2Digital Marketing will Continue to be an Active Sector in 2013 Strong market growth: We are only partly through the growth phase of upgrading andexpanding the enterprise marketing stack, still substantial ROI to be achieved CMO influence is increasing: CMOs are wielding increasing purchasing power andinfluence over marketing software solutions Marketing is increasing in complexity: Areas like mobile, social, integrated analytics,and personalization make the creation of a marketing solution much more challenging SaaS model speeds adoption: The emergence of enterprise SaaS model companiesgreatly eases purchasing, integration and flexibility Emergence of platforms: Platform vendors pursuing full solution suites through organicdevelopment and inorganic acquisitionsWe believe that M&A and investment activity seen in 2012 will accelerate in 2013 as theconfluence of several trends will shape the digital marketing landscape
3Strong Market Growth Expected to ContinueThe foundational elements of digital marketing will continue to grow quickly even asthey mature – emerging point solutions are growing even fasterDIGITAL MARKETING MARKET SIZE The CMO is the new CIO− CMO tech budgets are expected togrow at 11% per year, compared toless than 3% for CIOs SaaS delivery is expanding the market− Lower cost and flexible solutionsexpand the market The marketing stack as a competitiveadvantage− Successfully integrating customertouch points, analytics, and internalworkflow software allows CMOs tocreate more effective campaignsKEY DRIVERSSource: Gartner, Forrester, Technavio05101520253035402010 2012 2015 2016$ (Billions)AnalyticsSocial CRMWCMEmailAutomationSales CRMeCommerce$14.2B$20.2B$33.3B13% CAGR19% CAGR
4Complexity is Growing and Demanding IntegrationThe evolution of digital marketing demands integrated next-generation technologiesthat enable marketers to deliver exceptional customer experienceSource: Gartner, Forrester, Technavio CMOs areemploying agrowing number of“best of breed”solutions The number oftechnologies in thestack has increasedby 2x in the last 5years The locus of customerinteraction has movedwell beyond the web Growing number ofdigital touch points needto be managed – web,mobile, social and agrowing number ofadditional channels Need for a single,seamless conversationacross all channels Extracting the most valueand best customerexperience requiresintegration of technologiesin the stack Complexity is onlyincreasing withproliferation of channelsand additional trends suchas Big DataGrowing StackEvolving ConsumerNext-Generation MarketingNEXT-GENERATION MARKETING REQUIRES COMPLEXITY
5Overall Market Comprised of a Growing Number of SolutionsDigital marketing is fragmenting into several specialized sub-market solutions atvarious levels of maturityExternal Facing InternalMaturityLessMoreCustomer Experience / Touch Intelligence / Analytics Internal Workflow Solutions enabling digitaltouch points used tointeract directly withconsumers− Web contactmanagement− Blogs− Email marketing− eCommerce− Communications− Search− Mobile apps− Video content− Social channels Customer intelligenceand analytics packagesused to optimize userexperience− CRM− Web analytics− Automation / inbound− Personalization− Social media analytics− Business intelligence /big data Solutions used tomaximize efficiency andoptimize budgets− Content management− Digital assetmanagement− Marketing resourcemanagement− Workflow automation− Project management
6Many Point Solutions and Few Suite ProvidersSizeLargerSmallerPoint Solution ProvidersSuitesCustomer Experience / Touch Customer Intelligence Resource Mgmt / WorkflowExternal Internal
7Maturation is Driving ConsolidationAs expected, consolidators are beginning to acquire the emergent leadersCRMAutomationE-mailMktgE-CommerceTraditional ConsolidatorsExample Emerging Consolidators Category leaders arebecomingincreasinglycompetitive withtraditionalconsolidators Leaders in maturingmarkets inevitablyfacing a slowdown ingrowth Need for additionalgrowth avenues,particularly as publiccompanies Recognition of addedvalue from integratingsystems
8Acquisition Activity Following Platform ThesisThe best positioned consolidators are building end to end suite solutions byassembling product portfolios through acquisitionNo offeringStrong offering Some offeringMRM/Automation Social Web Analytics eCommerce WCM Sales CRM E-mailin 2012 for $870M in 2012 for $300M in 2010 for $1B in 2011 in 2011 for $1.5Bin 2010 for $480M in 2010 for ~$600M in 2010 for $1.4Bin 2011 for $400M in 2009 for $1.8B in 2010 for $240Min 2012in 2012 for $689Min 2012 for $96M in 2012 for $21MAcquirerTargets and Offering MapSource: Pitchbook, Public Filings
9M&A Activity Has Been Steady And Will AccelerateThe consolidators are paying attractive prices for the emergent leaders to fill inproduct offering holesSource: Company Press Releases, SEC Filings, Wall Street Research, CapitalIQ, PitchbookDate Acquirer Target EV Revenue / EVJan 2013 N/A N/ADec 2012 N/A N/ADec 2012 $870M 9.7xOct 2012 $95.5M 8.7xOct 2012 $21M N/AJul 2012 $350M ~7.8x – 10xJul 2012 N/A N/AJun 2012 $745M ~14.9x – 18.6xMay 2012 $500M 10.0xMay 2012 $300M 3.0xFeb 2012 $169M 3.4xDec 2011 $400M ~5.0x – 6.7xDec 2011 $107M 2.0x
11Falvey Partners OverviewFOCUS SELECT TRANSACTION EXPERIENCEDecember 2011Has acquiredJuly 2012Has beenacquired bySeptember 2011Series DConvertiblePreferred StockLed bySeptember 2012Has beenacquired byA portfolio company ofJuly 2011Has been acquiredby a portfoliocompany ofApril 2011Has beenacquired byJuly 2011Has beenacquired byFebruary 2011Growth equityinvestment fromJuly 2011Has beenacquired byMarch 2011Has divestedits diagnosticsolutions unitNovember 2010Has received aninvestment fromA portfolio company ofOctober 2010PGI Notify and Sendplatforms acquired byAugust 2010Two divisions have beenacquired by a portfoliocompany ofApril 2010Has beenacquired byAugust 2010Series CConvertiblePreferred StockLed bySERVICES Sell-side or buy-side M&A Growth capital raising Board and corporate advisorySECTOR Software / SaaS Tech-enabled business services IT services Internet / digital mediaCOMPANY TYPE $50M - $250M in enterprise value Growing, with established scale Profitable or near-term path to profitabilityFalvey Partners is a leading advisory firm servingmid-market clients across technology sectors Founded in 2012 by Peter Falvey and key members of the Morgan Keegan / Revolution Partners team Falvey Partners professionals have closed dozens of software transactions representing billions ofdollars in transaction value
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