horizon partners q3 2013 newsletter

Digital Media & Internet

Quarterly Market Update: Q3 2013

Contact Us

Mike Firmage

Managing Director

650.861.9090

[email protected]

I. Executive Summary (3)

II. Sector Trends (4)

III. M&A Overview (9)

IV. Market Performance (16)

V. IPO Overview (21)

VI. Deals Outlook (27)

Sandy Kory

Managing Director

650.776.8806

[email protected]

Allen Carey

Associate

440.554.2129

[email protected]

1821 Union Street San Francisco, CA 941231

Farooq Abbasi

Associate

708.228.7582

[email protected]

Digital Media & Internet Industry Landscape

2

Diversified

Automation/Analytics/SaaS

E

N

T

E

R

P

R

I

S

E

C

O

N

S

U

M

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R

Marketing Technology Digital Media

B2C

Social Networking

Comparison Shopping

Traditional MediaGaming

Online Media

2013’Q3 was the busiest 3rd quarter in the last 5 years as deal volumes registered an uptick with 632 deals. Aggregate deal values stood at $13.4 bn in 2013’Q3, up 86.8% over the same

quarter last year

In the mid-market space, deal volume was flat in 2013’Q3 compared to the previous quarter, and up 64% over the same quarter last year. YTD’2013 saw average deal sizes trending

upward, with 17 upper mid-market transactions (>$500 mn deal value), the highest in the last 5 years

2013’Q3 deals priced at an average EV/Revenue multiple of 3.6x, up from 2.9x in the previous quarter and higher than the 20-quarter average of 3.2x

North America attracted 51% of the global M&A activity; Asia/Pacific, Europe and Latin America exhibited strong increase in dealflow

Executive Summary

3

Sector Trends

2013’Q3 Digital Media & Internet M&A Activity

Market Performance & IPO Activity

S&P Software outperformed the broader NASDAQ and S&P500 indices; this is indicative of an upbeat sector performance. CBOE Volatility Index (VIX) fell to 14.7%, below the one-year

average. Strength in investors’ confidence and interest in the sector continues to stimulate primary market activity

The last two quarters were the busiest quarters for IPOs since the Facebook public offering. Gross offerings stood at $2 bn in 2013’Q3, nearly 2x the offerings’ amount in the previous quarter

In 2013’Q3, IPOs exhibited an impressive performance, registering strong one-day and one-week gains, trending above the five-year averages. The pipeline is strong with announced IPOs

totalling >$2 bn YTD

Developments in online commerce, big data, mobile apps , social engagement, content marketing and video are redefining consumers’ online engagement and hence, creating new ways for

businesses to connect with their audiences

Marketers are perceiving content marketing as a vehicle for long-lasting consumer engagement and effective digital targeting. Content marketers are using a multitude of platforms to

engage target audiences; number of channels used has increased by 50% over the last year

Companies offering content solutions that help consumers navigate the marketplace are partnering with technology companies to deliver innovative offerings that enhance the users’ digital

experience

As cloud services become the center of competition in many IT market segments, SaaS continues to be a hot sector, yielding high trading multiples

II. SECTOR TRENDS

Digital Trends Reshaping the Way Businesses

Engage with Consumers

5

New ways in which consumers engage online and businesses connect with them

Source: Edison Research; Centre for Media Research; Kleiner, Perkins, Caufield and Byers

Digital media publishers are increasing focus on optimizing website content and advertisements for mobile devices

31% growth in worldwide smartphone usage

100 hours of video/minute added on YouTube each day

5 mn photos added on Instagrameach day

14x time spent online via mobile compared to desktop

102 bn app downloads in 2013 (up 60% from 2012)

2 bn user count crossed on Facebook

45% consumers searching for local products use mobile first

Consumer

Engagement…

…Is Driving Online

Media Trends

Marketing analytics solutions are being increasingly used to extract insights from digital information –documents, Tweets, posts, pictures and video

Online businesses and marketers are looking for innovative ways to engage with customers through mobile apps

Consumers frequently use digital word of mouth to make decisions; Social media and review sites become important for marketers

91% of in-house marketers use content marketing; Focus is shifting to the integrated use of multiple online platforms

Video content is increasingly becoming an important medium of communication with target audiences

New ways to access information: trend is emerging in wearable devices, such as Google Glass and Jawbone

