corum webinar 01-18-2007
TRANSCRIPT
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THE GLOBAL LEADER IN SOFTWARE M&A
AN M&A UPDATE
2006 Software M&A Reviewand 2007 Outlook
Corum Group Ltd.
www.corumgroup.com
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THE GLOBAL LEADER IN SOFTWARE M&A
Opening Remarks - Corum
M&A Market Overview
Market Trends
IPO Market
International Public Markets
Valuations
Top Buyers & Active Sectors
Corum Q4 M&A Briefing Release
Agenda
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THE GLOBAL LEADER IN SOFTWARE M&A
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 Outconferences
Sponsor of World Financial SymposiumsConferences
Publisher of industry leading M&A research
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THE GLOBAL LEADER IN SOFTWARE M&A
Headlines Tell the Story
Private Equity Fueling BuyoutsAssociated Press, December 2006
2006 - Bubble 2?Seattle Times, December 2006
Hong Kong tops New York this year in IPOsNew York Times, December 2006
Money is everywhere but for how long?Wall Street Journal, January 2007
Wall Street Bonuses so much money too few
FerrarisNew York Times, January 2007
Can M&As Best Times Get Better?Wall Street Journal, January 2007
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THE GLOBAL LEADER IN SOFTWARE M&A
Surge in M&A Continues
2006 vs 2005 - M&A up 30+% worldwide / all industries
2006 $3.7 Trillion in worldwide M&A
2000 $3.4 Trillion in worldwide M&A
Europe $1.43 Trillion in 2006 (up 39% vs. 05)
US $1.56 Trillion in 2006 (up 36% vs. 05)
Source: Thomson Financial
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THE GLOBAL LEADER IN SOFTWARE M&A
Software and IT M&A Activity
# of Transactions by Sector
0%5%
10%15%20%
25%30%35%40%
45%
Digit
alMe
dia
Ente
rprise
App
licati
ons
Ente
rprise
Infra
struc
ture
Gami
ng
Intern
et
Intern
etInf
rastr
uctur
e
Intern
etPu
rePla
ys
ITSe
rvice
s
Secu
rity
Wire
less
Vertic
alMa
rkets
2005 % Deal Volume 2006 % Deal Volume
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THE GLOBAL LEADER IN SOFTWARE M&A
Software and IT M&A Activity
Transaction Value by Sector
0%
10%
20%
30%
40%
50%
60%
DigitalM
edia
Enter
prise
Applic
ation
s
Enter
prise
Infrastr
uctur
e
Gami
ng
Intern
et
ITS
ervic
es
Secu
rity
W
ireles
s
Vertical
Marke
ts
2005 % Deal Value 2006 % Deal Value
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THE GLOBAL LEADER IN SOFTWARE M&A
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 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
In
Bi
llion
M&A Dollar Volume IPO Amount Raised
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THE GLOBAL LEADER IN SOFTWARE M&A
Slow IPO Market is Recovering
Source: D&B
IPO data all industries
December most active IPO month since 1999
2006 much stronger than 05
Venture-backed technology deals returned to the IPO scene
Eleven technology IPOs in Q4 - up from three in Q3
Q4:05 Q4:06 % Change
# of IPO Pricings 48 82 70.83%
Total Value $7,000 $16,100 130.00%
Average Value $145 $196 35.17%
Values are in millions
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THE GLOBAL LEADER IN SOFTWARE M&A
Surge in M&A - Deal Drivers
Enormous liquidity (equity and debt)
Strong stock markets
Recovery in IPOs
Analysts favorable to acquisitions
Private Equity in 25% of deals
Converging market sectors
Heavy competition for market leadership
Strength of Euro / British Pound
