2011 World Tech M&A Report

2011World Tech M&A Report

www.corumgroup.com

Deal volume, transaction size and valuations for software, IT and related technologies have rebounded. 2011 has started with momentum.

The recovery trend will continue as global financial markets remain strong, IPO’s are up, with cash reserves at record levels. Major strategic acquirers are being pressed to solidify their positions in Cloud, Gaming and Social Networking against Private Equity, which has returned to the market, accounting for many of the largest deals last year. In addition, there are other bidders emerging, including newly minted public companies from the East, as well as many well-funded private firms such as Facebook.

Traditional technologies in Enterprise, Horizontal, Vertical and Infrastructure markets will see continued consolidation. Mobile, Tablets, and Apps, unknown a few years ago, will be a large source of transactions. Of course there are firms that just need to re-invent, or they will fall by the wayside.

The Corum Group Annual World Tech M&A Report follows. It is prepared by Corum’s research staff, and covers the basic drivers of tech M&A including financial markets, leading buyers, cash reserves, and overall M&A metrics in the Corum Index. Notable transactions are detailed, as are trends for 26 market segments in six major categories - Horizontal, Vertical, Consumer, Infrastructure, Internet and IT Service as detailed below.

Introduction

Major Category

Horizontal Application Software

Vertical Application Software

Consumer Application Software

Infrastructure Software

Internet

IT Services and BPO

Business Intelligence (BI) Communications (Horizontal) Content Management (CM) Customer Relationship Management (CRM)

A/E/C (Architecture, Engineering, Construction) Energy and Environment Financial Services

Digital Content

Infrastructure

(No subsectors)

Communications (Infrastructure) Development Tools Legacy / Software Oriented Architecture (SOA) Network ManagementSecurity

Government Healthcare Other Vertical

Video Games

Pure Play

Storage Systems Management Virtualization

Human Resource/Capital (HR and HCM)Supply Chain Management (SCM) Enterprise Resource Planning (ERP) Other Horizontal

Market Segment

Page 1

The technology industry is trading at 30% above its value since 2007, outperforming the overall Dow and Nasdaq as reflected in the market chart. Tech took off in Q2 2010, riding out a market downturn in August, then accelerating through the end of 2010 into 2011.

The Tech Stock Movers table highlights the percentage of price changes in select companies with over $1 billion market capitalization.

Netflix, the largest mover in stock value, has become the preferred streaming content vendor across a wide array of platforms. Netflix now spans beyond PC and mobile to include gaming consoles like Xbox 360 and PS3.

Considering its sector, IT Services, VanceInfo’s move is a surprise. VanceInfo is representative of a new breed of Chinese competitor.

Nokia declined more than 20 percent. The company stood out as a flop among 2010 smartphone competitors, battered down by continued pressure from Apple and Android.

Keep an eye on Microsoft–rumor has it they may put their OS into the new Nokia phone release.

Companies with cash either need to engage in stock buybacks, issue dividends or make acquisitions. Thus, 2011 should be a banner year for M&A with record coffers among the high tech leaders who are also the major buyers.

Microsoft, as seen in the Cash Reserves chart, is sitting on the largest war chest (over $43 billion) - part of which was raised in convertible debt in 2010 when interest rates were low. As Microsoft sat at the bottom of the acquisition leader board for 2010, with a flat stock price, we expect

Markets Up for 2011

Tech Stock Movers

Cash Up

Page 2

them to pick up the pace of acquisitions in 2011. Cisco is a similar scenario.

Google is cash rich and should continue its sizzling pace as the M&A leader. HP’s cash stores were depleted in 2010 due to multiple big deals, including the acquisitions of 3PAR, ArcSight and Palm, but HP should not be counted out.

The technology industry is trading at 30% above its value since 2007, outperforming the overall Dow and Nasdaq as reflected in the market chart. Tech took off in Q2 2010, riding out a market downturn in August, then accelerating through the end of 2010 into 2011.

The Tech Stock Movers table highlights the percentage of price changes in select companies with over $1 billion market capitalization.