Technology Companies Forming Partnerships to

Enhance Consumers’ Experiences

Content providers that help consumers navigate the marketplace are looking for innovative ways to provide a better user experience

Partnerships with emerging cloud-based technologies like Square, Reachlocal, LevelUp, among others allow technology companies to

automate customer acquisition and monetization

6

Select indicative partnerships

Allows Yelp’s site visitors to directly use Booker’s booking capabilities

Allows consumers to pay at ShopKeep POS merchants using PayPal

Integrate Square mobile payments for Angie’s List service providers

Partnership to enable users to book home services directly on Yelp

Allows Facebook users to book restaurant reservations online

Amex rewards and discounts tie-up with Foursquare checkins

Allows consumers to pay at Revel POS merchants using LevelUp

Source: Street Fight Insights

Content Marketing – Capitalizing on Engagement

7

Content rises in priority

18%

6%

29%

32%

27%

29%

32%

54%

37%

21%

3%

9%

12%

21%

21%

22%

22%

33%

33%

37%

38%

36%

Connected TV*

Video Marketing

Marketing Automation

Content Optimisation

Brand Building/Viral Marketing

Social Media Analytics

Integrating Online and Offline Data

Conversion Rate Optimisation

Targeting & Personalization*

Social Media Engagement

Mobile Optimisation

Content Marketing

% of respondents (marketing solution providers) citing the following digital themes as one of their top 3 priorities

2013

2012

Content marketing emerged as a key focus area for marketing

solution providers with a jump to 36% from only 21% a year ago. A

similar result was observed for in-house marketers:

29%

39%

2012 2013

% of respondents citing content marketing as one of the top 3 digital priorities

While social media engagement still ranks highly with 37% of

respondents, it saw a meaningful drop from 54% in 2012. Social

media was a top priority for marketers a year ago – a promising but

unproven channel; it has apparently lost some of that luster in 2013

“The most important opportunity is content, as this pervades all the

digital media that we are using to reach our audiences”

– Adobe’s Digital Marketing TrendsSurvey Responder

*Newly added survey options

Source: Adobe & Econsultancy’s Digital Marketing Trends Survey

Marketing Technologies Driven by Content

Marketers’ Multi-Platform Focus

8

Content marketers use a multitude of platforms to engage target audiencesSo

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87%

83%

78% 77%

71% 70% 70% 69%

61%59%

44%

40%38% 38%

33% 32% 31%29% 28% 27% 26% 26%

35% 34%

20%

11%

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20%

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Digital Media Traditional Print

8

12

2010-11 Avg. 2012

Average Number of Channels Used by a Content Marketer

Source: Content Marketing Institute B2B Marketers’ Survey 2013

III. M&A OVERVIEW

Momentum Building in Digital Media & Internet

M&A Activity

2013'Q3 saw deal volume in the Digital Media & Internet space up 9.5% Q/Q, and up 8.4% over the same quarter last year

In terms of the number of deals, 2013'Q3 was the second busiest quarter in the last 5 years, and the busiest 3rd quarter in the last 5 years

Aggregate deal values were relatively flat from the prior quarter and up 86.8% over 2012’Q3

The average deal raised $84 mn, maintaining the uptrend over the 20-quarter (5-year) average of $54 mn

10

Deal volumes register an uptick in the latest quarter

Source: Capital-IQ; Note: Deals refer to announced deals not cancelled till date

11.5

7.1

3.34.2 3.5 3.6

7.89.8

2.8

6.17.7 7.3

8.7 8.4

19.9

4.96.9

10.6

7.2 6.8

4.2

13.7 13.4

513

480

449

415

357 353371

414

517535

510529

608

567584 581

603

647

583567 555

577

632

0

100

200

300

400

500

600

700

$0

$5

$10

$15

$20

$25

08'Q1 08'Q2 08'Q3 08'Q4 09'Q1 09'Q2 09'Q3 09'Q4 10'Q1 10'Q2 10'Q3 10'Q4 11'Q1 11'Q2 11'Q3 11'Q4 12'Q1 12'Q2 12'Q3 12'Q4 13'Q1 13'Q2 13'Q3

Deal Value in $ bn (LHS) Deal Volume (RHS) Average Annual Deal Value

Mid-Market Deal Volume Stabilizes; Ticket Size

Continues To Rise

2013’Q3 deal volume in the mid-market Digital Media & Internet space was flat compared to the prior quarter and up 64% over 2012’Q3

