Corum Group Ltd.www.corumgroup.com

SIIA - On-demand Europe 2008Software Industry M&A Market UpdateJune 10, 2008

SaaS in the Economic Storm

Bellevue Boston Houston London Mexico City Munich Oslo Paris Philadelphia Phoenix Portland Santa Clara Toronto Zurich

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Middle Market Software M&A Specialists

M&A specialists since 1985

Software and IT experts – mostly former CEOs

Publisher of industry-leading M&A research

Host of Selling Up Selling Out conferences / M&A workshop series

Dominant North American and European presence

60%+ cross-border transactions

Platinum sponsor of World Financial Symposiums – Silicon Valley, Boston, London

$6 billion in wealth created

200+ transactions completed

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Headlines Tell the Story

“Can M&A’s Best Times Get Better?”Wall Street Journal, January 2007

“Money is Everywhere – But for How Long?”Wall Street Journal, January 2007

“Stock Surge + Bond Boom = M&A Magic”Wall Street Journal, April 2007

“As Deal Barriers Fall, Takeover Bids Multiply”Wall Street Journal, May 2007

“M&A – The Best Investment Game in Town”Moneyextra.com UK, May 2007

“Market Pressures Test Resilience of Buyout Boom”Wall Street Journal, June 2007

“Dry-Up in Debt Won’t Deter Tech Deals”Barron’s, September 2007

“Time to Celebrate; 2007 Breaks M&A Record”Wall Street Journal, October 2007

“M&A Seen on the Brink After Record 2007”Reuters, December 2007

“Tech Cos Seen Going M&A Route, Not IPO in 2008” Reuters, December 2007

“IT Spending Growth Expected to Slow in 08”InformationWeek, December 2007

“Bear Stearns’ No. 1 Foe: Fear Itself”CNN Money, March 2008

“Deal Making: It Shall Return” Wall Street Journal, May

2008

“Let’s Still Make a Deal” Business Week, June

2008

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Current Market Conditions

Global economic infrastructure in disarray

Difficultly borrowing money

IPO markets are dead

Many are struggling

Worries about depth of recession

Concern over inflation

Price of oil up

Troubled housing market

Consumer confidence low

Unemployment up

Cost of food and consumer goods rising

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The Silver Lining

On the plus side: Technology revenues remain strong

Earnings remain positive

Forward analyst estimates look good

Lending requirements loosening

PE buyers see opportunity in the coming months

PE and VC investors raising new funds

International markets remain strong

No buyers saying “we’re pulling back”

Large cap stocks up

Strong cash reserves

M&A has become operational

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Company Stock Price 6/01/2007

Stock Price 6/0/2008

% Change Year AgoCash

Current Period Cash

Sun $5.18 $12.94 149.81% $4,114 $3,027

Apple $118.40 $186.10 57.18% $12,557 $19,448

IBM $106.54 $127.36 19.54% $11,935 $12,134

Oracle $19.66 $22.68 15.36% $9,085 $10,366

Google $500.40 $575.00 14.91% $10,782 $12,027

SAP $49.05 $53.80 9.68% $6,445 $10,506

EMC $16.83 $17.30 2.79% $10,363 $9,976

HP $45.81 $46.25 0.96% $2,987 $2,426

Nokia $28.19 $27.90 -1.03% $4,284 $5,613

Cisco $26.86 $26.35 -1.90% $3,832 $2,416

Symantec $19.97 $19.34 -3.15% $20,681 $22,693

Yahoo $28.78 $26.40 -8.27% $28,873 $21,076

Microsoft $30.59 $27.80 -9.12% $2,345 $2,608

Large Cap Tech Stocks

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Reality Check

Don’t take the current market for granted.

Volatile public markets

“Long, deep recession,” Warren Buffet

Price of oil continues to rise

Political change

Global conflicts

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The need to buy is stronger than ever

Acquisitions add more growth

Counter takeover attempts

Consolidation

Speed 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

Need for international presence

Only true liquidity event for managing shareholders

Why Does M&A Prevail?

