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www.corumgroup.com

GamingMergers & Acquisitions

Market Update

Tuesday, May 22, 2012

Corum Group Presentation ■ 2

Entertainment software entrepreneur Jim Perkins is directly responsible for publishing some of the industry’s biggest franchises, including Unreal, Duke Nukem, Wolfenstein, Doom, Hunting Unlimited, and Driver. A well-known senior executive with a 22-year track record of publishing such bestselling hits, he founded and grew two highly successful software publishing companies (FormGen and ARUSH) from start-ups to multi-million dollar enterprises.

Jim also launched Radar Group, the first Transmedia Incubation Company to monetize entertainment franchises across all media, including film and television. His success and extensive experience in software production, marketing and public relations, packaging, online and retail distribution and software M&A, uniquely qualify him as an expert in building value and realizing wealth. Jim joined Corum Group, the world’s leading software M&A firm, with a specific focus on educating and helping prospective sellers maximize the value of their digital media companies.

Introduction

Jim PerkinsRegional Director, Digital Media SpecialistCorum Group Ltd.


Industry Leadership


Agenda

Introductions

Global Tech Market

Gaming M&A

Gambling in Gaming

The Optimal Outcome

Q&A


The Corum Group

M&A specialists since 1985 – only software/related tech

Only work on sell-side, primarily with privately held firms

Offices globally – 60% of transactions cross border

Developed the “Optimal Outcome” M&A process

Employs a team approach - fully offloads clients with 5 experts

Senior negotiators are former CEOs – selling/results oriented

Largest educator in the world – builds buyer relations

Largest proprietary buyer database – provides client advantage


Sold More Firms Than Anyone

Tific is a leading vendor in SaaS-based remote help support systems.

PlumChoice: USATific: Sweden

Cintellate works in the areas of environment, health, safety (EHS) and risk-related performance.

SAI Global: AustraliaCintellate: Australia

Petrospec is a leader in geopressure analysis and drilling engineering SW for hydrocarbon exploration and production.

Geoservices Group: FrancePetrospec: USA

Edvantage Group’s SaaS-based learning solutions are used by over 500,000 users across hundreds of organizations to develop employee skills and competencies.Lumesse: United KingdomEdvantage Group: Norway

inubit AG is the technologically leading provider for Business Process Management (BPM) software.

Bosch: GermanyInubit: Germany

Instantiations is a leading vendor in platform specific development tools.

Google: USA Instantiations: USA


Recent Corum Transactions

360 is a recognized player in field workforce management, with a SaaS offering.

IFS: Sweden360 Scheduling: UK

The ECM division of Beta Systems is a recognized leader in output management for the financial and postal sectors.

BancTec: USABeta Systems: Germany

Apex Systems of Singapore is a leader in the Asia-Pac region for banking and insurance solutions.

NTT Data: JapanApex Systems: Singapore

has acquired

Altitude is a leading provider of Telecommunication Management Solutions to businesses globally.

BBVA / iP: Spain Altitude: Portugal

The Nefsis videoconferencing software and online service was the first to use cloud computing in the videoconferencing industry.

Brother: JapanNefsis: USA

Satori Software is a leader in address management tools with focus on the postal delivery space.

Neopost: FranceSatori Software: USA


Relevant Corum Transactions


0

500

1000

1500

2000

2500

3000

3500

4000

4500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Software M&A Activity 2002-2012

Total Deal Volume vs. Total Deal Value

1921

1508

2081

3040

4029

3640

3015 30083212

$83b$62b

$226b

$373b

$457b$432b

$301b

$150b$200b

$220b

3696

$250b

3800

Deal Volume Dollar Value


10 Reasons Tech M&A Will Remain Strong

1. Extraordinary change – interrelated mega trends

2. Strategic buyers have record cash

3. Debt is at lowest cost ever

4. Private equity - over $500 billion available

5. New public foreign buyers (e.g. China, India)


6. Entrance of new non-tech buyers (e.g. Bosch)

7. Many large private buyers

8. American companies are cheap to foreign investors

9. Most US buyers cash is international (e.g. Skype)

10.Software rising in importance (e.g. HP, IBM)

10 Reasons Tech M&A Will Remain Strong


In Dollar Volume (Billions) – All Industries

M&A is the Primary Source of Liquidity


M&A – Cash Is King

Total Cash Reserves Total Increase Held OffshoreCompany 2007 2012 Amount Percent Amount Percent

AAPL $9 $98 $89 989% $64 65%

MSFT $6 $59 $53 883% $50 85%

CSCO $3 $42 $42 1050% $41 89%

GOOG $6 $45 $39 650% $20 44%

ORCL $6 $25 $25 417% $21 68%

INTEL $9 $15 $6 67% $7 47%

EMC $4 $9 $5 125% $5 56%

All estimates in US$Billions


1. Media tablets & beyond Expected iOS/Android will dominate the market with 80% of

tablets shipped by 2015 Entering the post-PC era – Windows just one of a variety of

environments

2. Mobile-centric applications and interfaces More than 70 billion mobile app store downloads by 2014 50% of tools optimized for app development in 2010 will be

acquired or disappear by 2014

3. Social and contextual user experience Context-aware computing uses information about end users or

objects environment to improve interaction

Gartner Top 10 Strategic Technologies


4. Application stores and marketplace Rise of enterprise app stores that can develop specific apps Use a managed diversity system approach

