STRICTLY CONFIDENTIAL

UBS Technology M&A
Discussion of Current Industry Trends

March 2005

ppt Table of Contents SECTION 1 SECTION 2 SECTION 3 M&A Market Conditions M&A Drivers and Considerations UBS Overview 2 8 14 1 .[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.

SECTION 1 M&A Market Conditions .

2003 ($ in billion) 750 608 530 500 407 296 250 97 0 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 110 116 154 529 433 Source: Securities Data Corporation 3 .045 1. Johnson & Johnson / Guidant and Wachovia / SunTrust  Significant financial sponsor activity in the middle market – Taking advantage of depressed market conditions and attractive debt markets 1.328 1. JPMorgan / BankOne.ppt M&A Volume in the US Current rebound in activity across all industries is reflective of a return to a healthier market  Large. Sprint / Nextel. strategic combinations are back—Proctor & Gamble / Gillette.219 1.500 1.000 Volume up 41% in 2004 vs.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.411 1. Symantec / Veritas. Oracle / PeopleSoft. Cingular / AT&T Wireless.250 1.

133 1998 1.508 Source: Securities Data Corporation Note: Oracle/PeopleSoft included as 2004 transaction.318 2003 1.648 2001 1.409 1999 1. of Deals $311 3.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.000 300 65 250 200 150 100 50 58 0 1997 1998 1999 2000 2001 2002 2003 2004 58 $85 26 98 65 $143 25 60 157 148 $124 24 36 $65 19 46 $64 17 47 65 0 $103 22 15 500 1.000 2.500 No. of Deals 1997 No.000 233 1.ppt Technology M&A Activity Technology M&A Volume Has Increased Steadily Since 2002 Lows 500 450 400 350 $485 > $10bn 95 $1bn .$10bn < $1bn No.500 Deal Value (US$ Billions) 2.862 2000 2.705 2002 1.329 2004 1. of Deals 1. original hostile offer was first launched in Q3 2003 4 .

9 $64. "survive the downturn" mentality and reviewing strategic options – Recalibrating under invested businesses – Capturing upside as economic conditions continue to improve  Technology M&A deal volume increased 60% in 2004 – M&A pipeline is expected to be strong for 2005 Number of Announced Transactions 1 500 400 300 200 100 Q1 Q2 Q3 2003 Q4 Q1 Q2 2004 Q3 Q4 281 325 352 371 399 370 394 Technology M&A Deal Volume (US$ Billions) 1 120 (1% ) 60% 102.ppt M&A Deal Activity is Intensifying Market recovery in 2003 and stability in 2004 have increased corporate confidence and created an environment conducive to M&A transactions  Technology companies are exiting defensive.6 345 100 80 60 40 2002 $64.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.2 2003 2004  179 additional transactions were announced in 2004 compared with 2003  Volume of discussions has intensified drastically Source: Security Data Corporation Note: 1 Oracle/PeopleSoft included as 2004 transaction. original hostile offer was first launched in Q2 2003 5 .

