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Bellevue Boston Houston London Mexico City Munich Oslo Paris Philadelphia Phoenix Portland Santa Clara Toronto

Santa Clara Toronto Zurich

Software M&A Year-end Review and

Forecast for 2008
January 29, 2008
Middle Market Software M&A Specialists

 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

 58% cross-border transactions

 Host of Selling Up Selling Out conferences

 Sponsor of World Financial Symposiums conferences

 Publisher of industry-leading M&A research

Corum Group Presentation ■ 2

Broad Exposure to Software M&A

Corum’s information is drawn from

 Global M&A engagements
 Research in the U.S. and Europe
 Buyer / client feedback
 Education and activities

The last 90 days

 Selling Up Selling Out conference series:
Boston, Houston, Philadelphia, Toronto, Ottawa, Helsinki, Prague, London, Santa Clara
 Merge Briefing
Buenos Aires, Montevideo, Santiago, Oslo, Paris
 Software Business Conference – Santa Clara
 Banff Venture Forum – Banff, Alberta
 Security CEO Roundtable with Milestone Group
 World Financial Symposiums – October 30, London

Corum Group Presentation ■ 3


1Market Insights

2International Activity & Valuations

3Sector Analysis


Corum Group Presentation ■ 4

Headlines Tell the Story

“Can M&A’s Best Times Get Better?” “Dollar Declines on its Rivals”
Wall Street Journal, January 2007 Wall Street Journal, September 2007

“Money is Everywhere – But for How Long?” “Time to Celebrate; 2007 Breaks M&A Record”
Wall Street Journal, January 2007 Wall Street Journal, October 2007

“Stock Surge + Bond Boom = M&A Magic” “M&A Seen on the Brink After Record 2007”
Wall Street Journal, April 2007 Reuters, December 2007

“As Deal Barriers Fall, Takeover Bids Multiply” “Tech Cos Seen Going M&A Route, Not IPO in
Wall Street Journal, May 2007 2008”
Reuters, December 2007
“M&A – The Best Investment Game in Town” UK, May 2007 “IT Spending Growth Expected to Slow in ‘08”
InformationWeek, December, 2007
“Market Pressures Test Resilience of Buyout Boom”
Wall Street Journal, June 2007

“Dry-Up in Debt Won’t Deter Tech Deals”

Barron’s, September 2007

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Economic Climate Weakens

Credit crunch – tip of the iceberg?

Energy prices drag on economy
Consumer spending down
Corporate earnings down
Recession odds increase
More sellers
Corum Software Peer Group valuations down
But… IT sector still strong

In spite of problems, M&A activity for 2008 may exceed 2007

Corum Group Presentation ■ 6

ACG/Thomson Dealmakers Survey
Year-end 2007

 Dealmakers optimistic, but less bullish than six months ago

 Expect fewer buyouts in next six months and more distressed sales

 Increased likelihood of doing a cross-border deal

 Credit issues will be a factor, but private equity to remain viable

 Greater balance of buyers and sellers predicted

 Optimism that debt markets will improve in ‘08

Corum Group Presentation ■ 7

Public Markets – Reaching New Heights, then Oops


Corum Group Presentation ■ 8

M&A is the Primary Source of Liquidity

In Dollar Volume – U.S. dollar volume all industries

Source: Dealogic, IPO Central

Corum Group Presentation ■ 9
Current M&A Market

Broad Market Technology Market

2007 M&A up 22% to $4.7 trillion High tech deals for 2007 totaled $268 billion
worldwide (all industries)
Private equity deal volume fell 65%, while
portfolio company activity increased
Europe outpaced U.S. in deal
volume for first time in 5 years Strategic buyers remain very active

Consolidation continues across most

2007 finished strong, although deal sectors
volume and deal size dipped in the
second half of the year Companies of all sizes continue to be
aggressive buyers

Global buyer community expanding –

Europe, Asia

Corum Group Presentation ■ 10

Private Equity – Credit Impact

 Deal volumes by PE down dramatically from 1H07

 Funding issues slow deal closings

 Uncommitted funds still high – $200+ Billion

 Pressure to invest strong

 Many PE have broad technology portfolios to build on – leading to PE-backed

strategic acquisitions by portfolio companies

 Sovereign wealth role in supporting large tech investors and banks

 Most tech lenders not impacted by mortgage mess

Even with the slowdown, 2008 is poised for another stellar year.

