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Q3 2007 Software M&A Update

October 17, 2007
Middle Market Software M&A Specialists

Corum’s information is drawn from

 Global M&A Engagements
 Research in the U.S. and Europe
 Newsletter feedback
 Education and activities

The last 60 days

 Selling Up Selling Out conference series
Boston, Houston, Philadelphia, Toronto, Ottawa, Buenos Aires, Helsinki, Prague
 Merge Briefing
 Software Business Conference – Santa Clara
 Banff Venture Forum – Banff, Alberta
 Security CEO Roundtable
 Long Island Software CEO Roundtable
 World Financial Symposiums – October 30 in London

Corum Group Presentation ■ 2


Market Insights

2International Activity & Valuations

3Sector Analysis


Corum Group Presentation ■ 3

Headlines Tell the Story

“Wall Street Beat: M&A, VC Funding Stay “M&A – The Best Investment Game
Hot in Town”
InfoWorld, September 2007 UK, May 2007

“Dry-Up in Debt Won’t Deter Tech “Series of small tech IPOs defy
Deals” market turmoil”
Barron’s, September 2007 MSNBC, August 2007

“Dollar Declines on its Rivals” “Market Pressures Test Resilience

Wall Street Journal, September 2007 of Buyout Boom”
Wall Street Journal, June 2007

“Fear the Roller Coaster? Embrace it”

Wall Street Journal, September 2007

Corum Group Presentation ■ 4

Current Market is Mixed

 Credit crunch

 High oil prices / threat of inflation

 Fed actions to provide liquidity

 Demise of the dollar

 Some earnings reports disappoint

 First utterances of the “R word”

 Slight softening in software peer group valuations

But, M&A activity levels for 2007 to set record highs

Corum Group Presentation ■ 5

Public Markets – Reaching New Heights

Dow Jones NASDAQ S&P AIM Stockholm

Corum Group Presentation ■ 6

M&A is the Primary Source of Liquidity

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

Source: Dealogic, IPO Central

Corum Group Presentation ■ 7
Current M&A Market

Broad Market Technology Market

Q3 2007 M&A up 17% or $884 Q3 2007 – $52 billion, a significant

billion worldwide drop from Q2’s $255 billion total

Private equity firms remain active,

YTD M&A worldwide to $3.38 trillion although debt freeze has slowed
(all industries) pace

2007 maintaining momentum Strategic buyers very active

although August and
September have slowed Consolidation continues across
most sectors

Companies of all sizes continue to

be aggressive buyers

Global buyer community expanding

– Eastern Europe, Asia

Corum Group Presentation ■ 8

Private Equity Resolving Credit Issues

 Backlog of deals to fund

 PE not involved in many smaller software deals

 With or without debt, PE still sitting on 200+B in uncommitted


 Current fundraising efforts on track to set new record

 Pressure – Need to invest or return capital

 New investments and add-ons

 Sovereign wealth funds will provide even more cash

Corum Group Presentation ■ 9

Strategic Buyers Still Very Active

Fill void left by private equity

 Not impacted by credit

 Strong cash reserves

 Confident with strong stock market and 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 ■ 10

Missing a Market

History has taught us…

 Many sellers missed 1999-2000 market

 M&A market evaporated – for many never returned

 For others, took until 2004-2005 to recover

 Technology evolved – what was hot was now not

 New competitors appeared

 Things change – and opportunities lost

 Current level of seller activity very high

Corum Group Presentation ■ 11

Buyer Activity High

Current Examples

Sector Interested Parties

Storage Management 17
Entertainment & Multimedia 15
EAI 14
Telecom 11
Knowledge Management 9

Interested parties range from billion dollar household names to

companies never heard of.