816mm)  Oracle / Peoplesoft ($10. Warbug Pincus / UGS PLM from EDS ($2.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt. versus 27% in 2003 – Return of landscape shaping deals such as Symantec/Veritas.100mm)  Symantec / Veritas ($13. cash consideration has been linked to stock consideration as acquirors tap into the equity markets to raise funds for acquisitions – Improvements in capital markets have allowed companies to raise cash at a low cost through convertibles or straight equity  Private equity players continue to show interest in acquiring technology companies – Some technology stocks have enjoyed only limited participation in the market recovery – Low interest rates have enabled private equity players to borrow at low costs to fund acquisitions – The downturn has created companies with lower cost structures and higher profitability – The recent market recovery has provided private equity players with better exit opportunities RECENT TRANSACTIONS  IBM / Ascential ($1.300mm)  ARM / Artisan ($933mm)            3Com / TippingPoint ($408mm) Credence / NPTest ($663mm) Serena / Merant ($380mm) Cisco / NetSolve ($137mm) Resurgence in Deal Activity Sector Consolidation Stock Consideration Mm) Symantec / Veritas ($13.ppt Current Trends in Technology M&A TREND OVERVIEW  A recovery in technology stock prices and increased corporate confidence have driven M&A activity – Companies have restructured their businesses and increased earnings – Companies are eager to make acquisitions to capture upside as market conditions improve  2004 marked the return of the Technology M &A “mega-deals” – Deals over $1 billion represented 36% of deal value in 2004.050mm) Private Equity Activity 6 . Silver Lake Partners.521mm) Safenet / Rainbow ($463mm) Credence / NPTest ($663mm) – Issued convertible  Serena / Merant ($380mm) – Issued convertible   Carlyle / Insight ($2.300mm)  CA / Netegrity ($451mm)  Juniper / Netscreen ($3. they are seeking opportunities to expand product offerings. ARM/Artisan and the completion of Oracle/PeopleSoft  Sector consolidation continues to drive M &A – As companies refocus on growth.100mm)   Golden Gate Capital / Blue Martini ($54mm)  Veritas Capital / DynCorp from CSC ($850mm)  Bain Capital. acquire new technology and achieve critical mass – Regulatory environments created product opportunities for acquirors and at the same time forced smaller listed firms to re-assess the pros and cons of operating on a standalone basis  Stock consideration has become a more favorable M &A currency as technology stock prices have recovered – Most technology companies have been trading at or close to their three-year highs  In some recent deals.521mm)  Lenovo Group / IBM PC Business ($1.

of IPOs Filed 200 1.329 150 Source: Securities Data Corporation and UBS Equity Capital Markets Group Note: Oracle/PeopleSoft included as 2004 M&A transaction. of Announced M &A Deals 235 2.862 1.318 124 100 100 60 500 23 0 1997 1998 1999 2000 M&A 2001 IPO 2002 2003 2004 19 21 0 50 1.705 250 No.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.409 1.000 1. original hostile offer was first launched in Q3 2003 7 .ppt M&A and IPO Activity in the Technology Sector Number of Announced M&A Transactions and IPO Filings 3.500 2.133 1.648 300 350 No.000 1.508 1.000 309 2.500 1.

SECTION 2 M&A Drivers and Considerations .

[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt. make — time to market  Engineering talent and/or management acquisition  Off-income statement R&D  Fill product gaps Offer Complete Solution  Capitalize on installed base  Accelerate time to market  Strengthen channel partnerships  Offer one-stop shop 9 .ppt Principal Drivers of Technology M&A  Critical mass and financial strength Achieve Scale  Customer leverage  Increased distribution and sales support  Market position consolidation  Leapfrog competition  New market entry — product or geography Expand Product Offering  Capture new customer bases  Buy vs.

ppt M&A Considerations A number of factors to consider in pursuing any M&A transaction Business Rationale  Compelling strategic rationale  Create or consolidate market leadership position  Essential new technologies. simple to understand story  Financial parameter clarity  Price paid / consideration mix  Time to closure Execution Risk  Anti-trust / regulatory  Tight contract terms  Integration strategy 10 . markets or products  Transaction multiples compared to public comparables and precedent transactions Financial Considerations  Impact on combined company revenue and earnings growth trajectories  Effect on margins  Revenue and cost synergies  EPS accretion / dilution  Market perception of target company / merger partner M arket Reaction  Consistent.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.

