corum's q3 2007 software m&a update
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Bellevue Houston London Mexico City Munich Oslo Paris Philadelphia Phoenix Portland Zurich
Q3 2007 Software M&A UpdateQ3 2007 Software M&A Update
October 17, 2007October 17, 2007
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Corum Group Presentation 2
Middle Market Software M&A Specialists
Corums information is drawn from
Global M&A Engagements Research in the U.S. and Europe
Newsletter feedback
Education and activities
The last 60 days
Selling Up Selling Out conference seriesBoston, Houston, Philadelphia, Toronto, Ottawa, Buenos Aires, Helsinki, Prague
Merge Briefing
Software Business Conference Santa Clara
Banff Venture Forum Banff, Alberta
Security CEO Roundtable
Long Island Software CEO Roundtable
World Financial Symposiums October 30 in London
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Corum Group Presentation 3
Agenda
1Market Insights
2International Activity & Valuations
3Sector Analysis
4Discussion
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Corum Group Presentation 5
Current Market is Mixed
Credit crunch
High oil prices / threat of inflation
Fed actions to provide liquidity
Demise of the dollar
Some earnings reports disappoint
First utterances of the R word
Slight softening in software peer group valuations
But, M&A activity levels for 2007 to set record highs
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Corum Group Presentation 6
Public Markets Reaching New Heights
Dow Jones NASDAQ S&P AIM
Stockholm
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Corum Group Presentation 7
M&A is the Primary Source of Liquidity
In Dollar Volume U.S. dollar volume all industries
Source: Dealogic, IPO Central
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Corum Group Presentation 8
Current M&A Market
Broad Market
Q3 2007 M&A up 17% or $884billion worldwide
YTD M&A worldwide to $3.38 trillion(all industries)
2007 maintaining momentumalthough August andSeptember have slowed
Technology Market
Q3 2007 $52 billion, a significantdrop from Q2s $255 billion total
Private equity firms remain active,although debt freeze has slowedpace
Strategic buyers very active
Consolidation continues acrossmost sectors
Companies of all sizes continue to
be aggressive buyers
Global buyer community expanding Eastern Europe, Asia
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Corum Group Presentation 9
Private Equity Resolving Credit Issues
Backlog of deals to fund
PE not involved in many smaller software deals
With or without debt, PE still sitting on 200+B in uncommitted
equity
Current fundraising efforts on track to set new record
Pressure Need to invest or return capital
New investments and add-ons
Sovereign wealth funds will provide even more cash
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Corum Group Presentation 10
Strategic Buyers Still Very Active
Fill void left by private equity
Not impacted by credit
Strong cash reserves
Confident with strong stock market and outlook
Actively looking for strategic investments
Business as usual
Strength of non-U.S. buyers (dollar devaluation / public multiples)
Converging markets / new models spur M&A
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Corum Group Presentation 11
Missing a Market
History has taught us
Many sellers missed 1999-2000 market
M&A market evaporated for many never returned
For others, took until 2004-2005 to recover
Technology evolved what was hot was now not
New competitors appeared
Things change and opportunities lost
Current level of seller activity very high
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Corum Group Presentation 12
Buyer Activity High
Current Examples
Sector Interested Parties
Storage Management 17
Entertainment & Multimedia 15EAI 14Telecom 11Knowledge Management 9
Interested parties range from billion dollar household names tocompanies never heard of.
