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  1. Corum Group Ltd.www.corumgroup.com SaaS in the Economic Storm Bellevue Boston Houston London Mexico City Munich Oslo Paris Philadelphia Phoenix Portland Santa Clara Toronto Zurich SIIA - On-demand Europe 2008 Software Industry M&A Market Update June 10, 2008

  2. 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

  3. 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

  4. 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

  5. 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

  6. Large Cap Tech Stocks

  7. 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

  8. Why Does M&A Prevail? 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

  9. Global M&A Activity • Cross-border transactionlevels 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

  10. Emerging International Markets Regions to watch: • China • Brazil • Israel • India • Eastern Europe • Russia

  11. Sectors 2008 sector stats looking good…

  12. Public Valuation Revenue Multiples TTM EV/S Multiples Increased Decreased N/A

  13. 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

  14. SaaS is Mainstream 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) 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)

  15. Waves of SaaS Evolution SaaS 1.0 SaaS 2.0 Wave I: 2001-2006Cost-effective Software Delivery Wave II: 2005-2010Integrated Business Solutions Wave III: 2008-2014Workflow-enabled Business Transformation High Ubiquitous AdoptionOptimized Bus. EcosystemsIT-targeted EcosystemsInter-enterprise CollaborationIT Utility / SaaS InfrastructureCustomized, Personalized WorkflowFocus on Business Transformation Early AdoptionStand-alone AppsMulti-tenancyLimited ConfigurabilityFocus on TCO / rapid deployment Mainstream AdoptionIntegrated w/ Business PortfolioSaaS Integration PlatformsBusiness Marketplaces and SaaS ecosystems Adoption SaaS Tipping-Point Low 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 • A platform for mission-critical application workloads Source : Saugatuck Technology

  16. The SaaS Value Chain – Drivers Customer Satisfaction Margin Solve customer business needs

  17. 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

  18. SaaS – Public Valuation Multiples

  19. SaaS transaction multiple

  20. SaaS in the heart of the 5 revolutions* • 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

  21. 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

  22. 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

  23. Vision Research Management Business Model Planning R&D Process Patents Documentation Pricing Support Market Share Staff User Base What Do Buyers ReallyBuy? • Marketing Channels • Alliances • Competitive Position • Technology • Sales Process • Capital Structure • Growth • Profitability • Domain Expertise

  24. 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

  25. 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

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

  27. Contact Information Corum Group Ltd. 10500 NE 8th Street, Suite 1500Bellevue, WA 98004USA+1 425-455-8281 Corum Group International S.à.r.l.BeimParadeplatzBasteiplatz 78001 ZurichSwitzerland+41 44 251 82 65 www.corumgroup.com For full research and conference registration