[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.ppt Process Considerations Public Offering Versus Sale Initial Public Offering PROS:  Primary shareholders retain voting control and existing management continues to execute the strategic vision of the business  Proceeds from an IPO can be used to increase scale through acquisitions or fuel organic growth  Shareholders can participate in potential upside should the business continue to execute and market conditions remain favorable CONS  The organization must take on the costs associated with public filing and compliance requirements while managing greater scrutiny by investors  An IPO lock-up prevents current shareholders from achieving immediate liquidity  There is a high degree of uncertainty in future capital market conditions PROS: Sale of Business  Reduces or eliminates execution risks of the current business plan as well as future capital market uncertainties  M&A valuation includes control premium  Can offer a more immediate path to liquidity for current shareholders  Avoids the costs associated with being a public company  Partnering increases opportunity to cross-sell and up-sell through larger distribution platform and gain rapid critical mass to better compete CONS:  Primary shareholders relinquish voting control and new management executes the strategic vision of the company  Cash transactions eliminate the upside participation in the pro forma company  Integration and execution risk of combined business  There is the potential for a downside in valuation should the business lose traction 11 .

ppt Sarbanes-Oxley 404 Compliance Benefits  Intended to restore investor confidence in U. public markets  Drives greater consistency and transparency in reported filings  Increased executive accountability over financial reporting  Increased spending at the CFO and CTO level to meet compliance criteria Costs  Increased cost of being public.000 2. IT Spending Mix for SOX Compliance 4.500 2.S.500 1.500 3.000 1.000 3. especially small cap companies  Entails significant allocation of resources  Not meeting SOX deadline requirements or announcing inadequacies in significant controls can have negative effect on stock price – UTStarcom – Chordiant Software – Interpublic Group Advisory Services Vs.000 500 0 2003 2004 Advisory Services 2005 2006 2007 IT Spending Anticipated Technology Spending to Support SOX Compliance Security Storage Process Control Record Management Business Intelligence ERP 0% 10% 20% 30% 30% 40% 50% 60% 70% 40% 39% 36% 52% 61% Source: Gartner 2004 estimates ($ millions) Source: Forrester Research survey of 454 technology decision-makers 12 .[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.

ppt Typical Timing of an M&A Transaction Illustrative Timeline of a Sell-Side Controlled Auction Engagement Weeks Activity Action Organizational meetings 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 Due Diligence and Preparation Due diligence meetings Information Memorandum Preparation of management presentation Finalize buyer list Initiate contact with buyers Marketing Deliver Information Memorandum Finalize management presentation and data room Buyer due diligence Receipt and review of final proposals Negotiations and Closing Negotiate and sign definitive agreement Closing 13 .[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.

SECTION 3 UBS Overview .

ppt UBS—A Leading Global Financial Services Firm Our strength is backed by industry accolades “Wall Street Powerhouse” FORBES 2004 The UBS Way BLOOMBERG 2004 World’s Best Investment Bank EUROMONEY 2004 World’s Best Bank EUROMONEY 2003 Best Investment Bank THE ECONOMIST 2003 World’s Best Investment Bank INVESTMENT DEALERS’ DIGEST 2002 “ UBS is a banking giant but. source of roughly half the global investment banking fee pool.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt. a Wall Street powerhouse? Oh Yes. “BIG KID ON THE BLOCK” FORBES “ UBS has achieved what once seemed impossible for any European investment bank: it has broken into the front rank in the US market. But it’s the push into the rarified realm of Investment Banking that sets UBS apart. it doubled its share in announced US M&A deals. In the 12 months ending in April 2004. WORLD’S BEST INVESTMENT BANK EUROMONEY 2004 ” ” 15 . This is a house… that’s grown out of its regional shell to assume premier proportions in world finance.

capturing more market share than any other bank since 2002 16 .2% 10. Full credit given to acquiror and target advisor(s).6% 262 8.4% Notes: Data represents all M&A deals worldwide greater than $100 million in transaction value.0% 12. equity carveouts. target advisor and acquiror advisor) UBS has positioned itself as one of the leading M&A advisors worldwide and has unprecedented momentum.8% 403 13.1% 377 459 426 13.8% [yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.. and open market repurchases 1 Market share based on number of transactions. exchange offers.8% 10.UBS—A Leading M&A Advisor with Rapid Improvement in Market Share 2003–2004 # of Transactions / Market Share 1 14. Market shares do not sum to 100% due to multiple advisors on each transaction (e. Excludes withdrawn deals.g.4% 8.ppt 2003–2004 Market Share versus 2000—2002 +23% Lehman Bros Deutsche Bank Lazard Goldman Sachs Citigroup JP Morgan Morgan Stanley Merrill Lynch CSFB (38% ) (23% ) (1% ) (2% ) (5% ) (11% ) +9% +6% +3% Goldman Sachs JP Morgan Citigroup Morgan Stanley CSFB 333 322 Deutsche Bank Merrill Lynch Lehman Bros Lazard 265 8.5% 252 197 6.

