Software and IT Industry Market Update

Transcription

1 USA Switzerland Germany France United Kingdom Canada Norway Brazil M&A Flash Report July 2009 Software and IT Industry Market Update Thursday, July 2, :00 am PT

2 Ward Carter President Corum Group Ltd. Ward's technology background includes a variety of management positions with the Burroughs Corporation (later Unisys). Then, as vice president of a Wall Street investment firm and as principal in a regional venture firm, he raised capital for ventures in computer hardware, software, and biotechnology. As an executive for a Seattle-based archival storage software company, he attracted venture capital and assisted with the eventual acquisition of the company by a larger competitor. As president of InfoMatrix, and later Discovery Sales + Marketing, Ward provided strategic consulting support to emerging software companies. He joined Corum in 1997, has successfully managed numerous software company mergers and acquisitions worldwide, and was appointed president in He graduated with Honors from Seattle University with a B.A. in Business. Mark Reed Executive Vice President Corum Group Ltd. Ryan Blakely Vice President, Research Corum Group Ltd. >> For today s presentation or more information, contact Pat Sultan (pats@corumgroup.com, ext. 248) Corum Group Presentation 2

3 Agenda Overview of Current Market Managing for an Exit Marc Brown - Microsoft Market and Valuation ation Analysis Closing Comments - Q&A Corum Group Presentation 3

4 Recent Headlines are Mixed Economic contraction is slowing Markets up 30-50% from lows Mortgage defaults continue Inflation a threat Unemployment rising Optimism indexes rising M&A valuations stabilizing Recovery by 2010 or 2014??. Have markets bottomed? Corum Group Presentation 4

5 Where are Markets Headed? Don t know, and can t control DJIA +/ points in 12 months? Don t base decisions on indexes What you can control: how you spend your cash & manage your business Corum Group Presentation 5

6 Take Stock of Where You Are Be honest about your business Growing, adding customers, hiring, solid cash position, attractive market, profitable Cash stable, business slowing, not hiring Burning cash, flat or negative growth, market sector troubled Step back, evaluate situation and goals Corum Group Presentation 6

7 Starting Today 1) Manage your cash carefully 2) Tune business model for the times Old Model Growth at all cost Get big fast Revolutionary product Horizontal expansion The next big thing New Model Cash flow at all cost Cut the fat Become necessary Core focus Improve customers business now Corum Group Presentation 7

8 Starting Today 3) Look at your company with an acquirer s eye 4) Clean up your company Record keeping Business process Business planning & projections Corum Group Presentation 8

9 Starting Today 5) Make decisions with M&A in mind Development Marketing and Sales Revenue composition 6) Articulate your story Corum Group Presentation 9

10 Reminders The M&A process takes time Sectors consolidate quickly You may only get one chance Start preparing p early Take time to understand the M&A dynamics of your market Pick good advisors who know your business Corum Group Presentation 10

11 M&A from a Buyer s Perspective Use downturn to build a more valuable company Act while competitors are scrambling Benefit from strong recurring revenue Deal based on perceived value, not multiples No patience for unsubstantiated upside pitch Cash balances strong Corum Group Presentation 11

12 Corporate Cash Company Year Ago Cash Current Period Cash Sun $2,272 $2,700 Apple $11,875 $25,010 Nokia $3,130 $2,404 Microsoft $10,339 $23,900 Oracle $8,262 $12,620 HP $10,153 $12,920 EMC $5,843 $7,250 Cisco $5,191 $33,550 Google $8,656 $17,780 SAP $1,804 n/a Yahoo! $2,292 $3,450 IBM $12,741 $12,300 Symantec $1,890 $1,990 Corum Group Presentation 12

13 Top Technology Stocks Company Stock Price Stock Price Stock Price % Change from 07/01/ /03/ /01/2009 March Sun $10.74 $4.54 $ % Apple $ $87.71 $ % Nokia $24.21 $9.25 $ % Microsoft $26.87 $16.03 $ % Oracle $21.31 $15.06 $ % HP $44.00 $28.30 $ % EMC $14.65 $10.13 $ % Cisco $23.15 $14.50 $ % Google $ $ $ % SAP $51.89 $32.28 $ % Yahoo! $20.20 $12.58 $ % IBM $ $88.01 $ % 12% Symantec $19.74 $13.15 $ % Corum Group Presentation 13

14 Shopping List Buyer One Competitors active in M&A Dramatically expand software side through acquisitions Prefer SaaS Vertical focus vs. horizontal Consider Retail, Telecom, Financial Services, Public Sector, Healthcare Targets 5 to 100 mil in rev OEM or outright acquisition Corum Group Presentation 14

15 Shopping List Buyer Two IT services / BPO Services Building geographic reach, adding technology and customers $10 to 200 mil revenue North America, Japan or Europe ERP, CRM, Data Recovery, Infrastructure Mgmt, Healthcare Off-shoring opportunities a plus Corum Group Presentation 15

16 Marc Brown Managing Director, Corporate Development Group Marc Brown is a managing director in the Corporate Development Group at Microsoft Corp., where he has been employed since January From May 1998 to December 1999, he was an associate in the Private Equity and Emerging Companies Group of the law firm Goodwin, Procter & Hoar LLP. Before that, he was an associate in the Mergers and Acquisition and Merchant Banking groups at the Union Bank of Switzerland, from 1987 to Brown holds a doctor of jurisprudence degree from Georgetown University Law Center, an MBA in Finance from New York University it and a bachelor of arts in Economics from Colgate University. Corum Group Presentation 16

