Electronics Software and Engineering Services Industry Update · Comcast and Verizon that deliver content on the Internet, in light of vocal concerns from net neutrality advocates.

Electronics Software and Engineering Services

Industry Update

May 2014

Mergers & Acquisitions

Business Valuation

Strategic Consulting

Notable M&A Activity Capital Markets

FireEye acquired nPulse for $60 million

AnySys acquired Spaceclaim for $85 million

Cirrus Logic acquired Wolfson Electronics for $488

million

Cadence Design agreed to acquire Jasper Design

for $170 million

Zebra Technologies agreed to acquire Motorola

Solutions’ Enterprise Business for $3.5 billion

Freescale acquired the Communications Processor

Division of Mindspeed

Microsoft acquired GreenButton, formerly known as

InterGrid

Industry News

Source: Public Filings; Industry Newswires and Capital IQ as of 5/9/14

Industry News

Apple is in talks to buy Beats Electronics, the high-end, audio headset manufacturer started by Dr. Dre and funded by the Carlyle Group, for $3.2 billion.

The Federal Communications Commission is evaluating changes to rules on how to regulate broadband companies like Comcast and Verizon that deliver content on the Internet, in light of vocal concerns from net neutrality advocates.

AT&T is in talks to buy DirecTV for $50 billion, allowing it to offer bundled service for TV, phone and Internet.

Amazon continues to generate speculation that it has ambitions of developing expertise in the chip industry. Recently, Amazon’s Web Services group has been reportedly hiring engineers with expertise in semiconductor design, which may help them develop technology for more efficient data centers.

Technology employers Apple, Google, Adobe and Intel reached a tentative $324 million settlement in the class action lawsuit against them regarding anti-competitive agreements for hiring in-demand tech workers.

The global semiconductor market posted record sales in 1Q 2014, reaching revenues of $78.5 billion, the industry’s highest first quarter total, according to the Semiconductor Industry Association.

% Change

1 Week 4 Weeks YTD

Semiconductors Index (0.0%) 1.5% 4.3%

Defense Electronics Index 1.0% 6.0% 2.2%

EDS and Contract Manufacturers Index (0.9%) 2.6% 8.8%

Large Cap Software Index 0.0% 2.6% 3.6%

Mid/Small Cap Software Index (7.0%) (10.0%) (10.1%)

Electronics Equipment Index (0.8%) 7.6% 1.9%

EDA & Semiconductor IP Index: (0.2%) (3.2%) (13.0%)

S&P 500 (0.1%) 3.5% 1.6%

Semiconductors Index: NasdaqGS:INTC, NasdaqGS:QCOM, NasdaqGS:TXN, NasdaqGS:BRCM, ENXTPA:STM

Defense Electronics Index: NYSE:LMT, NYSE:BA, NYSE:RTN, NYSE:LLL, NYSE:CW

EDS and Contract Manufacturers Index: NasdaqGS:FLEX, NYSE:JBL, TSX:CLS, SEHK:2038, NasdaqGS:SANM

Large Cap Software Index: NasdaqGS:CA, NYSE:ORCL, NasdaqGS:ADSK, NasdaqGS:NTAP, NYSE:VMW

Mid/Small Cap Software Index: NasdaqGM:GUID, NasdaqGM:BSQR, NYSE:SWI, NYSE:DATA

Electronics Equipment Index: NasdaqGS:AAPL, NYSE:GE, NasdaqGS:CSCO, NYSE:SLB, NYSE:DHR

EDA & Semiconductor IP Index: NasdaqGS:CEVA, NasdaqGS:SNPS, NasdaqGS:MENT, NasdaqGS:MENT, LSE:ARM

2

May 2014 Announced M&A Transactions

Completed Completed Completed

May 6, 2014 May 1, 2014 April 29, 2014

Notes Notes Notes

Seven months after its IPO, FireEye

has made another security related

acquisition with its deal for Virginia-

based nPulse. FireEye paid $60

million plus a $10 million earn-out on

trailing revenue of $7 million. The

deal follows FireEye’s recent $1

billion acquisition of Mandiant.

nPulse offers network forensic

capabilities that enable customers to

capture, inspect and analyze traffic

on the network.

Ansys has acquired SpaceClaim, a

leading provider of fast and intuitive

3-D modeling software for engineers,

for $85 million in cash. SpaceClaim

offers a 3-D modeling tool that can

be utilized by any engineer during the

product development process. This

process, called "direct modeling,"

differs from traditional CAD software,

which is used by a relatively small

percentage of engineers.

