Angels Forum

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The Current State Of The Technology M&A and IPO Markets

October 2006

Presented by:

David LiuMANAGING DIRECTOR, JEFFERIES BROADVIEW

[email protected]

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1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006YTD

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While The M&A Market Has Recovered, The IPO Market Is Still Lackluster

Source: Jefferies Broadview's Global Mergers & Acquisitions and IPO databases.

Number of M&A Transactions Number of IPOs

M&A (Transactions > $50MM) and IPO Activity 1993 – 2006YTD North America – Technology

280

31

313

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2006 YTD US Technology IPO ActivityPriced Transactions

Company Subsector Pricing

CommVault Systems Comm. Equipment TopDivX Software AboveRiverbed Technology Comm. Equipment AboveInnerworkings New Media TopQimonda Semiconductors BelowWNS Holdings Services TopGmarket New Media TopOmniture New Media BelowTechwell Semiconductors BelowSynchronoss Services BelowVerigy Semiconductors BelowLoopNet New Media MidCPI International Comm. Equipment TopCorel Software BelowVisicu Software AboveHimax Technologies Semiconductors TopChina GrenTech Semiconductors AboveNextest Systems New Media BottomEagle Test Systems Semiconductors WithinLiquidity Services New Media MidSMART Modular Semiconductors BelowDigital Music Group New Media WithinTraffic.com New Media Within

BacklogCompany Subsector

IPG Photonics Comm. EquipmentMitel Networks Comm. Equipment

IBuyDigital.com New Media

Local Matters New Media

Veraz Networks Comm. Equipment

Netlist Semiconductors

Optium Semiconductors

Jazz Semiconductor Semiconductors

Wireless Ronin Technologies ServicesParadigm Software

Double-Take Software Software

Withdrawn/PostponedCompany Subsector

Go Daddy Group New MediaAlien Technology SemiconductorsBidz.com New MediaWintegra SemiconductorsRitz Interactive New MediaTechnology Spectrum Services

On The RoadCompany SubsectorPricing Date

09/21/0609/21/0609/20/0608/15/0608/08/0607/25/0606/28/0606/27/0606/21/0606/14/0606/12/0606/06/0604/27/0604/25/0604/04/0603/30/0603/29/0603/21/0603/08/0602/22/0602/02/0602/01/0601/24/06 While the markets were closed over the past

several months, recent activity suggests the markets may be opening again

Shutterfly New Media Top09/28/06

Mellanox Technologies Semiconductors

eHealth New MediaAcme Packet Comm. Equipment Above

10/12/0610/12/06

SAIC Services Top10/12/06Above

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Summary Of Median Performance For Technology IPOs Since 2004

(1) As of October 19, 2006. Source: Jefferies Broadview’s IPO Database / Hoover’s IPO Central / Capital IQ.(2) Includes transactions priced between 7/1/2006 to 10/19/2006.

OfferingAmount

TTMRevenue

TTMRevenueGrowth

Quarters ofProfitability

EBITMargin

% ChangeFrom IPO

TTM

Period

Median Profile(1)

H1 2004 $86,000 $87,357 54.8% 5 7.6% 43.2%

H2 2004 $74,300 $47,447 60.3% 3 4.4% 6.7%

H1 2005 $78,000 $67,286 72.1% 8 12.5% 33.3%

H2 2005 $86,971 $73,027 74.4% 5 9.4% 14.8%

H1 2006 $96,000 $90,550 32.6% 3 8.4% 1.1%

IPO prospects need to have revenue in excess of $50MM and should be growing at a minimum of 30% per year

H2 2006(2) $127,304 $73,027 114.0% 4 6.8% 47.0%

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Wall Street Still Has A Strong Appetite For Companies With Compelling Attributes

Revenue growth takes precedent over profitability and critical mass, though all three are important

Subscription-based models are preferred, particularly those where cash is collected upfront and can be used as a proxy for bookings for valuation purposes

From a Software perspective, horizontally focused companies are preferred (vs. vertically focused) because of their larger addressable markets

From an Internet perspective, focused and differentiated businesses such as niche E-Commerce companies (vs. broad plays) are trading at fundamentally higher multiples

TEV / LTM Revenue: 7.4x




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Technology IPO Investors Primarily Care About Growth