Aggregate mid-market deal value was down 11% from the prior quarter and up 219% over 2012’Q3

The average mid-market deal raised $161 mn, higher than the 20-quarter (5-year) average of $147 mn

11

Mid-market deal activity off the year’s highs, but remains on an uptrend

Source: Capital-IQ; Note: Deals in range $50-$500 mn are considered Mid Market Deals; Deal statistics refer to deals with disclosed values only

2.2

2.42.2 2.2

1.31.6

2.8

1.9

0.8

2.6

4.3

3.6

2.5

3.8

3.7

2.8

2.0

3.8

1.3

2.41.8

3.32.9

18

16

12

14

8

12

18

11

8

16

28

24

20

23

27

23

14

25

11

18

13

18 18

0

5

10

15

20

25

30

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0


Deal Value in $ bn (LHS) Deal Volume (RHS) Average Annual Deal Value

Larger Deals Boost Average Transaction Sizes

YTD’2013 saw deal sizes climbing up, with 17 deals in the mid-

to-large market space, the highest in the last 5 years

Big ticket deals (>$500 mn) raised $20.2 bn in YTD’2013, up

47% over the same period last year

The average deal raised $73.1 mn in YTD’2013, higher than any

comparable period in the last 5 years

12

Rise in high-value deals… Leading to higher average transaction sizes

Source: Capital-IQ; Note: Deal statistics refer to deals with disclosed values only

465

297400 432 401 364

46

38

5270

5049

7

6

713

1317

YTD'08 YTD'09 YTD'10 YTD'11 YTD'12 YTD'13

Deal Volume

Deals (<=$50 mn) Deals (~$50-$500 mn) Deals (>=$500 mn)

11.56.9 5.6

23.2

13.7

20.2

6.9

5.8 7.7

9.9

7.1

8.0

3.5

2.1 3.3

3.8

3.8

3.2

YTD'08 YTD'09 YTD'10 YTD'11 YTD'12 YTD'13

Deal Values ($ bn)

Deals (>=$500 mn) Deals (~$50-$500 mn) Deals (<=$50 mn)

YTD’08, $42.2 mn

YTD’09, $43.4 mn

YTD’10, $36.2 mn

YTD’11, $71.8 mn

YTD’12, $53.1 mn

YTD’13, $73.1 mn

25

35

45

55

65

75

85

35 45 55 65 75 85 95

Ave

rage

De

al S

ize

($

mn

)

Deal Volume (Deals >$50 mn)

* Bubble Size reflects Deal Value (Disclosed deals > $50 mn)

M&A Activity Marked by Higher Purchase Multiples

2013'Q3 M&A deals exhibited an average acquisition EV/Revenue multiple higher than that of the previous quarter and above the 20-quarter

average of 3.2x

The average revenue size of the acquired company shot up to $368 mn, nearly a 5x increase compared to the previous quarter. Average size

was boosted by EBay's acquisition of Bureau of Trade ($15 bn company), and Blackberry’s deal with ScrOOn ($10 bn company)

The quarter witnessed average target stock premiums (from 1-week prior to announcement) of 25%

13

Acquisition multiples higher than the five-year average

Source: Capital-IQ; Note: Multiples based on non-cancelled deals with reported multiples only

3.4x

5.3x

2.3x

3.8x

2.2x 2.1x

2.9x

1.9x2.2x

2.8x3.5x

3.2x

5.0x

2.6x

5.6x

2.8x3.3x

3.8x 3.5x 3.3x2.9x 2.9x

3.6x

$100

$38 $29 $46 $36

$146$120 $104

$40$72

$29$51

$104$68

$213

$39 $32 $24$47

$108$64 $62

$368


EV/Revenues (LHS) Average Target LTM Revenues (RHS)

2013’Q3 Announced Transactions

14

Source: Capital-IQ

Date Announced Target Acquirer Status Deal Value ($ mn) Target Rev. ($ mn) EV/REV.