Netflix, the largest mover in stock value, has become the preferred streaming content vendor across a wide array of platforms. Netflix now spans beyond PC and mobile to include gaming consoles like Xbox 360 and PS3.

Considering its sector, IT Services, VanceInfo’s move is a surprise. VanceInfo is representative of a new breed of Chinese competitor.

Nokia declined more than 20 percent. The company stood out as a flop among 2010 smartphone competitors, battered down by continued pressure from Apple and Android.

Keep an eye on Microsoft–rumor has it they may put their OS into the new Nokia phone release.

Companies with cash either need to engage in stock buybacks, issue dividends or make acquisitions. Thus, 2011 should be a banner year for M&A with record coffers among the high tech leaders who are also the major buyers.

Microsoft, as seen in the Cash Reserves chart, is sitting on the largest war chest (over $43 billion) - part of which was raised in convertible debt in 2010 when interest rates were low. As Microsoft sat at the bottom of the acquisition leader board for 2010, with a flat stock price, we expect

Markets Up for 2011

Tech Stock Movers

Cash Up

Page 2

them to pick up the pace of acquisitions in 2011. Cisco is a similar scenario.

Google is cash rich and should continue its sizzling pace as the M&A leader. HP’s cash stores were depleted in 2010 due to multiple big deals, including the acquisitions of 3PAR, ArcSight and Palm, but HP should not be counted out.

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

Percentage Change in Markets in 2010

NASDAQ S&P TECH 500 DOW JONES

-0.18%

-2.52%

-4.67%

-8.20%

-14.93%

-15.50%

-17.03%

-20.30%

226.40%

177.49%

153.60%

142.52%

122.30%

119.37%

85.17%

81.31%

56.39%

55.88%

36.31%

Yahoo! Inc.

Google Inc.

Dell Inc.

Microsoft Corporation

Adobe Systems Incorporated

Cisco

Hewlett-Packard Company

Nokia

Netflix

OpenTable Inc

F5 Networks, Inc.

Baidu.com, Inc.

LogMeIn

VMware, Inc.

salesforce.com, inc.

VanceInfo Technologies Inc.

Apple Inc.

NetSuite Inc.

Amazon % Price Change2010 Stock Movement

DEC

NO

V

OC

T

SEP

AUG

JULY

JUN

E

MAY

APR

MA

R

FEB

JAN

Amazon

NetSuite Inc.

Apple Inc.

VanceInfo Technologies Inc.

salesforce.com, Inc.

VMware, Inc.

LogMeIn

Baidu.com, Inc.

F5 Networks, Inc.

OpenTable Inc.

Netflix

Nokia

Hewlett-Packard Company

Cisco

Adobe Systems Incorporated

Microsoft Corporation

Dell Inc.

Google Inc.

Yahoo! Inc.

2010 Stock Movers

2010NASDAQ S&P TECH 500 DOW JONES

Company

MSFTCSCOGOOGAAPLORCLIBMHPQEMCSAPYHOOCASYMC

Year Ago Cash

$29,910$35,000$19,340$24220

$12,620$12,530$13,590

$7,260$2,703$3,880$1,275$2,220

(in millions)

Current Cash

$43,250$38,920$33,380$25,620$23,640$11,100$10,930

$6,650$3,740$2,820$2,540$2,260

%Change

44.6%11.2%72.6%

5.8%87.3%

-11.4%-19.6%

-8.4%38.4%

-27.3%99.2%

1.8%

Cash Reserves

While this list isn’t definitive (CA and EMC are missing), what’s notable is that there are new entrants to the M&A leader board, private firms Facebook, Zynga, and Twitter.

Facebook is comfortable staying private and they are making acquisitions: 11 in 2010, most of which were completed in the latter half of 2010. With the cash they are generating, Facebook started 2011 by immediately making acquisitions. Additionally, watch out for Groupon; with a war chest of $950 million, they may move to consolidate the “mass discount” market in 2011.