Corum Group Presentation ■ 11

Strategic Buyers Still Very Active

Fill void left by private equity

 Not impacted by credit

 Strong cash reserves

 Confident in stock market 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

Corum Group Presentation ■ 12

Buyer Activity High

Current Examples

Sector Interested Parties

Wireless 14
Compliance 13
Enterprise Infrastructure 12
Storage 12
Supply Chain 12
Visualization 11

Interested parties range from billion dollar household names to

companies never heard of

Corum Group Presentation ■ 13

Interest Translating into Deals

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Market Insights

2International Activity & Valuations

3Sector Analysis


Corum Group Presentation ■ 15

Global M&A Activity

 Cross-border transaction
levels remain strong

 Cross-border M&A activity

contributed to 47% of the
announced deals for 2007

 Europe and Asia both set

records for deal volume in

 U.S. sellers continue to look overseas for buyers

 Weak dollar attracting non-U.S. buyers

Corum Group Presentation ■ 16

International Scope

 An increasing number of buyers are not in your backyard

 Emerging countries remain active buyers
 Need to look at international companies as both competitors and potential acquirers

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Corum Transactions 2007

Provider of payment
Leading MRP and process
processing software and
automation vendor for the
glass industry.

Purepay – U.S.
Glaston – Finland
Creditron – Canada
Albat+ Wirsam – Germany

Leading provider of event- Developer of 3D digital

driven business application designs in the building, plant
automation and batch and marine markets
integration technologies

UC4 – Austria backed by Autodesk – U.S.

Carlyle – U.K. NavisWorks – U.K.
AppWorx – U.S.

Value-added distributor of voice,

Provider of estimating
data and converged communications
and earth measuring
software for contractors

Datatec – South Africa

Maxwell – U.S.
on behalf of Westcon – U.S.
Quest – U.S.
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Corum Transactions 2007

Electronic invoicing and

legal spend management IT services provider
solutions to government and
commercial organizations

DataCert – U.S. TechTeam – U.S.

CorpraSoft – U.S. RL Phillips – U.S.

Networking and lobby

Human capital management
services for game
publishers &
StepStone − Norway
Activision – U.S.
ExecuTRACK − Germany
DemonWare − Ireland

HR information systems for Provider of applications

middle market enterprises support maintenance
services (ASM)
BPO – U.S. Sierra Systems – Canada
HR Microsystems – U.S. RIS – Canada

Corum Group Presentation ■ 19

International Private Equity

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International Strategic Buyers

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International Buyers Remain Active

Need to Look Internationally

International Buyer U.S. Seller

Vivendi Activision
Nokia Navteq, Enpocket, Avvenu
Grisoft Exploit Prevention Labs
nCipher NeoScale Systems
Philips Visicu
Cognos Applix, Celequest
Wipro Infocrossing
Trend Micro Provilla
Fast Search & Transfer RetrievalWare, AgentArts
SAP Yasu Technologies, OutlookSoft,
Pilot Software

Corum Group Presentation ■ 22

Global Marketplace

Almost 60% of Corum’s recent transactions are cross-border



A trend which is holding steady and one seen throughout the industry

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Looking Back – Valuation Multiples

M&A Transaction Multiples – Software Industry

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Public Valuation Multiples
Sector Q4:06 Q1:07 Q2:07 Q3:07 Q4:07 Y on Y
Digital Media 2.59 x 1.92 x 2.07 x 2.12 x 1.61 x