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Corum Group Presentation 13
Interest Translating into Deals
LOIs and Offers
Vertical market
IT services (2)
Graphic modeling
User interface technology
Business Process Outsourcing
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Corum Group Presentation 14
Agenda
1Market Insights
2International Activity & Valuations
3Sector Analysis
4Discussion
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Corum Group Presentation 15
Global M&A Activity
Cross-border transaction levels remain strong
Quarterly activity ahead of U.S. for second straight quarter
European deal activity up 58% year on year in the EU
Britain continues to have the most aggressive European buyers, as they are in
nearly a quarter of current deal volume (all industries)
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Corum Group Presentation 16
European IPO Market
Emerging and Less Regulated Equity Markets
Over 50 U.S. companies listed and increasing, especially Londons AIM
Approximately 35 foreign companies have voluntarily de-listed from U.S. exchanges
Listings up in Q3, although funds raised are down
London50%
Euronext15%
Deutsche Borse19%
OMX2%
Borsa Italiana7%
Other3%
WSE3%
Athens1%
Source: Pricewaterhousecoppers IPO Watch Europe Survey
40The number oftechnology firmsthat have listedon European
exchanges overthe past 6 months
Q3 listing percentage by exchange
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Corum Group Presentation 17
International Private Equity
Private Equity
PE acquisitions at all time high, leading to some uneasiness about how
U.S. credit issues will affect things going forward
Debt financing terms are still quite attractive
European PE community set to exceed last years total of funds raised of71.1 billion
UK led the European PE market with buy-outs increasing by 250% in Q2
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Corum Group Presentation 18
Global Marketplace
Currently almost 60% of CorumCurrently almost 60% of Corums recent transactions are crosss recent transactions are cross--borderborder
Cross Border58%
Intra-Country42%
A trend we are seeing throughout the industryA trend we are seeing throughout the industry
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Corum Group Presentation 19
Corum Transactions 2007
Provider of paymentprocessing softwareand service
Purepay U.S.Creditron Canada
Provider of estimating andearth measuring softwarefor contractors
Glaston FinlandAlbat+ Wirsam Germany
Leading provider of event-driven business application
automation and batchintegration technologies
UC4 Austria backed byCarlyle U.K.AppWorx U.S.
Developer of 3D digitaldesigns in the building,plant and marine markets
Autodesk U.S.NavisWorks U.K.
Provider of estimatingand earth measuringsoftware forcontractors
Maxwell U.S.
Quest U.S.
Value-added distributor of voice,data and convergedcommunications solutions
Datatec South Africaon behalf of Westcon U.S.CRANE U.K.
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Corum Group Presentation 20
Corum Transactions 2007
Electronic invoicingand legal spendmanagement solutions
DataCert U.S.CorpraSoft U.S.
IT services providerto government andcommercial
organizations.
TechTeam U.S.RL Phillips U.S.
Networking and lobby
services for gamepublishers &developers
Activision U.S.DemonWare Ireland
Human capitalmanagement solutions
StepStone NorwayExecuTRACK Germany
HR information systemsfor middle marketenterprises
BPO U.S.HR Microsystems U.S.
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Corum Group Presentation 21
International Buyers Remain Active
Need To Look Internationally
International Buyer U.S. Seller
Software AG WebMethods
UC4 Software AppWorx
SAP AG OutlookSoft Corp
Autonomy ZANTAZNorkom Technologies Digital Harbor
Sophos, Inc ENDFORCE, Inc.
Siemens AG UGS Corporation
Cegedim S.A. Dendrite International
WPP Group plc 24/7 Real Media, Inc.Nokia Corporation Endpocket and Twango
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Corum Group Presentation 22
Brazil
A pioneer in the development of sophisticated real-time solutions
Banking systems and e-government More than 10,000 software companies exist in Brazil
According to ABES and IDC, the IT market in Brazil in 2006 was approximately $16.2 billion
$3.26 billion in software
$5.83 billion in services
Brazil has emerged as a vibrant and globally recognized near-shore outsourcing destination
Brazil now supports almost 900,000 IT employees (end of 2006), 47% of Latin Americas
Mexico