VALUATION STATISTICS TEV/2007E Revenue: 4.1x TEV/2007E EBITDA: 19.5x 2006-2007E Growth: 40% Price Change Since IPO: 132%INVESTMENT HIGHLIGHTS Disruptive business model & technology in a highly

fragmented, low technology, low-margin market Serves large and growing Print, E-Commerce and

Small Business Services markets Significant growth opportunities including

up-selling print-related products and international expansion

VALUATION STATISTICS TEV/2007E Revenue: 2.0x TEV/2007E EBITDA: 6.4x 2006-2007E Growth: 3% Price Change Since IPO: (20%)INVESTMENT HIGHLIGHTS Platform for consolidation and robust acquisition pipeline Opportunity for steady revenue growth in core franchises Organic growth opportunities in upgrades, emerging

markets and product cross-selling Established direct, reseller, OEM and retail channels and

growing service provider channel

10/20/05 12/5/05 1/20/06 3/7/06 4/21/06 6/7/06 7/21/06 9/7/06 10/23/06$10

$15

$20

$25

$30

$35

$40VistaPrint Daily Closing Price

20-Oct-2005 through 20-Oct-2006

4/26/06 5/18/06 6/9/06 6/30/06 7/25/06 8/16/06 9/8/06 9/29/06 10/23/06$9

$10

$11

$12

$13

$14

$15

$16

$17Corel Daily Closing Price

20-Oct-2005 through 20-Oct-2006

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Observations From Our Equity Research Analysts

M&A activity in the small and medium cap space has created demand for IPOs as mutual funds look to redeploy capital to fulfill sector allocation requirements

— Katherine Egbert, Jefferies’ Infrastructure Software Analyst

Because the markets open and close so quickly, companies that are looking to go public should go as far as they can in the IPO preparation process, then be nimble about when to go on the roadshow

— Katherine Egbert, Jefferies’ Infrastructure Software Analyst

Underlying market trends and dynamics are the most important considerations for IPO investors. This is why there is an incredible amount of interest in Online Marketing companies – the fundamental shift of advertising dollars from traditional venues to online continues to transform the industry

— Youssef Squali, Jefferies’ Internet and New Media Analyst

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Venture-Backed Private Company Exits Are On The Rebound

(1) Source: Jefferies Broadview's Global Mergers & Acquisitions database.

Venture capital-backed companies out of total

North American Private Seller Transactions > $50MM(1)

#

2002 2003 2004

> $50MM

> $150MM

63

21

67

21

104

38

40

16

50

17

72

24

> $250MM 9 9 176 7 10

2005

130

54

84

43

3427

1H 2006

80

28

54

21

1812

2002 2003 2004

> $50MM

> $150MM

63

21

67

21

104

38

40

16

50

17

72

24

> $250MM 9 9 176 7 10

2005

130

54

84

43

3427

1H 2006

80

28

54

21

1812

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There Continues To Be Many Hot Segments Grabbing The Mindshare Of Both Strategics And Investors

Internet & Digital Media Mobility

Software-as-a-Service Security

Value continues to be driven by market and company specific factors

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High-Multiple Exits Are Becoming Increasingly Frequent

Date Seller Buyer Price/Revenue

10/06 12x

8/06 > 10x

6/06 15x

5/06 11x

4/06 > 10x

4/06 > 20x

12/05 13x

11/05 17x

9/05 > 25x

9/05 > 400x

9/05 12x

8/05 26x

6/05 28x

4/05 11x

3/05 33x

5/04 15x

3/04 > 10x

Representative Transactions Since 2004 with Price/Revenue Multiples > 10x

Between 2003-2004, there were 17 transactions with > 10x price/revenue multiples. In 2004-2005, this number more than doubled to 36(1)

(1) North American transactions > $50MM.

