AN M&A UPDATE Software M&A Sizzles - The Market Roars Back Update Webi… · Q1:05 Q2:05 Q3:05 Q4:05 Q1:06 Q2:06 Q3:06 Q4:06 % Deal Volume • Cumulative look at % deal volume per

THE PREMIER PROVIDER OF M&A SERVICES TO SOFTWARE / IT COMPANIES

AN M&A UPDATE

Software M&A Sizzles - The Market Roars Back

Corum Group Ltd.www.corumgroup.com


• Opening Remarks - Corum• M&A Market Overview• Market Trends

• Public Markets• IPO Market • Venture Capital• Top Buyers & Active Sectors

• Valuations• Corum Q3 M&A Briefing Release

Agenda


Corum Group

• 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• 55+% cross border transactions• Recognized industry leaders/experts• Sponsor of Selling Up Selling Out conferences• Sponsor of World Financial Symposiums Conferences • Publisher of industry leading M&A research


M&A Volumes Out Pace Previous Year – Again

Deal Drivers:• Enormous liquidity in the market • Strong stock market• Wall Street is receptive to smart, strategic deals• Need for global presence• Companies stimulate growth via acquisition• Greater competition for deals• Private Equity firms driving M&A activity – recaps• Converging market sectors


Industry Wide Technology M&A Activity

% Deals By Sector

0.00%5.00%

10.00%15.00%20.00%25.00%30.00%35.00%40.00%45.00%

Digital

Med

ia

Enterpr

ise App

licatio

ns

Enterpr

ise In

frastr

uctur

e

Gaming

Intern

et

IT Serv

ices

Securi

ty

Wireles

s

Vertica

l Mark

ets

2005 % Deal Volume 2006 YTD % Deal Volume


Industry Wide Technology M&A Activity (continued)

% Deal Value By Sector

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

Digital

Med

ia

Enterpr

ise App

licatio

ns

Enterpr

ise In

frastr

uctur

e

Gaming

Intern

et

IT Service

s

Securi

ty

Wireles

s

Vertica

l Mark

ets

2005 % Deal Value 2006 YTD % Deal Value


Industry Wide Deal Volume Past 8 Quarters

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

Q1:05 Q2:05 Q3:05 Q4:05 Q1:06 Q2:06 Q3:06 Q4:06

% D

eal V

olum

e

• Cumulative look at % deal volume per quarter over the past 8 quarters YTD

• Q3 historically weaker than Q4

• 1st half stronger then 2nd half* Projected % deal volume assuming deal levels maintain momentum

through close of 2006

*


Is it 1998?

• M&A levels are strong, but justified• Valuations are strategic, while sensible• New technology is pervasive and real• Sellers are optimistic, but rational• Buyers are opportunistic, yet cautious


M&A Is the Primary Source of LiquidityIn Dollar Volume – US dollar volume all industries

$0$100$200$300$400$500$600$700$800$900

$1,000$1,100$1,200$1,300$1,400$1,500$1,600$1,700

1990 1992 1994 1996 1998 2000 2002 2004 YTD:06

In B

illio

ns

M&A Dollar Volume IPO Amount Raised


Why Does M&A Dominate?

The need to buy is stronger than ever

• Acquisitions add more growth • Counter takeover attempts• Consolidation• Speed up time to market• Buy talent and domain expertise• Fill product gaps• Get ahead of a technology curve• Tap into emerging consumer markets• Cost of being public and complying with SOX


Global Market Place

58% of Corum’s transactions have been cross-border – A trend we seeing throughout the industry

Data represents transactions since January 2005

Cross Border58%

Domestic42%


Momentum Continues

• Stability – strong stock market and Euro will enable more overseas buyers

• Expansion - US firms will go international for acquisitions –need to capitalize on growing IT markets/opportunities

• Fear – recent deal activity increases pressure on all to keep pace; acquire or be acquired

• Innovation – small start-ups developing the most cutting edge solutions

• Resources – friendly capital markets & high cash balances coupled with improved revenue growth


Slower IPO Market Pushes M&A

Source: D&B

IPO data all industries

• October most active in more than a year

• 50% of October offerings closed with double digit gains

Software IPO’s during Q3:06 = 3

Software IPO filings during Q4:06 = 5

Q3:05 Q3:06 % Change

# of IPO Pricings 63 31 -50.79%

Total Value $9,200.00 $6,100.00 -33.70%

Average Value $146.00 $197.00 34.93%

Values are in millions


Source: PricewaterhouseCoopers/Venture Economics/NVCA/MoneyTree survey

VC’s Are Actively Backing the Next Generation of Tech Companies

Total Investment in Software Industry

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

Q1:04

Q2:04

Q3:04

Q4:04

Q1:05

Q2:05

Q3:05

Q4:05

Q1:06

Q2:06

$ In

vest

ed

0

30

60

90

120

150

180

210

240

270

# of

Inve

stm

ents


Top Buyers in 2006 Year To DateStrategic Buyers Active Private Equity Firms*Microsoft 15 Accel-KKRIBM 12 Apax PartnersOracle 11 Carlyle GroupEMC 9 Francisco PartnersL-3 Communications 7 Golden Gate CapitalSage Group 7 Silver Lake PartnersCisco Systems 6 Symphony Technology GroupJupitermedia 6 Thoma CresseyNeoMedia Technologies 6Accenture 5Google 5 * Partial ListKronos 5Motorola 5VeriSign 5

70+ Strategic buyers with 2 to 4 transactions


What Do Buyers Really Buy?