IBM had their highest volume year on record with 15 deals, though Google led the pack with a record 26 acquisitions for 2010. Most remarkable for Google–transactions were often small and fairly far-ranging technology. They are continuing this trend into 2011 with three acquisitions in the first month.

On the opposite end of the spectrum, Microsoft has sat on the sidelines with only 2 acquisitions in Q4, the lowest number from them in a single year.

The M&A market returned in 2010 - as seen in this chart, the last 8 years were mapped for both deal volume (vertical bars) and annual deal value (line chart).

With stock prices rising, cash reserves at record levels, and heated global competition, volume and value will continue to trend up in 2011.

Expect Strategic deals to lead the way, with Mega Deals setting the pace due to the resurgence of Private Equity after a hiatus in 2008/09.

Software M&A - 2002-2011

Page 3









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0

500

1000

1500

2000

2500

3000

3500

4000

4500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Deal Volume vs. Total Deal Value

1921

1508

2081

3040

4029

3640

30153008

3212

$83b$62b

$226b

$373b

$457b$432b

$301b

$150b$200b

$225b

3500

Deal Volume Dollar Volume

4500

4000

3500

3000

2500

2000

1500

1000

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Deal Volume

$83b$62b

$226b

$373b

$457b $432b

$301b$150b

$200b$225b

19211508

2081

3040

40293640

3015 30083212

3500

Dollar Volume

26

1511

9 8 86 6

5 5 53 3

2

Top Acquirers: 2010









Page 3

0

500

1000

1500

2000

2500

3000

3500

4000

4500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Total Deal Volume vs. Total Deal Value

1921

1508

2081

3040

4029

3640

30153008

3212

$83b$62b

$226b

$373b

$457b$432b

$301b

$150b$200b

$225b

3500

Deal Volume Dollar Volume

4500

4000

3500

3000

2500

2000

1500

1000

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Deal Volume

$83b$62b

$226b

$373b

$457b $432b

$301b$150b

$200b$225b

19211508

2081

3040

40293640

3015 30083212

3500

Dollar Volume

26

1511

9 8 86 6

5 5 53 3

2

Top Acquirers: 2010

The Annual Corum Index of Tech M&A Metrics shows that we are up in volume, number of deals, and Mega Deals this past year. Mega Deals are important as they lead the market; we refer to them as a “ripple” indicator. When the strategic and private equity giants do $1B+ acquisitions, it sends a clear message to the small and mid-market players that it’s safe to be doing deals and spending money.

Corum divides the tech industry into six broad markets: Horizontal, Vertical, Consumer, Infrastructure, Internet, and IT Services, which are further broken down into 26 sub-sectors. The major groupings are represented by the 6 logos on the left of the chart. Multiples in this report are in median values, not averages.

Note that the most recent numbers include the newly public companies in Asia as they are aggressive global competitors and buyers. With the recent addition of these firms, some of

the charts will show a bump-up due to the higher multiples in the East.

After the trough of the recession in late ‘08/early ‘09, we came back dramatically with EV/S multiples of 2.7x and EV/EBITDA multiples currently trading at a healthy 12.5x. From the bottom in Q1 ’09, both multiples more than doubled, and we expect that they will continue back up in 2011 as they are still short of the peaks registered in 2007.

Corum IndexM&A Metrics

Page 4

The transactions that led the market last year were Intel acquiring McAfee for $7.6B, the acquisition of Sybase by SAP for around $6B, and EMC buying Isilon Systems for around $2.3B.

One of the most important aspects of 2010 was the re-emergence of Private Equity (PE) which had been very

active prior to the recession. Carlyle Group spent $6.5B in telecom infrastructure with acquisitions of CommScope and Syniverse. Other major transactions were SkillSoft, Vertafore, and Novell. We expect PE to be an even bigger factor in 2011 as there is nearly $500 billion in uncommitted funds, not counting sovereign equity.

