Private Capital Market Update

PRIVATE AND CONFIDENTIAL TECHNOLOGY FOCUS. BROAD REACH. OPTIMAL RESULTS.

Private Capital Market Update

2

I. Technology Private Equity Market Update

3

$5.0

$0.5

$5.3

$11.1

$4.2

$2.5

$6.8 $7.2

$8.9 $9.4

$8.4 $8.8

$6.7

$5.7

$10.7 $10.6

$2.6

64 65

79

101 97

59

102

90 88

117

94 92

107 103 103

107

66

0

20

40

60

80

100

120

140

$0.0

$2.0

$4.0

$6.0

$8.0

$10.0

$12.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

2009 2010 2011 2012 2013

Capital Invested ($B) Deal Count

Technology Private Equity Investing Losing Momentum...

TECHNOLOGY PRIVATE EQUITY INVESTING ACTIVITY

Source: PitchBook. Data Includes closed transactions only.

* Capital invested data excludes transactions with undisclosed transaction amounts.

Although Tech PE investing had gained strong momentum in 2012, Q1 2013 saw only

$2.6B invested in technology companies, 60% lower than the year ago period

($B)

4

...As Middle Market Leveraged Lending Trends Improve

The leveraged loan market continues to improve, fueled by low rates and availability of debt

MIDDLE MARKET LEVERAGED CASH FLOW TRENDS

KEY BASELINE INTEREST RATES

Source: Market Intelligence

Rate May 2013 May 2012

Fed Funds Target Rate 0.25% 0.25%

US Prime Rate 3.25% 3.25%

3-Month LIBOR 0.27% 0.47%

Metric May 2013 May 2012

CF Senior Debt (x EBITDA): 1.50 - 2.50x 1.50 - 2.25x

Total Debt Limit (x EBITDA): 3.00 - 4.25x 3.00 - 4.00x

Senior Cash Flow Pricing L+ 3.5% - 4.5% (bank)

L+ 4.5% - 6.5% (non-bank)

L+ 3.0% - 4.5% (bank)

L+ 4.5% - 6.0% (non-bank)

Subordinated Debt Pricing 14.0% - 17.0% 14.0% - 17.0%

"One Stop" Pricing: 10.0% - 12.0% Fixed

L+ 7.5% - 9.0% Floating

10.0% - 11.5% Fixed

L+ 9.0% - 10.0% Floating

Minimum Equity Contribution 25% - 35% 25% - 35%

5

$266 $252 $145 $51 $100 $113

293

247

121 120 137

112

0

50

100

150

200

250

300

350

$0

$50

$100

$150

$200

$250

$300

2007 2008 2009 2010 2011 2012

# F

un

ds C

lose

d

Cap

ita

l R

ais

ed

($

B)

Capital Raised ($B) # of Funds Closed

$43

$64

$51

$26

$71

$93

$0

$100

$200

$300

$400

$500

$600

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

2007 2008 2009 2010 2011 2012

Cu

mu

lativ

e O

ve

rha

ng

($B

) Ove

erh

an

g b

y V

inta

ge

($

B)

Cumulative Overhang Overhang by Vintage

Private Equity Capital Remains Near Record Highs

Significant amount of ‘dry powder’ built-up from large fund raises prior to the financial

crisis

PE Fundraising trending toward larger funds as more capital was raised by fewer funds

Source: PitchBook

PE FUNDRAISING BY YEAR

Source: PitchBook

CAPITAL OVERHANG BY VINTAGE

Cumulative Overhang

$348B

PE Firms continue to chip away at the significant amount of ‘dry-powder’ while the

fundraising environment continues to improve

6

$6.4

$0.6 $1.6

$6.4

$10.6

$4.3 $6.3

$12.4

$6.3

$10.1 $10.4

$4.7

$12.5

$7.2

$22.4

$12.9

$7.2

7

15

11

18 24

19

30

37

27

35

29 31

45

22

35

38

29

0

5

10

15

20

25

30

35

40

45

50

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0


2009 2010 2011 2012 2013

Exit Value ($B) Exit Count

Technology Private Equity Portfolio Company Exits on the Decline

TECHNOLOGY PRIVATE EQUITY PORTFOLIO COMPANY EXIT ACTIVITY

Source: PitchBook. Data Includes closed transactions only.