Enterprise Applications 4.43 x 3.87 x 3.98 x 4.14 x 3.67 x

Business Intelligence 3.03 x 3.13 x 3.25 x 2.98 x 4.12 x

Enterprise Content Management 2.15 x 2.07 x 2.37 x 2.40 x 2.08 x

Supply Chain Management 1.89 x 2.10 x 2.29 x 2.23 x 2.25 x

Enterprise Infrastructure 2.77 x 2.86 x 2.88 x 2.51 x 3.04 x

Legacy Extension / SOA 1.70 x 2.18 x 2.56 x 2.47 x 2.42 x

Software Development Tools 1.71 x 2.00 x 2.22 x 1.66 x 1.83 x

Storage 2.98 x 3.68 x 3.29 x 2.68 x 2.49 x

Gaming 2.47 x 2.54 x 2.24 x 2.20 x 1.75 x

TTM EV/S Multiples Internet Infrastructure 3.63 x 3.83 x 3.91 x 4.60 x 4.04x

Internet Pure Play 3.78 x 3.41 x 3.23 x 2.99 x 2.93 x

Increased IT Services 0.80 x 0.80 x 0.89 x 0.96 x 0.83 x

Security 3.36 x 3.15 x 3.69 x 3.43 x 3.62x

Decreased Wireless 2.34 x 1.46 x 1.75 x 1.55 x 0.99x

Vert Market - Energy & Environment N/A N/A N/A 4.94 x 4.46 x
N/A Vert Market - Engineering 3.06 x 3.40 x 3.29 x 3.73 x 2.73x

Vert Market - Financial Services 3.17 x 3.28 x 3.12 x 3.05 x 2.73 x

Vert Market - Government 1.13 x 1.16 x 1.15 x 1.21 x 1.24 x
Vert Market - Healthcare 2.36 x 2.28 x 2.53 x 3.16 x 2.62 x

Vert Market - Other 2.02 x 1.19 x 2.71 x 2.81 x 2.14 x

Vert Market - Telecom 2.10 x 1.33 x 1.52 x 1.50 x 1.44 x
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Sector Consolidation & Evolution

Legacy Extension / EAI − Past and Present

Past Present:
Focus: Legacy extension, application Focus: Software Oriented Architecture,
integration, mainframe connectivity Web services

Players: Players:
 Attachmate  Attachmate
 Candle  Candle
 Iona  Iona
 Jacada  Jacada
 NetManage  NetManage
 Seagull Software  RocketSoftware
 SeeBeyond  Seagull Software
 Tarantella  SeeBeyond
 Tibco  Software AG
 Vitra  Tarantella
 WRQ  Tibco
EV/S Multiple Q2:05 − 1.40 x  Webmethods
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EV/S Multiple Q4:07 − 2.42 x

Market Insights

2International Activity & Valuations

3Sector Analysis


Corum Group Presentation ■ 27

Software and IT M&A Activity

Number of Transactions by Sector

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Sectors to Watch – Trending Up

Positive momentum in sector DEAL VOLUME underscores current

interest and viability of space.

Digial Media
Business Intelligence
Supply Chain Management
Internet Pure Plays
Financial Services











Corum Group Presentation ■ 29
Sectors to Watch – Trending Down

Deals are happening in these sectors, but slowing –

 Buyers are digesting previous acquisitions
 Sectors are maturing
 Decrease in the number of ‘material’ acquisition targets
 Broaden exposure and sector presence

Enterprise Applications
Internet Infrastructure
IT Services











Q4:07 Corum Group Presentation ■ 30

Top Buyers 2007

Active Private Equity Firms Strategic Buyers

Company # of Deals
PE Firm (partial list)
Google 12
Kohlberg Kravis Roberts & Co.
Microsoft 11
Carlyle Group
Oracle 10
Francisco Partners Cisco 9

Platinum Equity IBM 9

HP 7
Thoma Cressy Bravo
Nuance 7
Golden Gate Capital Sungard 7
Silver Lake Partners Accenture 6
Dell 6
Apax Partners
Yahoo! 6
Autodesk 5
170+ buyers with 2-4 transactions BT Group 5
CDC Software 5
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Buyer Profile