148.8 4.com M ay 2004 US$663 million Acquisition of NPTest M ay 2004 US$380 million Sale to Serena Software M arch 2004 US$463 million Sale to SafeNet January 2004 US$601 million Sale to Manpower January 2004 US$467 million Financial Restructuring November 2003 US$295 million Sale to NetScreen 17 .0 1.3 4.093.4 5.2 6.492.025.187.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt.1 2.476.560.ppt Overview of UBS Technology M&A Group Technology M&A Expertise  Strong technology-focused M&A presence with deep industry knowledge and company relationships  Experienced in a wide range of advisory assignments – Buyer advisory – Seller advisory – Cross-border transactions – Merger of equals – Shareholder value protection – Leveraged transactions 2004 Technology M&A Transactions Less Than $1 Billion Financial Advisor Goldman Sachs & Co Morgan Stanley Credit Suisse First Boston UBS JP Morgan Banc of America Securities LLC Citigroup Jefferies & Co Lehman Brothers Rothschild Source: SDC Rank Value ($mm) No.6 17 22 15 11 14 5 12 21 9 3 Selected Recent Transactions February 2005 US$415 million Sale to eBay February 2005 US$850 million Sale of Selected DynCorp Units to Veritas Capital November 2004 US$137million Sale to Cisco Systems July 2004 US$170 million Sale to FindWhat.4 1. of Deals 1 2 3 4 5 6 7 8 9 10 7.2 2.168.375.4 2.114.

without limitation of any kind. +1-415-352 5650 www. distributed or passed to others at any time without the prior written consent of UBS. the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to the company relating to such tax treatment and tax structure. accounting or investment advice or a recommendation. This presentation has been prepared on a confidential basis solely for the use and benefit of the company. net income and stock performance) are based upon the best judgment of UBS from the information provided by the company and other publicly available information as of the date of this presentation. divestment or other financial decisions or actions should be based solely on the information in this presentation.com This presentation has been prepared by UBS Securities LLC (―UBS‖) for the exclusive use of recipient (together with its subsidiaries and affiliates. Actual results will vary from the projections and such variations may be material. UBS Investment Bank is a business group of UBS AG UBS Securities LLC is a subsidiary of UBS AG 18 . There is no guarantee that any of these estimates or projections will be achieved. The company should not construe the contents of this presentation as legal. UBS has not independently verified the information contained herein.ubs. tax.ppt Contact Information UBS Securities LLC 555 California Street Suite 4650 San Francisco CA 94104 Tel. expense. or other agents may disclose to any and all persons. or shall be relied upon as. This material must not be copied.[yuanni] [printed: 03/14/05 17:59] [saved: 03/14/05 18:01] S:\intc\M&A\Projects\2005\Seth Conference\Merrill Corp Presentation_ppt. The company should consult its own counsel. either express or implied. representatives. UBS expressly disclaims any and all liability relating or resulting from the use of this presentation. Any estimates or projections as to events that may occur in the future (including projections of revenue. This presentation does not purport to be all-inclusive or to contain all of the information which the company may require. a promise or representation as to the past or future. completeness or reliability of the information contained in this presentation. Distribution of this presentation to any person other than the company and those persons retained to advise the company is unauthorized. Nothing contained herein is. the ―company‖) using information provided by the company and other publicly available information. reproduced. as to the accuracy. nor does UBS make any representation or warranty. tax and financial advisors as to legal and related matters concerning any transaction described herein. provided that the company and any of its employees. This presentation has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. No investment.

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