Q4:08 Q1:09 Q2:09 Q4:09 Q1:10 Q2:10 Q3:10 Q3:11

EV/EBITDA 6.63x 5.99x 8.07x 10.13x 10.55x 9.87x 10.48x 11.48x

EV/S 1.28x 1.08x 1.37x 1.77x 1.77x 1.76x 2.23x 3.23x

Aggregate Growth (six markets)

The Annual Corum Index of Tech M&A Metrics shows that we are up in volume, number of deals, and Mega Deals this past year. Mega Deals are important as they lead the market; we refer to them as a “ripple” indicator. When the strategic and private equity giants do $1B+ acquisitions, it sends a clear message to the small and mid-market players that it’s safe to be doing deals and spending money.

Corum divides the tech industry into six broad markets: Horizontal, Vertical, Consumer, Infrastructure, Internet, and IT Services, which are further broken down into 26 sub-sectors. The major groupings are represented by the 6 logos on the left of the chart. Multiples in this report are in median values, not averages.

Note that the most recent numbers include the newly public companies in Asia as they are aggressive global competitors and buyers. With the recent addition of these firms, some

of the charts will show a bump-up due to the higher multiples in the East.

After the trough of the recession in late ‘08/early ‘09, we came back dramatically with EV/S multiples of 2.7x and EV/EBITDA multiples currently trading at a healthy 12.5x. From the bottom in Q1 ’09, both multiples more than doubled, and we expect that they will continue back up in 2011 as they are still short of the peaks registered in 2007.

Corum IndexM&A Metrics

Page 4

The transactions that led the market last year were Intel acquiring McAfee for $7.6B, the acquisition of Sybase by SAP for around $6B, and EMC buying Isilon Systems for around $2.3B.

One of the most important aspects of 2010 was the re-emergence of Private Equity (PE) which had been very

active prior to the recession. Carlyle Group spent $6.5B in telecom infrastructure with acquisitions of CommScope and Syniverse. Other major transactions were SkillSoft, Vertafore, and Novell. We expect PE to be an even bigger factor in 2011 as there is nearly $500 billion in uncommitted funds, not counting sovereign equity.

2009 2010 Change

# of Transactions 3008 3212 6.8%

# of Mega Deals 32 41 28.1%

Largest Deal $6,400 $7,680 20.0%

% Sub-$100m 24% 19% -20.8%

Private Equity Deals 97 119 22%

Private Equity Value $13,318 $25,793 93%

# VC backed Exits 398 474 19.1%

All Cash (announced) 44% 58%

% Targets were Public 18% 13%

% Public Buyers 47% 51%

Q4:08 Q1:09 Q2:09 Q4:09 Q1:10 Q2:10 Q3:10 Q3:11

EV/EBITDA 6.63x 5.99x 8.07x 10.13x 10.55x 9.87x 10.48x 11.48x

EV/S 1.28x 1.08x 1.37x 1.77x 1.77x 1.76x 2.23x 3.23x

2009 2010 Change

Aggregate Growth (six markets)

The Horizontal Application Software Market is one of the top performers. There are a large number of SaaS companies in this group with subscription, recurring revenue streams, predictable revenue streams, or web-delivered solutions.

At the top is SalesForce.com–they have set the bar and escalated the whole SaaS trend while completely changing the landscape of the CRM space. To that end, they acquired Jigsaw in 2010 as part of their Cloud 2 strategy. On their heels is RightNow who started the year by acquiring Q-Go in the Netherlands.

Recently, the biggest SaaS growth story has been in the broad HR world, especially by SuccessFactors and Taleo. SuccessFactors acquired Inform for its Business Execution Suite, and Taleo bought Learn.com to move into the SaaS learning space. Both firms will be making more acquisitions this year, further challenging the traditional license model companies.

Concur, the enterprise travel expense management solution, is currently the second highest valued pure SaaS company. Concur has been among the deal laggards the last few years, but started 2011 with the acquisition of Tripit–a brilliant strategic move.

This section cannot be reviewed without mentioning SAP. SAP maintains strong multiples and a favorable market position relative to their big stateside competitors. SAP had the second largest tech deal of last year, spending $6.1B on Sybase, adding a complementary unit to their enterprise offering to manage and analyze a broad array of enterprise data, but, more importantly, to provide a mobile outlet for data access and updates in real time.