Sep 30 The Active Network, Inc. Vista Equity Partners Announced 1050.0 441.3 2.1x

Sep 30 Dongyang Huaer Entertainment Media Co Ltd.Leshi Internet Information and Technology Corporation

Announced 147.0 NA NA

Sep 30 FastConnect SAS Bull Société Anonyme Closed NA NA NA

Sep 30 AdStack, Inc. TellApart, Inc. Closed NA NA NA

Sep 30 Find A Grave, Inc. Ancestry.com LLC Closed NA NA NA

Sep 30 pepperbill GmbH Sky & Sand GmbH Closed NA NA NA

Sep 30 Lainetar Oy Innofactor Plc Closed NA NA NA

Sep 30 Choose Energy, LLC Power2Switch LLC Closed NA NA NA

Sep 30 My New Financial Advisor, Inc. Invested.in Inc. Effective NA NA NA

Sep 30 ScrOOn SA BlackBerry Limited Closed NA NA NA

Sep 30 Funshion Networks Co., Ltd. Bestv New Media Co., Ltd. Closed NA NA NA

Sep 27 Think Design Media Inc., Certain AssetsUbiquity Broadcasting Corporation (OTCBB:UBIQ)

Closed 2.4 NA NA

Sep 26 Braintree Payment Solutions, LLC PayPal, Inc. Announced 800.0 NA NA

Sep 25 Meetic S.A. Match.com, L.L.C. Announced 73.8 223.9 2.4x

Sep 23 VINtek, Inc. Dealertrack Technologies, Inc. Closed 53.4 NA NA

Sep 09 MoPub, Inc. Twitter, Inc. Closed 350.0 NA NA

Sep 05 Grapple Mobile Limited Monitise Create Limited Closed 59.7 NA NA

Sep 04Renesas Mobile Europe Oy and LTE-Related Assets

Broadcom Corp. Closed 164.0 NA NA

Sep 04 OB10 Ltd. Tungsten Corporation Plc Announced 154.9 NA NA

Aug 30 Cumulus Media Inc., 53 Radio Stations Townsquare Media LLC Announced 238.0 NA NA

Aug 23 Omnitracs, Inc. Vista Equity Partners Announced 800.0 NA NA

Select List

2013’Q3 Announced Transactions

15

Source: Capital-IQ

Date Announced Target Acquirer Status Deal Value ($ mn) Target Rev. ($ mn) EV/REV.

Aug 19 Arsys Internet S.L. 1&1 Internet AG Announced 186.8 53.4 3.5x

Aug 19 e-conomic international a/s HgCapital; HgCapital Trust plc Closed 120.6 NA NA

Aug 19 Locu, Inc. The Go Daddy Group, Inc. Closed 70.0 NA NA

Aug 19 NMD Interactive, Inc. Zillow, Inc. Closed 50.0 NA NA

Aug 17 ShopRunner, Inc. Alibaba Group Holding Limited Effective 75.0 NA NA

Aug 13 Jumptap, Inc. Millennial Media Inc. (NYSE:MM) Announced 261.3 63.6 4.1x

Aug 12Digital Generation, Inc., TV Business And Advertising Distribution Business Unit

Extreme Reach, Inc. Announced 490.0 NA NA

Aug 07 Adap.tv, Inc. AOL Inc. Closed 405.0 NA NA

Aug 05 Adam Internet Holdings Pty Ltd iiNet Ltd. Closed 53.4 NA NA

Aug 01 Monoprice, Inc. Blucora, Inc. Closed 180.0 131.1 1.4x

Jul 26 Activision Blizzard, Inc.Leonard Green & Partners, L.P.; Davis Selected Advisers LP; Tencent Holdings Ltd.

Closed 2338.8 4984.0 2.1x

Jul 22 Fortress Paradise Limited China Public Procurement Limited Announced 773.4 NA NA

Jul 19 Host Europe WVS Limited Cinven Limited Closed 668.0 NA NA

Jul 18 LOEN Entertainment, Inc. Star Invest Holdings Limited Closed 236.3 175.0 2.1x

Jul 17 Cineplex Digital Networks Cineplex Inc. Closed 112.3 24.9 4.5x

Jul 17 Quest Resource Management Group, LLC Earth911 Inc. Closed 77.0 131.0 1.2x

Jul 15 91 Wireless Websoft Limited Baidu, Inc. Closed 1847.9 45.2 40.9x

Jul 15 Cupid plc, Casual Dating Businesses Grendall Investment Limited Announced 65.0 NA NA