Cirrus Logic acquired Wolfson

Microelectronics for $488 million. The

deal should help minimize Cirrus'

reliance on Apple and help both

companies combat Qualcomm's

growing position in the audio market.

Apple consistently accounts for more

than 80% of Cirrus' sales each

quarter and nearly half of Wolfson's

sales last year went to Samsung.

has acquired has acquired has acquired


3

May 2014 Announced M&A Transactions

Announced Announced Completed

April 21, 2014 April 15, 2014 May 13, 2014

Notes Notes Notes

EDA leader Cadence Design has

agreed to acquire Jasper Design

Automation for $170 million. Jasper

provides verification software, which

finds bugs in silicon before the

expensive fabrication process

begins. The acquisition represents

Cadence’s 3rd this year and 7th deal

in 24 months. Last year Jasper

brought in $28 million in revenue,

growing 25% each year.

Zebra Technologies, a maker of

asset-tracking technologies, has

agreed to acquire Motorola Solutions’

Enterprise Group for $3.5 billion.

Zebra will leverage cash on its

balance sheet plus raise $3.25 billion

in debt to fund the deal. Motorola’s

enterprise business brings in $2.5

billion in revenue, which will result in

Zebra tripling its total revenue with

the deal.

Freescale Semiconductor has

acquired the communications

processor division of Mindspeed for

an undisclosed sum. Through the

acquisition, Freescale will inherit a

range of multi-core embedded

processors based on ARM cores that

support high-end voice-over-IP

(VoIP)-enabled gateways to SMB

security systems to 802.11n. Macom

bought Mindspeed last year, and has

sold off other pieces of the company.

to acquire to acquire has acquired


Enterprise Group Communications Processor Division

4

May 2014 Capital Markets: Overview

-30.00%

-20.00%

-10.00%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

S&P 500 Index Semiconductors Index Defense Electronics Index

EDS and Contract Manufacturers Index Large Cap Software Index Mid/Small Cap Software Index

Electronics Equipment Index EDA & Semiconductor IP Index

% Change

1 Week 4 Weeks YTD

Semiconductors Index (0.0%) 1.5% 4.3%

Defense Electronics Index 1.0% 6.0% 2.2%

EDS and Contract Manufacturers Index (0.9%) 2.6% 8.8%

Large Cap Software Index 0.0% 2.6% 3.6%

Mid/Small Cap Software Index (7.0%) (10.0%) (10.1%)

Electronics Equipment Index (0.8%) 7.6% 1.9%

EDA & Semiconductor IP Index: (0.2%) (3.2%) (13.0%)

S&P 500 (0.1%) 3.5% 1.6%

Source: Public Filings; Capital IQ as of 5/9/14

-6.2%

15.5% 14.1%

22.7%

47.3%

20.0% 20.0%

-3.8%

5

May 2014 Capital Markets: Stock Performance


(18.8%)

(18.7%)

(17.4%)

(10.4%)

(9.1%)

(5.4%)

(3.4%)

3.1%

5.3%

7.3%

7.9%

8.0%

9.1%

11.0%

12.7%

15.0%

15.4%

16.7%

17.9%

19.6%

20.6%

21.3%

23.0%

23.8%

29.3%

30.5%

32.4%

36.7%

39.1%

41.1%

51.2%

54.6%

62.0%

95.5%

(50%) (25%) 0% 25% 50% 75% 100% 125% 150%

Broadcom Corp.

SolarWinds, Inc.

ARM Holdings

CEVA, Inc.

Jabil Circuit Inc.

NetApp, Inc.

STMicroelectronics NV

Guidance Software, Inc.

Synopsys, Inc.

Intel Corporation

BSQUARE Corp.

CA Technologies

Cisco Systems, Inc.

Cadence Design Systems, Inc

Mentor Graphics Corp.

S&P 500

General Electric Company

FIH Mobile Limited

Autodesk, Inc.

Danaher Corp.

Oracle Corporation

VMware, Inc.

QUALCOMM Incorporated

Texas Instruments Inc.

Apple Inc.

Schlumberger Limited

Flextronics International Ltd.

L-3 Communications Holdings Inc.

The Boeing Company

Celestica Inc.

Raytheon Co.

