Berger

USA Switzerland Germany France United Kingdom Canada Norway Brazil

www.corumgroup.com

EE--Business ForumBusiness Forum Prague October 6 th, 2009 “How to run your M&A – some Recommendations”

Corum Group Presentation ■ 2

Frank Berger Director Corum Group International

� Berlin * , Dipl.-Math.@TUB, Stanford GSB

� > 30 years management in IT Industry

� Founder & Seller IQproducts GmbH

� 3 years Consultant to the Software Industry � 3 years M&A Advisor with the Corum Group

The Presenter


The Corum Group

� Worldwide M&A Consultant since 1985

� Only M&A, only Software and IT Services

� Middle Market Focus (3 to 100 M$ Revenues)

� Project Managers are mostly former CEOs in SW- and IT Services Firms

� Offices in Europe, Canada, Latin America and United States

� 200+ transactions completed

� $6 billion in wealth created

� 60% cross-border transactions

� Host of Selling Up Selling Out conferences & multi-national Merge Briefings

� Sponsor of World Financial Symposiums conferences

� Publisher of industry-leading M&A research


Agenda Today

� The M&A Project - Why and When?

� The M&A Project - What and What Not?

� Closing with Langara


As an Entrepreneur - What Are Your Options?


Why Sellers Sell

Money

Growth/ Opportunity

Fatigue

Conflict

Funding the enterprise Personal liquidity – hard work but no money in the bank M&A is the primary source of liquidity!

Partners, Employees, Family, Board/Investors

Age / Burnout Health – what if something happened? Management challenges – aiming at something new

Insure company’s success Cannot make it as a small company Technological threat/ change


U.S. dollar volume all industries

Sources: Dealogic, IPO Central, Corum

M&A Activity vs. IPO Activity

$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

In B

illio

ns

M&A Dollar Volume IPO Amount Raised


• Your Personal Needs , Plans, Wishes…

• The M&A market in general , trends in valuations etc:

� The situation and trends in your company’s market segment:

� The market position, performance and future of your company :

Timing for an M&A Project

THE TRIGGER !

IMPORTANT

MORE IMPORTANT

MOST IMPORTANT

The ideal starting-point is determined by FOUR key parameters:


� IMF Raises Global Growth 2010 to 3.1%

� World Bank Sees True Global Recovery

� GY: Exports rise by 7% (July)

� U.S. Productivity Up 6.6% in Q2

� Goldman Sachs Revises China Growth to 8.3%

� Clear recovery in Real Estate

� Worldwide Growth of Stock Markets

� …..

� …..

� However: Uncertainty remains

Signs of Recovery


Public Markets

40.00

50.00

60.00

70.00

80.00

90.00

100.00

110.00

120.00

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

Nasdaq S&P Tech Dow


European Public Markets


…and the M&A Market is doing well

CORUM Index $ values in millions

# of Transactions# of Mega Deals >$1BLargest DealAverage Deal ValueMedian Seller Revenue# VC backed Exits% Terms UndisclosedAll Cash (announced)% Targets Public% Buyers Public

Sep-092556

$6,400$381$11233

77%47%13%45%

Sep-082421

$2,000$99$2817

64%59%16%49%


Mega Deals Are Up

� Xerox � ACS : $6.4b ; 1.3x

� Adobe � Omniture : $1.8b ; 5.2x

� SilverLake � Skype : $2b ; 5.1x

� Dell � Perot Systems : $3.9b ; 1.4x

� CISCO � Tandberg: $ 3.0b


Corum Transactions Are Up

� Six Companies Sold In Q3

� Six More In LOI During Q3

� Five More Weighing Offers

� Corum New Client - and Project Activity High


Market Trends e-Commerce (1)

Online Retail

• Amazon continues to Wal-Murder online retail

• Mid-tier vendors: innovate, expand, sell, or perish

• Verticalization becomes a necessity to survival

• International and US e-commerce laws getting closer

• Security still a concern


Market Trends e-Commerce (2)

e-Commerce Infrastructure

� Consolidation continues : � Logistics � Hosting � Payment / cart / billing � Security

� Innovation begins to plateau:

� Advertising / Marketing

� Innovation continues to excel: � Customer intelligence � Search


Internet Market

Public Valuations Deal Spotlight: Sector: e-Commerce Target: BuscaPe.com (Brasil) Buyer: Naspers (SA) Date: September 2009 Transaction Value: $342m Comments: � Geographic expansion � Dominant regional player � Favorable Demographics

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

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

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

Internet


Recent E-Commerce Transactions (Retail)

GoAdv acquires LeGuide.com (February 2009)

�GoAdv, of Ireland, operates a network of retail and search-focused websites for consumers globally.