17 Ryan Blakely Vice President, Research Corum Group Ltd. Ryan joined Corum in 1998 and has held a number of roles central to research and market analysis in the software and technology space. With over ten years experience in the software M&A environment, Ryan has an intimate understanding of the software industry as a whole, especially as it relates to mergers and acquisitions. As the Vice President of Research, Ryan directs Corum s research group in both North America and Europe, and has played a direct role in developing buyer relationships during his tenure with Corum. He also is a major contributor to Corum s research reports. Ryan graduated from Washington State University with a B.A. in Business Management, with a focus on Entrepreneurial Studies. Corum Group Presentation 17

18 M&A Activity June Number of Software and IT M&A Transactions June Corum Group Presentation 18

19 M&A Activity June May April March February January Corum Group Presentation 19

20 Corum Index M&A Statistics # of Transactions # of Mega Deals Largest Deal Average Deal Size Median Seller Size # VC backed Exits Q2:08 Q1:09 Q2: $28, $ $8,500 $382 $31 97 $67 $25 70 $274 $38 84 % Terms Undisclosed All Cash (announced) % Targets were Public % Public Buyers 60% 44% 17% 55% 77% 55% 18% 43% 73% 43% 20% 46% $ values in millions Corum Group Presentation 20

21 Public Markets Nasdaq S&P Tech Dow Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Corum Group Presentation 21

22 Horizontal Application Software Market Public Valuations Horizontal Application Software Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 EV/EBITDA x x 7.69 x 6.82 x 9.99 x EV/S 1.81 x 1.71 x 1.04 x 1.12 x 1.50 x Corum Group Presentation 22

23 Horizontal Application Software Market Notable Transactions Spotlight: Target Buyer ETH Tech Ltd. Clear2Pay NV Cura Software Solutions XyEnterprise PayCycle Inc. Softpro Systems SDL International Intuit, Inc. Sector: Accounting/Payroll Target: PayCycle y Inc. Buyer: Intuit Date: June 2009 Transaction Value: $170 million Structure: Cash Transaction Multiple: 5.7x Comments: Expanding product portfolio SaaS Corum Group Presentation 23

24 Vertical Application Software Market Public Valuations Vertical Application Software Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 EV/EBITDA x 9.37 x 6.92 x 6.53 x 8.17 x EV/S 2.19 x 1.71 x 1.26 x 1.14 x 1.51 x Corum Group Presentation 24

25 Vertical Application Software Market Notable Transactions Spotlight: Target Buyer Sector: Financial Services eresearch OmniComm Target: Prospectus Central Technology (EDC) Systems Buyer: RR Donnelley & Sons Date: June 2009 equilibrium EnerNOC Transaction Value: Undisclosed Solutions Prospectus Central R.R. Donnelley Comments: Big buys small Distressed sector Building on prior success SaaS Corum Group Presentation 25

26 Consumer Application Software Market Public Valuations Consumer Application Software Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 EV/EBITDA x x 5.41 x 2.74 x 4.47 x EV/S 1.70 x 0.99 x 0.61 x 0.64 x 0.53 x Corum Group Presentation 26

27 Consumer Application Software Market Notable Transactions Spotlight: Target Buyer Sector: Mobility Fueps SpA Dada SpA Target: Dash Navigation Id Software Mustache Inc. Dash Navigation ZeniMax Media Fanzter Research In Motion Buyer: Research In Motion Date: June 2009 Transaction Value: Undisclosed Comments: SaaS Differentiator Hot space Corum Group Presentation 27

28 Infrastructure Market Public Valuations Infrastructure Software Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 EV/EBITDA x 8.98 x 6.47 x 6.98 x 8.74 x EV/S 1.98 x 1.67 x 1.47 x 1.43 x 1.72 x Corum Group Presentation 28

29 Infrastructure Market Notable Transactions Spotlight: Target Buyer Sector: Development Tools HourGlass Ipswitch Target: Wind River Technologies Buyer: Intel Corporation Wind River Intel Corporation Date: June 2009 Transaction Value: $884 million Structure: Cash Transaction Multiple: 2.2x Comments: New software focus Corum Group Presentation 29

30 Internet Market Public Valuations Internet Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 EV/EBITDA x 9.60 x 8.11 x 7.54 x x EV/S 2.71 x 2.34 x 1.10 x 1.60 x 2.30 x Corum Group Presentation 30

31 Internet Market Notable Transactions Spotlight: Target Buyer Sector: Advertising / Talkzilla.com TZ Holdings local l networking Siliconinvestor.com TZ Holdings Target: Going Buyer: AOL, Inc. SendTec Inc. PHIDS Inc. Date: June 2009 SnapTell A9.com Transaction Value: Undisclosed Going Inc. AOL Comments: Desire to be local Million-plus unique visitors monthly Corum Group Presentation 31

32 IT Services Market Public Valuations ITServices Q2:08 Q3:08 Q4:08 Q1:09 Q2:09 EV/EBITDA 6.92 x 6.50 x 5.36 x 5.32 x 5.24 x EV/S 0.89 x 0.80 x 0.70 x 0.56 x 0.63 x Corum Group Presentation 32

33 IT Services Market Notable Transactions Spotlight: Target Buyer Sector: Services Resource Group Swisscom AG Target: Carillion plc AG Buyer: Capita Group plc Bearing Point Keane Date: June 2009 Transaction Value: $57 million Structurum AS Inmeta ASA Carillion plc Capita Group plc Comments: Intra-country Services around the network Valuation in services range Corum Group Presentation 33

34 Contact Information Corum Group Ltd. Ward Carter, President Ryan Blakely, l VP Research ryanb@corumgroup.com NE 8th Street, Suite 1500 Bellevue, WA USA Corum Group International S.à.r.l. Beim Paradeplatz Basteiplatz Zürich Switzerland Research and Conferences: Corum Group Presentation 34