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M&A Flash Report

p – Sept.
p 2009
Software and IT Industry Market Update:
I’ll Buy!
y Is Private Equity
q y Coming
g Back?

Thursday, September 3
Thursday 3, 2009
10:00 am PT

www.corumgroup.com
 Mark Reed
Executive Vice President
Corum Group Ltd
Ltd.

Bruce Milne
CEO & Chairman
Corum Group Ltd.
Bruce Milne, the founder of Corum, is one of the true leaders in the software industry. He built the largest vertical market
software company in the world before founding Corum, where he has overseen more mergers than anyone in history,
generating over $6 Billion in wealth for the owners of privately held firms. Along the way, in addition to publishing
extensively, he has owned three other software companies (Rosesoft, Dataword, Insider Edition) and been a seed investor Nat Burgess
Executive Vice President
in some of the leaders in our industry (Blue Coat, Bright Star, Sabaki). He founded the largest regional tech association
Corum Group Ltd.
(Washington Software Association),
Association) and
and, as a recognized leader
leader, has served on numerous advisory boards including
Comdex, DEC, Apple, IBM, and personally advised Bill Gates at Microsoft. He has been a tech cabinet advisor to two
Governors, a Congressman and U.S. Senator on issues related to the future of the software industry. For his expertise, he
was commissioned by the U.S. government to write the definitive high tech business guide for the SBA. The Canadian
Government had him conduct research which led to the establishment of SoftWorld, and he was recently voted one of the
most influential people in the European software community for his work during the last market decline.

Ryan Blakely
>> For today’s presentation or more information, contact Pat Sultan Vice President, Research
(pats@corumgroup.com, +1 425-455-8281 ext. 248) Corum Group Ltd.
Corum Group Presentation ■ 2
Agenda
g

ƒ Langara!

ƒ Overview of Current Market

ƒ Market and Valuation Analysis

ƒ Private
Pri ate Eq
Equity
it Panel

ƒ Closing Comments - Q&A

Corum Group Presentation ■ 3

Corum’s Annual Client Celebration
Aug. 29 – Sept. 1
A tradition for 22 years

Corum Group Presentation ■ 4

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What Wall of Worry?
y

ƒ IMF Set to Raise Global Growth to 3.3%

ƒ World Bank Sees True Global Recovery

ƒ ISM IIndex
d U Up T
Two M
Months
th St
Straight
i ht tto 52
52.9%
9%

Corum Group Presentation ■ 13

Much Good News

ƒ South Korea Economy Grew Faster Than Expected

ƒ U.S.
U S Productivity Up 6
6.6%
6% in Q2

ƒ Goldman Sachs Revises China Growth to 8

8.3%
3%

ƒ Strong
g Export
p Growth Lifts German Market

ƒ European Spending Rose - First Time in a Year

Corum Group Presentation ■ 14

Real Estate Seems to be Recovering
g

ƒ Pending Sales of Existing Homes Rise in July

ƒ Housing Prices Up 1
1.7%
7%

ƒ U.K.
U K Mortgage Approval Rose to 15 Month High

Corum Group Presentation ■ 15

But, Still Real Concerns

ƒ Back to School Sales Auger Retail Woes

ƒ Majority See No Benefit from Stimulus Program

ƒ Housing
H i “P“Poverty
t Eff
Effect”
t” Fouls
F l U.S.
U S Rebound
R b d

ƒ Companies Cut More Jobs Than Forecast

ƒ Factory Orders Rose Less Than Expected

Corum Group Presentation ■ 16

So Many
y Mixed Messages
g

ƒ China Stimulus Helps Global Rebound or

ƒ The Gloom in China’s Growth Stats

ƒ Cash for Clunkers Real Boost to Auto Sales or

ƒ Cash for Clunkers Is a Sugar High!

ƒ Worst Over for Commercial Real Estate or

ƒ Commercial Real Estate Ticking Time Bomb

Corum Group Presentation ■ 17

But, Deals Are Up!