�LeGuide.com, of France, is an online shopping portal to consumers in Europe, enabling users to search, compare and purchase a wide variety of products online.

�The acquisition further strengthens GoAdv’s consumer goods market position in Europe. Both companies are publicly traded on the Euronext.

�Transaction valued at $56.75m; 2.2x TTM revenues

Amazon.com acquires Zappos.com (July 2009)

�Amazon.com is the world’s largest online marketplace , an aggregate for online retailers of consumer goods and other proprietary goods.

�Zappos.com operates as an online retailer of shoes and apparel for the consumer market.

�Amazon gains considerable market-share and ,more importantly, considerable market penetration to verticalized consumer apparel segments.

�Transaction valued at $847m; 1.3x TTM revenues


Recent E-Commerce Transactions (Infrastructure)

Timberline Interactive acquires CommerceV3 (Septemb er 2009)

�Timberline provides e-commerce website design and online marketing services to retailers . Also provides e-commerce shopping cart software.

�CommerceV3 provides e-commerce software-as-a-service (SaaS) that enables online retailers to build and maintain Web stores.

�The acquisition brings together two e-commerce companies capable of delivering two pieces: the online marketing services to drive traffic, and the online store or shopping cart technology to con vert it to sales.

�Transaction value undisclosed.

WebTrends [Francisco Partners] acquires Widemile, I nc. (July 2009)

�WebTrends provides web-based and hosted CRM customer analytics software-as-a-service (SaaS) and related managed services to enterprises.

�Widemile provides testing and site optimization SaaS and web analytics services to online marketers and interactive agencies.

�The acquisition was a technology buy for Webtrends. Adding new testing capabilities will help WebTrends compete with Omniture’s broader portfolio.

�Transaction value undisclosed.


There are good arguments FOR it: � Be in Sync with the Recovery

� Close a transaction before the Next Recession comes ??

� Strategic buyers and PE have lots of Cash, PE starting to invest again

� Consolidation Activity is Strong

� Get Active before the Market for your Company Narrows

� M&A Market is very active again

� Valuations improved significantly

� “Wealth Effect” - What is the value of a €, $, CZK gained today?

� The “Value Added ” by the Process

Is the time right to start an M&A Project ?


M R R S

M

Model – You will develop a better model from the process

Market Feedback – You gain immeasurably from buyer feedback

Research – You learn a great deal from these proprietary databases

Relationships – Not everyone is a buyer, but you open many doors

Sale of your company, or significant recapitalization

A professional, global M&A Project is “Adding Value ”

Insight from over 200 M&A Transactions


Agenda Today

� The M&A Project - Why and When?

� The M&A Project - What and What Not?

� Closing with Langara


� The M&A process takes time � Nine to twelve months is a reasonable expectation � In the extremes, a few weeks to years

� Time and success depend on careful planning and proper execution of the process

� The M&A process requires patience Sarbanes Oxley, Foreign Corruption Practices Act Audit, thorough

due diligence, volatile markets, management changes, buyers own timelines….