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Global M&A Activity

Cross-border transaction

levels remain strong while

international M&A activity

contributed over 40% to the

total of announced deals

for 2007

Europe and Asia both set records for deal volume in 2007

U.S. sellers continue to look overseas for buyers

Weak dollar attracting non-U.S. buyers

Strong € makes European targets attractive to acquisitive international buyers looking to

increase revenues and profits based in stronger currency

67 international tech co’s on BusinessWeek’s InfoTech 100 list up from 25 in 1998

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Emerging International Markets

Regions to watch:

China

Brazil

Israel

India

Eastern Europe

Russia

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Sectors

Sector Public Val. Deal Volume Outlook

Horizontal Applications Neutral

Vertical Applications Positive

Consumer Applications Neutral

Infrastructure Positive

Internet Positive

IT Services Positive

2008 sector stats looking good…

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Public Valuation Revenue Multiples

TTM EV/S Multiples

N/A

Decreased

Increased

Sector Q1:07 Q2:07 Q3:07 Q4:07 Q1:08 Yr on Yr

Digital Media 1.92 x 2.07 x 2.12 x 1.61 x 1.06 x  

Enterprise Applications 3.87 x 3.98 x 4.14 x 3.67 x 3.15 x  

Business Intelligence 3.13 x 3.25 x 2.98 x 4.12 x 2.72 x  

Enterprise Content Management 2.07 x 2.37 x 2.40 x 2.08 x 1.57 x  

Supply Chain Management 2.10 x 2.29 x 2.23 x 2.25 x 1.40 x  

Enterprise Infrastructure 2.86 x 2.88 x 2.51 x 3.04 x 2.34 x  

Legacy Extension / SOA 2.18 x 2.56 x 2.47 x 2.42 x 2.69 x  

Software Development Tools 2.00 x 2.22 x 1.66 x 1.83 x 1.43 x  

Storage 3.68 x 3.29 x 2.68 x 2.49 x 1.99 x  

Gaming 2.54 x 2.24 x 2.20 x 1.75 x 1.98 x  

Internet Infrastructure 3.83 x 3.91 x 4.60 x 4.04 x 2.85 x  

Internet Pure Play 3.41 x 3.23 x 2.99 x 2.93 x 2.15 x  

IT Services 0.80 x 0.89 x 0.96 x 0.83 x 0.85 x  

Security 3.15 x 3.69 x 3.43 x 3.62 x 3.52 x  

Wireless 1.46 x 1.75 x 1.55 x 0.99 x 0.51 x  

Vert Market - Energy & Environment N/A N/A 4.94 x 4.46 x 4.02 x

Vert Market - Engineering 3.40 x 3.29 x 3.73 x 2.73 x 1.99 x  

Vert Market - Financial Services 3.28 x 3.12 x 3.05 x 2.73 x 2.70 x  

Vert Market - Government 1.16 x 1.15 x 1.21 x 1.24 x 1.21 x  

Vert Market - Healthcare 2.28 x 2.53 x 3.16 x 2.62 x 1.93 x  

Vert Market - Other 1.19 x 2.71 x 2.81 x 2.14 x 2.05 x  

Vert Market - Telecom 1.33 x 1.52 x 1.50 x 1.44 x 1.26 x  

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Looking Back – Valuation Multiples

M&A Transaction Revenue Multiples – Software Industry

2008 is starting off stronger than 2007 finishedQ1 P/S multiple of 2.6x

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SaaS is Mainstream

40% surveyed use hosted CRM (AMR)

49% will expand use of SaaS (AMR)

25% of business software revenue by 2011 (Gartner)

29% annual growth (IDC)

70% plan to use SaaS (Aberdeen Group)

5% to 55% cost savings (Springboard Research)

30%+ new soft licenses will be deployed as SaaS by 2012 (Saugatuck)

50%+ software revenues from subscription by 2015 (Needham)

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Waves of SaaS Evolution

A platform for mission-critical application workloads

Source : Saugatuck Technology

Early AdoptionStand-alone AppsMulti-tenancyLimited ConfigurabilityFocus on TCO / rapid deployment