2007 Trends
 Active international buyer communities
 U.K., France, Germany and the Nordics

 Active North American buyer communities

 California, New York, Massachusetts, Ontario

 Increased presence of buyers from secondary markets

 Approx 63% of the deals tracked were all cash

 Remaining 37% were a mix of cash, stock, debt and earnout

 Strategic buyers more active

 PE-backed portfolio companies more active

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Transaction Highlights – Largest

Buyer Seller Value (Millions $) Sector

Vivendi Activision $18,900.00 Gaming

Nokia NAVTEQ Corporation $8,100.00 Wireless

SAP AG Business Objects $6,800.00 Business Intelligence

IBM Cognos Incorporated $5,000.00 Business Intelligence

Kohlberg Kravis NorthGate Information $1,190.00 Enterprise Applications

Roberts Solutions plc

 Appetite for mega deals has slowed
 Convergence and consolidation driving forces
 Stronger presence from the strategic community
 Prevalent international mix

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Transaction Highlights – Private Equity

Buyer Seller Value (Millions $) Sector

Kohlberg Kravis NorthGate Information $1,190.00 Enterprise Applications

Roberts Solutions plc
Platinum Equity, LLC Covad Communications $304.00 Telecom

Silver Lake Partners Mobile Messenger Undisclosed Wireless

Accel-KKR LLC iTradeNetwork Undisclosed Vertical Market

Genstar Capital TravelClick Undisclosed Vertical Market

 Current debt market has slowed pure acquisitions
 PE portfolios picking up the slack
 Fundraising at record highs
 Strong focus on technology
 PE firms looking at smaller opportunities, which may not require leverage

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Transaction Highlights – Strategic

Buyer Seller Value (Millions $) Sector

Macrovision Gemstar-TV Guide $2,800.00 Digital Media

McAfee, Inc. SafeBoot $350.00 Security

Hypercom Thales SA $120.00 Financial Services

Kronos, Inc. Deploy Solutions, Inc. Undisclosed Enterprise Applications

Dell Inc. Everdream Corporation Undisclosed Enterprise Infrastructure

 Deals have to make strategic sense
 Willing to pay higher valuations, for the right deal
 Product expansion through complementary technology acquisitions
 Market convergence

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Transaction Highlights – International

Buyer Seller Value (Millions $) Sector

Dolby Laboratories, Coding Technologies $250.00 Wireless/Internet

Inc. GmbH
Parametric Technology CoCreate Software $250.00 Engineering
Software AG Jacada $26.00 Legacy Modernization

Ness Technologies FMC Consulting and Undisclosed IT Services

Securitas Systems Installerende Partners Undisclosed Security

 Global expansion and local domain expertise
 Desire to enter U.S. markets
 Sector consolidation

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Looking Forward

Sectors and Sub-sectors to Watch

 Enterprise Applications  Security

• HCM  IT Services
• BI  Vertical Markets
 Enterprise Infrastructure • Geospatial Technologies
• Legacy Extension / SOA

Revenue Model
License revenues are projected to slow in 2008, thus recurring revenue models
will be in high demand

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Corum Q4 Briefing

Q4 Report Highlights
 Technology market overview:
Record Year
 Strategic buyer spotlight:
SAGE Group
 Private equity buyer spotlight:
Carlyle Group
 Valuation data
 International perspective on M&A
 In-depth sector coverage

Corum Group Presentation ■ 38


1Market Insights

2International Activity & Valuations

3Sector Analysis


Corum Group Presentation ■ 39

Contact Information

Corum Group Ltd.

Ward Carter, President

Ryan Blakely, VP Research

10500 NE 8th Street, Suite 1500 Corum Group International S.à.r.l.

Bellevue, WA 98004 Miro Parizek, Managing Director

+1 425-455-8281 Beim Paradeplatz

Basteiplatz 7
CH-8001 Zurich

+41 44 251 82 65

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