PRIVATE AND CONFIDENTIAL TECHNOLOGY FOCUS. BROAD REACH. OPTIMAL RESULTS.
Private Capital Market Update
2
I. Technology Private Equity Market Update
3
$5.0
$0.5
$5.3
$11.1
$4.2
$2.5
$6.8 $7.2
$8.9 $9.4
$8.4 $8.8
$6.7
$5.7
$10.7 $10.6
$2.6
64 65
79
101 97
59
102
90 88
117
94 92
107 103 103
107
66
0
20
40
60
80
100
120
140
$0.0
$2.0
$4.0
$6.0
$8.0
$10.0
$12.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
Capital Invested ($B) Deal Count
Technology Private Equity Investing Losing Momentum...
TECHNOLOGY PRIVATE EQUITY INVESTING ACTIVITY
Source: PitchBook. Data Includes closed transactions only.
* Capital invested data excludes transactions with undisclosed transaction amounts.
Although Tech PE investing had gained strong momentum in 2012, Q1 2013 saw only
$2.6B invested in technology companies, 60% lower than the year ago period
($B)
4
...As Middle Market Leveraged Lending Trends Improve
The leveraged loan market continues to improve, fueled by low rates and availability of debt
MIDDLE MARKET LEVERAGED CASH FLOW TRENDS
KEY BASELINE INTEREST RATES
Source: Market Intelligence
Rate May 2013 May 2012
Fed Funds Target Rate 0.25% 0.25%
US Prime Rate 3.25% 3.25%
3-Month LIBOR 0.27% 0.47%
Metric May 2013 May 2012
CF Senior Debt (x EBITDA): 1.50 - 2.50x 1.50 - 2.25x
Total Debt Limit (x EBITDA): 3.00 - 4.25x 3.00 - 4.00x
Senior Cash Flow Pricing L+ 3.5% - 4.5% (bank)
L+ 4.5% - 6.5% (non-bank)
L+ 3.0% - 4.5% (bank)
L+ 4.5% - 6.0% (non-bank)
Subordinated Debt Pricing 14.0% - 17.0% 14.0% - 17.0%
"One Stop" Pricing: 10.0% - 12.0% Fixed
L+ 7.5% - 9.0% Floating
10.0% - 11.5% Fixed
L+ 9.0% - 10.0% Floating
Minimum Equity Contribution 25% - 35% 25% - 35%
5
$266 $252 $145 $51 $100 $113
293
247
121 120 137
112
0
50
100
150
200
250
300
350
$0
$50
$100
$150
$200
$250
$300
2007 2008 2009 2010 2011 2012
# F
un
ds C
lose
d
Cap
ita
l R
ais
ed
($
B)
Capital Raised ($B) # of Funds Closed
$43
$64
$51
$26
$71
$93
$0
$100
$200
$300
$400
$500
$600
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2007 2008 2009 2010 2011 2012
Cu
mu
lativ
e O
ve
rha
ng
($B
) Ove
erh
an
g b
y V
inta
ge
($
B)
Cumulative Overhang Overhang by Vintage
Private Equity Capital Remains Near Record Highs
Significant amount of ‘dry powder’ built-up from large fund raises prior to the financial
crisis
PE Fundraising trending toward larger funds as more capital was raised by fewer funds
Source: PitchBook
PE FUNDRAISING BY YEAR
Source: PitchBook
CAPITAL OVERHANG BY VINTAGE
Cumulative Overhang
$348B
PE Firms continue to chip away at the significant amount of ‘dry-powder’ while the
fundraising environment continues to improve
6
$6.4
$0.6 $1.6
$6.4
$10.6
$4.3 $6.3
$12.4
$6.3
$10.1 $10.4
$4.7
$12.5
$7.2
$22.4
$12.9
$7.2
7
15
11
18 24
19
30
37
27
35
29 31
45
22
35
38
29
0
5
10
15
20
25
30
35
40
45
50
$0.0
$5.0
$10.0
$15.0
$20.0
$25.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
Exit Value ($B) Exit Count
Technology Private Equity Portfolio Company Exits on the Decline
TECHNOLOGY PRIVATE EQUITY PORTFOLIO COMPANY EXIT ACTIVITY
Source: PitchBook. Data Includes closed transactions only.