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THE GLOBAL LEADER IN SOFTWARE M&A
M&A Dominant Corporate Strategy
Support for acquisitions is stronger than ever:
Immediate impact on top/bottom line
Stimulate growth in new or existing markets Counter takeover attempts
Speed time to market
Forestall competitive threats
Gain talent, brand and domain expertise
Fill product and technology gaps
Tap into emerging markets
Provide pathway to a global presence Gain access to innovation
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THE GLOBAL LEADER IN SOFTWARE M&A
Global M&A Activity
Cross-border transactions increasing
European deal activity was up 39% in 2006
Of European buyers, the United Kingdom was the most activeglobally with $339 billion of transactions
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THE GLOBAL LEADER IN SOFTWARE M&A
Global Marketplace
64% of Corums recent transactions have been cross-border A trend we are seeing throughout the industry
Cross Border64%
Intra-Country36%
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THE GLOBAL LEADER IN SOFTWARE M&A
Corum Transactions (Partial 2006)
Carlyle Group / UC4 Software GmbH
Enterprise job scheduling and event-driven IT automation
NCR Corporation / IDVelocity
RFID infrastructure and process management software
WellPoint Systems Inc. / IDEAS International
Provider of accounting and campaign finance solutions for domestic and
multinational marketplace
NICE Systems / FAST Video Security
Developer of video systems for security and surveillance purposes
Blue Cross Blue Shield / REDmedic
Provider of a personal medical profile available to emergency personnel
via the internet
Thomson West / Cowles Legal
User-friendly solutions for estate planning and trust terminations
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THE GLOBAL LEADER IN SOFTWARE M&A
Corum Transactions (More 2006)
Microsoft / iView Multimedia
Digital asset cataloging solution for creative professionals
Apax Partners / Plexus Systems On-demand manufacturing execution software (SaaS)
Rocket Software / Mainstar Software
Storage management and disaster recovery solutions for OS/390
environmentsGemcom Software / Surpac Minex Group
Mine planning, engineering, geology, surveying, mineral exploration and
resource modeling solutions for the mining industry
Harland Financial / Financialware, Inc. Enterprise Content Management system for banks and financial
institutions
MDA / Mindbox
Sophisticated decisioning software for mortgage banking
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THE GLOBAL LEADER IN SOFTWARE M&A
Current Activity
With a strong 2006 completed, we enter 2007 with optimism
8 companies currently under Letter of Intent:
Enterprise Applications
Enterprise Infrastructure
Systems Management
Gaming and Entertainment
Vertical Markets
Specialty services Financial Services
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THE GLOBAL LEADER IN SOFTWARE M&A
Public Markets Reaching New Highs
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THE GLOBAL LEADER IN SOFTWARE M&A
Public Valuation Multiples
Sector Q4:05 Q1:06 Q2:06 Q3:06 Q4:06 Y on Y Q to Q
Digital Media 3.50 x 2.65 x 2.82 x 2.74 x 2.59 x
Enterprise Applications 3.19 x 2.91 x 4.27 x 4.35 x 4.43 x
Business Intelligence 1.36 x 3.10 x 2.15 x 2.87 x 3.03 xEnterprise Content Management 1.52 x 1.59 x 1.46 x 1.89 x 2.15 x
