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M&A Flash Report – Nov. 2009


Software and IT Industry Market Update

Thursday, November 5, 2009


10:00 am PT

www.corumgroup.com
Monthly M&A Flash Report

Bruce Milne
CEO Mark Reed
Corum Group Ltd. Executive Vice President
Corum Group Ltd.

Bruce Milne, CEO and founder of Corum, has overseen more M&A transactions than anyone in the world
over the past 25 years, generating over $6 Billion in wealth for clients in 24 countries.

He has founded or owned four software companies, including AMI, the world’s largest vertical market
software firm, and was a founding investor in some of the most innovative firms in their field, including
Dougan Milne
Blue Coat, Bright Star and Sabaki. Director of Research
Corum Group Ltd.
A recognized industry expert, he has served as a personal advisor to Bill Gates on operating systems,
Apple on the development of the Mac, and as one of top 10 industry advisors to IBM. He has served on
the board of Washington Technology Center at the University of Washington, and is the founder of the
WTIA, the nation’s leading regional technology trade association.

Outside the U.S. he worked with the Canadian government to found SoftWorld, and he was recently
chosen as one of the 200 most influential individuals in the IT community in Europe. He is also the only
juror from North America for the Tornado 100 Awards in Europe’s. Charles Rim
Corporate Developer
A Deans List graduate in International Business from the UW, and a graduate “With Distinction” from Google
Harvard Business School, Mr. Milne has written three book, including “Power Planning, How To Structure
Your Software Company For Success”.

>> For today’s presentation or more information, contact Pat Sultan


(pats@corumgroup.com, +1 425-455-8281 ext. 248)

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Agenda

 Overview of Current Market

 Market and Valuation Analysis

 Charles Rim - Google

 Closing Comments - Q&A

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World Overview

 U.K. Services Index Rises to Highest in Two Years


 Asia to Grow More Than Forecast, Adding Asset-
Bubble Risk, World Bank Says
 U.K. Consumer Confidence Holds at 1 ½-Year High
on House Price Recovery
 Europe Manufacturing, Services Industries Expand
for Ninth Straight Month
 Carlsberg Cuts 2009 Sales Forecast as Russia
Contracts More Than Expected

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World Overview

 European Producer Prices Drop for Ninth Month as


Energy Costs Plummet 17%
 Gold Extends Record High on India Purchase
 Nissan Returns to Quarterly Profit on China Sales

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U.S. Overview

 Time Warner Raises Annual Forecast, Reports Profit


that Exceeds Estimates
 Service Industries in U.S. Probably Expanded as
Economic Recovery Spread
 Dollar Drop Continues
 Retailers Optimistic About October Sales
 Ford has over $1Billion profit for quarter
 “Cash for Clunkers” Program was Almost Half of the
Whole GDP Gain

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Financial Industry

 Ministers Points to US/Europe Currency ‘Collapse’


 UBS Rocked by Fresh Losses
 U.K. TO Inject £37bn into Lloyds and RBS
 The World Bank and IMF are raising concerns that
efforts by governments and central banks to stoke a
recovery will create asset bubbles in real estate,
stock and currency.
 For CIT Customers, An Uncertain Future Looms

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Financial Industry

 FHA Digging Out After Loans Sour


 Fed Keeps Key Rate at Record Low
 VIX Volatility Gauge Soared 24%

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Don’t Forget Unemployment

 9.8 million workers are collecting unemployment.


 Another 3.8 million are collecting emergency
unemployment benefits (a reference to unemployed
people who have been out of work for more than 26
weeks).
 5.2 million homeowners who are no longer paying
their mortgages and contracting income.
 Income is still contracting rapidly with wages and
salaries off 4% to 5% year over year.

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Actions of the Titans

 Warren Buffet made the biggest bet of his


career, agreeing to buy Burlington Northern in
a $26.3 billion deal that reflects his long-term
optimism about the U.S. economy.
 Wilbur Ross Predicts Commercial Real Estate
“Crash”

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Recent Transactions Closed

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Recent Transactions Closed

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Firms in Letter Of Intent (LOI)

 Vertical market – Financial Services


 Mobile search applications
 Vertical market – Healthcare (SaaS)
 Network security solutions
 IT Services
 Mobile messaging solutions

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Current Offers

 Network management solutions


 Vertical market - Wholesale Distribution
 Application development tools
 Enterprise Content Management
 CRM
 Vertical market – Insurance
 Enterprise Application Integration

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Market Valuation Analysis

Dougan Milne
Director of Research
Corum Group Ltd.