Jul 10 Voxeo Corporation Aspect Software, Inc. Closed 145.0 NA NA

Jul 03 Opta Sportsdata Limited Perform Group plc. Effective 61.1 16.5 3.7x

Jul 01 Digital Insight Corporation Thoma Bravo, LLC Closed 1025.0 305.0 3.4x

Select List

IV. MARKET PERFORMANCE

Upbeat Market Performance

17

S&P Software outperforms; Low volatility signals higher investor confidence

Source: Bloomberg

S&P Software outperformed the broader NASDAQ and S&P500 indices

90

100

110

120

130

140

150

11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13 11/13S&P 500 NASDAQ Composite S&P Select Software

Index Returns Last 3-month Last 6-month LTM

S&P 500 8.2% 8.4% 32.9%

NASDAQ Composite 10.5% 14.8% 40.5%

S&P 500 Software Industry Index 7.7% 15.0% 43.2%

Low volatility signals higher investor confidence

10.0%

12.0%

14.0%

16.0%

18.0%

20.0%

22.0%

24.0%

11/12 12/12 01/13 02/13 03/13 04/13 05/13 06/13 07/13 08/13 09/13 10/13 11/13

CBOE Volatility Index Average Volatility

Volatility trading in a narrow range below 1-year average; Investor confidence expected to lead to increased capital market activity

Trading Comparables – Digital Media

18

Source: Capital-IQ; Note: All values as of November 21, 2013

Market data Operational Data Trading Multiples

Company % of 52 Market Revenues 2yr Rev. LTM EBITDA EV/Revenues EV/EBITDA

Name Share Price Week High Cap. EV LTM CAGR (%) Margin (%) LTM CY+1 LTM CY+1

All values are in $ mn, except share price and per share data

Digital Media

AOL 44.66 95.1% 3,436 3,374 2,240 0.4% 18.6% 1.5x 1.5x 8.1x 7.2x

Yahoo 36.30 99.0% 36,824 35,092 4,760 -4.2% 24.9% 7.4x 7.9x 29.6x 23.3x

Google 1034.07 98.6% 345,470 297,871 57,386 26.7% 30.7% 5.2x 5.0x 16.9x 13.8x

Trulia 37.50 71.1% 1,399 1,363 115 NA -2.6% 11.9x 9.5x NM NM

TripAdvisor 87.27 96.5% 12,398 12,342 901 20.4% 36.3% 13.7x 13.2x 37.7x 32.9x

Shutterstock 73.24 96.2% 2,564 2,368 217 NA 20.6% 10.9x 10.1x NM 46.5x

LinkedIn 220.61 85.7% 26,342 24,070 1,385 78.2% 12.1% 17.4x 15.8x NM NM

Bankrate 18.94 81.8% 1,922 2,027 428 5.1% 21.8% 4.7x 4.5x 21.7x 17.3x

Demand Media 5.24 53.0% 470 414 401 13.0% 15.8% 1.0x 1.0x 6.6x 4.8x

Facebook 46.70 85.2% 114,640 105,887 6,871 NA 47.5% 15.4x 13.9x 32.4x 23.5x

Gannett 26.46 93.6% 6,030 7,442 5,312 0.0% 20.0% 1.4x 1.4x 7.0x 7.2x

IAC/InterActiveCorp 56.25 96.2% 4,685 4,583 3,064 26.5% 17.6% 1.5x 1.5x 8.5x 7.8x