5. The Internet of everything Cameras, sensors, recognition etc. now all part of

environment Privacy issues a concern

6. Next-generation analytics Mobile devices performing analytics themselves Analytics to enable and track collaborative decision making

7. Big data New techniques to handle extreme data Enterprises just can’t store it all




8. In-memory computing Most devices will have persistent flash memory New layer of memory hierarchy A long-term, disruptive trend on par with Cloud computing

9. Extreme low-energy servers Server technologies are going to change to handle big data More smaller, slower, physical servers vs. fewer virtual ones

10.Cloud Computing Next-gen battleground for Google, Amazon & others Focus on hybrid private/public cloud apps & improving security

and governance


33

21

13 1312

11 1110

9 9 98 8 8 8 8

7

Top Strategic Acquirers: 2011


Games M&A History

Source: Digi-Capital


Games Trends

Acceleration of M&A − Slowing of Gaming IPOs

Franchise Blockbusters − Max Payne, Bioshock, GTA

Smartphone and Tablet Gaming – highest global growth

Social Game monetization/ profitability shake out

Voice Recognition emergence


Games M&A

2011 M&A – $3.4B - up 160%

113 Transactions – up 88%

Average Transaction - $30M – up 38%

Social Games dominated- 45% of M&A value- will continue into 2012

MMO M&A value – 30% of deals

Social-mobile is next!

Too late for the console giants?

Source: Digi-Capital


Games M&A – Asia

GREE (J) – OpenFeint, FunzioSocial Mobile - US

WeMade (SK) – 3 recent acquisitionsSocial Game Studios – SK

NEXON (SK) - 4 recent acquisitionsSocial Games Studios - SK

NEOWIZ (SK)– very active in 2011Online and Mobile Studios –

J&SK


Online Games Market

Client MMO – Blizzard

Social Casual Web – Tencent, Zynga

Casual Mobile – Apple, Google

Social Mobile – DeNA, Gree

Browser MMO - Bigpoint

Cloud Gaming – Onlive

What does it all mean?


Games Consolidation Mania

Competitive Consolidation

Complimentary Consolidation

Media – Disney, IGT, Viacom

Asia – Tencent, Perfect World, Nexon

Console – EA, T2, ZeniMax

Online/Mobile – Zynga, Rovio, Unity


Gambling and Games

Worldwide Focus

Legalized Gambling US, China

Content Differentiation

The Casino Floor vs. Online

Mobile Gambling

Customer Loyalty


Contact

Research

Preparation

Discovery

Negotiation

Due Diligence

Closing

Integration

1 2 3 4 5 6 7 8

8 Required Stages in M&A Process


Optimal Process – 8 Stages Will Yield

20 to 300 Global Buyer Candidates (depends on your size)

700 to 1,000 Communications of Various Kinds

10 to 30Expressions of Interest

5 to 15NDAs

3 to 8Qualified Parties

1 to 3+Offers

Typically 6 contacts to get to first discussion

29 contacts to get to meaningful dialogue


Improperly handled M&A process problems:

Confidentiality issues externally Internal confidentiality problems Theft of technology Loss of staff (non-solicitation) Wear on management Business drop-off due to lack of focus

Tech M&A: Value Destroyers


10 Biggest Deal Killers

1. Dealing with only one buyer No leverage in negotiation

2. MisalignmentShareholders & management & employees

3. Contact at wrong level, with the wrong person Not knowing the buyer well enough

4. Improper research of potential buyers “A,” “B,” financial, international, strategic

5. Not understanding the buyer’s process & models

Timeline, decision-makers


6. Unable to portray value properly Credibility in valuation is imperative

7. Improper due diligence preparationAffects credibility, prolongs process

8. Not qualifying buyer properly Ability to pay, interest, etc.

9. Not orchestrating all buyers properly This is the tough part!

10. Ego / Greed / Arrogance You need experience during negotiations

10 Biggest Deal Killers


Valuation Maximization Creating the Best Transaction Structure Minimizing Personal Liability/Risk Reducing Tax Liability and Holdbacks Structuring Ideal Employment/Non-competes Providing for Proper Integration

What is Optimal Outcome?


The Benefits of a Professional Process

Model – The preparation process will help forge a better business model for your firm

Research – Your strategic position will improve from the research/positioning process

Market Feedback – Buyer contact will provide invaluable data/insights to help improve your value

Relationships – Not everyone is a buyer, but you open many doors which will yield business

Exit – The merger, asset sale or financial recapitalization of your company


10 Things to Look for in an M&A Advisor

1. Are they centered on your industry – games/software

2. Is there focus - sellside transaction experience

3. Are they conflicted with buyers, consulting, opinions, etc.

4. Do they have senior staff involved - no juniors allowed!

5. Is there a team assigned; this is not a one-man effort

6. Are they international - the buyers are

7. Do they have proprietary industry research/contacts

8. Are they a respected group in their field

9. Do they have a detailed global search process

10. Is there a track record of success

www.corumgroup.com


M&A Summary

Games M&A – record activity and growth

Social-Mobile M&A – next big thing!

Competitive and Complimentary Consolidation

Gambling in Games – worldwide phenomena

Worldwide Buyers

Professional Preparation is key to Optimal Outcome


M&A Is About Changing Your Life

What’s your dream?

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