The M&A Process: Characteristics


The M&A Process: Overview

Decision SELL UP SELL OUT

Decision SELL UP SELL OUT

Preparation INTERNAL DUE DILIGENCE

Preparation INTERNAL DUE DILIGENCE

Presentation EXECUTIVE SUMMARY

Presentation EXECUTIVE SUMMARY

Research POTENTIAL PARTNERS

Research POTENTIAL PARTNERS

Contact INFORMATION EXCHANGE

Contact INFORMATION EXCHANGE

Follow-up CONFERENCE CALLS & VISITS

Follow-up CONFERENCE CALLS & VISITS

Valuation Valuation

Structure LETTER OF INTENT

Structure LETTER OF INTENT

Due Diligence Due Diligence

Final Negotiations CONTRACT

Final Negotiations CONTRACT

Closing Closing


*On average, based on a global search

A Professionally Executed M&A Project will include:

700 700 to to 11,,000000 communications of various kinds (email, voicemail, letters, conference calls, etc.)

10 10 to to 3030 expressions of interest

1515 to to 2020 NDAs

8 8 to to 1010 qualified parties

1 1 to to 22 offers


What Buyers Are Looking For

� Consolidation (market leaders)

� Tuck-ins with positive EBITDA

� Growth

� Client Base

� Geographical expansion

� Recurring revenue

� Small IP acquisitions with a Laser focus


Targets

� Firms selling to the same customer � Companies Interested in diversification

� Firms with complementary products

� Technology partners/acquirers

� Competitors, Users, Dealers/OEMs

� Over $400 billion in uncommitted funds � Primarily concerned with ROI

� No strategic leverage

� Price paid may be lower than strategic buyers, but is in cash

� Due diligence is tough � Will try to keep management (as shareholders)

(b) Financial Buyers

(a) Strategic Buyers


You Will Need at Least

� Researched buyers list incl. contact names and EAs (A, B & Special)

� Strategic analysis per buyer

� Introductory Letter (s)

� Executive Summary

� Transaction NDA

� Financial Memorandum (history, 3 years projections…)

� Corporate Presentation (verbal / PPT)

� Valuation

Presenting Your Company


� Unable to portray value Credibility in valuation is imperative � Incomplete due diligence preparation This will prolong the process � Hiding of Critical Issues The M&A process requires total openness � Not orchestrating/ synchronizing all parties properly This is the tough part! � Lack of clearly defined closing conditions Don’t be greedy & avoid “circular negotiations”

Biggest Mistakes in The Process

� Dealing with only one buyer No leverage in negotiation � Improper research of potential buyers “A,” “B,” financial, international � Contact at wrong level, wrong person Not knowing the buyer well enough � Not understanding buyer’s process Timeline, decision-makers � Not qualifying buyer properly Ability, interest, needs etc.


There are good arguments FOR it : � Be in Sync with the Recovery � Close a transaction before the Next Recession comes ?? � Strategic buyers and PE have lots of Cash, PE starting to invest again � Consolidation Activity is Strong � Get Active before the Market for your Company might be Closed � M&A Market is very active again � Valuations have improved significantly � “Wealth Effect” - What is the value of a €, $, CZK gained today? � The “Value Added ” by the Process

Is the time right to start an M&A Project ?

Ultimately, the deciding factors are your personal needs & wishes and the situation your company is in!


Corum’s Annual Client Celebration Aug. 29 – Sept. 1 A tradition for 22 years






Upcoming Corum Events

October 5: Prague -- SUSO

October 6: Boston -- MB

October 8: Lyon – MB

October 8: Washington DC -- MB

October 13: Scotland -- MB

October 13: Austin -- SUSO

October 14: Ireland -- MB

October 20: Stockholm -- MB/SUSO

October 22: Denmark -- MB/SUSO

October 22: Grenoble -- MB

October 23: Munich -- MB

October 27: Frankfurt – MB

October 27: Dublin – SUSO

November 5: MERGE Webinar (Int’l)

November 10: MERGE Webinar (France)

November 11: MERGE Webinar (DACH)

November 17: London – WFS

November 18: Ft. Lauderdale -- MB

Merge Briefing (MB) Selling Up Selling Out (SUSO) World Financial Symposium (WFS)


Contact Information

Research and Conferences

www.corumgroup.com

Corum Group Ltd. 10500 NE 8th Street, Suite 1500 Bellevue, WA 98004 USA +1 425-455-8281

Corum Group International S.à.r.l. Frank Berger, Regional Director [email protected] Basteiplatz 7 8001 Zürich Switzerland +41 44 251 82 65

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