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Although The M&A Markets Have Been Strong, We Are In A Fundamentally Different Environment

Technology Bubble1998-2000“Promise”

Post-Technology Bubble2000-2006“Proven”

Potential for high growth

A few “business development” relationships

Maybe 1-2 referenceable customers

The higher the cash burn the better

Real Customers

Real Revenue

Real Relationships

Real Growth

Real Metrics:

CPM x Page Views x # of Ads x STR = Advertising Potential

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Recent Transactions Validate The Importance Of Key Market And Company Specific Factors

Proven leader in the open source application server technology market

Innovative, standards-based middleware solutions enabling customers to develop and deploy next-generation, service-enabled applications at a low cost

Revenue growth in excess of 100%

Projected to turn corner on profitability in near future

Proven leader in the storage area network management and storage resource management market

Key relationships with leading OEMs including Hitachi, Sun, HP, Engenio and SGI

Revenue growth of approximately 150% per year

Unique assets in its robust shopping search engine, a strong brand name and a loyal customer base

Over 2,500 merchants, 23 million unique users and 22 million leads delivered per month

Revenue growth in excess of 150%

Highly profitable with 30% EBITDA margins

Deal Value: $420MMRevenue Multiple: > 20x



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An IT Buyout “Binge” Is Occurring Within The More Mature And Cash-Flow Rich Segments

Representative Transactions:- Onyx Software / Battery

Ventures- SSA Global / Golden Gate

Capital- Systems Union / Golden

Gate Capital- NetIQ / Francisco Partners,

Golden Gate Capital and TCEP

- SunGard / Silver Lake Partners, Bain Capital and

The Blackstone Group- Serena Software / Silver

Lake Partners- FrontRange / Francisco

Partners

Implications Large private equity

capital pools interested in technology

Hedge funds entering the private market

Acceptance of sponsors selling companies to other sponsors

Historically low borrowing costs

Reduced required rate of return / IRR driving pricing higher

Sponsors more comfortable about ultimate exit as other sponsors provide safety net

Profitable companies valued between $50 and $300MM have an attractive alternative to an IPO

Secular Changes

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003 2004 2005

Public IT >$1BN EMC

Public IT <$1BN EMC

Public Non-IT

Private

Financial

While Still Dominated By Large Public IT Buyers, Private Equity Firms Have Become Increasingly Active In Technology M&A

Buyer Profiles for Enterprise Software Transactions(Transactions > $50MM)

In 2005, large public buyers represented approximately 60% of all buyers in the Enterprise Software market

Private Equity firms represented nearly 20% of all buyers, up from 5% in 2001

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Answers to Common Questions?

When should your Company start courting Acquirers?

— Industry dependent: varies; better to ask; review M&A/IPO comps

— Metrics: IPO: $50MM+ revenues; M&A: no rule of thumb, market timing

When should you look for a Banker?

— Need: Liquidity, negotiation (price, terms); provide CEO/Board advocacy

— Cost: Typically US$1MM+; success based; 1-year tail

— Selection: Industry expert, confidant, personality, reputation, access

What are the best ways to move towards a Smart Transaction?

— Aligned interests: Board, C-level execs, employees

— Tactics: Bought not sold

— Publicity: Raise profile when ready

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has been acquired by

$185,000,000

Financial Advisor to the Seller

December 2005


$185,000,000


December 2005


$185,000,000


December 2005


Financial Advisor to Seller

October 2005


$497,000,000


June 2004


$497,000,000


June 2004



$600,000,000

April 2004



$242,000,000

July 2004



$242,000,000

July 2004

$445,000,000


November 2004

$445,000,000


November 2004




$324,000,000

November 2005



$206,000,000

October 2005Additional Q&A

Additional Q&A


June 2006


$420,000,000

has agreed to be acquired

Pending

Financial Advisor to the Buyer

Confidential

has acquired

August 2006

Financial Advisor to the Buyer

$375,000,000Financial Advisor to the Seller

$354,000,000

Pending

has agreed to be acquired by

RealNetworks, Inc.

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Who is Jefferies?

#1 Investment Bank Catering to High Growth, Middle Market

— #1 fastest growing Wall Street firm last 10 yrs

— IDD 2005 Middle Market Bank of the Year

— #1 Technology M&A firm last 4 years

— Top 3 NASDAQ Trader

— 50%+ employee owned, listed on the NYSE (TICKER:JEF)

— Global with offices in US, Europe, China, Japan, India, Israel, Dubai

— Sector Coverage: Practically every sector of the global economy

Contact:

— David A. LiuManaging DirectorTechnology Investment BankingT: (650) 573-4803Email: [email protected]