Supply Chain Management 1.70 x 1.82 x 1.58 x 1.60 x 1.89 x
Enterprise Infrastructure 2.20 x 2.15 x 2.36 x 2.40 x 2.77 x
Legacy Extention / SOA 1.40 x 2.72 x 2.59 x 1.36 x 1.70 x
Software Development Tools 2.34 x 1.95 x 1.44 x 1.88 x 1.71 x
Storage 3.17 x 2.81 x 2.43 x 2.66 x 2.98 x
Gaming 2.19 x 1.59 x 1.44 x 2.25 x 2.47 x
Internet Infrastructure 4.10 x 4.41 x 3.57 x 4.03 x 3.63 xInternet Pure Play 4.10 x 6.07 x 3.34 x 4.00 x 3.78 x
IT Services 0.74 x 0.85 x 0.78 x 0.84 x 0.80 x
Security 3.76 x 3.36 x 3.00 x 2.94 x 3.36 x
Wireless 2.85 x 2.18 x 2.28 x 2.07 x 2.34 x
Vertical Market - Engineering 3.00 x 2.61 x 2.71 x 2.69 x 3.06 x
Vertical Market - Financial Services 2.88 x 3.15 x 3.26 x 3.53 x 3.17 x
Vertical Market - Government 1.07 x 1.45 x 1.21 x 1.24 x 1.13 x
Vertical Market - Healthcare 2.36 x 2.54 x 1.98 x 2.69 x 2.36 xVertical Market - Other 2.51 x 2.63 x 2.63 x 1.75 x 2.02 x
Vertical Market - Telecom 2.37 x 2.52 x 2.02 x 2.12 x 2.10 x
TTM EV/S Multiples
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THE GLOBAL LEADER IN SOFTWARE M&A
Public Multiples
Differ Dramatically by Sector
TTM EV/Sales Range
NicheApplications
1.00x 2.50x
SecuritySoftware
1.39x 7.83x
Financial Services
1.50x 4.00x
Software as aService
3.90x 9.49x
0
1x
2x
3x
4x
5x
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THE GLOBAL LEADER IN SOFTWARE M&A
Looking Back Valuation Multiples
2.3
2.7 2.72.9
6.7
3.0
2.01.5 1.5
1.6 1.8 2.1 2.3 2.2 2.5 2.6
2.9 2.95
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
P/S
Multiple
1H
:98
2H
:98
1H
:99
2H
:99
1H
:00
2H
:00
1H
:01
2H
:01
1H
:02
2H
:02
1H
:03
2H
:03
1H
:04
2H
:04
1H
:05
2H
:05
1H
:06
2H
:06
M&A Transaction Multiples - Software Industry
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THE GLOBAL LEADER IN SOFTWARE M&A
Top Buyers in 2006
100+ Strategic buyers with 2 to 4 transactions
Strategic Buyers Active Private Equity Firms*
Microsoft 16 Accel-KKR
IBM 13 Apax Partners
Oracle 11 Carlyle GroupEMC 9 Francisco Partners
Motorola 8 Golden Gate Capital
Jupitermedia 7 Silver Lake Partners
L-3 Communications 7 Symphony Technology Group
Sage Group 7 Thoma Cressey
Cisco Systems 6
NeoMedia Technologies 6
Yahoo 6 * Partial List
Accenture 5
Google 5
Kronos 5
Trimble Navigation 5
VeriSign 5
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THE GLOBAL LEADER IN SOFTWARE M&A
Vertical Market Consolidation Fewer Buyers
Tougher to find buyers for smaller companies
Example: Financial Services Software Sector
Advanced Financial Solutions(Metavante 04)
BancTec (taken private WelshCarson PE 99)
Bisys Group (Open Solutions 05) Bottomline Technologies Carreker (Checkfree in 07) CheckFree Concord EFS (First Data 03) Digital Insight (Intuit 06)
First Data Fiserv Jack Henry
John Harland (M&F Worldwide 07) Kirchman (Metavante 06) Metavante Misys
Open Solutions (Carlyle 06) S2 Systems (Total Systems 05)) Sanchez (Fidelity National in 04) Sungard (taken private Silver
Lake Partners 05) Total Systems
TSA
2000 to 2006 - Key Buyers - 60% of list is gone
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THE GLOBAL LEADER IN SOFTWARE M&A
Private Buyers
Number of private buyers increasing
Slow IPO market and high cost of being public
Cash and credit available to Private Equity
Financial buyers comfortable with technology deals
Notable companies going private in 2006 John H. Harland
Embarcadero
WatchGuard Technologies Sabre Holdings