Dougan is the head of Corum’s research team serving as the Director of Research. During
his time with Corum, Dougan spent three years working with Corum's international group
headquartered in Zürich, Switzerland. Prior to joining Corum's team in 2005, Dougan spent
three years working in the banking industry with Bank of America, and Citigroup's Private
Wealth business unit. Before entering finance and investment banking, Dougan founded the
successful garment distribution business, Billions Apparel and the advertising firm, Modo
Marketing. Dougan has a Bachelors degree in Business Economics from the University of
San Diego.

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Public Markets

Nasdaq S&P Tech Dow


120.00

110.00

100.00

90.00

80.00

70.00

60.00

50.00

40.00
Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09

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M&A Activity – September

Number of Software and IT M&A Transactions

286

225

311
October
329

2005

2004

0 50 100 150 200 250 300 350

2009 2008 2007 2006 2005 2004

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Corum Index – M&A Statistics

Oct-08 Oct-09
# of Transactions 254 286
# of Mega Deals >$1B 3 4
Largest Deal $1,000 $3,000
Average Deal Value $235 $230
Median Seller Revenue $30 $63
# VC backed Exits 19 36
% Terms Undisclosed 61% 72%
All Cash (announced) 53% 46%
% Targets Public 18% 18%
% Buyers Public 51% 46%

$ values in millions

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Horizontal Application Software Market

Public Valuations Deal Spotlight:


Sector: PLM
Target: IBM – PLM Software Assets
Buyer: Dassault Systèmes
Date: October 2009
Transaction Value: $600 million
Structure: Cash
Horizontal
Application Comments:
Software  Market share
 Technology
Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09
 Expanded product portfolio
EV/EBITDA 5.85 x 6.82 x 9.23 x 9.39 x 9.99 x 11.06 x 11.06 x 12.67 x 12.26 x
EV/S 1.12 x 1.12 x 1.16 x 1.35 x 1.50 x 1.58 x 1.93 x 2.41 x 2.21 x

Corum Group Presentation ■ 19


Vertical Application Software Market

Public Valuations Deal Spotlight:


Sector: Insurance
Target: Risk Management Solutions
– Weather derivatives software
franchise
Buyer: MDA Federal
Date: October 2009
Vertical Transaction Value: n/a
Application
Software Comments:
 Gains weather-related risk tech
 Expands product portfolio
 Client base

Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09


EV/EBITDA 6.19 x 6.53 x 7.26 x 7.99 x 8.17 x 8.91 x 9.01 x 9.32 x 8.42 x
EV/S 1.01 x 1.14 x 1.31 x 1.40 x 1.51 x 1.51 x 1.66 x 1.80 x 1.57 x

Corum Group Presentation ■ 20


Consumer Application Software Market

Public Valuations Deal Spotlight:


Sector: Consumer Health
Target: Vasectomy.com,
HealthNews.org,
BusinessFinance.com,
TheNewParentGuide.com
Buyer: Internet Brands
Consumer Date: September 2009
Application Transaction Value: $6.7m
Software Structure: unknown

Comments:
 Several online consumer sites
Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09
 Broadened portfolio and customer
base
EV/EBITDA 2.40 x 2.74 x 3.81 x 2.83 x 4.47 x 4.57 x 4.27 x 5.88 x 5.23 x
 Now operating in seven
EV/S 0.58 x 0.64 x 0.69 x 0.50 x 0.53 x 0.53 x 0.59 x 0.83 x 0.60 x
high-interest consumer categories

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Infrastructure Market

Public Valuations Deal Spotlight:


Sector: Virtualization
Target: Gresham Enterprise Storage
- Storage Director Business
Buyer: Tributary Systems
Date: October 2009
Transaction Value: n/a
Infrastructure Structure: n/a
Software
Comments:
 Complements product line
 Includes offering to IBM, Windows,
Linux, Unix users

Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09


EV/EBITDA 6.32 x 6.98 x 8.46 x 8.29 x 8.74 x 9.59 x 10.92 x 10.46 x 10.81 x
EV/S 1.31 x 1.43 x 1.55 x 1.52 x 1.72 x 1.95 x 2.02 x 2.14 x 2.20 x

Corum Group Presentation ■ 22


Internet Market

Public Valuations Deal Spotlight:


Sector: e-Commerce
Target: Retail Convergence –
Ru La La, SmartBargains.com
Buyer: GSI Commerce
Date: October 2009
Transaction Value: $180 million
Seller’s Revenue: $134.6 million
Internet
Transaction Multiple: 1.3x
Structure: $90 cash, $90 stock
+ additional earnout