Mainstream AdoptionIntegrated w/ Business PortfolioSaaS Integration PlatformsBusiness Marketplaces and SaaS ecosystems

Ubiquitous AdoptionOptimized Bus. EcosystemsIT-targeted EcosystemsInter-enterprise CollaborationIT Utility / SaaS InfrastructureCustomized, Personalized WorkflowFocus on Business Transformation

SaaS 1.0 SaaS 2.0Wave I: 2001-2006

Cost-effective Software Delivery

Wave II: 2005-2010Integrated Business

Solutions

Wave III: 2008-2014Workflow-enabled

Business TransformationHigh

Low

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Ad

op

tio

n

SaaS Tipping-Point

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Customer Satisfaction

Margin

The SaaS Value Chain – Drivers

Enterprises ISV – SaaS Prov.

Buyers (M&A)

Competition is next door, stay

focus

Keep the customer, stay

closer

Strengthen position,

consolidate Allocation of resources on business ops & innovationIT more accountable Leverage investments and lower the riskProductivity Solve business needsIt’s all about services

IT is not the customer, business isAdd-on strategy and standardizationShorter sale cyclesLonger term and « healthier » relationships

SaaS across business and functionsStable predictable revenue More sustainable marginsPlatform approachCreate value vs growth

Solve customer business needs

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Valuation over 9 months

Multiples In September 07

EV / Sales : 6.33 ; forward multiples : 4.19 (12months later) In January 08

EV / Sales : 3.69 ; forward multiples : 2.65

In May 08 EV / Sales : 3.14 ; forward multiples : 2.35

Relevant M&A Transactions

Date SaaS AllSeptember 07 3.99 3.11

January 08 4.62 2.47May 08 4.00 2.6

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SaaS – Public Valuation Multiples

Ticker Company EV/S EV/EBITDA P/E EV/S P/E

CNQR Concur Technologies, Inc. 9,18 x 42,95 x nm 6,02 x 52,94 CTCT Constant Contact, Inc 7,13 x nm nm 3,34 x 74,96 TRAK DealerTrack Holdings, Inc. 2,68 x 10,21 x 48,22 2,16 x 15,45 DMAN DemandTec, Inc. 2,62 x nm nm 1,71 x 30,34 KNXA Kenexa Corporation 2,14 x 10,39 x 0,85 1,46 x 11,20 KNTA Kintera, Inc 0,96 x nm nm 0,95 x 36,00 LPSN LivePerson, Inc. 2,16 x 23,62 x 31,10 1,26 x 10,03 N NetSuite, Inc. 9,71 x nm nm 5,48 x nmOMTR Omniture, Inc. 9,65 x nm nm 4,04 x 32,65 RNOW RightNow Technologies, Inc. 3,31 x nm nm 2,36 x 60,04 SLRY Salary.com, Inc 0,81 x nm nm 0,43 x nmCRM Salesforce.com 10,75 x nm 481,27 5,75 x nmSFSF SuccessFactors, Inc. 6,74 x nm nm 3,15 x nmSNCR Synchronoss Technologies, Inc. 2,53 x 8,18 x 18,15 2,34 x 19,49 TLEO Taleo Corporation 2,97 x 31,78 x nm 2,17 x 23,21 ULTI Ultimate Software Group, Inc. 5,53 x 60,76 x 31,04 3,77 x 39,54 VOCS Vocus, Inc. 7,94 x nm nm 5,29 x 46,88 WSTM Workstream, Inc. 0,71 x nm nm 0,58 x nm

0,71 x 8,18 x 0,85 0,43 x 10,03 10,75 x 60,76 x 481,27 6,02 x 74,96 4,86 x 26,84 x 101,77 2,90 x 34,83 3,14 x 23,62 x 31,07 2,35 x 32,65

