jefferies domainfest global 2007
TRANSCRIPT
Jefferies BroadviewA division of Jefferies & Company, Inc.
DOMAINfest Global 2007
February 2007
CONFIDENTIAL DRAFT
Member, SIPC
Ask the Experts: Venture Capital & Technology Overview
Global Investment Banking Franchise
A leading institutional brokerage and investment banking firm – led by one of the most powerful capital markets trading platforms in the industryPrincipal operating subsidiary of Jefferies Group, Inc. (NYSE: JEF), a holding company with an equity market capitalization of over $3.5B, $1.5B in 2005 revenue and 2,000 employees in over 25 offices worldwide“Investment grade” ratings by Standard & Poor’s and Moody’s#1 performing investment bank by stock price(2), with over 50% employee ownership, over the past 10 yearsSince 2005 Jefferies has executed 129 equity offerings raising in excess of $30B
San Francisco
Los AngelesDallas
HoustonNew Orleans
Chicago
Nashville
Atlanta Richmond
Boston
StamfordNew York
Jersey CityWashington
LondonParisZurich
Tokyo
Sydney*Melbourne*
Silicon Valley
Israel*
Waltham
Cities in blue indicate Jefferies Broadview locations* Indicates Affiliates
Since 1998, Jefferies has advised on(1):
544 technology transactions globally worth approximately $72.0 billion
189 cross-border transactions
137 public-to-public transactions
Denver
(1) As of 12/1/2006.(2) Wall Street Journal, April 2006.
Investment Dealers Digest
2005
Middle Market
Bank of the Year
Shanghai
Mumbai
Hong Kong
Dubai
Singapore
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Jefferies Delivers The Full Spectrum Of Products And Services ToTechnology Clients
Investment Banking
Leading banking franchise focused on high growth companies with over 400 Investment Bankers (90 in technology) in over 25 offices worldwide
Equity Offerings – Completed approximately 300 public equity offerings in the past 10 years
M&A – Ranked #1 in technology M&A advisory assignments in 2005 and 2006(1)
Private Equity – Regular dialogue and relationships with over 250 financial sponsors
Restructuring – Restructured approximately $150B in securities and liabilities
Equity
Over 135 institutional salespeople that cover over 2,200 institutional accounts; make markets in nearly 3,500 stocks
#2 volume trader of NASDAQ and OTC stocks in 2006(2); top 5 trader in nearly 1,700 NASDAQ stocks
79 research analysts covering over 1,100 companies
Debt
Dedicated high yield team of over 40 experienced senior professionals
Integrated sales, trading, research, capital markets and banking functions
#1 underwriter of mid-cap high yield debt(3); led by team that joined Jefferies from Drexel Burnham Lambert
Jefferies Finance LLC –Commercial bank with nearly $2B in capital
Offers A Full Suite Of Investment Banking Products And Services To Serve High Growth Companies Throughout The
Corporate Lifecycle
Asset Management
Private Client Services / Cash Management – Advisory, portfolio management and customized financial solutions
Jefferies Capital Partners – More than $685MM in private equity funds under management
Investm
ent Bankin
g
Equity
Asset ManagementDebt
Cash Management
Capital Partners
High Yield
PrivatePlacements
Structured Finance
Trading
Sales
Research
Capital Markets
IndustryCoverageMergers
andAcquisitions
FinancialSponsors
Restructuring
Private ClientServices
Bank Lending
(1) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals.(2) Source: Autex. Ranking amongst investment banks; 1/1/2006 – 12/31/2006 (2006). (3) Source: SDC, 1/1/06-9/30/06. Excludes split rated, mortgage and asset-backed securities. Full credit to lead manager, equal if joint.
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The Investment Bank Of Choice For Growth Companies
Jefferies Broadview’s team of 90 Bankers is one of the largest dedicated to the technology industry
#1 Technology M&A Advisor in 2005 and 2006 (YTD)1,2
#2 Sales and Trading Platform for NASDAQ stocks3
Leading Issuer of Debt for Digital Media and Software companies
“There is a hole in the marketplace where the Four
Horsemen have gone. Jefferies has a chance to fill
it. They always had great trading and great
distribution. Now they’ve got the whole puzzle.”