Moving down the ERP food chain, there are 10 or 12 mid-tier public players. It’s crowded with a lot of vertical differentiation in their product portfolios: Lawson, Epicor, CDC, NetSuite, and QAD among them. We expect to see continued consolidation in this space in 2011, especially as the top-tier players like Microsoft and Oracle have such huge cash reserves.


Page 5

Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-102.23 x 2.49 x 2.69 x 2.94 x 3.07 x 2.99 x 3.37 x11.95 x 10.49 x 9.27 x 10.74 x 11.89 x 12.41 x 17.17 x



Avid Technologies


Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10

EV/EBITDA 11.67 x 10.76 x 11.16 x 12.71 x 12.07 x 11.39 x 11.95 x 10.49 x 9.27 x 10.74 x 11.89 x 12.41 x 17.17 x EV/S 2.41 x 2.48 x 2.42 x 2.11 x 2.24 x 2.12 x 2.23 x 2.49 x 2.69 x 2.94 x 3.07 x 2.99 x 3.37 x


Corum Group Presentation ■ 26

Horizontal Application Software Market

  Informatica Corp.   MicroStrategy Inc.

  Amdocs Ltd.   Nuance Communications

  RightNow Technologies Inc.   Salesforce.com

  Open Text Corp.

  Lawson Software Inc.   Oracle Corp.

  Kenexa Corp.   Taleo Corp.

  Trimble Navigation Ltd.   Concur Technologies Inc.

  SPS Commerce Inc.   Manhattan Associates Inc.

Business Intelligence

EV/S 4.21 x EV/EBITDA 20.39 x

Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other







  Open Text Corp.







Communications


Content Mgmt.


Human Resources


ERP


SCM


CRM


Horizontal Other


In the Vertical Market Software space, the SaaS business model is not quite as prevalent, but we’re starting to see more — it is definitely driving value.

At the bottom of the spectrum is the Government sector, which will continue to hurt due to budget cuts. At the other end, the Healthcare and Energy sectors are outperforming.

One market of note is online learning, particularly in the K-12 space. Blackboard has made a push into collaboration solutions for education with the acquisitions in 2010 of Elluminate and Wimba. Thoma Bravo, the big PE firm, has been pushing the education space hard with their PLATO Learning acquisition to complement their existing portfolio with Excelligence and Porter Chester. In general, we expect to see high-value education deals in 2011 as more of the delivery and infrastructure of education is being built through technology platforms, not just in the


Page 6

U.S. but in Asia with the emergence of India and China into the education space.

Energy and Environment is also on the march, particularly for China as they have been able to take over half the wind power market. Software for power management and smart grid utilization will increase as energy costs rise.

Software is also relevant on the flip side of alternative energies, where we have the old world titans, oil and gas companies, scrambling to get their governance, risk and compliance (GRC) management solutions in order due to legislation resulting from the Deepwater Horizon Incident. We have seen firms like IHS double-down on environmental GRC through acquisitions, picking up both Syntex Management and Atrion International.








Vertical Application Software Market

  Autodesk Inc.   Parametric Technology

  Itron Inc.   Schlumberger Ltd.

  Advent Software Inc.   Fiserv Inc.

  Harris Corp.   Lockheed Martin Corp.

  Cerner Corp.   AllScripts Healthcare Inc.

  BlackBoard Inc.   Rockwell Automation Inc.

A/E/C EV/S 2.48 x EV/EBITDA 17.02 x

Government EV/S 0.65 x EV/EBITDA 5.83 x

Energy & Environment EV/S 3.05 x EV/EBITDA 17.87 x

Financial Services EV/S 2.95 x EV/EBITDA 12.09 x

Vertical Other EV/S 2.33 x EV/EBITDA 11.58 x

Healthcare EV/S 3.05 x EV/EBITDA 15.69 x



























































































































































For Consumer Application Software, Corum included the new breed of public Chinese gaming companies. Gaming companies have been independent of our standard index for awhile, but are now merged into our primary index, mostly in the consumer space. Companies like DangDang, and in the gaming space Changyou, Giant Interactive, and Perfect World, will be of growing importance as China is investing heavily in software and internet technologies to supplement their leadership in manufacturing.