Corum Group Presentation ■ 12

Interest Translating into Deals

LOIs and Offers

 Vertical market

 IT services (2)

 Graphic modeling

 User interface technology

 Business Process Outsourcing

Corum Group Presentation ■ 13


Market Insights

2International Activity & Valuations

3Sector Analysis


Corum Group Presentation ■ 14

Global M&A Activity

 Cross-border transaction levels remain strong

 Quarterly activity ahead of U.S. for second straight quarter

 European deal activity up 58% year on year in the EU

 Britain continues to have the most aggressive European buyers, as they are in
nearly a quarter of current deal volume (all industries)

Corum Group Presentation ■ 15

European IPO Market

Emerging and Less Regulated Equity Markets

 Over 50 U.S. companies listed – and increasing, especially London’s AIM

 Approximately 35 foreign companies have voluntarily de-listed from U.S. exchanges

 Listings up in Q3, although funds raised are down

Q3 listing percentage by exchange

Other WSE Athens
Borsa Italiana
7% 3% 3% 1% 40
OMX The number of
technology firms
that have listed
Deutsche Borse London on European
19% exchanges over
the past 6 months


Source: Pricewaterhousecoppers IPO Watch Europe Survey Corum Group Presentation ■ 16

International Private Equity

Private Equity
 PE acquisitions at all time high, leading to some uneasiness about how
U.S. credit issues will affect things going forward

 Debt financing terms are still quite attractive

 European PE community set to exceed last year’s total of funds raised of

€71.1 billion

 UK led the European PE market with buy-outs increasing by 250% in Q2

Corum Group Presentation ■ 17

Global Marketplace

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

Cross Border

A trend we are seeing throughout the industry

Corum Group Presentation ■ 18

Corum Transactions 2007

Provider of payment Provider of estimating and

processing software earth measuring software
and service for contractors

Purepay – U.S. Glaston – Finland

Creditron – Canada Albat+ Wirsam – Germany

Leading provider of event-

driven business application
automation and batch Developer of 3D digital
integration technologies designs in the building,
plant and marine markets

UC4 – Austria backed by

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

Provider of estimating Value-added distributor of voice,

and earth measuring data and converged
software for communications solutions

Datatec – South Africa

Maxwell – U.S. on behalf of Westcon – U.S.
Quest – U.S. CRANE – U.K.
Corum Group Presentation ■ 19
Corum Transactions 2007

IT services provider
Electronic invoicing
to government and
and legal spend
management solutions

DataCert – U.S.
TechTeam – U.S.
CorpraSoft – U.S.
RL Phillips – U.S.

Networking and lobby

services for game
Human capital
publishers &
management solutions

StepStone − Norway
Activision – U.S.
ExecuTRACK − Germany
DemonWare − Ireland

HR information systems
for middle market

BPO – U.S.
HR Microsystems – U.S.
Corum Group Presentation ■ 20
International Buyers Remain Active

Need To Look Internationally

International Buyer U.S. Seller

Software AG WebMethods
UC4 Software AppWorx
SAP AG OutlookSoft Corp
Autonomy ZANTAZ
Norkom Technologies Digital Harbor
Sophos, Inc ENDFORCE, Inc.
Siemens AG UGS Corporation
Cegedim S.A. Dendrite International
WPP Group plc 24/7 Real Media, Inc.
Nokia Corporation Endpocket and Twango

Corum Group Presentation ■ 21

Latin America Spotlight

 A pioneer in the development of sophisticated real-time solutions

 Banking systems and e-government

 More than 10,000 software companies exist in Brazil

 According to ABES and IDC, the IT market in Brazil in 2006 was approximately $16.2 billion

 $3.26 billion in software

 $5.83 billion in services

 Brazil has emerged as a vibrant and globally recognized near-shore outsourcing destination

 Brazil now supports almost 900,000 IT employees (end of 2006), 47% of Latin America’s

 According to AMITI, the IT market was 10.1 billion. USD$ in 2006

 $910m USD in software and

 $2,617 bn. US$ in services

 The market is growing three times faster than the general economy

 Mexico had 429,600 IT professionals, 23% of LAM’s resources, of which 70% in software in 2006

 Due to its proximity to the U.S., Mexico is becoming a preferred near-shore outsourcing destination
Corum Group Presentation ■ 22
Looking Back – Valuation Multiples

M&A Transaction Multiples – Software Industry


P/S Multiple

2.9 3.0 3.11
2.7 2.7
2.6 2.9 2.95
3.00 2.3 2.0 1.6 1.8 2.1 2.3 2.2 2.5
1.5 1.5




















Corum Group Presentation ■ 23
Public Valuation Multiples
Sector Q3:06 Q4:06 Q1:07 Q2:07 Q3:07 Y on Y Q to Q
Digital Media 2.74 x 2.59 x 1.92 x 2.07 x 2.12 x