Comments:
 Multi-interest consumer strategy
Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09
 Market leading brands
EV/EBITDA 6.05 x 7.54 x 9.80 x 11.78 x 11.81 x 13.32 x 13.02 x 15.80 x 11.81 x  Interactive marketing abilities
EV/S 1.36 x 1.60 x 2.11 x 2.26 x 2.30 x 2.48 x 2.60 x 2.70 x 2.19 x

Corum Group Presentation ■ 23


IT Services Market

Public Valuations Deal Spotlight:


Sector: IT Services
Target: Bearing Point –
Chinese Services Division
Buyer: Dell/Perot
Date: October 2009
Transaction Value: N/A
IT Services
Comments:
 Geographic expansion
 Off-shoring
 Domain expertise

Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09


EV/EBITDA 5.27 x 5.32 x 5.76 x 5.51 x 5.24 x 5.56 x 5.67 x 6.66 x 6.10 x
EV/S 0.55 x 0.56 x 0.60 x 0.61 x 0.63 x 0.68 x 0.68 x 0.73 x 0.73 x

Corum Group Presentation ■ 24


Asset Sales

 Why Now?
 Great Timing
 Who’s In?
 Everyone: Small – Large firms
 What For?
 Cash Cow / Discontinued Tech.
 Focus / Re-focus
 Streamlining / Fat Cutting
 Cash & Growth
 Prepare for Exit

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The Google Perspective

Charles Rim
Corporate Development
Google

Charles Rim is currently Principal in the Corporate Development Team at Google, Inc.
heading Asia coverage. CorpDev is responsible for all forms of strategic investments and
acquisitions at Google. Previously, Mr. Rim was a Director at Yahoo!Korea in charge of
Strategy& Corporate Development, and prior to that stint was the VP/CFO of Korea Thrunet
(formerly NASDAQ-listed, now merged with Hanaro Telecom), Korea's first broadband
carrier.

In addition to his corporate career in finance and investments, Mr. Rim was an investment
banker briefly with Citigroup and with Credit Agricole (W.I.Carr Securities) in Asia, with
postings in HK, Jakarta and Singapore. As an investment banker, the main focus of
activities was in M&A, IPO advisory and equity capital markets financing. Previous to his
banking career, Mr. Rim was a practicing attorney (again, focused on securities and M&A)
both in the USA and Korea.

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London – November 17
Partial Speaker List

November 17, London – info@worldfinancialsymposiums.com

Jenny Rosberg Frank Boenke Andrew Tsao Pelle Hjortblad Kristof de Spiegeleer
NASDAQ Wellington Partners Silicon Valley Bank ProjectPlace SUN (Q-Layer)

Ashley Ward Anil Hansjee Bernard Dalle Mike Peplow Gustavo Garcia
European Leadership Google Index Ventures Banctec BuyVIP
Programme

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www.worldfinancialsymposiums.com
Growth and Exit Strategies
Staging for Recovery
The Future of M&A, VC, Private Equity and Public Offerings in the New Tech Landscape

November 17, 2009  London


December 15, 2009  New York
Attend this conference to learn about:
 Raising capital in the current environment
 The new rules of global tech M&A
 The role of private equity in a credit-starved market
 The IPO window
 Creative transaction structures
 Finding value and opportunity in the cloud
 Acquisition multiples, VC tactics and more
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Upcoming Corum Events

November 3: Houston – SUSO December 15: New York City – WFS


November 5: Flash Webinar (Int’l) January 7: Flash Webinar – (Int’l)
November 10: Flash Webinar (France) January 12: Toronto – MB & SUSO
November 11: Flash Webinar (DACH) January 14: Flash Webinar (France)
November 17: London – WFS January 14: Ottawa – MB
November 18: Ft. Lauderdale – MB January 15: Montreal – MB
November 19: Tampa – MB January 19: Calgary – MB
December 3: Flash Webinar – (Int’l) January 21: Flash Webinar – (Nordic)
December 8: London – SUSO January 25-27:Miami – Progress Conference
December 10: Flash Webinar (Nordic) January 28: Flash Webinar (DACH)

Merge Briefing (MB)


Selling Up Selling Out (SUSO)
World Financial Symposium (WFS)
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Contact Information

Corum Group Ltd.

Bruce Milne, CEO


brucem@corumgroup.com

Dougan Milne, Director Research


douganm@corumgroup.com
Corum Group International S.à.r.l.
10500 NE 8th Street, Suite 1500
Beim Paradeplatz
Bellevue, WA 98004
Basteiplatz 7
USA
8001 Zürich
Switzerland
+1 425-455-8281
+41 44 251 82 65

Research and Conferences:


www.corumgroup.com

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