-border transaction

levels remain strong

Cross-border M&A activity

contributed to 47% of the

announced deals for 2007

Europe and Asia both set

records for deal volume in

2007

U.S. sellers continue to look overseas for buyers

Weak dollar attracting non-U.S. buyers


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International Scope

An increasing number of buyers are not in your backyard

Emerging countries remain active buyers

Need to look at international companies as both competitors and potential acquirers


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Corum Transactions 2007Provider of paymentprocessing software andservice

Purepay U.S.Creditron Canada

Leading MRP and processautomation vendor for theglass industry.

Glaston FinlandAlbat+ Wirsam Germany

Leading provider of event-driven business applicationautomation and batchintegration technologies

UC4 Austria backed byCarlyle U.K.AppWorx U.S.

Developer of 3D digital

designs in the building, plantand marine markets

Autodesk U.S.NavisWorks U.K.

Provider of estimatingand earth measuringsoftware for contractors

Maxwell U.S.Quest U.S.

Value-added distributor of voice,data and converged communicationssolutions

Datatec South Africaon behalf of Westcon U.S.

CRANE U.K.


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Corum Transactions 2007

Electronic invoicing andlegal spend managementsolutions

DataCert U.S.CorpraSoft U.S.

IT services providerto government andcommercial organizations

TechTeam U.S.RL Phillips U.S.

Networking and lobby

services for gamepublishers &developers

Activision U.S.DemonWare Ireland

Human capital managementsolutions

StepStone NorwayExecuTRACK Germany

HR information systems formiddle market enterprises

BPO U.S.HR Microsystems U.S.

Provider of applicationssupport maintenanceservices (ASM)

Sierra Systems CanadaRIS Canada


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International Private Equity


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International Strategic Buyers


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International Buyers Remain Active

Need to Look Internationally

International Buyer U.S. Seller

Vivendi Activision

Nokia Navteq, Enpocket, Avvenu

Grisoft Exploit Prevention Labs

nCipher NeoScale SystemsPhilips Visicu

Cognos Applix, Celequest

Wipro Infocrossing

Trend Micro Provilla

Fast Search & Transfer RetrievalWare, AgentArtsSAP Yasu Technologies, OutlookSoft,

Pilot Software


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Global Marketplace

Almost 60% of Corums recent transactions are cross-border

A trend which is holding steady and one seen throughout the industry

Cross-border

58%

Intra-country

42%


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Looking Back Valuation Multiples

M&A Transaction Multiples Software Industry


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Public Valuation MultiplesSector Q4:06 Q1:07 Q2:07 Q3:07 Q4:07 Y on Y

Digital Media 2.59 x 1.92 x 2.07 x 2.12 x 1.61 x

Enterprise Applications 4.43 x 3.87 x 3.98 x 4.14 x 3.67 x

Business Intelligence 3.03 x 3.13 x 3.25 x 2.98 x 4.12 x

Enterprise Content Management 2.15 x 2.07 x 2.37 x 2.40 x 2.08 x

Supply Chain Management 1.89 x 2.10 x 2.29 x 2.23 x 2.25 x

Enterprise Infrastructure 2.77 x 2.86 x 2.88 x 2.51 x 3.04 x

Legacy Extension / SOA 1.70 x 2.18 x 2.56 x 2.47 x 2.42 x

Software Development Tools 1.71 x 2.00 x 2.22 x 1.66 x 1.83 x

Storage 2.98 x 3.68 x 3.29 x 2.68 x 2.49 x

Gaming 2.47 x 2.54 x 2.24 x 2.20 x 1.75 x

Internet Infrastructure 3.63 x 3.83 x 3.91 x 4.60 x 4.04x

Internet Pure Play 3.78 x 3.41 x 3.23 x 2.99 x 2.93 x

IT Services 0.80 x 0.80 x 0.89 x 0.96 x 0.83 x

Security 3.36 x 3.15 x 3.69 x 3.43 x 3.62x

Wireless 2.34 x 1.46 x 1.75 x 1.55 x 0.99x

Vert Market - Energy & Environment N/A N/A N/A 4.94 x 4.46 x

Vert Market - Engineering 3.06 x 3.40 x 3.29 x 3.73 x 2.73x

Vert Market - Financial Services 3.17 x 3.28 x 3.12 x 3.05 x 2.73 x

Vert Market - Government 1.13 x 1.16 x 1.15 x 1.21 x 1.24 x

Vert Market - Healthcare 2.36 x 2.28 x 2.53 x 3.16 x 2.62 x

Vert Market - Other 2.02 x 1.19 x 2.71 x 2.81 x 2.14 x

Vert Market - Telecom 2.10 x 1.33 x 1.52 x 1.50 x 1.44 x

TTM EV/S Multiples

N/A

Decreased

Increased


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Sector Consolidation & Evolution