WebMD Health 38.75 94.8% 1,742 1,665 502 -6.7% 12.2% 3.3x 3.2x 27.1x 13.9x

Yelp 63.93 84.8% 4,444 4,343 203 66.2% -0.3% 21.3x 18.9x NM NM

Zillow 74.98 72.8% 2,920 2,555 174 76.5% -5.5% 14.7x 13.1x NM NM

j2 Global 46.72 83.1% 2,142 2,079 485 23.8% 41.7% 4.3x 4.0x 10.3x 9.1x

RetailMeNot 31.13 78.8% 1,574 1,481 182 NA 34.9% 8.1x 7.4x 23.3x 19.4x

Netflix 348.50 89.6% 20,651 20,016 4,145 19.0% 5.1% 4.8x 4.6x NM NM

Mean 8.3x 7.6x 19.1x 17.4x

Median 6.3x 6.2x 19.3x 13.9x

Min 1.0x 1.0x 6.6x 4.8x

Max 21.3x 18.9x 37.7x 46.5x

Comparables

Trading Comparables – Marketing Technology

19





Marketing Technology

Adobe Systems 56.23 97.0% 28,109 26,465 4,167 1.2% 23.3% 6.4x 6.5x 27.3x 22.1x

Constant Contact 27.03 91.0% 829 722 277 16.4% 8.5% 2.6x 2.5x 30.8x 15.7x

Demandware 55.83 85.7% 1,785 1,675 95 36.9% -15.8% 17.7x 16.5x NM NM

Bazaarvoice 7.38 64.2% 551 476 176 45.1% -17.8% 2.7x 2.7x NM NM

Brightcove 13.91 85.6% 400 366 104 34.9% -5.6% 3.5x 3.4x NM NM

Jive Software 10.56 57.1% 731 624 139 41.5% -38.9% 4.5x 4.3x NM NM

ValueClick 21.21 65.8% 1,416 1,556 684 19.1% 32.7% 2.3x 2.7x 6.9x 7.0x

Web.com 27.85 82.6% 1,327 1,910 473 70.1% 19.2% 4.0x 3.6x 21.0x 12.4x

Responsys 16.26 89.2% 836 728 194 23.0% 6.9% 3.7x 3.6x NM 30.2x

Rocket Fuel 48.15 70.2% 1,580 1,482 195 NA -7.7% 7.6x 6.4x NM NM

Salesforce.com 54.44 93.3% 32,446 34,200 3,760 34.1% 0.2% 9.1x 8.4x NM NM

LivePerson 11.65 76.7% 631 553 173 17.1% 5.4% 3.2x 3.1x NM 27.6x

Marketo 29.46 74.0% 1,119 986 85 NA -42.7% 11.7x 10.4x NM NM

OpenTable 84.00 96.0% 1,955 1,852 181 16.5% 31.3% 10.2x 9.8x 32.7x 22.8x

Priceline.com 1,159.11 99.6% 59,611 55,333 6,443 25.4% 37.4% 8.6x 8.2x 22.9x 21.1x

ReachLocal 12.71 73.1% 353 268 502 18.8% 1.9% 0.5x 0.5x 27.9x 9.3x

Mean 6.1x 5.8x 24.2x 18.7x

Median 4.3x 3.9x 27.3x 21.1x

Min 0.5x 0.5x 6.9x 7.0x

Max 17.7x 16.5x 32.7x 30.2x

Comparables


Trading Comparables – Other Notable Companies

20





Other Notable Companies

Amazon.com 368.92 98.8% 168,867 164,221 70,133 26.8% 4.5% 2.3x 2.2x NM 32.7x

Apple 521.14 87.6% 468,886 445,256 170,910 25.7% 32.6% 2.6x 2.6x 8.0x 8.0x

AVG Technologies 17.48 65.8% 952 936 400 25.2% 33.0% 2.3x 2.3x 7.1x 6.6x

eBay 50.21 86.5% 65,002 59,262 15,510 20.0% 29.7% 3.8x 3.7x 12.9x 11.0x

IBM 184.13 85.3% 199,938 225,976 101,356 -2.4% 25.6% 2.2x 2.3x 8.7x 8.4x

Intuit 73.16 98.9% 20,683 19,521 4,231 5.3% 34.4% 4.6x 4.5x 13.4x 11.6x

Oracle 34.94 95.9% 159,238 144,669 37,371 1.2% 43.5% 3.9x 3.9x 8.9x 7.9x

SAP AG 81.36 93.0% 97,101 99,860 22,646 10.1% 35.0% 4.4x 4.4x 12.6x 12.6x

Microsoft 37.40 97.9% 312,214 248,805 80,370 6.3% 39.0% 3.1x 3.0x 7.9x 7.9x

Mean 3.3x 3.2x 9.9x 11.8x

Median 3.1x 3.0x 8.8x 8.4x

Min 2.2x 2.2x 7.1x 6.6x

Max 4.6x 4.5x 13.4x 32.7x

Comparables


V. IPO OVERVIEW

Buzzing IPO Activity in Digital Media & Internet

2013'Q3 announced IPOs in the Digital Media & Internet space were up 9.5% Q/Q, relatively flat from the prior quarter and up 80% over

2012’Q2

2013'Q3, together with 2013'Q2, were the busiest quarters for IPOs since the Facebook public offering. Gross offerings in 2013’Q3 stood at

nearly 2x the offered amount in the previous quarter

The average IPO raised $123 mn, up from $58 mn in the same quarter last year

22

IPOs remain on an uptrend

Source: Capital-IQ; Note: 2012’Q1 deal value exclusive of the 16 bn Facebook IPO; Deals refer to effective, closed and announced IPOs not withdrawn till date

