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Gridley & Company LLC

Gridley & Company LLC 7 th Annual Information, Marketing, Financial Technology & Internet Services Conference. January 15, 2008 Jumeirah Essex House New York City. Agenda The Gridley Commercial A Look Back at 2007 Gridley Year End 2007 M&A Survey Results A Look Ahead to 2008.

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Gridley & Company LLC

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  1. Gridley & Company LLC 7th Annual Information, Marketing, Financial Technology & Internet Services Conference January 15, 2008 Jumeirah Essex House New York City

  2. Agenda • The Gridley Commercial • A Look Back at 2007 • Gridley Year End 2007 M&A Survey Results • A Look Ahead to 2008

  3. The Gridley Commercial

  4. Gridley’s Investment Banking Effort is Focused on a Few Related Sectors of Information Services Financial Technology and Outsourcing Services Advertising & Marketing Services INFORMATION & TECHNOLOGY & SERVICES Database / Information Services Internet Services

  5. Gridley’s Value Proposition • Highly strategic approach • Buyside work for industry leaders • Sellside and fundraising work for private companies • Well-developed industry “network” • Excellent client references • 1,800+ quarterly newsletter distribution • Host of Bellwether Events

  6. Select Recent Gridley Transactions Undisclosed Acquired by WPP Group plc Headlight Vision January 2008 Advisor Undisclosed $17,450,000 $113,189,337 Undisclosed PrePay Intelligent Network Solutions (INS) Business Unit of Acquired by Acquired by Secondary Offering Sold to Schulman, Ronca, & Bucuvalas, Inc. Verisign Parthenon Capital LLC Advisor Issued Fairness Opinion Co - Manager Advisor Undisclosed $138,000,000 Undisclosed $58,000,000 Acquired by Acquired Acquired by Acquired ISIS Equity Partners, Inc. Modem Media, Inc. Valassis Communications, Inc. Performics, Inc. Advisor Advisor Advisor Advisor Undisclosed Undisclosed Undisclosed $58,000,000 $58,000,000 Advisory Communications Marketing One to One, Inc. d/b/a Systems, Inc. (ACS) d/b/a Acquired by Acquired by Acquired by Follow Follow - - on Offering on Offering Carlson Marketing Group Alliance Data Systems, Inc. ARAG Group Advisor Advisor Advisor Co Co - - Manager Manager March 2004 March 2004 Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Email Business of Ad - serving Business of Acquired by Quest Software Sold to Sold to Sold to Sold to One to One Interactive, Inc. One to One Interactive, Inc. Aegis plc Aegis plc January 2008 Advisor Advisor Advisor Advisor Advisor

  7. A Look Back at 2007

  8. Stocks in Our Sectors for 2007 • Poor performance year overall • More “losers” than “winners” – first time in 3 years • Best performing sector = Financial Technology • Biggest sector shift = Marketing Services Median Stock Price Performance of Targeted Industry Sectors

  9. Stocks in Our Sectors for 2007 Performance of $1 billion+ Market Cap. Company

  10. Stocks in Our Sectors for 2007 Performance of $100 million - $1 billion Market Cap. Companies

  11. IPO Activity in Our Sectors for 2007 • Significant increase over 2006 • Internet Services = Most Active • Mixed performance overall • # 1 Performing IPO = Mercadolibre +310%

  12. 2007 Gridley Sector IPOs

  13. 2005 & 2006 Gridley Sector IPOs

  14. M&A Themes in Our Sector for 2007 • Lots of significant strategic deals • Strong LBO momentum until the credit crunch • Internet Services is where the action was • Financial Technology remained robust

  15. LBO Activity in Our Sectors for 2007 • 5 completed, 2 terminated, and 1 pending transaction • Keynote deal = KKR / First Data

  16. Largest Strategic M&A Deals in Our Sector for 2007

  17. A Look Back – What We Said in Dec. 2006 Financial Technology • M&A ⇒ more of the same • “Premium pricing for premiere private companies” • More LBOs • More activity by “unusual buyers” • Highly competitive auctions • Emergence of the card networks • Continued attractiveness of under / non-banked consumer • Continued growth in stored value / prepaid / gift card market • Emergence of large banks as financial technology buyers?

  18. A Look Back – What We Said in Dec. 2006 Marketing Services • Hopes for a more exciting year than 2006 • Continuation of ad spending shift • Beneficiaries = direct mail, innovative marketing solutions • “Consumer Pull” marketing is here to stay • Database marketing = core capability for next generation marketing • Harte Hanks LBO? • Industry transforming deal in e-marketing?

  19. A Look Back – What We Said in Dec. 2006 Internet Services • The consumer remains “king” • Slow increase in M&A consolidation throughout the year • Ad networks • Companies wanting to offer broader solutions • Use of internet and digital devices to reach consumers in new ways • Growth in local online advertising • More “real action” by traditional media companies • The seemingly unstoppable Google – what’s next? • Emergence of a new e-marketing industry leader?

  20. Gridley Year End 2007 M&A Survey Results

  21. Gridley Survey Reveals Deal Activity to Remain Strong but Cautious • Companies in all of the Gridley sectors are interested in doing deals • More than half plan to acquire a private company in the next 12-18 months • Private equity buyers will also stay active but less so than in 2007 • Buyers will be more selective

  22. Credit Crunch will Have an Impact… On Some • Overall 40% of respondents expect fewer deals as a result of the credit crunch • 58% expect the lending environment to become more selective • More than half think private equity will be less active in 2008 • Internet Services companies feel largely unscathed by the credit crunch

  23. Focus On the Middle Market • Marketing services companies expect to see deals under $50 million • Internet services companies expect to see deals under $100 million • Financial technology companies expect to see deals under $250 million

  24. A Look Ahead to 2008

  25. A Look Ahead – Financial Technology • Decline in M&A multiples – first time in 5 years • Banks become sellers not buyers • Niche private companies continue to flourish • New startups from First Data alumns • Underperforming stocks • Need for new industry consolidation drivers • Financial security gets hit by tougher bank environment

  26. A Look Ahead – Marketing Services • Direct mail takes a hit • Client frustration with traditional providers becomes more evident • Clients show their insatiable appetite for data analytics • Ad spending without the internet, olympics & elections looks bleak • Valassis, Harte-Hanks, or Vertis get acquired • Increase in M&A activity by ad holding companies?

  27. A Look Ahead – Internet Services • Globalization – Foreign buyers increase U.S. presence • ValueClick gets sold? • The 4 Titans continue to dominate • Strong sector activity continues • Broadening buyer universe • Plethora of acquisition opportunities • Media companies become more aggressive buyers

  28. What’s Your Prediction for 2008?

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