Open Solutions
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THE GLOBAL LEADER IN SOFTWARE M&A
Transaction Highlights Private Equity
Buyer Seller Value (Millions $) Sector
Silver Lake Partners Sabre Holdings $5,000 Vertical Market
Carlyle Group Open Solutions, Inc. $1,300 Financial Services
Silver Lake Partners IPC $800 Vertical Market
Thoma Cressey Embarcadero $234 Enterprise Infrastructure
Francisco Partners WatchGuard Technologies $151 Security
Insight Venture Partners Netsmart Technologies $115 Healthcare
Thoma CresseyVision Solutions, iTera and
Sirius Computer Solutions$100 Enterprise Infrastructure
Francisco PartnersEndeavor Information
SystemsUndisclosed Vertical Market
Carlyle Group / KennetPartners
FRS Global Undisclosed Vertical Market
Vista Equity Who'sCalling Undisclosed Enterprise Applications
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THE GLOBAL LEADER IN SOFTWARE M&A
Transaction Highlights International
Buyer Seller Value (Millions $) Sector
Publicis Group S.A. Digitas Inc $1,300 Internet Infrastructure
Check Point Software Protect Data AB $586 Security
ePLDT SPI Technologies $159 IT Services
Stepstone ExecuTRACK Software $41 Enterprise Applications
Yahoo! Inc. Wretch $22 Internet Pure Play
McAfee, Inc. Onigma $20 Security
Nokia Gate5 Undisclosed Wireless
Microsoft iView Undisclosed Digital Media
Tandberg Television Zetools Undisclosed Digital Media
Sage Group plc / SageSoftware Canada Ltd.
Corum Corporation(no relation)
Undisclosed Enterprise Applications
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THE GLOBAL LEADER IN SOFTWARE M&A
Transaction Highlights Strategic
Buyer Seller Value (Millions $) Sector
Google YouTube $1,650 Internet Pure Play
Intuit Inc Digital Insight $1,350 Financial Services
Trimble Navigation @Road Inc $496 Wireless
Oracle Stellent, Inc. $440 Enterprise Applications
Rocket Software Seagull Software $56 SOA
Corel Corporation InterVideo $196 Digital Media
Kronos Unicru $150 Enterprise Applications
Cisco System Arroyo Video $92 Digital Media
IBM Webify Undisclosed Enterprise Infrastructure
ADP Employease Undisclosed Enterprise Applications
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THE GLOBAL LEADER IN SOFTWARE M&A
Active Sectors
Strong activity across all sectors in 2006
Outlook for 2007:
Enterprise Applications
Internet - Infrastructure and pure plays
IT Services
Security
Vertical market applications
Wireless technologies and infrastructure
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THE GLOBAL LEADER IN SOFTWARE M&A
Corum Q4 Briefing SampleEnterprise Applications
Public Peer Group (In $U.S. millions except share prices)Stock Stock Market Enterprise
Symbol Company Price Value Value P/E EV/EBITDA EV/S P/E EV/S
CA CA, Inc. $22.79 $11,990.0 $13,290.0 126.6 x 16.07 x 3.43 x 22.56 x 3.29 xLWSN Lawson Software Inc. $7.45 $1,400.0 $1,120.0 -248.33 x 30.37 x 2.41 x 16.93 x 1.31 x
ORCL Oracle Corp. $17.21 $89,190.0 $87,210.0 24.59 x 13.40 x 5.43 x 15.50 x 4.47 x
QADI QAD Inc. $8.40 $271.5 $239.8 18.26 x 11.60 x 1.05 x 20.49 x 0.94 x
SAP SAP AG $53.16 $259,780.0 $255,910.0 118.13 x 69.92 x 21.08 x 24.73 x 19.27 x
CRM Salesforce.com $36.74 $4,170.0 $3,930.0 734.80 x 98.57 x 8.85 x 85.44 x 5.50 x
Median Valuation Multiples 71.36 x 23.22 x 4.43 x 21.53 x 3.88 x
Trailing Multiple Forward Multiple
M&A Transactions
Witness Systems Acquires Demos Solutions and Exametric, Inc.
