m&a flash report – july 2009...top technology stocks stock price stock price stock price %...

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M&A Flash Report M&A Flash Report –– July 2009July 2009pp yySoftware and IT Industry Market Update

Thursday, July 2, 200910:00 am PT

www.corumgroup.com

Ward CarterPresidentCorum Group Ltd.

Mark ReedExecutive Vice PresidentCorum Group Ltd.

Ward's technology background includes a variety of management positions with the Burroughs Corporation (later Unisys). Then, as vice president of a Wall Street investment firm and as principal in a regional venture firm he raised capital forinvestment firm and as principal in a regional venture firm, he raised capital for ventures in computer hardware, software, and biotechnology. As an executive for a Seattle-based archival storage software company, he attracted venture capital and assisted with the eventual acquisition of the company by a larger competitor. As president of InfoMatrix, and later Discovery Sales + Marketing, Ward provided strategic consulting support to emerging software companies.

Ryan BlakelyVice President, ResearchCorum Group Ltd.

strategic consulting support to emerging software companies.

He joined Corum in 1997, has successfully managed numerous software company mergers and acquisitions worldwide, and was appointed president in 2006. He graduated with Honors from Seattle University with a B.A. in Business.

Corum Group Presentation ■ 2

>> For today’s presentation or more information, contact Pat Sultan([email protected], +1 425-455-8281 ext. 248)

Corum Group Ltd.

Agendag

Overview of Current Market

Managing for an Exit

Marc Brown - Microsoft

Market and Val ation Anal sisMarket and Valuation Analysis

Closing Comments - Q&A


Recent Headlines are Mixed

Economic contraction is slowingg

Markets up 30-50% from lows

Mortgage defaults continueMortgage defaults continue

Inflation a threat

Unemployment risingUnemployment rising

“Optimism” indexes rising

M&A valuations stabilizingM&A valuations stabilizing

Recovery by 2010 or 2014??


…. Have markets bottomed?

Where are Markets Headed?

Don’t know, and can’t control

DJIA +/- 2000 points in 12 months?

Don’t base decisions on indexes

What o can control ho o spend o r cash &What you can control: how you spend your cash &

manage your business


Take Stock of Where You Are

Be honest about your business

Growing, adding customers, hiring, solid cash position attractive market profitableposition, attractive market, profitable

Cash stable, business slowing, not hiringCas s ab e, bus ess s o g, o g

Burning cash, flat or negative growth, market sector troubled

Step back evaluate situation and goals


Step back, evaluate situation and goals

Starting Todayg y

1) Manage your cash carefully ) g y y

2) Tune business model for the times

Old ModelGrowth at all costG t bi f t

New ModelCash flow at all costC t th f tGet big fast

Revolutionary productHorizontal expansion

Cut the fatBecome necessaryCore focusp

The next big thing Improve customers’ business now


Starting Today…g y

3) Look at your company with an acquirer’s eye3) Look at your company with an acquirer s eye

4) Clean up your companyR d k iRecord keepingBusiness processBusiness planning & projections


Starting Today…g y

5) Make decisions with M&A in mind5) Make decisions with M&A in mindDevelopment Marketing and SalesMarketing and SalesRevenue composition

6) Articulate your story


Reminders…

The M&A process takes timeThe M&A process takes timeSectors consolidate quicklyYou may only get one chanceStart preparing earlyp p g yTake time to understand the M&A dynamics of your marketyPick good advisors who know your business