— Sandy Robertson, founder Robertson Stephens
New York Times
($ in Millions)
6Merrill Lynch
5Bear Stearns
4Morgan Stanley
3Citigroup
2
1UBS
RankBroker
2005 NASDAQ Trade Volume 3
6
5
4
2Jefferies & Company
1UBS
RankBroker
2006 NASDAQ Trade Volume 3
8Deutsche Bank
5 40Citigroup6 40Morgan Stanley6 38Goldman Sachs8 37Houlihan Lokey
44
# of Deals
8Rothschild
4JP Morgan3UBS2Credit Suisse1Jefferies & Company
RankFinancial Advisor
2006 Technology M&A League Table 1
8 31Deutsche Bank
5Citigroup6Morgan Stanley6Goldman Sachs8Houlihan Lokey
28
41465055
# of Deals
8Rothschild
4JP Morgan3UBS2Credit Suisse1Jefferies & Company
RankFinancial Advisor
2006 Technology M&A League Table 1
Jefferies & Company
Lehman Brothers
UBSJPMorganHoulihan LokeyCredit Suisse
Merrill Lynch
Morgan StanleyCitigroupGoldman Sachs
2005 Technology M&A League Table 2
20
24222220
283037
20
24222220
20
283037
9
5578
10
4321
(1) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. January 1, 2006 to September 29, 2006.(2) Source: SDC. All announced North America and Western Europe technology deals with transaction value less than $1B excluding bio-tech and telecom deals. January 1, 2005 to December 31, 2005.(3) Source: Autex. Ranking amongst investment banks; 1/1/2006 – 12/31/2006 (2006).
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Web Content / Services Mobile Content
Online Marketing / Lead Generation
eCommerce
With Leadership In Digital Media And Internet Investment Banking
Financial Advisor to the Seller
November 2005
€180,000,000valuing the Company at
has sold an equity stake to
April 2004
has been acquired by
Financial Advisor to the Seller
€475,000,000$78,000,000
March 2005
Initial Public OfferingCo-Manager
August 2006
$95,310,000Initial Public Offering
Co-Manager Financial Advisor to the Seller$29,000,000
March 2006
has sold a majority stake to
May 2006
$30,000,000144A Block TradeSole Bookrunner
May 2006
Financial Advisor to the Seller
Confidential
has been acquired by
September 2006
$87,000,000Initial Public Offering
Co-Manager
Financial Advisor to the Seller
Confidential
December 2005
has been acquired by
July 2006
$130,000,000Financial Advisor to the Company
September 2006
has agreed to acquire
Motorola, Inc.
BroadbusTechnologies, Inc.
ConfidentialFinancial Advisor to the Buyer
May 2006
$113,189,000Follow-On Offering
Co-Manager
$207,000,000Follow-On OfferingJoint Bookrunner
March 2006
has been acquired by
Financial Advisor to the Seller
December 2005
Confidential
July 2004
$75,900,000Follow-On OfferingCo-Manager
May 2006
Financial Advisor to the Seller
Confidential
has been acquired by
May 2006
$87,500,000Follow-On Offering
Co-Manager
September 2005
$138,000,000Initial Public Offering
Co-Manager
Financial Advisor to the Seller
Confidential
April 2006
has been acquired by
Financial Advisor to Seller
January 2006
has been acquired by
€115,000,000
SearchOctober 2004
has been acquired by
Financial Advisor to the Seller
Confidential
Financial Advisor to the Seller
$353,500,000
October 2006
RealNetworks , Inc.
has agreed to be acquired by
has been acquired by
ConfidentialFinancial Advisor to the Seller
January 2007 May 2005
$85,000,000Senior Credit Facility
Financial Advisor
Who Have We Helped?Online Marketing: aQuantive, BankRate, Kelkoo, etc.
eCommerce: Shutterfly, VistaPrint, etc.Mobile: WiderThan, Musiwave, etc.
Content Distribution: LimeLight, etc.