One of those Chinese manufacturing companies, Foxconn, assembles a significant amount of consumer electronics, including the iPhone and iPad for Apple. This has spawned a major new growth sector over the past few years in apps and content. As app stores from Apple, Google, Microsoft, Amazon – and nearly every other consumer vendor – have hit stride, this form of application and content delivery is the de facto standard for end users to purchase tools for productivity, utility and fun.

In 2011, watch for more deals in the app store ecosystem concerning analytics, development, payments and targeting… not to mention, plenty of new apps and games.

Aside from the sale of the apps and games, an increasing part of the value is being derived from the data captured from the users and players. In the light speed growth of casual and social gaming, user data generated from these games is becoming important to the growing social graph phenomenon–some games register over 100 million users online, generating terabytes, even petabytes of user data.

2011 started off strong in gaming following a banner year in 2010. We saw nearly 80 transactions in the gaming space for 2010–the highest volume of any sector for the year. While transaction values are generally small to mid-sized in this space, premiums are being paid for studios that can produce addictive games with the potential for recurring revenue, virtual goods sales, or high availability for ad placement.

What makes the gaming sector increasingly interesting is the global breadth and acceptance of certain games–a factor that has led to a high number of cross-border deals, particularly between the U.S., China and Japan. Expect to see another significant year in this sector for 2011; there is room for consolidation in this quickly evolving market.


Page 7


Public Valuations

Consumer Application Software Market

  Apple Computer Inc.   Adobe Systems Inc.

  Electronic Arts Inc.   Shanda Games Ltd.

Digital Content EV/S 4.02 x EV/EBITDA 13.05 x

Video Games EV/S 2.14 x EV/EBITDA 6.32 x


Public Valuations







Public Valuations







Public Valuations












The idea of data loss prevention and security in the Cloud is being established as a top priority. We saw a long list of deals in 2010, which will continue through 2011 and beyond. Just look at the significance of Google, Facebook, and Twitter, not to mention the rise in the smartphone and mobile industry which, by all accounts, has less security than the aforementioned web companies. Much happened last year, with McAfee being the largest transaction in 2010. VeriSign closed a $1B+ deal when it sold off its identity and authentication business to fellow security giant Symantec. These types of deals will continue as witnessed by Dell’s recent announcement to buy SecureWorks for $500M at a rich 4.4x multiple.

Virtualization has seen rich deals in terms of multiples. VMware had a few $100M+ deals, and Citrix had three


Page 8

add-ons, plus CA had a host of acquisitions with 3Tera for their platform, Nimsoft for their software, along with other integration and security deals to create a complete unit that spans the enterprise and SMB sector.

Virtualized environments have created a changing demand for enterprise infrastructure that can be platform agnostic, or at least capable of running through various environments. Cisco, IBM, and HP have put a big focus on their unified computing capabilities, those private/hybrid Clouds for the enterprise. As many are calling 2011 “The Year of the Cloud”, we expect transactions to continue. Will the BMC–Cisco recently announced platform alliance for their “Integrated Cloud Delivery Platform” lead to something bigger, maybe Cisco buying BMC? Cisco has the cash to do it.


Infrastructure Market

  BroadSoft Inc.   Openwave Systems Inc.

  Compuware Corp.   Progress Software Corp.

  BluePhoenix Solutions Ltd.   Tibco Software Inc.

  Cisco Systems Inc.   NetScout Systems Inc.

  Symantec Corp.   Verisign Inc.

  BMC Software Inc.   CA Inc.

  EMC Corp.   Qlogic Corp.

  Citrix Systems Inc.   VMware Inc.