M&A – from a Buyer’s Perspectivey

Use downturn to build a moreUse downturn to build a more

valuable company

A t hil tit bliAct while competitors are scrambling

Benefit from strong recurring revenue

Deal based on perceived value, not multiples

No patience for unsubstantiated upside pitch

Cash balances strong


Corporate Cash

Company Year Ago Cash Current Period Cash

Sun $2,272 $2,700

Apple $11,875 $25,010

Nokia $3,130 $2,404

Microsoft $10,339 $23,900

Oracle $8,262 $12,620

HP $10,153 $12,920

EMC $5,843 $7,250

Cisco $5,191 $33,550

Google $8,656 $17,780

SAP $1,804 n/a

Yahoo! $2,292 $3,450

IBM $12,741 $12,300


Symantec $1,890 $1,990

Top Technology Stocksgy

Stock Price Stock Price Stock Price % Change fromCompany Stock Price 07/01/2008

Stock Price 03/03/2009

Stock Price 07/01/2009

% Change from March

Sun $10.74 $4.54 $9.22 103.08%

Apple $174.68 $87.71 $142.83 62.84%

Nokia $24.21 $9.25 $14.77 59.68%

Microsoft $26.87 $16.03 $24.04 49.97%

Oracle $21.31 $15.06 $21.74 44.36%

HP $44.00 $28.30 $38.68 36.68%

EMC $14.65 $10.13 $13.14 29.71%

Cisco $23.15 $14.50 $18.80 29.66%

$ $ $Google $534.73 $326.67 $418.99 28.26%

SAP $51.89 $32.28 $40.37 25.06%

Yahoo! $20.20 $12.58 $15.41 22.50%

IBM $119 27 $88 01 $104 84 19 12%


IBM $119.27 $88.01 $104.84 19.12%

Symantec $19.74 $13.15 $15.63 18.86%

Shopping List – Buyer Oneg y

Competitors active in M&ACompetitors active in M&A“Dramatically expand” software side through acquisitionsPrefer SaaSPrefer SaaSVertical focus vs. horizontalConsider Retail Telecom Financial Services PublicConsider Retail, Telecom, Financial Services, Public Sector, HealthcareTargets 5 to 100 mil in revOEM or outright acquisition


Shopping List – Buyer Twog y

IT services / BPO ServicesIT services / BPO Services Building geographic reach, adding technology and customers$10 to 200 mil revenueNorth America, Japan or Europe ERP, CRM, Data Recovery, Infrastructure Mgmt, HealthcareOff-shoring opportunities a plus


M BMarc BrownManaging Director, Corporate Development Group

Marc Brown is a managing director in the Corporate Development Group at Microsoft Corp., where he has been employed since January 2000. From May 1998 to December 1999, he was an associate in the Private Equity and Emerging Companies Group of the law firm Goodwin Procter & Hoar LLP Before that he was an associate in the Mergers andGoodwin, Procter & Hoar LLP. Before that, he was an associate in the Mergers and Acquisition and Merchant Banking groups at the Union Bank of Switzerland, from 1987 to 1991.

Brown holds a doctor of jurisprudence degree from Georgetown University Law Center, an MBA i Fi f N Y k U i it d b h l f t i E i f C l tMBA in Finance from New York University and a bachelor of arts in Economics from Colgate University.


Ryan BlakelyVi P id R hVice President, ResearchCorum Group Ltd.

Ryan joined Corum in 1998 and has held a number of roles central to research and marketRyan 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

Chas played a direct role in developing buyer relationships during his tenure with Corum. 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.


M&A Activity – Juney

Number of Software and IT M&A TransactionsNumber of Software and IT M&A Transactions

June

0 50 100 150 200 250 300 350 400

2009 2008 2007 2006 2005 2004


M&A Activityy

May

June

March

April

May

January

February

0 50 100 150 200 250 300 350 400

2009 2006 2005


Corum Index – M&A Statistics

Q2:09Q2:08 Q1:09 Q2:097148

$8,500

Q2:0871814

$28,100

# of Transactions# of Mega DealsLargest Deal

Q1:096150

$775$274$3884

$382$3197

Average Deal SizeMedian Seller Size# VC backed Exits

$67$2570

73%43%20%46%

60%44%17%55%

% Terms UndisclosedAll Cash (announced)% Targets were Public% Public Buyers

77%55%18%43% 46%55%% Public Buyers 43%


$ values in millions

Public Markets

Nasdaq S&P Tech Dow

Jun‐08 Jul‐08 Aug‐08 Sep‐08 Oct‐08 Nov‐08 Dec‐08 Jan‐09 Feb‐09 Mar‐09 Apr‐09 May‐09 Jun‐09


Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09

Horizontal Application Software Market

Public Valuations

HorizontalHorizontalApplicationSoftware

Q2:08 Q3:08 Q4:08 Q1:09 Q2:09

EV/EBITDA 10.12 x 11.01 x 7.69 x 6.82 x 9.99 x


EV/EBITDA 10.12 x 11.01 x 7.69 x 6.82 x 9.99 x

EV/S 1.81 x 1.71 x 1.04 x 1.12 x 1.50 x

Horizontal Application Software Market

Notable Transactions S tli htNotable Transactions Spotlight:

Sector: Accounting/PayrollTarget: PayCycle Inc.

Target BuyerETH T h Ltd Cl 2P NV

g y yBuyer: IntuitDate: June 2009Transaction Value: $170 millionStructure: Cash

ETH Tech Ltd. Clear2Pay NVCura Software Solutions

Softpro Systems

Structure: CashTransaction Multiple: 5.7x

Comments:

XyEnterprise SDL InternationalPayCycle Inc. Intuit, Inc.