VisionResearchManagementBusiness ModelPlanning R&D ProcessPatentsDocumentationPricingSupportMarket ShareStaff User Base

Marketing ChannelsAlliancesCompetitive PositionTechnologySales ProcessCapital StructureAccounting PoliciesGrowthProfitabilityDomain Expertise

>> Don’t forget the intangibles


Active Sectors

• Wireless technologies and infrastructure

• Enterprise infrastructure and systems management

• Convergence companies as the lines between the Internet, television, and telecommunications disappear – Digital Media

• Security companies

• Internet and E-commerce especially the “small but growing” category

• Vertical market applications especially financial services and niche market technologies

• Mature, profitable companies with strong balance sheet and install base but slowing growth as targets for consolidation or private equity (acquisition)


Corum Transactions

Sectors where Corum has recently completed transactions

• Digital Media• Enterprise Applications• Enterprise Infrastructure• Security• Vertical Markets

With an exceptionally strong first half complete, we look forward to a similar close to 2006

• 6+ companies currently under LOI or term sheets


Current Activity

With an exceptionally strong first half complete, we look forward to a similar close to 2006:

6+ companies currently under LOI or term sheetsEnterprise ApplicationsEnterprise InfrastructureGaming and EntertainmentVertical Markets

• Manufacturing• Financial Services


Public Markets – Reaching New Highs


Looking Back – Valuation Multiples

Valuations are up 13% from 2005


Public Multiples ─ Differ Dramatically by Sector

TTM EV/Sales Range

Niche Applications

1.00x – 2.50x

Security Software

1.39x – 7.83x

Financial Services

1.50x – 4.00x

Software as a Service

3.90x – 9.49x

0

1x

2x

3x

4x

5x


Public Valuation Multiples


Corum Q3 Briefing SampleVertical Market Technology The Vertical Market applications sector continued to demonstrate strength during the quarter. Total deal count YTD is up over 40% from the total for all of 2005, with a traditionally strong fourth quarter still to come. In part, this activity demonstrates the competitive pressure to build market share and fill out product suites with the necessary functionality that drives companies to be acquisitive. Along with acquired technology come customer bases and recurring support revenue, loads of domain expertise, brand name recognition and distribution channels. None of these resources would be present if the decision was made to build versus buy, so the market for these specialized solutions companies continues to thrive. Some notable transactions that reflect this include: First Data, a significant player in electronic commerce payments, acquired Peace Software, which develops advanced software for managing utility billing and customer care. This represents a new market for First Data, allowing them to expand beyond their traditional market servicing merchant payments and credit card issuers, and facilitating a broad range of consumer financial transactions. Peace offers highly specialized technology, a broad multi-national user base, and significant knowledge of the market. Softbrands, a leader in software solutions for manufacturing and hospitality industries worldwide, acquired MAI Systems and its subsidiary, Hotel Information Systems. Softbrands has been on an aggressive path the past two years in an effort to build girth in the applications space, and the addition of $23 million in revenue from MAI takes Softbrands over the $100 million revenue mark. The acquisition also moves Softbrands into a number two position worldwide in the hospitality space. The two firms are also highly complementary building on the other’s relative strength in Europe vs North America, and in chains vs independents. Strategic fit is everything when it comes to making these deals come together. If you are a specialized solutions vendor in a niche market, there is quite possibly a buyer for your software company. That is especially true if you are a leader or near-leader in your market, can demonstrate growth along with growth opportunities in your sector, are profitable, and have solid, state of the art technology.


Corum Q3 Briefing Sample (continued)

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

Stock Stock Market EnterpriseSymbol Company Price Value Value P/E EV/EBITDA EV/S P/E EV/S

DRTE Dendrite International Inc. $9.78 $427.6 $352.0 40.75 x 7.36 x 0.81 x 22.74 x 0.78 xEPIQ EPIQ Systems Inc. $14.71 $285.4 $355.9 38.71 x 7.91 x 2.33 x 14.56 x 2.01 xJDAS JDA Software Group Inc. $15.42 $450.2 $326.1 110.14 x 12.58 x 1.55 x 15.58 x 0.89 xMFLO Moldflow Corporation $11.91 $134.5 $74.9 132.33 x 10.11 x 1.14 x - - RLRN Renaissance Learning Inc. $14.31 $421.8 $422.2 23.08 x 13.39 x 3.49 x 19.08 x -ROK Rockwell Automation Inc. $58.10 $10,220.0 $10,610.0 18.50 x 9.73 x 1.95 x 15.25 x 1.82 x

Median Valuation Multiples 39.73 x 9.92 x 1.75 x 15.58 x 1.35 x

Trailing Multiple Forward Multiple

M&A Transactions NIIT to Acquire Element K NIIT Global to acquire Element K, a leading provider of learning solutions in North America. Element K's learning solutions business leverages its renowned technology KnowledgeHub, and an award-winning suite of more than 3,500 courses. Its learning solutions are enhanced through custom content development and strategic learning services to address specific business challenges. Together, NIIT and Element K will emerge as the leading global provider of comprehensive Learning Solutions, with more than 3,000 employees, over US$250 million in revenue, and a presence in 32 countries. This acquisition is strategic for NIIT and consistent with its stated plans for accelerated growth. Announcement Date: July 2, 2006 Deal Value: Undisclosed


Contact Information

Corum Group Ltd.10500 NE 8th Street, Suite 1500Bellevue, WA 98004USA(425) 455-8281

Corum Group International S.a.r.lGeneral Guisan – Quai 30CH-8002 ZurichSwitzerland+41 1 251 82 65

www.corumgroup.com

Documents

AN M&A UPDATE Software M&A Sizzles - The Market Roars Back Update Webi… · Q1:05 Q2:05 Q3:05 Q4:05 Q1:06 Q2:06 Q3:06 Q4:06 % Deal Volume • Cumulative look at % deal volume per