Infrastructure Comm. EV/S 2.52 x EV/EBITDA 10.27 x

Network Mgmt. EV/S 2.64 x EV/EBITDA 11.47 x

Storage EV/S 2.27 x EV/EBITDA 13.43 x

Virtualization EV/S 9.92 x EV/EBITDA 49.92 x

Security EV/S 3.26 x EV/EBITDA 13.40 x

Development Tools EV/S 2.81 x EV/EBITDA 13.68 x

Legacy/SOA EV/S 2.53 x EV/EBITDA 20.41 x

Systems Mgmt. EV/S 2.78 x EV/EBITDA 9.82 x






Internet



IT Services















































































































































































































































































The Internet Market performed well, both the Infrastructure side and Corum’s web pure players.

The Infrastructure side was explosive: Akamai and Digital River for content delivery, and the more pure infrastructure companies like Citrix and Juniper. Our Pure Play web companies are also doing very well: Google, Ancestry.com, Baidu (out of China), Amazon, Sohu – all at high multiples.

At the bottom of the bracket are companies like RealNetworks, who will need to figure out a new strategy moving forward, and others like InterActiveCorp and Infospace; they are not performing as well as they could.

The biggest Achilles heel of any company that primarily operates in the web is their inability to monetize their huge web traffic. Companies are continually unable to turn over profit relative to their size, and have to start looking towards M&A to ground themselves from the Cloud and have tangible assets that anchor them. One tech company that has done a terrific job is Amazon. Amazon has been able to combine old world technology of packaging, logistics, and general infrastructure with a blend of new technologies, anything from retail products like the Kindle to Amazon Web Services, their

Cloud computing initiative. 2011 is going to be a great year for Amazon as they have lined up a number of objectives that keep the company fresh. They just announced that they will be launching a Google App market competitor, and for a company delivering content through a proven website and knows how to handle digital downloads, we think they will be successful.

If Amazon were to buy Netflix, wags might call it a “blockbuster deal”. Netflix will probably rebuff the offer as they were the fastest growing technology stock in 2010; web streaming and video have become more of a consumer product and cord cutters more prevalent. Thus, 2011 is poised to be Netflix’s biggest year growing on their own terms.

Another key strategy of Amazon is their investment of $175M into LivingSocial, a Groupon competitor, possibly for a potential acquisition in the future. Amazon has synergies with the coupon companies.

Two other hot companies, Groupon and Zynga, each purchased a third of all Facebook ads served, plus all the hot game makers pay a 30% fee for use of their credits system. This really shows that Facebook taxes all the hot platform add-ons whether in advertising, virtual currency, gaming, or whatever may be the next great revenue generator.

Internet Software

Page 9


Internet Market

Public Valuations

  Akami Technologies Inc.   Juniper Networks Inc.

  Amazon.com   Google Inc.

Internet Infrastructure EV/S 3.43 x EV/EBITDA 21.34 x

Internet Pure Play EV/S 3.04 x EV/EBITDA 14.05 x


Internet Market

Public Valuations






Internet Market

Public Valuations






Internet Market

Public Valuations










Internet



IT Services

We move onto our last market, IT Services, and we are back to the topic of East vs. West. We have added a number of smaller service players here from the international markets over the past few months, and that is pushing the value we see.

From the West, our big players are Accenture, CGI, and CSC; their Eastern counterparts are companies like Wipro,

IT Services

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Tata, and Infosys. But the storm coming out of China is VanceInfo and other newly minted public companies such as hiSoft.

We expect to see some significant transactions from offshore companies expanding their footprint for market share in the Western world. Look for our upcoming report “China Rising”.

Data was compiled by the Corum Group research department based on the work done in the last 12 monthly webcast reports, available on our website www.corumgroup.com under the M&A Monthly webcasts. Corum Group is the leading global provider of M&A services to privately held software and IT companies, and has sold more such firms than anyone else in the last 25 years. For further information, please contact Dougan Milne, V.P. Research at +1 425 455 8281, or [email protected]. ©2011 Corum Group Ltd. All Rights Reserved.






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IT Services

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2011 World Tech M&A Report