* Total exit value data excludes transactions with undisclosed transaction amounts.
Portfolio company sales posted a weak quarter after finishing 2012 on a strong note.
$7.2B in exit value was recorded in Q1, down 42% from the year ago period
($B)
7
$40
$88
$95
$88 $85
$70
$48
$61
$100
$40
$85
$100
$0
$20
$40
$60
$80
$100
$120
1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 YTD2011
YTD2012
YTD2013
Larger Deals Fueling Strategic Technology M&A Activity
Technology M&A market marked by consolidation from major tech acquirers as they
snap up sector leaders leading to fewer, but larger deals
STRATEGIC M&A MEDIAN DEAL SIZE
Source: PitchBook
NOTABLE CASH POSITIONS
$47.4B
$12.8B
$12.5B
$74.5B
$33.4B
$13.2B
$4.9B
21 $1B+ strategic
acquisitions since
beginning of 2011
$6.5 B
($MM)
8
$0.0 $0.6 $1.7 $0.4 $0.5
$1.0
$2.3
$1.6 $1.1
$4.8
$0.3
$1.6 $1.6
$0.9 $0.7
$1.0
$0.4 0
5
2
3
5
14
12
11
9
17
3
7
12
9
6
5 5
0
2
4
6
8
10
12
14
16
18
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
Amount Raised ($B) IPO Count
Technology IPO Market Dragging, Marked by Caution
Source: PitchBook, CapitalIQ
TECHNOLOGY IPO MARKET
Capital Raised
Excludes Facebook’s
$16B IPO
After a strong start to 2012, the inconsistent / sporadic tech IPO market is beginning to
stabilize, with a number of high profile tech IPOs in registration for the coming months
($B)
9
Recent Significant Technology Transactions
Robust demand and activity in SaaS, e-learning and social media sectors
Interest from PE and strategic buyers driving valuations higher
─ Quest bidding war between Dell and Insight Venture Partners
PRIVATE EQUITY STRATEGIC
August 2012
Has received an
investment from
February 2012
Has been
acquired by
October 2011
Has been
acquired by
December 2011
Has been
acquired by
July 2012
Has been
acquired by
August 2012
Has been
acquired by
May 2012
Has been
acquired by
August 2012
Has been
acquired by
April 2012
Has been
acquired by
December 2011
Has been
acquired by
September 2012
Has been
acquired by
January 2012
Has been
acquired by
December 2011
Has been
acquired by
December 2011
Has been
acquired by
May 2012
Has been
acquired by
June 2012
Has been
acquired by
December 2012
Has been
acquired by
November 2012
Has been
acquired by
May 2013
Has been
acquired by
January 2013
Has been
acquired by
May 2013
Has been
acquired by
May 2013
Has been
acquired by
August 2012
Has been formed by
portfolio companies of
April 2012
Has been
acquired by
10
II. Venture Capital Market Update
11
Overall Venture Capital Investing Remains Stable …
~$6 billion in venture capital invested in Q1 2013, both deal volume and dollar volume
remain below 2011 highs but above 2010 levels
QUARTERLY VENTURE CAPITAL INVESTING ACTIVITY
Source: NVCA, PWC MoneyTree
($B)
$3.8
$5.1 $5.4
$5.9
$5.1
$7.1
$5.4 $5.7
$6.5
$8.2 $7.5 $7.4
$6.3
$7.3 $6.6 $6.7
$5.9
676
760 761
941
817
1,018
883 907 900
1,074
1,010 980
868
960 929
1,013
863
-
200
400
600
800
1,000
1,200
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2009 2010 2011 2012 2013
Capital Invested ($B) Deal Count
12
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13
Seed Early Stage Expansion Later Stage
…Though Later-Stage Deals Continue to Gain Momentum
Later-stage deals continue to gain momentum in the investment community, especially
where capital is used to fuel sales growth
Source: NVCA, PWC MoneyTree
($B)
QUARTERLY VENTURE CAPITAL INVESTING ACTIVITY
13
Stable Fundraising in 2012 / 2013 Increasing the Supply of Capital