Sanmina Corporation

Lockheed Martin Corporation

Curtiss-Wright Corporation

Last 52 Weeks

Semiconductors Index Defense Electronics Index EDS and Contract Manufacturers Index

Large Cap Software Index Mid/Small Cap Software Index Electronics Equipment Index

EDA & Semiconductor IP Index S&P 500 Index

(17.4%)

(8.2%)(8.1%)

(8.0%)

(7.6%)

(6.0%)

(4.9%)

(0.9%)

0.0%

0.5%

0.8%

0.8%

1.4%

1.6%

1.7%

1.7%

1.9%

1.9%

2.5%

3.2%

3.4%

3.5%

3.7%

3.9%

4.8%

5.3%

5.4%

6.5%

7.4%

7.4%

8.4%

12.7%

15.3%

21.7%

(20%) (10%) 0% 10% 20% 30% 40%

CEVA, Inc.

FIH Mobile Limited

SolarWinds, Inc.

Guidance Software, Inc.

ARM Holdings

VMware, Inc.

NetApp, Inc.

BSQUARE Corp.

CA Technologies

Intel Corporation

L-3 Communications Holdings Inc.

Raytheon Co.

Broadcom Corp.

Mentor Graphics Corp.

Jabil Circuit Inc.

Danaher Corp.

QUALCOMM Incorporated

Texas Instruments Inc.

Cisco Systems, Inc.

Schlumberger Limited

Synopsys, Inc.

S&P 500

Autodesk, Inc.

General Electric Company

Flextronics International Ltd.

Oracle Corporation

Celestica Inc.

Cadence Design Systems, Inc

Lockheed Martin Corporation

The Boeing Company

STMicroelectronics NV

Apple Inc.

Curtiss-Wright Corporation

Sanmina Corporation

Last Four Weeks

6

May 2014 Capital Markets: Market Movers

Top 3 Overperformers

Company Market Close One Week Change Recent News

$68.57 7.5%

Curtiss Wright reported $0.72 earnings per share for the quarter,

beating the analysts’ consensus estimate of $0.62 by $0.10, AR

Network reports. The Company had revenue of $641 million for

the quarter, compared to the consensus estimate of $627.05.

$15.48 4.2%

Cadence reported first quarter 2014 revenue of $379 million,

compared to revenue of $354 million reported for the same

period in 2013. The Company also reported $170 million

acquisition of Jasper Design Automation.

$41.04 4.0% Oracle continues its fight in U.S. appeals court to reinstate a

$1.3 billion jury ruling won by Oracle against SAP for copyright

infringement.

Top 3 Underperformers

Company Market Close One Week Change Recent News

$14.13 -15.8%

CEVA reported first quarter revenue was $13.7 million, an

increase of 13% compared to $12.1 million in 1Q 2013. First

quarter 2014 licensing and related revenue was $7.9 million,

representing an increase of 57%.

$3.91 -12.1% Big demand for Apple's iPhone likely helped Foxconn

Technology Group's main manufacturing arm increase net

profits by 19.5% in this year's first quarter.

$37.30 -10.8% Solarwinds reported 1st quarter results including total revenue

for the first quarter of $95.9 million, representing 32% year-over-

year growth.


7

May 2014

Large Cap Software Index

3x LTM EBITDA $4,698.0 $49,482.0 $1,279.5 $2,915.7 $4,479.0

Less LT Debt 1,910.0 24,193.0 746.4 995.2 1,500.0

Plus Cash 2,974.0 16,832.0 1,853.0 2,152.7 2,788.0

Dry Powder $5,762.0 $42,121.0 $2,386.1 $4,073.2 $5,767.0

Electronics Equipment Index

3x LTM EBITDA $173,385.0 $85,149.8 $38,940.0 $37,131.0 $12,707.4

Less LT Debt 16,962.0 380,600.0 17,157.0 12,489.0 3,487.0

Plus Cash 18,949.0 12,000.0 5,339.0 3,752.0 3,346.5

Dry Powder $175,372.0 ($283,450.3) $27,122.0 $28,394.0 $12,566.9

Mid/Small Cap Software Index

3x LTM EBITDA -$35.6 -$5.7 $409.4 $46.7

Less LT Debt 0.1 0.0 40.0 0.0

Plus Cash 21.3 13.5 208.3 616.5

Dry Powder ($14.4) $7.8 $577.7 $663.2

Company Liquidity Estimates by Subsector

($ millions)