Legacy Extension / EAI Past and Present

PastFocus: Legacy extension, applicationintegration, mainframe connectivity

Players:

Attachmate

BEA

Candle Iona

Jacada

NEON

NetManage

Seagull Software

SeeBeyond Tarantella

Tibco

Vitra

WRQ

EV/S Multiple Q2:05 1.40 x

Present:Focus: Software Oriented Architecture,Web services

Players:

Attachmate

BEA

Candle Iona

Jacada

NEON

NetManage

RocketSoftware

Seagull Software

SeeBeyond

Software AG

Tarantella

Tibco

Vitra

Webmethods

WRQ

EV/S Multiple Q4:07 2.42 x


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Agenda

1Market Insights


3Sector Analysis

4Discussion


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Software and IT M&A Activity

Number of Transactions by Sector


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Sectors to Watch Trending Down

Deals are happening in these sectors, but slowing

Buyers are digesting previous acquisitions

Sectors are maturing

Decrease in the number of material acquisition targets

Broaden exposure and sector presence

Q

1:05

Q

2:05

Q

3:05

Q

4:05

Q

1:06

Q

2:06

Q

3:06

Q

4:06

Q

1:07

Q

2:07

Q

3:07

Q

4:07

Enterprise Applications

Storage

Gaming

Internet InfrastructureIT Services


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Top Buyers 2007

Strategic BuyersActive Private Equity FirmsCompany # of Deals

Google 12

Microsoft 11

Oracle 10

Cisco 9

IBM 9

HP 7

Nuance 7

Sungard 7

Accenture 6

Dell 6

SAP 6

Yahoo! 6

AOL 5

Autodesk 5

BT Group 5

CDC Software 5

PE Firm (partial list)

Kohlberg Kravis Roberts & Co.

Carlyle Group

Francisco Partners

Platinum Equity

Thoma Cressy Bravo

Golden Gate Capital

Silver Lake Partners

Apax Partners

170+ buyers with 2-4 transactions


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Buyer Profile

2007 Trends

Active international buyer communities U.K., France, Germany and the Nordics

Active North American buyer communities

California, New York, Massachusetts, Ontario

Increased presence of buyers from secondary markets

Approx 63% of the deals tracked were all cash

Remaining 37% were a mix of cash, stock, debt and earnout

Strategic buyers more active PE-backed portfolio companies more active


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Transaction Highlights Largest

Observations

Appetite for mega deals has slowed

Convergence and consolidation driving forces

Stronger presence from the strategic community

Prevalent international mix

Buyer Seller Value (Millions $) Sector

Vivendi Activision $18,900.00 Gaming

Nokia NAVTEQ Corporation $8,100.00 Wireless

SAP AG Business Objects $6,800.00 Business Intelligence

IBM Cognos Incorporated $5,000.00 Business Intelligence

Kohlberg KravisRoberts

NorthGate InformationSolutions plc

$1,190.00 Enterprise Applications


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Transaction Highlights Private Equity

Observations

Current debt market has slowed pure acquisitions PE portfolios picking up the slack

Fundraising at record highs

Strong focus on technology

PE firms looking at smaller opportunities, which may not require leverage


Kohlberg Kravis

Roberts

NorthGate Information

Solutions plc

$1,190.00 Enterprise Applications

Platinum Equity, LLC Covad Communications $304.00 Telecom

Silver Lake Partners(Sumeru)

Mobile Messenger Undisclosed Wireless

Accel-KKR LLC iTradeNetwork Undisclosed Vertical Market

Genstar Capital TravelClick Undisclosed Vertical Market


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Transaction Highlights Strategic

Observations

Deals have to make strategic sense Willing to pay higher valuations, for the right deal

Product expansion through complementary technology acquisitions

Market convergence


Macrovision Gemstar-TV Guide

International

$2,800.00 Digital Media

McAfee, Inc. SafeBoot $350.00 Security

Hypercom Thales SA $120.00 Financial Services

Kronos, Inc. Deploy Solutions, Inc. Undisclosed Enterprise Applications

Dell Inc. Everdream Corporation Undisclosed Enterprise Infrastructure


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Transaction Highlights International

Observations

Global expansion and local domain expertise

Desire to enter U.S. markets

Sector consolidation


Dolby Laboratories,

Inc.

Coding Technologies

GmbH

$250.00 Wireless/Internet

Parametric TechnologyCorporation

CoCreate Software $250.00 Engineering

Software AG Jacada $26.00 Legacy Modernization

Ness Technologies FMC Consulting andInformatics

Undisclosed IT Services

Securitas Systems Installerende Partners Undisclosed Security


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Agenda

1Market Insights


3Sector Analysis

4Discussion


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M&A Year-End Review and 2008 Forecast

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