ƒ M&A Revival
Re i al Seen in Three Deals
ƒ Including Disney and Baker Hughes

ƒ Buyout Firms Return to Basics

ƒ Silver Lake acquires Skype for $2 Billion

Corum Group Presentation ■ 18

Corum Transactions Are Up

ƒ Five
Fi d deals
l iin 8 weeks
k

ƒ Four more set to close

ƒ Four more with new offers

ƒ Mobile Applications
ƒ Healthcare
ƒ Risk / Compliance
ƒ Security

Corum Group Presentation ■ 19

 Ryan Blakely
Vi P
Vice President,
id R
Research
h
Corum Group Ltd.

Ryan joined Corum in 1998 and has held a number of roles central to research and market
analysis in the software and technology space. With over ten years experience in the
software M&A environment, Ryan has an intimate understanding of the software industry as
a whole, especially as it relates to mergers and acquisitions. As the Vice President of
Research, Ryan directs Corum’s research group in both North America and Europe, and
has played a direct role in developing buyer relationships during his tenure with Corum.
C He
also is a major contributor to Corum’s research reports. Ryan graduated from Washington
State University with a B.A. in Business Management, with a focus on Entrepreneurial
Studies.

Corum Group Presentation ■ 20

 Public Markets

Nasdaq S&P Tech Dow

120 00
120.00

110.00

100.00

90.00

80.00

70.00

60.00

50.00

40.00
Jan‐09 Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09

Corum Group Presentation ■ 21

 M&A Activity
y – July
y

Number of Software and IT M&A Transactions

2009

2008

2007
August
2006

2005

2004

0 50 100 150 200 250 300 350

2009 2008 2007 2006 2005 2004

Corum Group Presentation ■ 22

Corum Index – M&A Statistics

Aug-08
A 08 Aug-09
A 09
# of Transactions 215 221
# of Mega Deals >$1B 0 0
Largest Deal $510 $530
Average Deal Value $78 $82
Median Seller Revenue $27 $42
# VC backed Exits 18 26
% Terms Undisclosed 55% 76%
All Cash (announced) 54% 43%
% Targets Public 17% 19%
% Buyers Public 53% 46%

$ values
l iin millions
illi

Corum Group Presentation ■ 23

 Horizontal Application Software Market

Public Valuations Deal Spotlight:

Sector: Supply Chain
Target: Advanced Information
Systems
Horizontal
Buyer: PSI AG
Application Date: August 2009
Software Transaction Value: $18 million
St
Structure:
t C h
Cash
Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09
EV/EBITDA
Revenue Multiple: 1.1x
5.85 x 6.82 x 9.23 x 9.39 x 9.99 x 11.06 x 11.06 x
EV/S 1.12 x 1.12 x 1.16 x 1.35 x 1.50 x 1.58 x 1.93 x

Comments:
ƒRegional consolidation
ƒVertical expansion

Corum Group Presentation ■ 24

 Vertical Application Software Market

Public Valuations Deal Spotlight:

Sector: Transportation
Target: Grey Island Systems
Buyer: WebTech Wireless
Date: August 2009
Vertical 
Application Transaction Value: $35.4 million
Software Structure: Stock
R
Revenue M
Multiple:
lti l 1.7x
17
Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09
EV/EBITDA 6.19 x 6.53 x 7.26 x 7.99 x 8.17 x 8.91 x 9.01 x
EV/S
Comments:
1.01 x 1.14 x 1.31 x 1.40 x 1.51 x 1.51 x 1.66 x
ƒNiche market expansion
p
ƒComplementary solutions
ƒPublic target

Corum Group Presentation ■ 25

 Consumer Application Software Market

Public Valuations Deal Spotlight:

Sector: Hyper Local Content
Target: EveryBlock
Buyer: MSNBC.com
Date: August 2009
Consumer  Transaction Value: Undisclosed
Application
Software
Comments:
C t
ƒExtending market reach
Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09
ƒUser generated content
EV/EBITDA 2.40 x 2.74 x 3.81 x 2.83 x 4.47 x 4.57 x 4.27 x
EV/S
/ 0.58 x 0.64 x 0.69 x 0.50 x 0.53 x 0.53 x 0.59 x