Expanding product portfolio SaaS


Vertical Application Software Market

Public Valuations

VerticalVertical ApplicationSoftware

Q2:08 Q3:08 Q4:08 Q1:09 Q2:09

EV/EBITDA 11.07 x 9.37 x 6.92 x 6.53 x 8.17 x


EV/S 2.19 x 1.71 x 1.26 x 1.14 x 1.51 x

Vertical Application Software Market

Notable TransactionsNotable TransactionsSpotlight:

Sector: Financial ServicesTarget: Prospectus Central

Target BuyerR h O iC Target: Prospectus Central

Buyer: RR Donnelley & SonsDate: June 2009Transaction Value: Undisclosed

eResearchTechnology (EDC)

OmniCommSystems

eQuilibrium Solutions

EnerNOC

Comments:Big buys smallDistressed sector

SolutionsProspectus Central R.R. Donnelley

Distressed sectorBuilding on prior successSaaS


Consumer Application Software Market

Public Valuations

ConsumerConsumer ApplicationSoftware

Q2:08 Q3:08 Q4:08 Q1:09 Q2:09

EV/EBITDA 10.99 x 11.45 x 5.41 x 2.74 x 4.47 x


EV/S 1.70 x 0.99 x 0.61 x 0.64 x 0.53 x

Consumer Application Software Market


Sector: Mobility T t D h N i ti

Target BuyerF S A D d S A Target: Dash Navigation

Buyer: Research In MotionDate: June 2009Transaction Value: Undisclosed

Fueps SpA Dada SpAId Software ZeniMax MediaMustache Inc. Fanzter

Comments:SaaSDifferentiator

Dash Navigation Research In Motion

DifferentiatorHot space


Infrastructure Market

Public Valuations

Infrastructure Software

Q2:08 Q3:08 Q4:08 Q1:09 Q2:09

EV/EBITDA 11.39 x 8.98 x 6.47 x 6.98 x 8.74 x

/


EV/S 1.98 x 1.67 x 1.47 x 1.43 x 1.72 x

Infrastructure Market


Sector: Development ToolsT t Wi d Ri

Target BuyerH Gl I it h Target: Wind River

Buyer: Intel CorporationDate: June 2009Transaction Value: $884 million

HourGlassTechnologies

Ipswitch

Wind River Intel Corporation$

Structure: CashTransaction Multiple: 2.2x

Comments:Comments:New software focus


Internet Market

Public Valuations

InternetInternet

Q2:08 Q3:08 Q4:08 Q1:09 Q2:09

EV/EBITDA 11.94 x 9.60 x 8.11 x 7.54 x 11.81 x


EV/S 2.71 x 2.34 x 1.10 x 1.60 x 2.30 x

Internet Market


Sector: Advertising / l l t ki

Target BuyerT lk ill TZ H ldi local networking

Target: GoingBuyer: AOL, Inc.Date: June 2009

Talkzilla.com TZ HoldingsSiliconinvestor.com TZ HoldingsSendTec Inc. PHIDS Inc.

Transaction Value: Undisclosed

Comments:Desire to be local

SnapTell A9.comGoing Inc. AOL

Desire to be localMillion-plus unique visitors monthly


IT Services Market

Public Valuations

ITServicesITServices

Q2:08 Q3:08 Q4:08 Q1:09 Q2:09

EV/EBITDA 6.92 x 6.50 x 5.36 x 5.32 x 5.24 x


EV/S 0.89 x 0.80 x 0.70 x 0.56 x 0.63 x

IT Services Market


Sector: ServicesT t C illi l

Target BuyerR G S i AG Target: Carillion plc

Buyer: Capita Group plcDate: June 2009Transaction Value: $57 million

Resource Group AG

Swisscom AG

Bearing Point Keane$

Comments:Intra-countryServices around the network

Structurum AS Inmeta ASACarillion plc Capita Group plc

Services around the networkValuation in ‘services’ range


Contact Information

Corum Group Ltd.

Ward Carter, [email protected]

R Bl k l VP R hRyan Blakely, VP [email protected]

10500 NE 8th Street, Suite 1500Bellevue WA 98004

Corum Group International S.à.r.l.

Beim ParadeplatzBellevue, WA 98004USA

+1 425-455-8281

Basteiplatz 78001 ZürichSwitzerland

+41 44 251 82 65

Research and Conferences:

+41 44 251 82 65


Research and Conferences:www.corumgroup.com

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