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2008 Mid-Year Review

Software and IT M&A Outlook:
WHAT LIES AHEAD?

Thursday, July 17, 2008

www.corumgroup.com
Middle Market Software M&A Specialists

 M&A specialists since 1985

 Software and IT experts – mostly former CEOs

 Offices in Europe, Canada, Latin America and United States

 200+ transactions completed

 $6 billion in wealth created

 58% cross-border transactions

 Host of Selling Up Selling Out conferences

 Host of multi-national Merge Briefings

 Sponsor of World Financial Symposiums conferences

 Publisher of industry-leading M&A research

Corum Group Presentation ■ 2

Broad Exposure to Software M&A

Corum’s information is drawn from

 Global M&A engagements
 Research facilities in the U.S. and Europe
 Buyer / client / advisor feedback
 Educational events and speaking activities

The last 90 days

 Selling Up Selling Out conference series:
Paris, San Diego, Bellevue, Austin, London, Denver
 Merge Briefings:
Toronto, Ottawa, Montreal, Calgary, Vienna, Zurich, Frankfurt, Dusseldorf, Hamburg, Berlin, Helsinki,
Munich, Stuttgart, São Paulo, Mexico City, Brazilia and Florianopolis
 World Financial Symposiums: Boston
 Other industry events

Corum Group Presentation ■ 3

Agenda

1Market Insights

2International Activity

3Sector Analysis

4Discussion

Corum Group Presentation ■ 4

 Headlines Tell the Story

“Can M&A’s Best Times Get Better?” “Tech Cos Seen Going M&A Route, Not IPO in 2008”
Wall Street Journal, January 2007 Reuters, December 2007

“Money is Everywhere – But for How Long?” “IT Spending Growth Expected to Slow in ‘08”
Wall Street Journal, January 2007 InformationWeek, December 2007

“Stock Surge + Bond Boom = M&A Magic” “Bear Stearns’ No. 1 Foe: Fear Itself”
Wall Street Journal, April 2007
CNN Money, March 2008

“As Deal Barriers Fall, Takeover Bids Multiply”

Wall Street Journal, May 2007 “Deal Making: It Shall Return”
Wall Street Journal, May 2008
“M&A – The Best Investment Game in Town”
Moneyextra.com UK, May 2007 “As Markets Plunge, So Does Deal Making”
New York Times, June 2008
“Market Pressures Test Resilience of Buyout Boom”
Wall Street Journal, June 2007
“Let’s Still Make a Deal”
Business Week, June 2008
“Dry-Up in Debt Won’t Deter Tech Deals”
Barron’s, September 2007
“M&A World Continues to Spin but at a Slower Pace”
Wall Street Journal, July 2008
“Time to Celebrate; 2007 Breaks M&A Record”
Wall Street Journal, October 2007

“M&A Seen on the Brink After Record 2007”

Reuters, December 2007

Corum Group Presentation ■ 5

 Impact on Equity Markets

15

10

Nasdaq
NYSE
-5 S&P500
FTSE
TSX

-10

-15

-20

-25

Corum Group Presentation ■ 6

Economic Climate Weakens

 Credit crunch won’t go away

 Energy prices drag on economy – $150 or $200 oil?
 Consumer spending slows – but supports U.S. economy
 Broad indices headed downward – Bear Market
 Corporate earnings down
 Recession a reality
 More Sellers while Buyers reset on valuations
 Corum Software Peer Group valuations down
 But… IT sector Buyers are still active

In spite of problems, M&A deals are getting done

Corum Group Presentation ■ 7

 Sellers’ Concerns

 Duration of downturn
 Sustaining the business during downturn
 Rising tax rates in 2009? (U.S.)
 Missing the market
 Emergence of new competitors
 Addressing new emerging markets alone
 Pressure to readjust value expectations
 Threat of sector consolidation
 Regulatory / Anti-trust impact on markets
 How to achieve Liquidity

All reasons to be in market now.