$4.1B was raised by VCs in Q1 2013, narrowly below 2012 levels. While still below 2011
highs, fundraising levels have climbed to pre-recession levels
QUARTERLY VC FUNDRAISING
Source: NVCA, PWC MoneyTree
NOTABLE RECENT FUNDS
$3,500M
$2,600M
$2,000M
$1,250M
$900M
$750M
$2,700M
($B)
$3.7
$8.1
$2.7
$2.1
$6.1
$4.7
$6.3
$5.1
$3.3
$4.1
$8.1
$4.7
$4.1
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
4Q'10 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13 YTD2011
YTD2012
YTD2013
14
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
$9.0
1Q'09 2Q'09 3Q'09 4Q'09 1Q'10 2Q'10 3Q'10 4Q'10 1Q'11 2Q'11 3Q'11 4Q'11 1Q'12 2Q'12 3Q'12 4Q'12 1Q'13
Capital
Inflows
Decreasing Momentum in Fundraising and Investing
While VC capital inflows and outflows remain above 2009 lows, both have been under
pressure in recent periods and struggle to regain momentum from 2011 highs
QUARTERLY VC INFLOWS / OUTFLOWS
Source: NVCA, PWC MoneyTree
($B)
Capital
Outflows
15
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1
2010 2011 2012 2013
Software Companies Continue to be Most Attractive Targets for VCs
$2.3B invested in software companies represents 40 percent of all VC invested dollars.
Later stage raisings continue to attract majority of VC
VC
AL
LO
CA
TE
D T
O S
OF
TW
AR
E
SO
FT
WA
RE V
C I
NV
ES
TIN
G
40% of all VC dollars
invested in Q1 went to
software companies
Source: NVCA, PWC MoneyTree
($MM)
$211 $187 $315 $253 $380 $440 $477 $331 $331 $409 $491 $551 $565
$1,027 $1,401 $1,246 $1,477
$1,462 $1,799
$2,179 $2,072
$1,689
$2,421 $2,098 $2,161 $2,327
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1
2010 2011 2012 2013
First Sequence Financing All Other Software Financings
16
Corporate Investors Decreasing Activity in Investing
Corporate VC investing decreased 17 percent yr/yr in Q4 2012 as corporations used
strong balance sheets to return cash to shareholders
QUARTERLY CORPORATE VC INVESTING ACTIVITY
Source: NVCA, PWC MoneyTree
($MM)
$705
$669
$835
$500
$230
$356
$297
$462
$376
$644
$455 $429 $424
$732
$555 $529 $523
$553
$670
$437
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2008 2009 2010 2011 2012
17
Falvey Partners Overview
FOCUS SELECT TRANSACTION EXPERIENCE
December 2011
Has acquired
July 2012
Has been
acquired by
September 2011
Series D
Convertible
Preferred Stock
Led by
September 2012
Has been
acquired by
A portfolio company of
July 2011
Has been acquired
by a portfolio
company of
April 2011
Has been
acquired by
July 2011
Has been
acquired by
February 2011
Growth equity
investment from
July 2011
Has been
acquired by
March 2011
Has divested
its diagnostic
solutions unit
November 2010
Has received an
investment from
A portfolio company of
October 2010
PGI Notify and Send
platforms acquired by
August 2010
Two divisions have been
acquired by a portfolio
company of
April 2010
Has been
acquired by
August 2010
Series C
Convertible
Preferred Stock
Led by
SERVICES
Sell-side or buy-side M&A
Growth capital raising
Board and corporate advisory
SECTOR
Software / SaaS
Tech-enabled business services
IT services
Internet / digital media
COMPANY TYPE
$50M - $250M in enterprise value
Growing, with established scale
Profitable or near-term path to profitability
Falvey Partners is a leading advisory firm serving
mid-market clients across technology sectors
Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team
Falvey Partners professionals have closed dozens of software transactions representing billions of
dollars in transaction value