8

May 2014 Company Liquidity Estimates by Subsector

Semiconductors Index

3x LTM EBITDA $61,902.0 $25,932.0 $13,326.0 $3,858.0 $2,451.0

Less LT Debt 13,459.0 12.0 5,652.0 1,395.0 1,133.0

Plus Cash 4,777.0 6,337.0 1,565.0 2,254.0 1,744.0

Dry Powder $53,220.0 $32,257.0 $9,239.0 $4,717.0 $3,062.0

($ millions)


EDA & Semiconductor IP Index

3x LTM EBITDA $18.8 $1,077.5 $875.9 $717.1 $1,497.3

Less LT Debt 0.0 97.5 329.1 233.9 13.6

Plus Cash 28.2 893.1 532.8 293.3 65.7

Dry Powder $47.0 $1,873.0 $1,079.6 $776.5 $1,549.4

9

May 2014

Defense Electronics Index

3x LTM EBITDA $16,875.0 $24,639.0 $10,245.0 $4,494.0 $1,132.9

Less LT Debt 6,152.0 8,935.0 4,735.0 3,643.0 1,009.1

Plus Cash 3,264.0 6,942.0 3,036.0 227.0 128.0

Dry Powder $13,987.0 $22,646.0 $8,546.0 $1,078.0 $251.8

Company Liquidity Estimates by Subsector


EDS and Contract Manufacturers Index

3x LTM EBITDA $3,140.9 $3,108.4 $620.1 $36.5 $844.1

Less LT Debt 2,102.6 1,836.2 0.0 137.8 650.3

Plus Cash 1,593.7 675.1 489.2 2,124.1 390.6

Dry Powder $2,632.1 $1,947.3 $1,109.3 $2,022.8 $584.4

($ millions)

10

May 2014 McLean Group Introduction

Mergers & Acquisitions

The McLean Group uses its considerable experience and

expertise in a wide range of industries to guide its clients

through each stage of the M&A process and ultimately

identify the most probable and suitable candidates to

complete transactions under the most favorable terms.

Market Intelligence

By leveraging superior competitive analysis, The McLean

Group provides business executives with comprehensive

market intelligence studies incorporating the requisite

market insights and analytical expertise to reduce risk and

uncertainty in M&A and strategic decision-making.

Capital Formation

The McLean Group arranges private equity, venture capital,

senior debt and subordinated debt to support clients’

expansions, mergers & acquisitions (M&A), refinancings,

recapitalizations, leveraged buyouts, and other shareholder

liquidity objectives.

Business Valuation & Litigation Support

As a core competency and complement to its M&A

business, The McLean Group provides business valuation

services, including intangible asset and financial security

valuations for a variety of transactions, financial reporting

and tax purposes. In addition, the McLean Group has the

experience and credentials necessary to support litigation

proceedings, including quantifying economic damages and

valuing a minority interest in a business.

McLean Securities, a wholly-owned affiliate of The McLean Group, is a registered broker/dealer with the Financial Industry Regulatory

Authority (FINRA) and a Member, Securities Investor Protection Corporation (SIPC).

Founded in 1997, The McLean Group is a national, middle market investment bank with deep expertise in a variety of industry

verticals. Headquartered in McLean, VA, The McLean Group is among the largest independent middle market investment

banks in the region. Our core advisory services include:

11

May 2014 Recent Technology Advisory Experience – M&A

12

May 2014 Recent Technology Advisory Experience – Valuation Services

13

May 2014

The McLean Group

7900 Westpark Drive, Suite A320

McLean, VA 22102

Main: 703.827.0200

Fax: 703.827.0175

Joe Golden

Principal

[email protected]

703.752.9018

Brent Lorenz

Vice President

[email protected]

301.455.1833

Vippy Bhambra

Director

[email protected]

410.440.3189

Kathleen Crow

Managing Director

[email protected]

703.827.0200, ext. 128

Stephen Findlay

Managing Director

[email protected]

814.464.3749

Tom Swanson

Managing Director

[email protected]

703.752.9014

Shari Overstreet

Managing Director

[email protected]

512.687.3485

Technology & Telecommunications Team

Team Members

Electronics Software and Engineering Services Industry Update · Comcast and Verizon that deliver content on the Internet, in light of vocal concerns from net neutrality advocates.

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