Witness Systems, a global provider of workforce optimization software and services, announcedthat it has acquired Demos Solutions Consulting Group Ltd. (also known as Demos Solutions) andExametric, Inc., the two leaders in supplying enterprise productivity and resource planning solutions to thefinancial services industry. The acquisitions broaden the revenue opportunity and customer base forWitness Systems, further extending the business valu e of its workforce optimization solutions fromcontact centers to bank branches and ultimately to other areas in the enterprise. The two companies willbe combined and operate as Witness Enterprise Solutions, a group focusing initially on WFO Solutionsfor retail bank branches and operations.
Announcement: October 2 2006Deal Value: $29 Million (Cash plus potential earn out up to $18 million of next three years)
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Corum Q4 Briefing Sample (continued)Security
Public Peer Group (In $U.S. millions except share prices)Stock Stock Market Enterprise
Symbol Company Price Value Value P/E EV/EBITDA EV/S P/E EV/S
CHKP Check Point Software Tech Ltd. $22.08 $5,100.0 $3,910.0 18.54 x 11.91 x 6.85 x 15.33 x 6.35 x
ENTU Entrust Inc. $4.32 $259.1 $228.2 -25.41 x -67.32 x 2.48 x 54.00 x 1.94 xMFE McAfee Inc. $28.31 $4,520.0 $3,360.0 33.31 x 12.05 x 3.08 x 19.00 x 2.75 x
SFNT SafeNet Inc. $24.50 $518.3 $438.4 -2450.00 x 13.30 x 1.53 x 18.56 x 1.39 x
SCUR Secure Computing Corp. $6.64 $428.3 $512.1 -39.06 x 23.86 x 3.30 x 27.67 x 2.04 x
SYMC Symantec Corp. $20.87 $19,580.0 $19,110.0 51.92 x 12.66 x 3.89 x 16.56 x 3.36 x
VRSN VeriSign Inc. $24.23 $5,880.0 $5,340.0 9.01 x 12.90 x 3.42 x 21.83 x 3.47 x
WBSN Websense Inc. $22.88 $1,020.0 $721.4 30.51 x 11.31 x 4.18 x 21.79 x 3.43 x
Median Valuation Multiples 13.77 x 12.35 x 3.36 x 20.40 x 3.06 x
Trailing Multiple Forward Multiple
M&A Transactions
McAfee, Inc. To Acquire Citadel Security Software Inc.
McAfee, Inc. will acquire Citadel Security Software Inc., a leading provider of solutions in security policycompliance and vulnerability remediation. Security risk management is emerging as a high growthopportunity. The acquisition will add to McAfee's suite of products that help enterprises neutralize securityvulnerabilities and reduce risk, giving McAfee a broader capability for security policy complianceenforcement and vulnerability remediation. Highly regulated enterprises, including government and
health-care customers, will especially benefit as McAfee integrates Citadel's automated solutions thathelp enterprises comply with regulatory requirements and internal policies, speed their complianceprocess and minimize threat exposure.
Announcement: October 3 2006Deal Value: $56.15 Million (Cash, plus an estimated $4 million in working capital reimbursement)Seller Revenue: $14.24 ttm
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THE GLOBAL LEADER IN SOFTWARE M&A
Corum LinksVIP Pass for Corum's Selling Up Selling Out Conference
To take advantage of the special VIP offer for this webinars attendees:
1) Go to Corum's conference registration page athttps://www.corumgroup.com/ConferenceRegistration.asp
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Corum M&A Report
http://www.corumgroup.com/ResearchAndReportsregistration.asp
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THE GLOBAL LEADER IN SOFTWARE M&A
Contact Information
Corum Group Ltd.10500 NE 8th Street, Suite 1500
Bellevue, WA 98004USA+1 425-455-8281
Corum Group International S..r.lGeneral Guisan Quai 30CH-8002 ZurichSwitzerland+41 1 251 82 65
www.corumgroup.com