corum webinar mid year update july 2006

8/8/2019 Corum Webinar Mid Year Update July 2006

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THE PREMIER PROVIDER OF M&A SERVICES TO SOFTWARE / IT COMPANIES

Software Mergers & AcquisitionsMid Year Update

July 2006

Corum Group Ltd.

Corum Group International S..r.l

www.corumgroup.com


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Opening Remarks M&A Review

Corum Transactions 1H:06

2H:06 Outlook

IPOs, Venture Capital and Private Equity

Sector Analysis

Valuations

What Will Drive Deals in 2006

Guest Speakers Questions & Answers

Agenda


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Corum Group

M&A specialists since 1985 Software and IT experts mostly former CEOs

Dominant North American and European presence

200+ transactions completed

$6 billion in wealth created 40% Cross border transactions

Recognized industry leaders/experts

Sponsor of Selling Up Selling Outconferences

Sponsor of World Financial SymposiumsConferences

Publisher of industry leading M&A research


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Corum Transaction Analysis - Recent Deals

MacDonald, Dettwiler & Associates / Mindbox Mindbox provides sophisticated decisioning software to automate knowledge intensive

business processes. Mindbox is especially strong in the financial services industry,specifically mortgage banking. Mindbox is based in Greenbrae, CA.

MDA, headquartered in Richmond, BC Canada, provides advanced information solutions tocapture and process vast amounts of data, produce essential information and improvedecision making.

MDA acquired Mindbox to expand their offerings to include advanced decision making andtheir presence in the US lender market.

Terms were not disclosed.

NICE / FAST Video

FAST Video is a Swiss developer of video systems for security and surveillance purposes.

NICE is an Israel-based provider of advanced content analytics for most forms ofcommunication video, web, radio, telephony, and offers security related systems.

NICE acquired FAST to strengthen their digital video product suite and complement theircurrent security offering.

The transaction was valued at $33 million plus earnout.


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Corum Transaction Analysis (continued)

Harland Financial Solutions / Financialware, Inc. Financialware, based Indianapolis, Indiana, is a leading provider of Enterprise Content

Management solutions specific to the financial services industry.

Atlanta based Harland Financial Solutions, a subsidiary of John H. Harland Company, suppliessoftware and services to financial institutions of all sizes.

Harland will integrate the Financialware ECM product into their core, lending, mortgage, item andpayment processing systems, providing a single view into all of a customers financial data.


The Carlyle Group / UC4 Software

UC4 is an Austrian software vendor in the enterprise job scheduling and workload automationspace.

The Carlyle Group is a global private equity firm with investments across multiple industriesincluding technology and business services.



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Wellpoint Systems Inc. / IDEAS International Inc. IDEAS International, a New Jersey-based company, develops sophisticated international financial

management software and professional services to the oil and gas industry.

Wellpoint Systems provides critical management software related services within the energyindustry. Wellpoint is based in Calgary, Alberta, Canada.

IDEAS brings a large install base, growing revenues and international operations to Wellpoint.

The transaction was valued at $6.15 million cash, including $1.4 million in common shares and$1.5 million in performance-based consideration.

NCR Corporation / IDVelocity, LLC

IDVelocity, located in Greensboro, North Carolina, develops end-to-end RFID solutions.

NCR, out of Dayton, Ohio, is a global technology company operating in a number of customer

centric industries like retail, data warehousing and banking.

NCR saw IDVelocity as an opportunity to extend their RFID solution portfolio and complementarywith other NCR technologies.



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Apax Partners / Plexus Systems (Investment) Plexus, out of Auburn Hills, Michigan, offers on-demand (SaaS) manufacturing performance

system which automates business processes for discrete manufacturers.

Apax Partners is a leading global private equity investment group.


Microsoft / iView iView is a UK developer of professional level digital asset management and cataloging software

for photographers and creative professionals.

Microsoft will expand their Digital Asset Management offering and continue to develop and supportthe iView product line for both the Mac and Windows operating systems.



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Blue Cross Blue Shield of SC / REDmedic, Inc. REDmedic, out of Santa Clara, California, is a provider of online personal health information

services.