* Total exit value data excludes transactions with undisclosed transaction amounts.

Portfolio company sales posted a weak quarter after finishing 2012 on a strong note.

$7.2B in exit value was recorded in Q1, down 42% from the year ago period

($B)

7

$40

$88

$95

$88 $85

$70

$48

$61

$100

$40

$85

$100

$0

$20

$40

$60

$80

$100

$120

1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 YTD2011

YTD2012

YTD2013

Larger Deals Fueling Strategic Technology M&A Activity

Technology M&A market marked by consolidation from major tech acquirers as they

snap up sector leaders leading to fewer, but larger deals

STRATEGIC M&A MEDIAN DEAL SIZE

Source: PitchBook

NOTABLE CASH POSITIONS

$47.4B

$12.8B

$12.5B

$74.5B

$33.4B

$13.2B

$4.9B

21 $1B+ strategic

acquisitions since

beginning of 2011

$6.5 B

($MM)

8

$0.0 $0.6 $1.7 $0.4 $0.5

$1.0

$2.3

$1.6 $1.1

$4.8

$0.3

$1.6 $1.6

$0.9 $0.7

$1.0

$0.4 0

5

2

3

5

14

12

11

9

17

3

7

12

9

6

5 5

0

2

4

6

8

10

12

14

16

18

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0


2009 2010 2011 2012 2013

Amount Raised ($B) IPO Count

Technology IPO Market Dragging, Marked by Caution

Source: PitchBook, CapitalIQ

TECHNOLOGY IPO MARKET

Capital Raised

Excludes Facebook’s

$16B IPO

After a strong start to 2012, the inconsistent / sporadic tech IPO market is beginning to

stabilize, with a number of high profile tech IPOs in registration for the coming months

($B)

9

Recent Significant Technology Transactions

Robust demand and activity in SaaS, e-learning and social media sectors

Interest from PE and strategic buyers driving valuations higher

─ Quest bidding war between Dell and Insight Venture Partners

PRIVATE EQUITY STRATEGIC

August 2012

Has received an

investment from

February 2012

Has been

acquired by

October 2011

Has been

acquired by

December 2011

Has been

acquired by

July 2012

Has been

acquired by

August 2012

Has been

acquired by

May 2012

Has been

acquired by

August 2012

Has been

acquired by

April 2012

Has been

acquired by

December 2011

Has been

acquired by

September 2012

Has been

acquired by

January 2012

Has been

acquired by

December 2011

Has been

acquired by

December 2011

Has been

acquired by

May 2012

Has been

acquired by

June 2012

Has been

acquired by

December 2012

Has been

acquired by

November 2012

Has been

acquired by

May 2013

Has been

acquired by

January 2013

Has been

acquired by

May 2013

Has been

acquired by

May 2013

Has been

acquired by

August 2012

Has been formed by

portfolio companies of

April 2012

Has been

acquired by

10

II. Venture Capital Market Update

11

Overall Venture Capital Investing Remains Stable …

~$6 billion in venture capital invested in Q1 2013, both deal volume and dollar volume

remain below 2011 highs but above 2010 levels

QUARTERLY VENTURE CAPITAL INVESTING ACTIVITY

Source: NVCA, PWC MoneyTree

($B)

$3.8

$5.1 $5.4

$5.9

$5.1

$7.1

$5.4 $5.7

$6.5

$8.2 $7.5 $7.4

$6.3

$7.3 $6.6 $6.7

$5.9

676

760 761

941

817

1,018

883 907 900

1,074

1,010 980

868

960 929

1,013

863

-

200

400

600

800

1,000

1,200

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0


2009 2010 2011 2012 2013

Capital Invested ($B) Deal Count

12

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

$3.5

1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13

Seed Early Stage Expansion Later Stage

…Though Later-Stage Deals Continue to Gain Momentum

Later-stage deals continue to gain momentum in the investment community, especially

where capital is used to fuel sales growth


($B)