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All Major Sectors Of The Internet Continue To Experience Strong Growth And Convergence
Jefferies Broadview Internet Market Taxonomy
180solutions ($40MM), Demand Media ($120MM & $100MM), DoubleClick ($1.2B), Double Fusion ($26MM), Right Media ($45MM), Spot Runner ($40MM)
RazorGator ($25MM), Glam Media ($18.5MM),Zappos ($20MM), HomeAway ($160MM), WrenchHead.com ($18MM)
FaceBook ($25MM), Topix.net ($15MM), PodShow($15.5MM), Red 5 Studios ($18.5MM), BrightCove($60MM), Heavy ($20MM)
Notable VC/PE Investments
ValueClick / FastClick, WebClientsExperian / LowerMyBills, PriceGrabberPublicis Groupe / Digitas
Liberty Media / Provide Commerce eBay / Verisign (assets), Shopping.com, Skype
NBC Universal / iVillageNews Corp / IGN, MySpaceGoogle / YouTube
Notable M&A Transactions
28%114%228%1Projected Growth Rate
Website Pros, FastClick, Interchange, OmnitureVistaPrint, LoopNet, Gmarket, InnerWorkings, Shutterfly, eHealthInsuranceWebMD, Baidu.com, PlanetOut, Traffic.com (Acquired)Notable IPOs
Leaders: aQuantive, ValueClick, DigitasContenders: 24/7, Marchex, MIVA, OmniturePrivate: Demand Media, Exponential, VendareNetBlueMedian 2006E TEV / Revenue: 2.9xMedian 2006E TEV / EBITDA: 17xMedian 2007E Revenue Growth: 21%
Leaders: Amazon, eBay, InterActiveCorpContenders: Netflix, Overstock, Monster, PricelinePrivate: HomeAway, Zappos, RazorGatorMedian 2006E TEV / Revenue: 1.6xMedian 2006E TEV / EBITDA: 20xMedian 2007E Revenue Growth: 19%
Leaders: Google, Yahoo, AOL, MSNContenders: TheStreet, CNET, BankRatePrivate: FaceBook, MyFamily, Reply Median 2006E TEV / Revenue: 3.4xMedian 2006E TEV / EBITDA: 20xMedian 2007E Revenue Growth: 21%
Representative Companies
& Median Multiples
$26 billion in 20061$170 billion in 20062$26 billion in 20061Market Size
Providers of technology and services focused on delivering messages to consumers on behalf of advertisers and direct marketers via the Internet
Consumer facing shopping destinations that either sell direct or match buyers and sellersIncludes both physical (books & CDs) and non-physical (travel & finance) ecommerce and subscription online services
Consumer facing Internet destinations providing content and services to a community of usersBusiness model is primarily advertising-supportedAdvertising formats can include search, banner, rich media, classifieds, etc.
Market Definition
Interactive Marketing ServicesOnline CommerceDigital Media
(1) Jefferies research.(2) eMarketer.
Convergence Is The Name of the Game!
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($Millions)
(1) Online marketing and domain name companies are highlighted.(2) Lead investors are in bold.
With Substantial Capital Chasing Relatively Few High Quality Opportunities, The Number Of $20MM+ Investments Has Increased
Internet Venture Investments Greater Than $20 Million Since 1/1/06
“Hot” Sectors:Next generation advertising and lead networksOnline video and rich media content and distributionOrganic traffic (e.g., domain aggregators, social networks)International (e.g., China, Korea, India)Consolidation themesB2B
Date Company(1)Amount Raised
($MM) Investor(s)(2)
Dec-06 Heavy $20.00 Polaris Venture Partners, Jacobsen InvestmentsDec-06 Double Fusion $26.00 Norwest Venture Partners, Accel, IDG Ventures, Sedona CapitalDec-06 Venda $20.00 Investor Growth CapitalNov-06 BitTorrent $20.00 Accel, DCMNov-06 Slide $20.00 Kohsla Ventures, Mayfield FundNov-06 HomeAway $160.00 Austin Ventures, Redpoint, American Capital, IVP, Trident CapitalOct-06 Spot Runner $40.00 WPP, CBS, Interpublic GroupOct-06 Jingle Networks $30.00 Goldman Sachs, HearstOct-06 Right Media $45.00 Yahoo!Sep-06 Demand Media $100.00 3i, Oak Investment PartnersSep-06 Handango $60.50 Institutional Venture Partners, Advanced Technology PartnersAug-06 ChinaCars $25.00 Goldman Sachs GroupJul-06 Digital Chocolate $22.50 Bridgescale Partners, DN Capital, Sequoia Capital, Outlook VenturesJul-06 Zillow.com $25.00 PAR Capital Management, TCV, Benchmark CapitalJul-06 CinemaNow $20.30 EchoStar Communications, Index Holdings, Menlo VenturesJul-06 CacheLogic $20.00 Amadeus Capital Partners, 3i, Pentech VenturesJul-06 DangDang.com $27.00 DCM, Alto Global Investment, IDG Ventures, Rakuten, Softbank ChinaJun-06 HomeAway $39.00 Austin VenturesJun-06 Global Market Insite $35.00 TCV, FT Ventures, Voyager Capital May-06 DemandMedia $120.00 Oak Investment Partners, Generation Partners, Spectrum Equity InvestorsApr-06 FaceBook.com $25.00 GreyLock, Meritech CapitalMar-06 AdKnowledge $48.00 TCVMar-06 CoreMetrics $31.00 FT Ventures, Accel, Highland, Mar-06 US Auto Parts $45.00 Oak Investment PartnersFeb-06 Claria $40.25 Softbank Capital, Sand Hill Capital & Rogers CommunicationsJan-06 Innerworkings $50.00 New Enterprise AssociatesJan-06 Webpay $24.30 3iJan-06 Revenue Science $24.00 Meritech Capital, Integral Capital, Mayfield, Mohr Davidow
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Venture Capital Investments In Internet And Digital Media Have Been Explosive, With Interactive Marketing Leading The Way
Venture Capital Investments Since January 2005
eCommerce18%
Social Media & User Generated Content
19%
Interactive Marketing33%
Domain Names9%
Other Internet & Digital Media
21%VCs continue to pour capital into Internet and Digital Media at a rapid pace
Approximately 2-3 deals per day since Jan 2005
Total invested capital in excess of $3.5 billion!