Enterprise Applications 4.35 x 4.43 x 3.87 x 3.98 x 4.14 x

Business Intelligence 2.87 x 3.03 x 3.13 x 3.25 x 2.98 x

Enterprise Content Management 1.89 x 2.15 x 2.07 x 2.37 x 2.40 x

Supply Chain Management 1.60 x 1.89 x 2.10 x 2.29 x 2.23 x

Enterprise Infrastructure 2.40 x 2.77 x 2.86 x 2.88 x 2.51 x

Legacy Extension / SOA 1.36 x 1.70 x 2.18 x 2.56 x 2.47 x

Software Development Tools 1.88 x 1.71 x 2.00 x 2.22 x 1.66 x

Storage 2.66 x 2.98 x 3.68 x 3.29 x 2.68 x

Gaming 2.25 x 2.47 x 2.54 x 2.24 x 2.20 x

Internet Infrastructure 4.03 x 3.63 x 3.83 x 3.91 x 4.60 x

Internet Pure Play 4.00 x 3.78 x 3.41 x 3.23 x 2.99 x

IT Services 0.84 x 0.80 x 0.80 x 0.89 x 0.96 x
TTM EV/S Multiples
Security 2.94 x 3.36 x 3.15 x 3.69 x 3.43 x
Wireless 2.07 x 2.34 x 1.46 x 1.75 x 1.55 x
Energy & Environment N/A N/A N/A N/A 4.94 x
Vertical Market - Engineering 2.69 x 3.06 x 3.40 x 3.29 x 3.73 x
Vertical Market - Financial Services 3.53 x 3.17 x 3.28 x 3.12 x 3.05 x
Vertical Market - Government 1.24 x 1.13 x 1.16 x 1.15 x 1.21 x
Vertical Market - Healthcare 2.69 x 2.36 x 2.28 x 2.53 x 3.16 x

Vertical Market - Other 1.75 x 2.02 x 1.19 x 2.71 x 2.81 x

Vertical Market - Telecom 2.12 x 2.10 x 1.33 x 1.52 x 1.50 x
Corum Group Presentation ■ 24
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  BEA
 Iona  Candle
 Jacada  Iona
 NEON  Jacada
 NetManage  NEON
 Seagull Software  NetManage
 SeeBeyond  Seagull Software
 Tarantella  SeeBeyond
 Tibco  Software AG
 Vitra  Tarantella
 WRQ  Tibco
EV/S Multiple Q2:05 − 1.15 x  Webmethods

EV/S Multiple Q3:07 − 2.47 x

Corum Group Presentation ■ 25

Market Insights

2International Activity & Valuations

3Sector Analysis


Corum Group Presentation ■ 26

Sectors to Watch – Trending Up

Enterprise Infrastructure
Internet Infrastructure
Internet Pure Plays
IT Services
Financial Services










Positive momentum in sector deal volume underscores current
interest and viability of space.

Corum Group Presentation ■ 27

Sectors to Watch – Trending Down

Enterprise Applications

Enterprise Content Management














Deals are happening in these sectors, but slowing as many
buyers are “digesting” previous acquisitions.

Corum Group Presentation ■ 28

Software and IT M&A Activity

Number of Transactions by Sector

35.00% Q3:06

30.00% Q4:06

Corum Group Presentation ■ 29

Top Buyers YTD 2007

Strategic Buyers Active Private Equity Firms*

Google 11 Bain Capital
Oracle 8 Battery Ventures
Cisco Systems 7 Carlyle Group
Sungard Data Systems 7 Court Square Capital Partners
CDC Software 6 Hellman & Friedman
Microsoft Corporation 6 Kohlberg Kravis Roberts & Co.
IBM 6 Francisco Partners
Bentley Systems 4 MBK Partners
First Data Corporation 4 Thoma Cressey Bravo
Nuance Communications 4 Vector Capital
*Partial List

80+ strategic buyers with 2 or 3 transactions

Corum Group Presentation ■ 30

Q3 Buyer Profile

Private Buyers and Foreign Buyers Remain Active

 56% were private or financial buyers

 Cash was the dominant form of consideration

 Almost 50% of buyers have revenues under $25M

 Acquirers from secondary markets active

Corum Group Presentation ■ 31

Transaction Highlights – Largest

Buyer Seller Value (Millions $) Sector

Fiserv, Inc. Checkfree Corporation $4,400.00 Financial Services

Bain Capital 3Com Corporation $2,200.00 Enterprise Infrastructure

Hewlett-Packard Opsware, Inc. $1,600.00 Enterprise Infrastructure

Royal KPN NV Getronics NV € 766.00 IT Services

Steria Xansa £475.00 IT Services

 Increase scale
 Strategic spending billions
 Market convergence
 Absence of private equity