Corum Group Presentation ■ 8

The Silver Lining

On the plus side:

 Technology revenues remain strong
 Earnings remain mostly positive
 Forward analyst estimates look good
 Lending requirements loosening
 PE buyers see opportunity in the coming months
 PE and VC investors raising new funds
 International markets remain strong – Euro up
 No buyers saying “We’re pulling back”
 Large cap stocks up
 Strong cash reserves

Deals are getting done for quality companies

Corum Group Presentation ■ 9

 M&A is the Primary Source of Liquidity

In Dollar Volume – U.S. dollar volume all industries

$1,700
$1,600
$1,500
$1,400
$1,300
$1,200
$1,100
$1,000
$900
$800
$700
s B
ilo
In

$600
$500
$400
$300
$200
$100
$0

M&A Dollar Volume IPO Amount Raised

Source: Dealogic, IPO Central

Corum Group Presentation ■ 10
Current M&A Market
Broad Market
1H:08 Global Deal Volume
$1.57 trillion, down 35%
2Q:08 Global Deal Volume
$940 billion down 37% vs. year ago
Private Equity down 82% globally
•89% in U.S.
•59% in Europe
Technology Market
High tech deals for Q2 $36.5 billion
Strategic buyers remain active
Private equity getting back into the game
Consolidation continues across most
sectors
Companies of all sizes continue to be
aggressive buyers
Companies in emerging countries are
viewed as buyers, not just targets
• Asia
• Eastern Europe
• Latin America
Corum Group Presentation ■ 11
 Public Valuation Multiples

Market Median EV / Revenue Multiples

Q1:08 Q2:08 %Δ
Horizontal Applications 1.84x 1.81x -2%
Vertical Applications 1.93x 2.19x 13%
Consumer Applications 1.91x 1.70x -11%
Infrastructure 2.08x 1.98x -5%
Internet 2.45x 2.71x 11%
IT Services 0.85x 0.89x 5%

Corum Group Presentation ■ 12

Private Equity – Credit Impact

 Deal volumes by PE down dramatically from 1H:07

 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
 No venture backed IPOs in U.S. during past quarter (1st time in 30 years)
 Some highly leveraged PE funds/buyers saved from correction by sub-prime
melt-down

Private Equity on sidelines, waiting for market to bottom?

Corum Group Presentation ■ 13

Strategic Buyers Very Active

Fill any void left by private equity

 Less impacted by credit crunch
 Strong balance sheets
 Equity values down, but not from 12 months ago
 Doing deals under currently favorable antitrust environment
 Business as usual for many
 Strength of non-U.S. buyers (dollar devaluation / public multiples)
 Converging markets / new models spur M&A
 Accommodate sellers looking to close deals before tax increases

Corum Group Presentation ■ 14

 Large Cap Tech Stocks

Company Stock Price Stock Price % Change Year Ago Current Period Cash
7/15/2007 7/15/2008 Cash
Sun $5.37 $8.80 63.87% $3,620 $3,030

Apple $137.73 $169.64 23.17% $9,352 $19,450

IBM $108.60 $123.20 13.44% $14,991 $12,030

Oracle $20.40 $20.25 -0.74% $6,218 $11,040

SAP $52.14 $51.68 -0.88% $3,151 $3,840

Symantec $19.80 $18.59 -6.11% $2,559 $2,430

Google $552.16 $516.09 -6.53% $6,082 $12,130

HP $47.25 $41.65 -11.85% $11,293 $11,650

Microsoft $29.82 $26.15 -12.31% $6,111 $24,020

Nokia $29.91 $24.86 -16.92% $3,130 $17,030

Yahoo $26.58 $21.54 -18.96% $1,514 $2,610

Cisco $29.89 $21.04 -29.61% $3,728 $24,430

EMC $19.19 $12.53 -34.71% $4,482 $5,610

Corum Group Presentation ■ 15

Analysis: A Recently Launched Corum Client

 Vertical market software company

 North America based
 Market leader
 One of 4 good options in specialty market
 Clear value proposition
 Solid management team
 Marketing and sales opportunities not fully exploited
 Solid business model
 Good revenue growth and solid EBITDA (12 million / 3+ million EBITDA)
 In market 8 weeks
 15 interested / 5 buyer calls / 2 meetings / 1 offer in process and 3 parties moving towards offers

Corum Group Presentation ■ 16

 Interest Translating into Deals

Current examples of
buyer interest across
multiple sectors:

Sector Interested Parties

Vertical Market 15
Gaming 12
Embedded Technologies 12
Security 11
Financial Services 10
Internet Infrastructure 10
Compliance 10

Interested parties from billion dollar

household names to unknown companies

Corum Group Presentation ■ 17

 Global M&A Activity

 Cross-border transaction levels remain strong

 Dramatic increase in BRIC country transaction volumes over 2007

 Asia Pacific firms remain bullish on M&A over the next 12 months

 Europe and Asia both set records for deal volume in 2007

– Europe off pace from last year

– Asia could break that record this year

 Weak dollar aiding in cross-border transactions

 European buyers shopping in the U.S.

