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STRICTLY CONFIDENTIAL UBS Technology M&A Discussion of Current Industry Trends March 2005 SECTION 1 M&A Market Conditions 2 SECTION 2 M&A Drivers and Considerations 8 SECTION 3 UBS Overview 14 Table of Contents SECTION 1 M&A Market Conditions M&A Volume in the US

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ubs technology m a


UBS Technology M&A

Discussion of Current Industry Trends

March 2005

table of contents
SECTION 1 M&A Market Conditions2

SECTION 2 M&A Drivers and Considerations8

SECTION 3 UBS Overview14

Table of Contents
section 1


M&A Market Conditions

m a volume in the us
M&A Volume in the US

Current rebound in activity across all industries is reflective of a return to a healthier market

  • Large, strategic combinations are back—Proctor & Gamble / Gillette, JPMorgan / BankOne, Cingular / AT&T Wireless, Sprint / Nextel, Oracle / PeopleSoft, Symantec / Veritas, Johnson & Johnson / Guidant and Wachovia / SunTrust
  • Significant financial sponsor activity in the middle market
    • Taking advantage of depressed market conditions and attractive debt markets
  • Source: Securities Data Corporation
technology m a activity
Technology M&A Activity

Technology M&A Volume Has Increased Steadily Since 2002 Lows

  • Source: Securities Data Corporation
  • Note: Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q3 2003
m a deal activity is intensifying
M&A Deal Activity is Intensifying

Market recovery in 2003 and stability in 2004 have increased corporate confidence and created an environment conducive to M&A transactions

  • Technology companies are exiting defensive, "survive the downturn" mentality and reviewing strategic options
    • Recalibrating under invested businesses
    • Capturing upside as economic conditions continue to improve
  • Technology M&A deal volume increased 60% in 2004
    • M&A pipeline is expected to be strong for 2005

Number of Announced Transactions 1

Technology M&A Deal Volume (US$ Billions) 1

  • 179 additional transactions were announced in 2004 compared with 2003
  • Volume of discussions has intensified drastically
  • Source: Security Data Corporation
  • Note:1 Oracle/PeopleSoft included as 2004 transaction, original hostile offer was first launched in Q2 2003
m a and ipo activity in the technology sector
M&A and IPO Activity in the Technology Sector

Number of Announced M&A Transactions and IPO Filings

  • Source: Securities Data Corporation and UBS Equity Capital Markets Group
  • Note: Oracle/PeopleSoft included as 2004 M&A transaction, original hostile offer was first launched in Q3 2003
section 2


M&A Drivers and Considerations

m a considerations
M&A Considerations

A number of factors to consider in pursuing any M&A transaction

process considerations
Process Considerations

Public Offering Versus Sale

  • Initial Public Offering
  • Sale of Business


  • Primary shareholders retain voting control and existing management continues to execute the strategic vision of the business
  • Proceeds from an IPO can be used to increase scale through acquisitions or fuel organic growth
  • Shareholders can participate in potential upside should the business continue to execute and market conditions remain favorable


  • The organization must take on the costs associated with public filing and compliance requirements while managing greater scrutiny by investors
  • An IPO lock-up prevents current shareholders from achieving immediate liquidity
  • There is a high degree of uncertainty in future capital market conditions
  • There is the potential for a downside in valuation should the business lose traction


  • Reduces or eliminates execution risks of the current business plan as well as future capital market uncertainties
  • M&A valuation includes control premium
  • Can offer a more immediate path to liquidity for current shareholders
  • Avoids the costs associated with being a public company
  • Partnering increases opportunity to cross-sell and up-sell through larger distribution platform and gain rapid critical mass to better compete


  • Primary shareholders relinquish voting control and new management executes the strategic vision of the company
  • Cash transactions eliminate the upside participation in the pro forma company
  • Integration and execution risk of combined business
sarbanes oxley 404 compliance
Sarbanes-Oxley 404 Compliance
  • Benefits
  • Costs
  • Intended to restore investor confidence in U.S. public markets
  • Drives greater consistency and transparency in reported filings
  • Increased executive accountability over financial reporting
  • Increased spending at the CFO and CTO level to meet compliance criteria
  • Increased cost of being public, especially small cap companies
  • Entails significant allocation of resources
  • Not meeting SOX deadline requirements or announcing inadequacies in significant controls can have negative effect on stock price
    • UTStarcom
    • Chordiant Software
    • Interpublic Group
  • Advisory Services Vs. IT Spending Mix for SOX Compliance