According to AMITI, the IT market was 10.1 billion. USD$ in 2006
$910m USD in software and
$2,617 bn. US$ in services
The market is growing three times faster than the general economy
Mexico had 429,600 IT professionals, 23% of LAMs resources, of which 70% in software in 2006
Due to its proximity to the U.S., Mexico is becoming a preferred near-shore outsourcing destination
Latin America Spotlight
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Corum Group Presentation 23
Looking Back Valuation Multiples
2.3
2.7 2.72.9
6.7
3.0
2.01.5 1.5
1.6 1.8 2.12.3 2.2 2.5
2.6 2.9 2.953.11
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
P/S
Multiple
1H:98
2H:98
1H:99
2H:99
1H:00
2H:00
1H:01
2H:01
1H:02
2H:02
1H:03
2H:03
1H:04
2H:04
1H:05
2H:05
1H:06
2H:06
1H:07
M&A Transaction MultiplesM&A Transaction Multiples Software IndustrySoftware Industry
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Corum Group Presentation 24
Public Valuation MultiplesSector Q3:06 Q4:06 Q1:07 Q2:07 Q3:07 Y on Y Q to Q
Digital Media 2.74 x 2.59 x 1.92 x 2.07 x 2.12 x
Enterprise Applications 4.35 x 4.43 x 3.87 x 3.98 x 4.14 x
Business Intelligence 2.87 x 3.03 x 3.13 x 3.25 x 2.98 x
Enterprise Content Management 1.89 x 2.15 x 2.07 x 2.37 x 2.40 x
Supply Chain Management 1.60 x 1.89 x 2.10 x 2.29 x 2.23 x
Enterprise Infrastructure 2.40 x 2.77 x 2.86 x 2.88 x 2.51 x
Legacy Extension / SOA 1.36 x 1.70 x 2.18 x 2.56 x 2.47 x
Software Development Tools 1.88 x 1.71 x 2.00 x 2.22 x 1.66 x
Storage 2.66 x 2.98 x 3.68 x 3.29 x 2.68 x
Gaming 2.25 x 2.47 x 2.54 x 2.24 x 2.20 x
Internet Infrastructure 4.03 x 3.63 x 3.83 x 3.91 x 4.60 x
Internet Pure Play 4.00 x 3.78 x 3.41 x 3.23 x 2.99 x
IT Services 0.84 x 0.80 x 0.80 x 0.89 x 0.96 x
Security 2.94 x 3.36 x 3.15 x 3.69 x 3.43 x
Wireless 2.07 x 2.34 x 1.46 x 1.75 x 1.55 x
Energy & Environment N/A N/A N/A N/A 4.94 x
Vertical Market - Engineering 2.69 x 3.06 x 3.40 x 3.29 x 3.73 x
Vertical Market - Financial Services 3.53 x 3.17 x 3.28 x 3.12 x 3.05 x
Vertical Market - Government 1.24 x 1.13 x 1.16 x 1.15 x 1.21 x
Vertical Market - Healthcare 2.69 x 2.36 x 2.28 x 2.53 x 3.16 x
Vertical Market - Other 1.75 x 2.02 x 1.19 x 2.71 x 2.81 x
Vertical Market - Telecom 2.12 x 2.10 x 1.33 x 1.52 x 1.50 x
TTM EV/S Multiples
N/A
Decreased
Increased
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Corum Group Presentation 25
Sector Consolidation & Evolution
Legacy Extension / EAILegacy Extension / EAI Past and PresentPast and Present
PastFocus: Legacy extension, applicationintegration, mainframe connectivity
Players:
Attachmate
Candle
Iona Jacada
NEON
NetManage
Seagull Software
SeeBeyond
Tarantella Tibco
Vitra
WRQ
EV/S Multiple Q2:05 1.15 x
Present:Focus: Software Oriented Architecture,Web services
Players:
Attachmate
BEA
Candle Iona
Jacada
NEON
NetManage
Seagull Software
SeeBeyond
Software AG
Tarantella
Tibco
Vitra
Webmethods
WRQ
EV/S Multiple Q3:07 2.47 x
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Corum Group Presentation 26
Agenda
1Market Insights
2International Activity & Valuations
3Sector Analysis
4Discussion
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Corum Group Presentation 27
Sectors to Watch Trending Up
Q1:05
Q2:05
Q3:05
Q4:05
Q1:06
Q2:06
Q3:06
Q4:06
Q1:07
Q2:07
Q3:07
Enterprise Infrastructure
Internet Infrastructure
Internet Pure Plays
IT Services
Financial Services
Positive momentum in sector deal volume underscores currentinterest and viability of space.
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Corum Group Presentation 28
Sectors to Watch Trending Down
Deals are happening in these sectors, but slowing as manybuyers are digesting previous acquisitions.
Q1:05
Q2:05
Q3:05
Q4:05
Q1:06
Q2:06
Q3:06
Q4:06
Q1:07
Q2:07
Q3:07
Enterprise Applications
Enterprise Content Management
Security
Engineering
Healthcare
Telecom
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Corum Group Presentation 29
Software and IT M&A Activity
Number of Transactions by SectorNumber of Transactions by Sector
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
40.00%
45.00%
Q3:06
Q4:06
Q1:07
Q2:07
Q3:07
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Corum Group Presentation 30
Top Buyers YTD 2007
Strategic Buyers
Google 11Oracle 8
Cisco Systems 7
Sungard Data Systems 7
CDC Software 6
Microsoft Corporation 6
IBM 6
Bentley Systems 4
First Data Corporation 4
Nuance Communications 4
SAP AG 4
Bain CapitalBattery Ventures
Carlyle Group
Court Square Capital Partners
Hellman & Friedman
Kohlberg Kravis Roberts & Co.