Blue Cross Blue Shield of South Carolina, an independent licensee of the Blue Cross Blue ShieldAssociation, has a number of technology subsidiaries which they are building through acquisitions.


Confidential

Legal software provider acquired by large multi-national software and services company.



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Momentum Continues

With an exceptionally strong first half complete, we lookforward to a similar close to 2006.

7+ companies currently under LOI or term sheets

Mining Software (Announced - Gemcom / Surpac Minex Group)

Compliance

Storage Management

Gaming

Services

Vertical Markets

Insurance

Government


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M&A Environment Macro View

Billion dollar+ strategic acquisitions are happening Disney / Pixar

EMC / RSA Security

Infor Global / SSA Global

Currently, the deal making climate is optimal Liquidity in equity & debt markets

Wall Street is receptive to smart, strategic deals

Fairly stable stock market

Competitive bids from the private equity community SOX compliance is better understood


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M&A Environment Technology Sector

Deal activity continues to accelerate in thetechnology industry

IT spending has stabilized and continues to grow inmany market segments

Executives are confident / support strategic acquisitions Companies are in growth mode vs. survival mentality of

past years

Elevated M&A activity puts pressure on all companies tobe in the M&A market in order to remain competitive andnot miss opportunities


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Is it 1998?

M&A levels are strong, but justified

Valuations are strategic, while sensible

New technology is pervasive, but real

Sellers are optimistic, but rational

Buyers are opportunistic, yet cautious


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M&A Is the Primary Source of LiquidityIn Dollar Volume US dollar volume all industries

$0

$100$200

$300$400$500$600$700$800$900

$1,000$1,100$1,200$1,300$1,400

$1,500$1,600

$1,700

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 1H:06

InBillion

M&A Dollar Volume IPO Amount Raised


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IPO Market

Number of IPOs increasing IPO candidates have gained financial stability

Positive perception of technology IPOs again

Drawbacks of being publicly held

High compliance cost

Greater management liability

Intense market scrutiny Less flexibility regarding corporate structure

Higher liquidity in M&A vs. IPO


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Venture Capital

Currently:

8 venture backed technology companies went public in Q2

74 venture backed technology companies exited via M&A in Q2

Ratio of VC backed M&A exits vs. IPOs 9:1

Investments in software companies rising

Post money valuations up, mainly due to slow IPO market

Overall the VC market is very stable

Going Forward:

VCs are actively seeking investments abroad

VCs are looking for a smaller quantity of higher qualityinvestments


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Total VC Investment in Software Industry

$500

$700

$900

$1,100

$1,300

$1,500

$1,700

Q3:02

Q4:02

Q1:03

Q2:

03

Q3:03

Q4;03

Q1:04

Q2:

04

Q3:04

Q4:04

Q1:05

Q2:

05

Q3:05

Q4:05

Q1:06

InMillion

Technology Investment Steady


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Private Equity

Currently: Buyouts continue to be a major driver of software M&A

Q2 was the third most active (All industries)

Private equity funds raised $24+ billion in Q1

Persistent interest in technology

Going Forward:

Continue to play a major roll in the consolidation of mature

markets Renewed confidence in resurgent IPO market

In an effort to differentiate, PEs are taking a more hands onapproach


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Active Buyers in 2006

Strategic Buyers Private Equity (Active)Microsoft - 12 Apax Partners

L-3 Communications - 8 Carlyle GroupIBM - 6 Francisco Partners

Oracle - 6 Golden Gate Capital

EMC - 6 Halo Technology Holdings

NeoMedia - 6 Thoma CresseyJupitermedia - 5

Sage Group - 4Think Partnership - 4

Numerous others with 3 transactions


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Software Sector Coverage

21 Markets Covered by Corum

Business Intelligence

Connectivity/Legacy Extension/WebServices

Digital Media

EngineeringEnterprise Applications

Enterprise Content Management

Enterprise Infrastructure

Gaming

Internet Infrastructure

Internet Pure PlaysIT Services

Security

Software Development Tools

Storage

Supply Chain Management

WirelessVertical Market

Financial Services Industry

Government/DoD/Homeland Security

Healthcare Industry

Other

Telecom


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Sector Statistics

Transaction volume by sector

Most Active Sectors

Vertical Market Applications


Enterprise Applications

Slow Sectors

Software Development Tools

Financial Services

Median transaction value all sectors 2005 $40 million

1H:06 $44.5 million

Approximately 60+ percent of technology transactions terms were not disclosed


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Sector Valuations

Software Sectors TTM EV/S Multiple

Business Intelligence 2.15 xConnectivity/Legacy Extension/Web Services 2.59 xDigital Media 2.82 xEngineering 2.71 x