Anticipated Technology Spending to Support SOX Compliance

  • Source: Gartner 2004 estimates
  • Source: Forrester Research survey of 454 technology decision-makers
typical timing of an m a transaction
Typical Timing of an M&A Transaction





















Due Diligence and Preparation

Organizational meetings




Information Memorandum

Preparation of management presentation


Finalize buyer list

Initiate contact with buyers

Deliver Information Memorandum

Finalize management presentation and data room

Buyer due diligence

Negotiations and Closing

Receipt and review of final proposals

Negotiate and sign definitive agreement


Illustrative Timeline of a Sell-Side Controlled Auction Engagement

section 3


UBS Overview

ubs a leading global financial services firm
UBS—A Leading Global Financial Services Firm

Our strength is backed by industry accolades

“Wall Street Powerhouse”FORBES 2004


World’s Best Investment BankEUROMONEY 2004

World’s Best BankEUROMONEY 2003

Best Investment BankTHE ECONOMIST 2003

World’s Best Investment Bank INVESTMENT DEALERS’ DIGEST 2002

ubs a leading m a advisor with rapid improvement in market share
UBS—A Leading M&A Advisor with Rapid Improvement in Market Share

2003–2004# of Transactions / Market Share 1

2003–2004 Market Shareversus 2000—2002

Notes: Data represents all M&A deals worldwide greater than $100 million in transaction value. Full credit given to acquiror and target advisor(s). Excludes withdrawn deals, equity carveouts, exchange offers, and open market repurchases

1 Market share based on number of transactions. Market shares do not sum to 100% due to multiple advisors on each transaction (e.g., target advisor and acquiror advisor)

UBS has positioned itself as one of the leading M&A advisors worldwide and has unprecedented momentum, capturing more market share than any other bank since 2002

overview of ubs technology m a group
Overview of UBS Technology M&A Group

Technology M&A Expertise

2004 Technology M&A Transactions Less Than $1 Billion

  • Strong technology-focused M&A presence with deep industry knowledge and company relationships
  • Experienced in a wide range of advisory assignments
    • Buyer advisory
    • Seller advisory
    • Cross-border transactions
    • Merger of equals
    • Shareholder value protection
    • Leveraged transactions

Selected Recent Transactions

contact information
Contact Information

UBS Securities LLC

555 California StreetSuite 4650San Francisco CA 94104Tel. +1-415-352 5650

UBS Investment Bank is a business group of UBS AGUBS Securities LLC is a subsidiary of UBS AG

This presentation has been prepared by UBS Securities LLC (“UBS”) for the exclusive use of recipient (together with its subsidiaries and affiliates, the “company”) using information provided by the company and other publicly available information. UBS has not independently verified the information contained herein, nor does UBS make any representation or warranty, either express or implied, as to the accuracy, completeness or reliability of the information contained in this presentation. Any estimates or projections as to events that may occur in the future (including projections of revenue, expense, net income and stock performance) are based upon the best judgment of UBS from the information provided by the company and other publicly available information as of the date of this presentation. There is no guarantee that any of these estimates or projections will be achieved. Actual results will vary from the projections and such variations may be material. Nothing contained herein is, or shall be relied upon as, a promise or representation as to the past or future. UBS expressly disclaims any and all liability relating or resulting from the use of this presentation.

This presentation has been prepared solely for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any securities or related financial instruments. The company should not construe the contents of this presentation as legal, tax, accounting or investment advice or a recommendation. The company should consult its own counsel, tax and financial advisors as to legal and related matters concerning any transaction described herein. This presentation does not purport to be all-inclusive or to contain all of the information which the company may require. No investment, divestment or other financial decisions or actions should be based solely on the information in this presentation.

This presentation has been prepared on a confidential basis solely for the use and benefit of the company; provided that the company and any of its employees, representatives, or other agents may disclose to any and all persons, without limitation of any kind, the tax treatment and tax structure of the transaction and all materials of any kind (including opinions or other tax analyses) that are provided to the company relating to such tax treatment and tax structure. Distribution of this presentation to any person other than the company and those persons retained to advise the company is unauthorized. This material must not be copied, reproduced, distributed or passed to others at any time without the prior written consent of UBS.