Corum Group Presentation ■ 26

 Infrastructure Market

Public Valuations Deal Spotlight:

Sector: Application Development
Target: SpringSource Inc.
Buyer: VMware, Inc.
Date: August 2009
Infrastructure  Transaction Value: $420 million
Software
Structure: Cash and stock
R
Revenue M
Multiple:
lti l 14.0x
14 0
Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09
EV/EBITDA 6.32 x 6.98 x 8.46 x 8.29 x 8.74 x 9.59 x 10.92 x Comments:
EV/S 1.31 x 1.43 x 1.55 x 1.52 x 1.72 x 1.95 x 2.02 x
ƒStrong
g valuation
ƒPaaS
ƒExtend current offerings

Corum Group Presentation ■ 27

 Internet Market

Public Valuations Deal Spotlight:

Sector: Social Networking
Target: iLike
Buyer: MySpace.com
Date: August 2009
Internet Transaction Value: Undisclosed

Comments:
C t
ƒSocial experiences
Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09
ƒUser base
EV/EBITDA 6.05 x 7.54 x 9.80 x 11.78 x 11.81 x 13.32 x 13.02 x
ƒTraffic
EV/S
/ 1.36 x 1.60 x 2.11 x 2.26 x 2.30 x 2.48 x 2.60 x

Corum Group Presentation ■ 28

 IT Services Market

Public Valuations Deal Spotlight:

Sector: Services
Target: TRS Consulting Inc.
B
Buyer: NCI IInformation
f ti S Systems
t
Date: August 2009
IT Services Transaction Value: $18 million
Structure: Cash + earn-out

Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09 Jul‐09 Aug‐09

Comments:
EV/EBITDA 5.27 x 5.32 x 5.76 x 5.51 x 5.24 x 5.56 x 5.67 x
ƒConsolidation
EV/S 0.55 x 0.56 x 0.60 x 0.61 x 0.63 x 0.68 x 0.68 x ƒIncrease scale
ƒDrive future growth

Corum Group Presentation ■ 29

Private Equity
y Data Points

ƒ $400
$ billion in available capital
p
ƒ % of deals
ƒ 2007 – 36%
ƒ 2008 – 6%
ƒ 2009 – 19%
ƒ Data suggests PE deal volumes have bottomed
ƒ Technology remains area of focus for PE community
ƒ See more PE activity in emerging markets in the next
year
ƒ Skype - $2 billion for majority stake

Corum Group Presentation ■ 30

 Market and Valuation Summary

ƒ Continue to see month on month increases in public

valuations
ƒ Good valuations for strategic opportunities
ƒ Transaction volumes slowed – typical August
ƒ Active buyer universe
ƒ Private equity putting dollars to work

Corum Group Presentation ■ 31

Private Equity
y Panel

Greg S. Goldfarb, Principal, Summit Partners

Greg joined the Palo Alto office of Summit Partners in 2002 and focuses on growth equity
in estments and recapitali
investments recapitalizations
ations in bootstrapped
bootstrapped, profitable gro
growth
th companies
companies. His board
directorships and investments include IntelliChem, LiveOffice, ProClarity Corporation, The
Mutual Fund Store, Tiny Prints, and Web Reservations International Limited. Previously, Greg
was Director of the Innovation Lab at Starwood Hotels & Resorts Worldwide, responsible for
developing new technology-based businesses for Starwood. He is a graduate of Harvard
University.

Matthew Picciano, Alpine Investors

Matthew joined Alpine Investors in 2007 from The University of Cincinnati where he
graduated cum laude with a Bachelor of Business Administration in Finance and Real
Estate. Matthew’s previous work experience includes an internship in capital management at
The Kroger Co. He also worked as a real estate analyst intern in The Kroger Co.’s Atlanta
Division and as a mutual fund accountant intern at Integrated Investment Services. Since
joining Alpine, Matthew has spent most of his time in the software sector including sourcing
and helping close the WebEquity Solutions transaction.