 Huge U.S. trade deficit – dollars to reinvest

Corum Group Presentation ■ 18

Global Marketplace

60% of Corum’s recent transactions are cross-border

Cross-
border
60%
Intra-country
40%

A trend holding steady and seen throughout the technology industry

Corum Group Presentation ■ 19

 International Scope

 Buyers less likely to be local

 New buyers from emerging countries increasing role in global M&A
 View international companies as both competitors and potential acquirers

Corum Group Presentation ■ 20

Representative Corum Transactions

Leading MRP and process

Developer of collaborative automation vendor for the
3D authoring and mapping glass industry
technology

Microsoft – U.S. Glaston – Finland

Caligari – U.S. Albat+Wirsam – Germany

Leading provider of event-

driven business application
Developer of 3D digital
automation and batch
designs in the building, plant
integration technologies
and marine markets
UC4 – Austria backed by
Carlyle – UK
Autodesk – U.S.
AppWorx – U.S.
NavisWorks – UK

Value-added distributor of voice,

Provider of estimating
data and converged communications
and earth measuring
solutions
software for contractors

Datatec – South Africa

Maxwell – U.S.
on behalf of Westcon – U.S.
Quest – U.S.
CRANE – UK
Corum Group Presentation ■ 21
Representative Corum Transactions

Electronic invoicing and

legal spend
IT services provider
management solutions
to government and
commercial organizations
DataCert – U.S.
TechTeam – U.S.
CorpraSoft – U.S.
RL Phillips – U.S.

Networking and lobby

Human capital management
services for game
solutions
publishers &
developers
StepStone − Norway
Activision – U.S.
ExecuTRACK − Germany
DemonWare − Ireland

HR information systems for Provider of applications

middle market enterprises support maintenance
services (ASM)

BPO – U.S. Sierra Systems – Canada

HR Microsystems – U.S. RIS – Canada
Corum Group Presentation ■ 22
International Buyer Activity

Need to Look Internationally

International Buyer U.S. Seller

Micro Focus Net Manage

Sopra Group Tumbleweed Communications
Kapsch TrafficCom Mobility Solutions
Dassault Systems Engineous Software
SAP AG Visiprise, Inc.
Alcatel-Lucent Motive, Inc.
Logica Holdings Dolphin Digital Media
NEC NetCracker
Purple Labs OpenWave Mobile Phone Business
Springsoft Novas
3i Infotech Regulus Group

Corum Group Presentation ■ 23

BRIC Countries and Beyond

BRIC - Brazil, Russia, India, and China… but don’t forget Mexico and South Korea
 Responsible for 39% of IPO dollar raised in 2007
 India third largest market for IPOs in Q1:2008
 Economies performing well
 Consumer spending strong, resulting in 800 million PC and Internet users by 2015*
 China predicted to become the most influential country in regards to IT
 Emerging economies’ GDP are now on par with those of developed economies
 Mexico’s close proximity to the U.S. puts them in a position of power (IT Services)

Volatility among emerging nations remains a concern:

 Stock markets overvalued?
 Valuations tend to be lower
 Geopolitical concerns

*DNV Technology Outlook 2015

Corum Group Presentation ■ 24
International Buyers

Corum Group Presentation ■ 25

Corum’s Market & Sector Re-Alignment

Horizontal Application Software Infrastructure Software

Vertical Application Software Internet

Consumer Application Software IT Services and BPO

Corum Group Presentation ■ 26

 Software and IT M&A Activity 1H:08

Where are the deals happening?