3.2

0.7

0.10.4

0.2 0.1

1.9

1.1

1.8

2.8

0.9

3.1

1.8

3.4

0.7

2.4 2.3

0.52.5

0.30.6

1.1

2.1

20

27

7

10

7

4

14

10

23

23

15

31

21

28

2324

27

16

10

89

18 18

0

5

10

15

20

25

30

35

$0

$1

$1

$2

$2

$3

$3

$4

$4


Deal Value in $ bn (LHS) Deal Volume (RHS)

Impressive IPO Performance

23

2013'Q3 IPOs Fared Well, Registering Notable 1-Day and 1-Week Gains

Source: Capital-IQ; Note: Deals refer to effective, closed and announced IPOs not withdrawn till date

38%30%

-1%

24%

100%

41%37% 39%

30%

15%

42%35% 39%

18%

45%

28%

38%43%

25%32%

22%28%

64%


Avg. 1-Day Return (%)

54%

20%

-9%

20%

100%

48%

37%33% 33%

13%

41% 42%

31%

15%

40%

23%

33%

50%

28%32%

17%

44%

65%


Avg. 1-Week Return (%)

2013'Q3 IPOs registered the best average one-day performance in the last 18 quarters

2013”Q3 IPO Avg. 1-Week gain nearly 3x that in same period last year

20-Quarter Average37%

20-Quarter Average37%

Vibrant IPO Activity Marked by Well-Performing

Offerings

24

Source: Capital-IQ

Date Announced Company Offering Size ($ mn) IPO Price/Share ($) 1-Day Performance Business

Sep 23, 2013 OzForex Group Limited 416.0 1.89 28.0% Online foreign exchange services

Sep 06, 2013 Macromac 0.8 0.16 50.0% Mobile messaging platform

Aug 26, 2013 RingCentral 97.5 13.00 - SaaS solutions for business communications

Aug 16, 2013 Rocket Fuel 116.0 29.00 93.5% Artificial-intelligence digital advertising solutions

Aug 14, 2013 Benefitfocus 130.8 26.50 102.1% Cloud based solutions for insurance carriers

Aug 13, 2013 CentralNic 10.8 0.85 19.1% Domain name registry services

Jul 31, 2013 RapidCloud International 1.6 0.83 28.7% SaaS solutions for Web and mobile online applications

Jul 23, 2013 99 Wuxian 18.9 0.38 12.5% Mobile online marketplace

Jul 08, 2013 Cvent 117.6 21.00 - Online events and meetings

Jul 02, 2013 YuMe 46.1 9.00 - Digital video brand advertising solutions

Jul 01, 2013 Control4 Corporation 64.0 16.00 - Automation and control solutions for the connected home

Jun 17, 2013 RetailMeNot 190.9 21.00 - Digital coupon marketplace

Jun 06, 2013 Photocreate 3.3 16.51 130.2% E-commerce platform for event photos

May 23, 2013 Tremor Video 75.0 10.00 -10.0% Technology-driven video advertising solutions

May 14, 2013 Covisint Corporation 64.0 10.00 23.1% Business process management platform

May 09, 2013 Outsourcery 19.2 1.66 15.0% Mobile virtual service provider

May 06, 2013 SLI Systems 21.5 1.20 18.7% site search and navigation technology provider

Apr 17, 2013 Ymagis Société Anonyme 15.2 10.07 -8.5% Digital cinema solutions for exhibitors and distributors

Apr 11, 2013 Liquid Holdings Group 28.6 9.00 - Trading and real-time risk management solutions

Apr 11, 2013 ChannelAdvisor 80.5 14.00 31.7% E-Commerce channel management

Apr 05, 2013 Textura Corporation 75.0 15.00 39.4% Online collaboration platform for the construction industry

YTD’2013 Closed IPOs

Vibrant IPO Activity Marked by Well-Performing

Offerings (Contd.)