Mini-bubble in certain sectors?
Source: Dow Jones VentureSource. 7
Internet Media & Services M&A Transactions (2003 – 2006YTD) > $20MM
Internet M&A Saw A Substantial Pick-up In 2004-2005, But Activity Trailed Off Last Year
Q1 Q2 Q3 Q4
2003 2004 2005
5 5
3
11 12 1214
12
1916
20
26
1.9x
4.1x
1.7x 2.1x3.3x 2.8x
3.1x
6.5x
3.4x 3.4x
4.8x3.7x
0
5
10
15
20
25
30
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q40.0x
4.0x
10.0x
Median TTM TEV / R
2006200520042003Quarter
EW Scripps / uSwitch ($366)United Internet / Web.De ($442)eBay / Mobile.de ($152)Lasminute.com / Holiday Autos ($65)
Google / DMARC Broadcasting ($670)Interactive Corp / Ask Jeeves ($1,781)Yahoo! / Kelkoo ($577)Overture / Altavista ($140)
Quarter 1
Alliance Data / DoubleClick Email Mktg. ($90)New York Times / About.com ($410)MemberWorks / LavaLife ($117)
John Fairfax / TradeMe ($466)Interactive Corp / Cornerstone ($720)FindWhat / eSpotting Media ($179)Overture / Fast Search & Transfer ($85)
Alliance Data Systems / Abacus ($435)Liberty Media / Provide Commerce ($417)eBay / MarktPlaats ($290)Drugstore.com / International Vision ($56)aQuantive / Accipiter ($30)Yellow Pages Group / Trader Media ($379)Marchex / NameDevelopment ($164)ValueClick / Commission Junction ($37)
Google / YouTube ($1,650)Bet&Win.com / OnGame E-Solutions ($569)Dow Jones / MarketWatch ($462)T-Online / Scout24 ($220)
Quarter 4Navteq / Traffic.com ($157)Experian / PriceGrabber ($485)eBay / Rent.com ($415)Yahoo! / 3721 Network Software ($120)
Publicis Groupe / Digitas ($1,020)Industri Kapital / WehKamp ($456)Cendant / eBookers ($330)Interactive Corp / Transat At Inc ($63)
NBC Universal / iVillage ($657)Telefonica / Terra Lycos ($1,714)Ask Jeeves / Interactive Search ($335)Rank Group / Blue Square ($105)
Microsoft / Massive Gaming ($300)Hellman & Friedman / DoubleClick ($1,206)AOL / Advertising.com ($387)USA Interactive / Lending Tree ($710)
Quarter 2Viacom / Xfire ($102)Sabre Holdings / Lastminute.com ($1,132)aQuantive / SBI.Razorfish ($160)eBay / Eachnet ($224)
DMGT / Allegran & Data Media ($86)EW Scripps / Shopzilla ($525)Monster Worldwide / Jobpilot ($105)Deutsche Telekom / T-Online ($101)eBay / Tradera ($48)eBay / Shopping.com ($521)Monster Worldwide / Tickle ($74)Roxio / PressPlay ($39)
aQuantive / Franchise Gator ($22)Experian / LowerMyBills ($380)DoubleClick / Performics ($62)RealNetworks / Listen.com ($36)
The Irish Times / MyHome.ie ($57)eBay / Skype ($2,600)Cendant / Orbitz ($1,032)Yahoo! / Overture ($1,442)
Quarter 3Viacom / AtomShockwave ($200)News Corp / IGN Entertainment ($650)Interactive Corp / eLong ($321)Interactive Corp / Hotwire ($685)
Sony / Grouper ($65)News Corp / Intermix Media ($580)Priceline / ActiveHotels ($161)Barnes & Noble / B&N.com ($328)Conde Nast / Wired.com ($25) Rakuten / LinkShare ($425)Yahoo! / MusicMatch ($160)
WebMD / Medsite ($41)Banco Popular / E-Loan ($296)Digitas / Modem Media ($137)
Representative Transactions (Consideration $MM)
Q1 Q2
16
2.0x
6.0x
8.0x
4.3x
Q3 Q4
Num
ber o
f Dea
ls
Median TTM TEV / Revenue
2006
74.4x
6
5.2x
3.2x
5
8
Observations:M&A driven by combination of “Fear” and “Greed”Valuation based on “Build vs. Buy”M&A started off Hot from 2003 to 2005 but then trailed off in 2006High multiple deals done by mega-Internet companies (GOOG, YHOO, EBAY) or Diversified Media companies (NWS, LM)Currently in M&A 2.0 phase…more to come!