Big6 Volume and Value Percentages

50%

45% 44%

40%
Oracle/BEA
$8.5 billion
35%

30% 28%

Volume Percentage
25%
Value Percentage
20%

15%

9%
10% 8%
7%
5% 4%
16% 25% 5% 26% 20% 7%
0%
Horizontal Application Vertical Application Consumer Application Infrastructure Software Internet IT Servicesand BPO
Software Software Software

Corum Group Presentation ■ 27

 Software and IT M&A Activity – A Closer Look

Vertical Application Software

Current Trends:
 Niche and point solutions attractive targets
 Buyers of vertical market solutions coming from other markets
 Tech M&A remains strong in sectors serving challenged markets

Q2:2008Vertical ApplicationSubsector Breakdown(Deal Volume)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
A/E
Ene
Fina
Gov
Hea

Oth
Q2 7% 6% 25% 12% 20% 29%

Corum Group Presentation ■ 28

Top Buyers

Active Private Equity Firms Strategic Buyers

PE Firms (partial list) Company # of Deals # of Deals
2007 YTD 2008
Carlyle Group
Google 12 0

Francisco Partners Microsoft 11 13

Oracle 10 5
Thoma Cressy Bravo
Cisco 9 1
Golden Gate Capital
IBM 9 8
Silver Lake Partners HP 7 3

Apax Partners Nuance 7 1

Sungard 7 3
Vista Equity
Accenture 6 6
Palladium Equity Partners Dell 6 1

Vector Capital SAP 6 1

Yahoo! 6 3

AOL 5 5

Autodesk 5 7

BT Group 5 0

CDC Software 5 2

Corum Group Presentation ■ 29

2008 Buyer Trends

 Active European buyer communities

 UK, France, Germany and the Nordics

 Increased presence of buyers from emerging markets

 BRIC, Latin America, Eastern Europe

 North American strategic buyer communities holding steady

 Immense deal scrutiny

 Cash remains the deal consideration of choice

 Specific domain expertise and geographical presence in high demand

 PE-backed portfolio companies more active

 Private equity firms getting back into the game

Corum Group Presentation ■ 30

Buyers Thinking “Small”

 Number of undisclosed deals up

 Young leading edge technology developers are poised for growth
 Niche markets present growth opportunities

Large market leaders thinking small:

Corum Group Presentation ■ 31

 Thinking Small Case Study

Business Intelligence

Tier 1 Vendors

Mid-market

Young / Small (>$50 million)

…and dozens more

Corum Group Presentation ■ 32
Transaction Highlights – Strategic

Buyer Seller Value (Millions) Sector

Symantec Corporation SwapDrive $123 (est)

Whitepages.com Snapvine, Inc Undisclosed (rumor $20)

Blackbaud, Inc. Kintera Inc. $46

VMware, Inc. B-hive Networks Undisclosed

TIBCO Software Insightful Corporation $25

Observations
 Deals have to make strategic sense
 High valuations for the right deal
 Product expansion through complementary technology acquisitions
 Market convergence
Corum Group Presentation ■ 33
Transaction Highlights – Private Equity
Buyer Seller Value (Millions) Sector

Vista Equity P2 Energy Undisclosed

Silver Lake Sumeru I2 Ltd. $185

Great Hill Partners CAM Commerce Solutions $180

Battery Ventures HighJump Software Undisclosed

Carlyle Group and JMI Equity Gemcom Software Int’l. $180

Observations
 Current debt market still having impact
 Dramatic increase in PE deals in Q2 vs. Q1
 Strong focus on technology
 PE firms looking at smaller opportunities, which may not require leverage
Corum Group Presentation ■ 34
Transaction Highlights – International

Buyer Seller Value (Millions) Sector

SAP AG Visiprise, Inc. Undisclosed

Forticom Nasza-klasa.pl $92

LeGuide.com SA Dooyoo AG Undisclosed

SafeNet, Inc. Beep Science AS Undisclosed

EMC Corporation Conchango plc £42

Observations
 Global expansion and local domain expertise
 Desire to enter U.S. markets
 Sector consolidation

Corum Group Presentation ■ 35

Corum Q2 M&A Briefing

Report Highlights
Technology market overview
Active buyers, sober valuations

Strategic buyer spotlight

Adobe

Technology Spotlight
Cloud Computing

Valuation data

International perspective on M&A

Sovereign Wealth Funds

In-depth sector coverage

Corum Group Presentation ■ 36

Contact Information

Corum Group Ltd.

Ward Carter, President
wardc@corumgroup.com

Ryan Blakely, VP Research

ryanb@corumgroup.com

10500 NE 8th Street, Suite 1500 Corum Group International S.à.r.l.

Bellevue, WA 98004 Miro Parizek, Managing Director
USA mirop@corumgroup.com

+1 425-455-8281 Beim Paradeplatz

Basteiplatz 7
8001 Zürich
Switzerland

+41 44 251 82 65
Visit our Website at
www.corumgroup.com

Corum Group Presentation ■ 37