Alex Rolfe, Alpine Investors

Alex Rolfe joined Alpine in 2008. Previously, Mr. Rolfe worked at Golden Gate Capital, a private
equity firm in San Francisco, where he completed transactions in technology, retail, and
healthcare. Prior to Golden Gate, Mr. Rolfe was a strategy consultant with Bain & Company
where he worked with private equity as well as corporate clients. Mr. Rolfe
f holds a BA from
f
Dartmouth College where he graduated Phi Beta Kappa, and an MBA from Stanford University's
Graduate School of Business where he was an Arjay Miller Scholar.

Corum Group Presentation ■ 32

 Summit Partners at a Glance

Summit Partners is a private equity and venture capital firm. We work

with owners and management
g teams to maximize long-term
g value.

Overview Investment profile

f Founded in 1984 f History of profitable growth
f Raised more than $11 billion in capital f Strong leadership team
f Offices in Boston, Palo Alto and London f Proven business model
f More than 90 investment professionals f Minimal previous outside capital
f Managing
g g directors average
g 14 yyears at Summit f In a market with g
growth p
potential
f Broad industry and geographic coverage
f Minority or majority interest
Investment options for capital

f Usually lead – and often sole – investor f $5 million to more than $500 million per company in
equity, with the ability to invest more than $800 million
f International
I t ti l iinstitutional
tit ti l investor
i t base
b in combined equity and subordinated debt
f More than 300 portfolio companies f Uses of capital
– Nearly 125 public offerings – Growth equity
– More than 115 mergers or sales – Recapitalizations
– Management buyouts

33
 Alpine Investors is a private equity firm focused on making investments in domestic
micro-cap
micro cap privately held companies
• Funds under Management: $250m across three funds (recently had a first close on Fund IV)
• Industries of Interest: i) Software ii) Business Services, iii) Education and iv) Gaming
• Target Size: $2-$10m of EBITDA; $5 – 50m of revenue
• Flexible Deal Structures:
• Majority buy-outs or minority growth equity investments
• We can back current management or bring in our own industry specific Executive in the event management is
g to retire,, transition out,, or wants to bring
looking g on more expertise
p
• Value-add Investment Partner: We take an active role in our portfolio companies including: i)
strategic planning, ii) key hiring, iii) add-ons (sourcing and transaction) and iv) other operational
projects
• Long Term Orientation: We expect to grow businesses over a 44-88 year period
• Example Portfolio Companies:

SaaS Loan Origination Provider High-end Online Lighting Retailer Turn-key ATM operator Online Continuing Education Provider
Upcoming
g Corum Events

September 15: Pittsburgh -- MB October 8: Washington DC -- MB

September 17: Chicago -- MB October 13: Scotland -- MB
September 22: Reading, U.K. -- MB October 13: Austin -- SUSO
September 23: Salt Lake City -- MB October 14: Ireland -- MB
September 24: Denver -- MB October 20: Stockholm -- MB/SUSO
October 5: Prague -- SUSO October 22: Denmark -- MB/SUSO
October 6: Boston -- MB October 23: Munich -- MB
October 8: Lyon
y -- MB October 27: Frankfurt -- MB

Merge
g Briefing
g (MB)
( )
Selling Up Selling Out (SUSO)
Corum Group Presentation ■ 35
Contact Information

Corum Group Ltd.

Bruce Milne, CEO

Ryan Blakely, VP Research

ryanb@corumgroup.com
b@
Corum Group International S.à.r.l.
10500 NE 8th Street, Suite 1500
Bellevue, WA 98004
USA Beim Paradeplatz
Basteiplatz 7
+1 425-455-8281 8001 Zürich
Switzerland

+41 44 251 82 65

Research and Conferences:

www.corumgroup.com

Corum Group Presentation ■ 36