Third Quarter Update Review

8/8/2019 Third Quarter Update Review

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

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


3/26


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


4/26


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


5/26


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

Media

Enter

prise

Applications

Enter

prise

Infrastr

uctur

e

Gaming

Inter

net

ITServices

Se

curity

Wire

less

Vertic

alMarkets

2005 % Deal Volume 2006 YTD % Deal Volume


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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

Media

Enter

priseA

pplic

ations

Enter

priseInfr

astru

cture

Gaming

Intern

et

ITSe

rvices

Security

Wire

less

VerticalM

arkets

2005 % Deal Value 2006 YTD % Deal Value


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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

%DealVolume

Cumulative look at % deal volume per quarter overthe past 8 quarters YTD

Q3 historically weaker than Q4

1st half stronger then 2nd half

* Projected % deal volume assuming deal levels maintain momentumthrough close of 2006

*


8/26


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


9/26


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

Billion

M&A Dollar Volume IPO Amount Raised


10/26


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


11/26


Global Market Place

58% of Corums transactions have been cross-border Atrend we seeing throughout the industry

Data represents transactions since January 2005

Cross Border58%

Domestic42%


12/26


Momentum Continues

Stability strong stock market and Euro will enable moreoverseas 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 balancescoupled with improved revenue growth


13/26


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 IPOs 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


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Source: PricewaterhouseCoopers/Venture Economics/NVCA/MoneyTree survey

VCs Are Actively Backing the Next Generationof 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

$Invested

0

30

60

90

120

150

180

210

240

270

#ofInvestments


15/26


Top Buyers in 2006 Year To Date

Strategic Buyers Active Private Equity Firms*

Microsoft 15 Accel-KKRIBM 12 Apax PartnersOracle 11 Carlyle Group

EMC 9 Francisco PartnersL-3 Communications 7 Golden Gate Capital

Sage Group 7 Silver Lake PartnersCisco Systems 6 Symphony Technology Group

Jupitermedia 6 Thoma CresseyNeoMedia Technologies 6

Accenture 5

Google 5 * Partial List

Kronos 5

Motorola 5

VeriSign 5

70+ Strategic buyers with 2 to 4 transactions


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What Do Buyers ReallyBuy?

Vision

Research

Management

Business Model

Planning R&D Process

Patents

Documentation

Pricing

Support

Market Share

Staff

User Base

Marketing Channels

Alliances

Competitive Position

Technology

Sales Process

Capital Structure

Accounting Policies

Growth

Profitability

Domain Expertise

>> Dont forget the intangibles


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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 andniche market technologies

Mature, profitable companies with strong balance sheet and

install base but slowing growth as targets for consolidation or

private equity (acquisition)


18/26


Corum Transactions

Sectors where Corum has recently completedtransactions

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


19/26


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 sheets

Enterprise Applications

Enterprise Infrastructure

Gaming and Entertainment

Vertical Markets Manufacturing

Financial Services


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Public Markets Reaching New Highs


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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


23/26


Public Valuation Multiples


24/26


Corum Q3 Briefing SampleVertical Market Technology

The Vertical Market applications sector continued to demonstrate strength during the quarter. Total dealcount YTD is up over 40% from the total for all of 2005, with a traditionally strong fourth quarter still tocome. In part, this activity demonstrates the competitive pressure to build market share and fill outproduct suites with the necessary functionality that drives companies to be acquisitive. Along withacquired 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 thedecision was made to build versus buy, so the market for these specialized solutions companiescontinues to thrive.

Some notable transactions that reflect this include:

First Data, a significant player in electronic commerce payments, acquired Peace Software, whichdevelops advanced software for managing utility billing and customer care. This represents a new marketfor First Data, allowing them to expand beyond their traditional market servicing merchant payments andcredit card issuers, and facilitating a broad range of consumer financial transactions. Peace offers highlyspecialized 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, acquiredMAI Systems and its subsidiary, Hotel Information Systems. Softbrands has been on an aggressive paththe 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 movesSoftbrands into a number two position worldwide in the hospitality space. The two firms are also highlycomplementary building on the others relative strength in Europe vs North America, and in chains vsindependents. 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 yoursoftware company. That is especially true if you are a leader or near-leader in your market, candemonstrate growth along with growth opportunities in your sector, are profitable, and have solid, state ofthe art technology.


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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

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Third Quarter Update Review

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