TTM Multiples Forward Multiples

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SaaS transaction multiple

Buyer Seller

Date Announced

Purchase Price Seller's Rev

EV/S Multiple

Blackbaud, Inc Kintera, Inc. May-08 $46,0 $43,0 1,07 xDell, Inc. MessageOne, Inc. Feb-08 $155,0 $7,7 20,13 xBridgeline Software Inc. Tenth Floor, Inc. Feb-08 $4,0 $3,0 1,33 xOmniture Inc. Visual Sciences Oct-07 $415,1 $76,0 5,46 xRisc Group Ornis Sep-07 $35,0 $17,0 2,06 xAriba Procuri Sep-07 $93,0 $7,1 13,10 xBlackbaud Inc eTapestry Aug-07 $24,8 $7,0 3,54 xCorMine LLC Perfect Commerce Inc. Jul-07 n/a n/a n/aRocket City Automotive Group Inc. The Intellimark Group May-07 n/a n/a n/aSunGard HTE Inc Aceva Technologies Feb-07 n/a n/a n/aWebsense Inc SurfControl plc Apr-07 $400,0 $94,0 4,26 xADP Employease Aug-06 n/a n/a n/aProcuri TrueSource Sep-06 n/a n/a n/aIllinois Tool Works Inc Click Commerce Inc Sep-06 $292,0 $80,0 3,65 xTransaction Systems Architects P&H Solutions Aug-06 $150,0 $40,0 3,75 xSurfContral plc BlackSpider Technologies Ltd Jul-06 £20,0 £4,0 5,00 x3M Company Pinnacle Distribution Concepts Inc. Jul-06 n/a n/a n/aSterling Commerce, Inc. Nistevo Corporation May-06 n/a n/a n/aAutodesk Constructware Feb-06 $46,0 n/a n/aConcur Outtask Jan-06 $88,0 $12,5 7,04 x

Low 1,07 xHigh 20,13 x

Median 4,00 x

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Unified communications NGNetworks, IPT, SIP Presence, conferencing

Devices What devices is right for particular application / activity

Datacenters Virtualized and distributed architectures ; multithreading

SOA achitectures Matching IT to business process ; core apps easy tailored

Application delivery SaaS business model

All of them are interelated !!

* John Chapman – IT Europa

SaaS in the heart of the 5 revolutions*

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Investors / Acquirers Attracted to:

SaaS is not only a matter of business model : part of a wider vision

SaaS is “reccession proof” : cutting costs and increasing flexibility

Predictable recurring cash flow

Revenue visibility this year and beyond

Low churn / high user satisfaction

Solves cutomer business needs or they’ll leave

Easier to plan and manage growth / scalability

Higher margins at scale

Cash flow is what gives a company value License models are difficult to project If it is not predictable it may be more volatile

Markets doesn’t like what’s volatile

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Seller Motivation

Timing – personal, business, market

Have been approached

Need a larger partner to achieve vision

Capitalize on current success

Investors want out

Running out of cash

Founder age

Facing a build vs. sell decision

Tough to compete with larger players

Lacking resources to expand internationally

Lack of liquidity

Time for change

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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

Growth

Profitability

Domain Expertise

What Do Buyers Really Buy?

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Buyers – Prioritize Acquisition Opportunities

Target Size

Product prioritization – which new products / markets do they want to own?

Product leadership – compared to competition

Market size – addressable market large / expandable?

Can product port into other verticals, market segments?

Cultural and technical compatibility

Management team

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Will the Numbers Pencil?

Financial Considerations: Will the acquisition improve financial performance?

Return on Equity

EBITDA multiples

Impact of deal on revenue growth rate and EBITDA

Recurring revenue

Accretion / dilution to GAAP Earnings Per Share (public buyer); cash flow

(private buyer)

Don’t forget -- third party analysts and / or lenders need to bless the deal

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Corum’s Weekly M&A Update

Weekly M&A Update Complete list of week’s deals (Registration)

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Contact Information

www.corumgroup.com

Corum Group Ltd.

10500 NE 8th Street, Suite 1500Bellevue, WA 98004USA

+1 425-455-8281

For full research and conference registration

Corum Group International S.à.r.l.

Beim ParadeplatzBasteiplatz 78001 ZurichSwitzerland

+41 44 251 82 65