Serv ices13%
EMS5%
Semis29%
New Media21%
Comm. Equipment
18%Softw are
11%
Computer Equip.
3%
Technology IPO Market Conditions Have Started To Improve
Sector Breakdown (LTM)
Quarterly Technology IPO issuance
Aftermarket Performance (LTM)
IPO pricing performance vs. range
Average P/E multiples by Quarter
Source: Dealogic / CapIQ
10
7
98
14
9
$0.0
$500.0
$1,000.0
$1,500.0
$2,000.0
Q3 '05 Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06
Amou
nt R
aised
($M
M)
42.9%
12.5%
55.6%
14.3% 10.0%
14.3%
12.5% 10.0%
14.3%
37.5%
14.3%12.5%
11.1%
12.5% 22.2%
57.1%
20.0%
14.3% 12.5% 11.1%28.6%
60.0%
0%
20%
40%
60%
80%
100%
Q4 '05 Q1 '06 Q2' 06 Q3' 06 Q4' 06
% p
ricin
g re
lativ
e to
mid
poin
t
Below Bottom Within Mid Top Above
28x23x
17x
30x
23x18x
31x29x33x 32x30x
43x
18x
42x
26x
0x5x
10x15x20x25x30x35x40x45x50x
Q4 '05 Q1 '06 Q2 '06 Q3 '06 Q4 '06
Aver
age
P/E
mul
itple
Forw ard PE at f iling Forw ard PE at pricing Forw ard PE at T+1
6 5
1
23
0
4
8
12
16
20
24
28
<-15% -15% - 0% 0% - 15% >15%Performance in aftermarket (offer / current)
# of
IPOs
Average aftermarket performance: 30.9%
Tech IPO environment very similar to that of the mid 1990s before the dotcom boom
9
Internet IPOs have been few and far between:Totals: 2004 2005 2006Marketing 6 3 3Other 14 5 6
200620052004
Online Marketing Services Companies Represented 30% Of NASDAQ Internet IPO Activity In 2004-06
* Forward P/Es at IPO are shown in parenthesis next to each company’s name.
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Fastclick (18x) Baidu.com (47x) Website Pros (29x)
Hurray! (9x)Gravity (20x)Odimo (NM)
WebMD (46x)VistaPrint (40x)
6
3
3
1
12
1
3
1
1
Traffic.com (NM)Digital MusicGroup (NM)
LiquidityServices (44x)
Gmarket (23x) InnerWorkings (31x)
Shutterfly (48x)
Loopnet (27x)Omniture (NM)
eHealth (22x)
3
3
1
2
3
21
12
10
2
4
6
8
10
12
Q1 Q2 Q3 Q4
Marchex (23x) Google (39x)WebSideStory
(37x)
Interchange (NA)Shopping.com
(25x)HouseValues
(34x)Marketing*
Other*
LinkTone (NA)Tom Online (17x)
Shanda (13x)Blue Nile (32x)
Kongzhong (13x)eCOST.com (NA)JAMDAT (28x)51job (NA)
PlanetOut (48x)China Finance
(30x)eLong (NM)zipRealty (32x)Inphonic (29x)The9 (NA)
2
1
3
2
2
2
6
46
3
9
10
Industry Predictions For 2007 and Beyond
Venture CapitalNew advertising technologies which better monetize online video / rich
mediaTechnologies that create new ad inventory (e.g., advergaming)Search technologies that optimize better than natural language searchLead generation and CPA or CPS based platformsInternational: China and Korea
Mergers And AcquisitionsConvergence between different ad units, media and agenciesDiversified media continuing to invest, buy online media and technologiesTechnology R&D to assist in online marketing arms raceInternational: Cross-border investment and M&A
Capital MarketsIPOs for many large private interactive marketing service companiesFollow-on and debt offerings by public players to consolidate the market
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NYSE: JEFwww.jefferies.com
www.jefferiesbroadview.com
Questions?
David A. Liu Managing Director
12