Enterprise Applications 4.27 xEnterprise Content Management 1.46 xEnterprise Infrastructure 2.36 xGaming/Entertainment 1.44 x

Internet Infrastructure 3.57 xInternet Pure Plays 3.34 xIT Services 0.78 xSecurity 3.00 x

Software Development Tools 1.44 xStorage 2.43 xSupply Chain Management 1.58 xWireless 2.28 x

Vertical Market Software Sectors

Financial Services Industry 3.26 x

Government/DOD/Homeland Security 1.21 xHealthcare Industry 1.98 xOther 2.63x

Telecom Industry 2.02 x


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Sector Analysis

Enterprise Applications Vital to the operation of the enterprise

Mature market, forcing companies to grow inorganically

Rising cost of acquiring new market share

M&A Activity

Cross-border transactions

Compliance related solutions

Private Equity reshaping sector

Numerous PE firms active in Q2

Building on previous investments


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Sector Analysis


Driving forces

Strong public peer group valuations

Surge of new players to the market

Continued acceptance of new technology

Diminished concerns over the Internet model failing again


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Sector Analysis

Vertical Market Applications

Lead all sectors in deal volume

Interest in niche market technology

Micro Verticals with multiple transactions Education/eLearning

Natural Resources

Retail Solutions

Legal Solutions


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Valuation

Software valuations ttm

Transaction multiples have increased, but not at the samepace as deal volume

Transaction value differs from company to company and

market to market

High value strategic valuations do exist

Although many deals are in the 1x to 2x range

Financial metrics are elusive


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Key Factors Driving High Valuations

Rapid growth High profitability

Track record of sustainability

Recurring revenue

Attractive business models Current and robust technology

Strong customer base

Specialized domain expertise

Distribution / channel strength

Brand recognition

Geographic position of power Localized solutions

Strong management and technology team(s)


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2006 Technology M&A Drivers

Strong economy

Heavy investment in IT

Emerging markets: Asia, India, Israel

Heightened strategic buyer activity

Industry stalwarts expand scope of business Private equity enabling consolidation

Competitive M&A environment multiple offers

Development and adoption of new technology

Re-invention and acceptance of old business models Convergence of once disparate technology silos

Greater acquisition interest in smaller firms


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Guest Speakers

Jason Wright, Principal Apax PartnersMr. Wright joined Apax in 2000 and is currently a member of the Financial

Business Services Group, focusing primarily on investments in the area ofsoftware as a service and technology.

Ken Hamlin, CEO IDVelocity

Mr. Hamlin is the Founder, CEO and corporate visionary for IDVelocity and has

been actively involved in the manufacturing software space with a number offirms throughout his career.


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Question & Answer Session


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Contact Information

Presenters:Bruce Milne, Chairman and CEO

Ryan Blakely, Director of Research

Corum Group Ltd.10500 NE 8th StreetSuite 1500Bellevue, WA 98004USA+1 425 455 8281

Corum Group International S..r.lGlrnischstrasse 36

CH-8022 ZurichSwitzerland+41 44 251 82 65

www.corumgroup.com


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Corum Links

VIP Pass for Corum's Selling Up Selling Out Conference

To take advantage of the special VIP offer for our July 18th Webinar attendees:

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2) Select the conference you wish to attend

3) Enter your Contact Information4) Enter Promo Code of WebJuly"

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You will receive a complimentary VIP Pass to the conference.

Corum M&A Report

http://www.corumgroup.com/ResearchAndReportsregistration.asp

corum webinar mid year update july 2006

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