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2008 Mid-
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

 -5
0
5

-25
-20
-15
-10
10
15

Price of Oil at $75/barrel

Half-point Rate Cut

Fear of Recession Looms

Impact on Equity Markets

Emergency Interest Rate Cut

Fear of Recession Takes Hold

Bear Stearns Falls

Price of Oil at $145/barrel

Freddy Mac/Fanny Mae Bailout
TSX
FTSE
NYSE
Nasdaq

Corum Group Presentation ■ 6

S&P 500
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
In Billions

$900
$800
$700
$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 %∆
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
7/15/2007 7/15/2008 Cash 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 Vertical
market
multiple sectors:
Financial
Sector Interested Parties Services IT services

Vertical Market 15
Gaming 12 LOIs and
Embedded Technologies 12
Security 11
Offers
Financial Services 10
Internet Infrastructure 10 Systems
Telecom
Compliance 10 Management

Interested parties from billion dollar

household names to unknown companies Security

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 management
IT services provider
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
Non-North American
Private Equity
• PE acquisitions impacted
somewhat less than those
in N.A.
• Debt financing still elusive
• Sovereign funds continue
spewing capital into market
International Strategic
Buyers
• Flush with cash and putting
to use
• Leveraging the value of the
Euro
• Targeting U.S. companies
• Not as affected by U.S.
economic lag
• Emerging market IPOs
keep up supply of new
buyers
Imperative to Look
Globally
• Q2 had the highest activity
of European companies
acquiring U.S. companies
(all industries)
• Outbound M&A from Asia
continues to rise
• 40% of first half 2008 M&A
worldwide was cross
border
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?

Big 6 Volume and Value Percentages

50%

45% 44%
Oracle/BEA
40% $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 Services and 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

Q2:2008 Vertical Application Subsector Breakdown (Deal Volume)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
A/E/C
Energy & Environment
Financial Services
Government
Healthcare
Other
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

Horizontal Applications
Software
Report Highlights
Vertical Market
Technology market overview Application Software
Active buyers, sober valuations

Strategic buyer spotlight

Adobe Consumer Application
Software
Technology Spotlight
Cloud Computing
Infrastructure
Valuation data Software

International perspective on M&A

Sovereign Wealth Funds
Internet
In-depth sector coverage

IT Services and BPO

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