Corum's Q3 2007 Software M&a Update

8/8/2019 Corum's Q3 2007 Software M&a Update

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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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Agenda

1Market Insights

2International Activity & Valuations

3Sector Analysis

4Discussion


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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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Public Markets Reaching New Heights

Dow Jones NASDAQ S&P AIM

Stockholm


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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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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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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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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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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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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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Interest Translating into Deals

LOIs and Offers

Vertical market

IT services (2)

Graphic modeling

User interface technology

Business Process Outsourcing


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Agenda

1Market Insights


3Sector Analysis

4Discussion


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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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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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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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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 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 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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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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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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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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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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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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Agenda

1Market Insights


3Sector Analysis

4Discussion


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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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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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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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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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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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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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Transaction Highlights Private Equity


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


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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Transaction Highlights International


Global expansion

Desire to enter U.S. markets

Local domain expertise

Active international buyer community


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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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


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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Corums Q3 Briefing Sample (cont.)



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Looking Forward

Sectors To Watch

Enterprise Applications

Internet Infrastructure

IT Services

Gaming and Entertainment

SaaS Opportunities


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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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