Francisco Partners
MBK Partners
Thoma Cressey Bravo
Vector Capital
*Partial List
Active Private Equity Firms*
80+ strategic buyers with 2 or 3 transactions
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Corum Group Presentation 31
Q3 Buyer Profile
Private Buyers and Foreign Buyers Remain Active
56% were private or financial buyers
Cash was the dominant form of consideration
Almost 50% of buyers have revenues under $25M
Acquirers from secondary markets active
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Corum Group Presentation 32
Transaction Highlights Largest
ObservationsObservations
Increase scale
Strategic spending billions
Market convergence
Absence of private equity
Buyer Seller Value (Millions $) Sector
Fiserv, Inc. Checkfree Corporation $4,400.00 Financial Services
Bain Capital 3Com Corporation $2,200.00 Enterprise Infrastructure
Hewlett-Packard Opsware, Inc. $1,600.00 Enterprise Infrastructure
Royal KPN NV Getronics NV 766.00 IT Services
Steria Xansa 475.00 IT Services
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Corum Group Presentation 33
Transaction Highlights Private Equity
ObservationsObservations
Current debt market has slowed this group
Fundraising at record highs Strong focus on technology
PE firms looking at smaller opportunities, which may not require leverage
Substantial prior investment in tech, and many deals are synergistic adding to current portfolio
Look more like strategic buyers
Buyer Seller Value (Millions $) Sector
Bain Capital 3Com Corporation $2,200.00 Enterprise Infrastructure
MBK Partners Ltd Yayoi Co. $610.00 Enterprise Applications
Thoma Cressey Bravo Hyland Software $265.00 Enterprise Content Management
Amadeus CapitalPartners
EPiServer AB $23.50 Internet Infrastructure
DC Capital Partners Technology ManagementSystems and Omen Inc. Undisclosed Government
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Corum Group Presentation 35
Transaction Highlights International
ObservationsObservations
Global expansion
Desire to enter U.S. markets
Local domain expertise
Active international buyer community
Buyer Seller Value (Millions $) Sector
Autonomy Corporation ZANTAZ, Inc. $375.00 Enterprise Infrastructure
Norkom Technologies Digital Harbour $36.50 Financial Services
Digital River, Inc. Netgiro Systems AB $27.00 Internet Infrastructure
EMC Corporation X-Hive Corporation BV Undisclosed Enterprise Content Management
Thomson S.A. SyncCast Corp Undisclosed Digital Media
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Corum Group Presentation 36
0.00 x
0.50 x
1.00 x
1.50 x
2.00 x
2.50 x
3.00 x
Q3:04
Q4:04
Q1:05
Q2:05
Q3:05
Q4:05
Q1:06
Q2:06
Q3:06
Q4.0
6
Q1:07
Q2:07
Q3:07
Historical Peer Group Valuations:Enterprise Content Management
Corum Q3 Briefing Sample
Market Headlines:
Is Time Finally Ripe for ECM?InformationWeek August 2007
The Changing Landscape of the ECM MarketECM Connection September 2007
The Data Deluge: The Growth of UnstructuredData
ComputerWorld Australia September 2007
Enterprise Content Management
2.40 x
Public Peer Group (In $U.S. millions except share prices)Stock Stock Market Enterprise
Symbol Company Price Value Value P/E EV/EBITDA EV/S P/E EV/SIWOV Interwoven Inc. $14.23 $620.2 $465.5 203.29 x 21.59 x 2.40 x 24.96 x 2.10 x
OTEX Open Text Corp. $25.97 $1,310.0 $1,500.0 60.40 x 10.83 x 2.52 x 13.05 x 2.11 x
VIGN Vignette Corporation $20.07 $554.4 $383.9 31.36 x 17.51 x 1.94 x 20.07 x 1.86 x
Median Valuation Multiples 60.40 x 17.51 x 2.40 x 20.07 x 2.10 x
Trailing Multiple Forward Multiple
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Corum Group Presentation 37
Corums Q3 Briefing Sample (cont.)
Enterprise Content Management
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Corum Group Presentation 38
Looking Forward
Sectors To Watch
Enterprise Applications
Internet Infrastructure
IT Services
Gaming and Entertainment
SaaS Opportunities
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Corum Group Presentation 39
Contact Information
www.corumgroup.comwww.corumgroup.com
Corum Group Ltd.Corum Group Ltd.
10500 NE 8th Street, Suite 1500Bellevue, WA 98004USA
+1 425-455-8281 Corum Group International S.Corum Group International S..r.l.r.l
General Guisan Quai 30CH-8002 ZurichSwitzerland
+41 44 251 82 65
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