25

Source: Capital-IQ

Date Announced Company Offering Size ($ mn) IPO Price/Share ($) 1-Day Performance Business

Apr 04, 2013 Cyan 88.0 11.00 1.0% Carrier-grade networking solutions

Apr 02, 2013 Marketo 78.8 13.00 77.7% Cloud-based marketing software platform

Apr 02, 2013 Tableau Software 254.2 31.00 63.7% Business analytics software products

Apr 02, 2013 Halogen Software 55.0 11.47 - SaaS based talent management solutions

Mar 22, 2013 Aucfan 8.4 26.15 130.0% Online auction services

Mar 21, 2013 SoMedia Networks 3.1 0.81 5.9% Cloud-based video content platform

Mar 11, 2013 Rally Software Development 84.0 14.00 27.2% Software lifecycle management solutions

Feb 19, 2013 Starcom 4.1 0.30 12.5% Remote tracking and fleet monitoring solutions

Feb 15, 2013 Broadleaf 213.4 11.36 37.0% After-market automobile software solutions

Feb 14, 2013 MC-link 3.4 10.08 - Voice, Internet, data and managed services

Feb 13, 2013 Marin Software 105.0 14.00 16.1% Cloud-based digital advertising management platform

Feb 13, 2013 Model N 104.5 15.50 - Revenue management solutions

Jan 11, 2013 Xoom Corporation 101.2 16.00 - Consumer-to-consumer online money transfers services

Dec 26, 2012 Mono Technology 91.8 0.37 4.4% Digital content and services

Nov 28, 2012 GankIt 0.1 0.01 - E-Commerce bidding website

Oct 24, 2012 Energizer Tennis 0.0 0.04 - Resources for tennis players

Aug 13, 2012 Just Dial 154.2 8.62 - Local services' search platform

May 22, 2012 Professional Diversity Network 21.0 8.00 - Professional networking site and job board

Dec 22, 2011 Gogo 187.0 17.00 -5.9% In-flight digital entertainment solutions

Oct 02, 2009 West Corporation 425.5 20.00 - Technology-driven communication services

YTD’2013 Closed IPOs

IPO Pipeline Encouraging

26

Source: Capital-IQ

YTD’2013 Announced IPOs

Date Announced Company Logo Offering Size ($ mn) IPO Price/Share ($) Business

Sep 30, 2013 Qunar Cayman Islands 125.0 - Online travel commerce and advertising platform

Sep 27, 2013 58.com 150.0 - On-line classified advertisement services

Sep 18, 2013 Criteo 187.2 23.00 to 26.00 Advertisement analytics

Sep 09, 2013 Endurance International 374.2 14.00 to 16.00 Cloud-based marketing solutions

Oct 10, 2013 Twitter 1,400.0 17.00 to 20.00 Online microblogging platform

Aug 27, 2013 Globant 86.3 - Content management systems, marketing solutions

Aug 14, 2013 Chegg, 150.0 - Student-first connected learning platform

VI. DEALS OUTLOOK

Optimistic Outlook for Deals

28

Strategic Transactions and Strong Buyer Interest to Drive Deal Activity

Source: Mtech Advisors

Technology Companies to Stay in Demand

As technology players continue to challenge conventional operating models, larger companies will snap up emerging innovative players in the Digital Media and Internet space

The trend in acquisitions at high multiples is expected to continue

Marketing Automation & SaaS Attractive

The prevalence of marketing automation is accelerating. Increasing focus by digital marketers and local companies on automating certain aspects of their workflow is expected to be one of the major drivers for M&A

Cloud computing continues to be a bright spot, with software as a service (SaaS) companies specifically being a hot target for high-multiple deals

Consolidation among Marketing Agencies

There has been a substantial increase in interactive/digital marketing agencies in the past five years

Such businesses will continue to experience consolidation, similar to the “dot com” experience a decade ago

Industry-Focused and Content Marketing Companies to Garner Interest

Companies with an industry-specific focus (healthcare, insurance, retail, communications and financial services among others) will attract much strategic investor interest

Given the increased focus by enterprises on content marketing, an opportunity exists for vendors with proven track records and quantifiable ROI across multiple channels such as search, display/web, social, mobile, e-mail, video

Buzzing Primary Market Activity

Capital market activity is expected to be vibrant as fresh companies pique investor interest

The IPO pipeline is strong with over $2 bn in announced IPOs YTD, including the much anticipated Twitter IPO

29

Digital Media Interactive Marketing Mobile Software

horizon partners q3 2013 newsletter

Business

quarter average

market segments

content marketing

upbeat sector performance

average deal sizes

midmarket space

hot sector

consumers online engagement