Corum Group Presentation ■ 32

Transaction Highlights – Private Equity

Buyer Seller Value (Millions $) Sector

Bain Capital 3Com Corporation $2,200.00 Enterprise Infrastructure

MBK Partners Ltd Yayoi Co. $610.00 Enterprise Applications

Thoma Cressey Bravo Hyland Software $265.00 Enterprise Content Management

Amadeus Capital EPiServer AB $23.50 Internet Infrastructure

DC Capital Partners Technology Management Undisclosed Government
Systems and Omen Inc.

 Current debt market has slowed this group
 Fundraising at record highs
 Strong focus on technology
 PE firms looking at smaller opportunities, which may not require leverage
 Substantial prior investment in tech, and many deals are synergistic adding to current portfolio
 Look more like strategic buyers

Corum Group Presentation ■ 33

Transaction Highlights – Strategic

Buyer Seller Value (Millions $) Sector

Cognos Incorporated Applix, Inc. $339.00 Business Intelligence

Concur Technologies H-G Holdings $160.00 Enterprise Applications

Intel Corporation Undisclosed Gaming

LexisNexis Group Juris, Inc. Undisclosed Vertical Market

Facebook, Inc. Parakey Undisclosed Internet Infrastructure

 Have more “breathing room” now that the PE community has slowed
 Willing to pay high valuations, for the right deal
 Product expansion through complementary technology acquisitions
 Market convergence

Corum Group Presentation ■ 34

Transaction Highlights – International

Buyer Seller Value (Millions $) Sector

Autonomy Corporation ZANTAZ, Inc. $375.00 Enterprise Infrastructure

Norkom Technologies Digital Harbour $36.50 Financial Services

Digital River, Inc. Netgiro Systems AB $27.00 Internet Infrastructure

EMC Corporation X-Hive Corporation BV Undisclosed Enterprise Content Management

Thomson S.A. SyncCast Corp Undisclosed Digital Media

 Global expansion
 Desire to enter U.S. markets
 Local domain expertise
 Active international buyer community

Corum Group Presentation ■ 35

Corum Q3 Briefing − Sample

Enterprise Content Management

Public Peer Group (In $U.S. millions – except share prices)

Stock Stock Market Enterprise Trailing Multiple Forward Multiple
Symbol Company Price Value Value P/E EV/EBITDA EV/S P/E EV/S
IWOV Interwoven Inc. $14.23 $620.2 $465.5 203.29 x 21.59 x 2.40 x 24.96 x 2.10 x
OTEX Open Text Corp. $25.97 $1,310.0 $1,500.0 60.40 x 10.83 x 2.52 x 13.05 x 2.11 x
VIGN Vignette Corporation $20.07 $554.4 $383.9 31.36 x 17.51 x 1.94 x 20.07 x 1.86 x
Median Valuation Multiples 60.40 x 17.51 x 2.40 x 20.07 x 2.10 x

Historical Peer Group Valuations:

Enterprise Content Management
3.00 x Market Headlines:
2.40 x
2.50 x “Is Time Finally Ripe for ECM?”
InformationWeek – August 2007
2.00 x
“The Changing Landscape of the ECM Market”
1.50 x ECM Connection – September 2007
1.00 x
“The Data Deluge: The Growth of Unstructured
0.50 x Data”
ComputerWorld Australia – September 2007
0.00 x


Corum Group Presentation ■ 36

Corum’s Q3 Briefing Sample (cont.)
Enterprise Content Management

Corum Group Presentation ■ 37

Looking Forward

Sectors To Watch

 Enterprise Applications

 Internet Infrastructure

 IT Services

 Gaming and Entertainment

 SaaS Opportunities

Corum Group Presentation ■ 38

Contact Information

Corum Group Ltd.

10500 NE 8th Street, Suite 1500

Bellevue, WA 98004

+1 425-455-8281 Corum Group International S.à.r.l

General Guisan – Quai 30

CH-8002 Zurich

+41 44 251 82 65

Corum Group Presentation ■ 39