M&A Year-End Review and 2008 Forecast

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
www.corumgroup.com
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

Agenda
1Market Insights
2International Activity & Valuations
3Sector Analysis
4Discussion

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”
Moneyextra.com 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

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

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

Public Markets – Reaching New Heights, then Oops
Dow Jones NASDAQ AIM S&P

M&A is the Primary Source of Liquidity
In Dollar Volume – U.S. dollar volume all industries
Source: Dealogic, IPO Central

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

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.

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

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

Interest Translating into Deals

Agenda
1
Market Insights
3Sector Analysis
4Discussion

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
2007
U.S. sellers continue to look overseas for buyers
Weak dollar attracting non-U.S. buyers

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

Corum Transactions 2007
Provider of payment
Leading MRP and process
processing software and
automation vendor for the
service
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
solutions
software for contractors
Datatec – South Africa

Maxwell – U.S.
on behalf of Westcon – U.S.
Quest – U.S.
CRANE – U.K.
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
solutions
publishers &
developers
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

International Private Equity

International Strategic Buyers

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

Global Marketplace
Almost 60% of Corum’s recent transactions are cross-border
Cross-border
58%
Intra-country
42%
A trend which is holding steady and one seen throughout the industry

Looking Back – Valuation Multiples
M&A Transaction Multiples – Software Industry

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
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
BEA BEA
Candle Candle
Iona Iona
Jacada Jacada
NEON NEON
NetManage NetManage
Seagull Software RocketSoftware
SeeBeyond Seagull Software
Tarantella SeeBeyond
Tibco Software AG
Vitra Tarantella
WRQ Tibco
Vitra
EV/S Multiple Q2:05 − 1.40 x Webmethods
WRQ
EV/S Multiple Q4:07 − 2.42 x
Agenda
1
Market Insights
3Sector Analysis
4Discussion

Software and IT M&A Activity
Number of Transactions by Sector

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
Security
Wireless
Financial Services
Government
Healthcare
Q1:05
Q2:05
Q3:05
Q4:05
Q1:06
Q2:06
Q3:06
Q4:06
Q1:07
Q2:07
Q3:07
Q4:07
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
Storage
Gaming
Internet Infrastructure
IT Services
Q1:05
Q2:05
Q3:05
Q4:05
Q1:06
Q2:06
Q3:06
Q4:06
Q1:07
Q2:07
Q3:07
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
SAP 6
Yahoo! 6
AOL 5
Autodesk 5
170+ buyers with 2-4 transactions BT Group 5
CDC Software 5
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

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

Transaction Highlights – Private Equity
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

(Sumeru)
Accel-KKR LLC iTradeNetwork Undisclosed Vertical Market
Genstar Capital TravelClick Undisclosed Vertical Market
Observations
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

Transaction Highlights – Strategic
Macrovision Gemstar-TV Guide $2,800.00 Digital Media

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

Transaction Highlights – International
Dolby Laboratories, Coding Technologies $250.00 Wireless/Internet

Inc. GmbH
Parametric Technology CoCreate Software $250.00 Engineering
Corporation
Software AG Jacada $26.00 Legacy Modernization
Ness Technologies FMC Consulting and Undisclosed IT Services

Informatics
Securitas Systems Installerende Partners Undisclosed Security
Observations
Global expansion and local domain expertise
Desire to enter U.S. markets
Sector consolidation

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

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

Agenda
1Market Insights
3Sector Analysis
4Discussion

Contact Information
Corum Group Ltd.

Ward Carter, President
wardc@corumgroup.com
Ryan Blakely, VP Research

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

Bellevue, WA 98004 Miro Parizek, Managing Director
USA mirop@corumgroup.com
+1 425-455-8281 Beim Paradeplatz

Basteiplatz 7
CH-8001 Zurich
Switzerland
+41 44 251 82 65
www.corumgroup.com

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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

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

Corum’s information is drawn from

The last 90 days

Corum Group Presentation ■ 3

2International Activity & Valuations

Corum Group Presentation ■ 4

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

Corum Group Presentation ■ 5

Credit crunch – tip of the iceberg?

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

Corum Group Presentation ■ 6

Dealmakers optimistic, but less bullish than six months ago

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

Dow Jones NASDAQ AIM S&P

Corum Group Presentation ■ 8

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

Source: Dealogic, IPO Central

Broad Market Technology Market

Consolidation continues across most

Global buyer community expanding –

Corum Group Presentation ■ 10

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

Sovereign wealth role in supporting large tech investors and banks

Most tech lenders not impacted by mortgage mess

Corum Group Presentation ■ 11

Fill void left by private equity

Strong cash reserves

Confident in stock market outlook

Actively looking for strategic investments

Strength of non-U.S. buyers (dollar devaluation / public multiples)

Converging markets / new models spur M&A

Corum Group Presentation ■ 12

Sector Interested Parties

Interested parties range from billion dollar household names to

Corum Group Presentation ■ 13

Corum Group Presentation ■ 14

2International Activity & Valuations

Corum Group Presentation ■ 15

Cross-border M&A activity

Europe and Asia both set

U.S. sellers continue to look overseas for buyers

Weak dollar attracting non-U.S. buyers

Corum Group Presentation ■ 16

M&A Year-End Review and 2008 Forecast

M&A Year-End Review and 2008 Forecast