QUARTERLY VENTURE CAPITAL INVESTING ACTIVITY

13

Stable Fundraising in 2012 / 2013 Increasing the Supply of Capital

$4.1B was raised by VCs in Q1 2013, narrowly below 2012 levels. While still below 2011

highs, fundraising levels have climbed to pre-recession levels

QUARTERLY VC FUNDRAISING


NOTABLE RECENT FUNDS

$3,500M

$2,600M

$2,000M

$1,250M

$900M

$750M

$2,700M

($B)

$3.7

$8.1

$2.7

$2.1

$6.1

$4.7

$6.3

$5.1

$3.3

$4.1

$8.1

$4.7

$4.1

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

4Q'10 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 YTD2011

YTD2012

YTD2013

14

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

1Q'09 2Q'09 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10 4Q'10 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13

Capital

Inflows

Decreasing Momentum in Fundraising and Investing

While VC capital inflows and outflows remain above 2009 lows, both have been under

pressure in recent periods and struggle to regain momentum from 2011 highs

QUARTERLY VC INFLOWS / OUTFLOWS


($B)

Capital

Outflows

15

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1

2010 2011 2012 2013

Software Companies Continue to be Most Attractive Targets for VCs

$2.3B invested in software companies represents 40 percent of all VC invested dollars.

Later stage raisings continue to attract majority of VC

VC

AL

LO

CA

TE

D T

O S

OF

TW

AR

E

SO

FT

WA

RE V

C I

NV

ES

TIN

G

40% of all VC dollars

invested in Q1 went to

software companies


($MM)

$211 $187 $315 $253 $380 $440 $477 $331 $331 $409 $491 $551 $565

$1,027 $1,401 $1,246 $1,477

$1,462 $1,799

$2,179 $2,072

$1,689

$2,421 $2,098 $2,161 $2,327

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1

2010 2011 2012 2013

First Sequence Financing All Other Software Financings

16

Corporate Investors Decreasing Activity in Investing

Corporate VC investing decreased 17 percent yr/yr in Q4 2012 as corporations used

strong balance sheets to return cash to shareholders

QUARTERLY CORPORATE VC INVESTING ACTIVITY


($MM)

$705

$669

$835

$500

$230

$356

$297

$462

$376

$644

$455 $429 $424

$732

$555 $529 $523

$553

$670

$437

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2008 2009 2010 2011 2012

17

Falvey Partners Overview

FOCUS SELECT TRANSACTION EXPERIENCE

December 2011

Has acquired

July 2012

Has been

acquired by

September 2011

Series D

Convertible

Preferred Stock

Led by

September 2012

Has been

acquired by

A portfolio company of

July 2011

Has been acquired

by a portfolio

company of

April 2011

Has been

acquired by

July 2011

Has been

acquired by

February 2011

Growth equity

investment from

July 2011

Has been

acquired by

March 2011

Has divested

its diagnostic

solutions unit

November 2010

Has received an

investment from

A portfolio company of

October 2010

PGI Notify and Send

platforms acquired by

August 2010

Two divisions have been

acquired by a portfolio

company of

April 2010

Has been

acquired by

August 2010

Series C

Convertible

Preferred Stock

Led by

SERVICES

Sell-side or buy-side M&A

Growth capital raising

Board and corporate advisory

SECTOR

Software / SaaS

Tech-enabled business services

IT services

Internet / digital media

COMPANY TYPE

$50M - $250M in enterprise value

Growing, with established scale

Profitable or near-term path to profitability

Falvey Partners is a leading advisory firm serving

mid-market clients across technology sectors

Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team

Falvey Partners professionals have closed dozens of software transactions representing billions of

dollars in transaction value

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