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Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
Q1-2012 Software Valuations
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Q1-2012 Software Valuations

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Review of Software and Internet Industry Q1 2012 Public Market, financial and M&A performance

Review of Software and Internet Industry Q1 2012 Public Market, financial and M&A performance

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  • 1. The Software Industry Th S ft I d t Financial ReportSoftware Equity Group, L.L.C.12220 El Camino RealSuite 320San Diego, CA 92130info@softwareequity.com(858) 509-2800
  • 2. Unmatched Expertise. Extraordinary ResultsOverview Deal TeamSoftware Equity Group is an investment bank and M&A advisory firm serving the software and technologysectors. Founded in 1992, our firm has guided and advised companies on five continents, including Ken Benderprivately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Managing DirectorAfrica and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, (858) 509-2800 ext. 222Toronto, London and Euronext exchanges. Software Equity Group also advises several of the worlds kbender@softwareequity.comleading private equity firms. We are ranked among the top ten investment banks worldwide for applicationsoftware mergers and acquisitions. R. Allen Cinzori Managing DirectorServices (858) 509-2800 ext. 226 acinzori@softwareequity.comOur value proposition is unique and compelling. We are skilled and accomplished investment bankerswith extraordinary software, internet and technology domain expertise. Our industry knowledge andexperience span virtually every software product category, technology, market and delivery model. We Dennis Clerkehave profound understanding of software company finances, operations and valuation. We monitor and Executive Vice Presidentanalyze every publicly disclosed software M&A transaction, as well as the market, economy and (858) 509-2800 ext. 233technology trends that impact these deals. We offer a full complement of M&A execution to our clients dclerke@softwareequity.comworldwide.worldwide Our capabilities include: include:. Brad Weekes Sell-Side Advisory Services – leveraging our extensive industry contacts, skilled professionals and Vice President proven methodology, our practice is focused, primarily on guiding our client s wisely toward the (858) 509-2800 ext. 239 achievement of their exit objectives. bweekes@softwareequity.com Buy-Side Advisory Services – utilizing a proven buy-side methodology, we help our clients acquire strategically, assess insightfully, value intelligently and structure transactions to better assure their desired outcome. Kris Beible Director, Business Development Management Buyouts & Recapitalization – assisting founders and owners of software and (858) 509-2800 ext. 227 technology companies to gain full or partial liquidity by facilitating capital investments by p gy p g p q y y g p y private equity q y kbeible@softwareequity.com kbeible@softwareequity com firms and other financial institutions. Private Equity & Debt Placement – facilitating private companies with leading institutional investors for financings that range from $5 million to $500 million. 12220 El Camino Real, Suite 320 San Diego, CA 92130 Mentoring Program – providing guidance to software companies contemplating an exit to ensure (858) 509-2800 (P) they’re doing everything now to better their odds and enhance their future exit valuation ahead. (858) 509-2818 (F) www.softwareequity.comTransactionsWe’ve enjoyed serving our software clients for 20 years and have highlighted a small subset of companies we’ve assisted:
  • 3. Software Equity Group, L.L.C. Q1 2012 Software Industry Financial Report ContentsU.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS........................................................................ 2IT SPENDING ............................................................................................................................................................ 2INTERNET RETAIL SPENDING AND ADVERTISING ............................................................................................ 3UPDATED SEG INDICES ......................................................................................................................................... 3PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE ................................................... 3PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE .......................................................................... 4PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ................................................................................... 5PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY.......................... 6PUBLIC SOFTWARE COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY ................................... 7PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE ...................................................... 8PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS ........................................... 9PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY .... 10PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS: BY PRODUCTCATEGORY ............................................................................................................................................................ 10PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE ........................................................................... 10PUBLIC INTERNET COMPANY MARKET VALUATIONS .................................................................................... 11PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE: BY PRODUCT CATEGORY ........................... 12PUBLIC INTERNET COMPANY MARKET VALUATIONS: BY PRODUCT CATEGORY .................................... 13INITIAL PUBLIC OFFERINGS................................................................................................................................ 14SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING ............................................................................... 15IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING............................................... 16SOFTWARE M&A VALUATIONS .......................................................................................................................... 16SOFTWARE M&A VALUATIONS BY EQUITY STRUCTURE............................................................................... 17SOFTWARE M&A VALUATIONS BY SIZE ........................................................................................................... 17SOFTWARE M&A BY VERTICAL AND HORIZONTAL MARKETS ..................................................................... 18M&A VALUATIONS BY SOFTWARE PRODUCT CATEGORY ............................................................................ 19SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS .............................................. 20INTERNET M&A DEAL VOLUME AND VALUATIONS ......................................................................................... 22 This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 4. Software Equity Group, L.L.C.APPENDIX A: 1Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCTCATEGORY ............................................................................................................................................................ 24APPENDIX B: 1Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY 26APPENDIX C: 1Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCTCATEGORY ............................................................................................................................................................ 27APPENDIX D: 1Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS .................. 28APPENDIX E: 1Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS .............................................. 29APPENDIX F: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS ...... 31APPENDIX G: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ..... 32 This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 5. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 1: U.S. Gross Domestic Product and Unemployment Rate10% GDP % Growth Unemployment Rate8%6% 5.0% 4.8%4% 3.6% 3.7% 3.2% 3.1% 2.7% 3.0% 2.2% 2.2% 2.6% 2.1% 2.1% 1.7% 1.8%2% 1.5% 1.3% 1.1% 1.2% 0.4%0% -0.7% -0.7%-2% -2.7%-4%-6% -5.4% -6.4%-8% 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11 1Q12U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICSWe begin with a brief synopsis of U.S. Gross An April employment report released by the U.S.Domestic Product (GDP) performance based Bureau of Labor Statistics provides more reasonupon the most recent data available. GDP is best for optimism. The U.S. unemployment ratedefined as the total market value of all final goods dropped to 8.2%, marking the third consecutiveand services produced in a country in a given quarter of improvement.year, equal to total consumer, investment andgovernment spending, plus the value of exports, IT SPENDINGminus the value of imports. SEG carefully monitors enterprise IT spendingThe Bureau of Economic Analysis (BEA) issued each quarter as a means of forecastingits first estimate of U.S. GDP for the first quarter of downstream public software company financial2012, confirming the U.S. economy has now performance and software M&A deal volume.grown, albeit modestly, for eleven consecutive Simply put, we long ago determined that healthyQuarters (Figure 1). 1Q12’s growth rate of 2.2% IT spending drives public software companies towas primarily driven by personal consumption, buy, not build, in response to growing marketexports, private inventory investment and demand. To provide some perspective, weresidential fixed investment. While the first estimate every percentage increase/decrease inquarter’s 2.2% growth was a significant YoY IT spending equates to approximately $5 billion.improvement from 1Q11’s 0.4% growth, it markedthe first QoQ deceleration in three quarters. The Our readers will recall large enterprises cut backslowdown was largely attributable to a decline in sharply on spending for software, hardware andprivate inventory investment and a downturn in IT services in 2009 during the economicnonresidential fixed investment. Looking forward, downturn, when IT capital spending declined byGoldman Sachs and other analysts are now more than 10%. The spending cut had an almostforecasting full year GDP growth in the range of immediate and traumatic impact on public2.5% - 3.5%, which suggests GDP growth will software company revenue and software M&Aimprove over the next three quarters. activity and valuations declined. In 2010 and 2011, enterprise customers loosened their purse strings and domestic IT capital spending grew 8% and 6% respectively. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 6. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsReflecting the uncertainty in the global economy, increase. Mobile was the fastest growing Internetanalysts are somewhat divided on worldwide IT ad category, soaring 149% over 2010’s $1 billionspending forecasts for 2012. Goldman is tally to reach $1.8 billion for the year. While notforecasting worldwide IT spending of 7%, down quite as jaw dropping, digital media ad revenuesfrom 8% in 2011, given the expectation of modest reached $1.8 billion in 2011, a 29% YoY increasedeceleration in emerging economies. Less from 2010’s compared to $1.4 billion.optimistic, Gartner is forecasting worldwide ITspending growth of 5.2%, believing that IT UPDATED SEG INDICESbudgets and spending in Europe will be weakerthan anticipated. Domestically, forecasts are SEG publishes three software industry indices –better aligned. Goldman forecasts domestic IT SEG Software, SEG SaaS, and SEG Internet –spending will grow 4.0%, while Gartner is and tracks dozens of product categoriesprojecting a 4.2% increase (Figure 2). comprising these indices. Each year, SEG reviews each company comprising each indexFigure 2: Domestic IT Spending and category to ensure they have been appropriately categorized, especially in light of 10.0% 9.0% 8.0% their prior acquisitions and adoption of new 6.0% 6.0% technologies and delivery models. This year’s 5.0% 4.1% examination was especially thorough - andYoY Change in IT Spending challenging - given the growing adoption of hybrid 0.0% delivery models and the increasing number of 2007 2008 2009 2010 2011 2012 large software companies spanning multiple ‐5.0% indexes and product categories. While admittedly both art and science, we are confident ‐10.0% our updated indices and categories provide an -10.0% exceptionally accurate portrait of today’s software, ‐15.0% IT Spending values calculated using an average of Goldman, Gartner and IDC estimates SaaS and Internet environments. PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCEINTERNET RETAIL SPENDING AND ADVERTISING In the first quarter, the major U.S. stock marketIn the Internet sector, we believe online retail indices turned in one of the best first quarterspending and Internet advertising spending each performances in more than a decade. Thequarter presage the financial performance and technology laden NASDAQ index finished Q1 upM&A activity of many public Internet companies. a stellar 18.7%, as investors were heartened byBuoyed by a continually growing number of the strong financial performance of several highshoppers, online retail sales reached nearly $49.7 flyers such as Apple and Google. The S&P 500billion in 4Q11 (the latest quarter for which data is and DOW also performed admirably, ending Q1available) according to comScore, up 14% from up 12.0% and 8.1%, respectively (Figure 3).4Q10. It was the ninth consecutive quarter of Across all three SEG tracking indices, 217 of thegrowth for online retail. Among online retail’s 258 (84%) public companies we track reportedmost popular categories in 4Q11 were digital higher year-to-date (YTD) stock prices.content and subscriptions, jewelry and watches,consumer electronics, toys and hobbies, and The SEG Software Index, consisting of 145 publiccomputer software, each growing by at least 18% on-premise software companies, closed the firstyear-over-year. quarter with a median stock price return of 18.6%. Close behind was the SEG SaaS Index, conistingThe Interactive Advertising Bureau (IAB) and of 28 public pure-play SaaS companies, whichPricewaterhouseCoopers (PwC) reported Internet closed Q1 with a median stock return of 18.4%.advertising revenues soared to record levels in4Q11, reaching $9 billion, a 20% year-over-year This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 7. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 3: Major Market Indices Compared to the SEG Software, Internet and SaaS Indices DOW S&P NASDAQ SEG SaaS SEG SW Index SEG Internet Index 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0%) Jan Feb MarA number of SaaS companies far outperformed PUBLIC SOFTWARE COMPANY FINANCIALtheir peers in terms of median stock return, with PERFORMANCEfive superstars posting YTD stock returnsexceeding 50%: Elli Mae (97.5%), Demandware The 145 public companies comprising the SEG(86.3%), Bazaarvoice (65.6%), Salesforce (52.3%) Software Index grew TTM revenue a medianand Athenahealth (50.9%). Demandware and 14.2% in the first quarter of 2012, down sharplyBazaarvoice went public in the first quarter of from 4Q11’s 17.0% and the lowest in the past five2012. quarters (Figure 4). The 1Q12 drop marks two consecutive quarters of slowing revenue growthThe SEG Internet Index, comprised of 87 publicly after the 17.3% peak reached in 3Q11. Althoughtraded Internet companies, closed the first quarter down sharply, 1Q12’s 14.2% is a relatively solidwith a 19.3% gain in median stock price, slightly performance historically by public softwareoutpacing SEG’s Software and SaaS Indexes and companies and marks the ninth consecutivethe NASDAQ. The median year-end stock return quarter of positive TTM revenue growth. Theof the SEG Internet Index was buoyed, in part, by modest decline in growth rate was entirelyinvestor enthusiasm for newly public companies predictable, given the modest decline in ITamid a wave of IPOs in 2011 and the first quarter spending.of 2012 (see this issue’s IPO section for moredetail). Four of Q1’s top ten stock performances Figure 4: SEG Software Index Median Metricswere turned in by companies that went public in SEG - Software: Median Metricsthe last twelve months: Brightcove (73.4%), Jive Measure 1Q11 2Q11 3Q11 4Q11 1Q12Software (69.8%), LinkedIn (61.9%) and Zillow EV/Revenue 2.9x 2.8x 2.4x 2.4x 2.6x(58.3%). EV/EBITDA 14.5x 13.5x 11.6x 12.2x 12.2x EV/Earnings 27.8x 24.8x 21.0x 20.9x 22.0x Current Ratio 2.2 2.1 2.1 2.0 2.0 Cash & Eq ($M) $137.4 $145.4 $157.5 $132.0 $146.5 Gross Profit Margin 68.8% 68.9% 67.8% 66.9% 66.4% EBITDA Margin 19.9% 19.6% 20.4% 20.5% 20.6% Net Income Margin 9.5% 10.4% 10.9% 10.9% 10.6% TTM Revenue Growth 15.9% 16.1% 17.3% 17.0% 14.2% TTM Total Revenue ($M) $324.7 $339.7 $350.5 $361.2 $370.8 TTM Total EBITDA ($M) $63.2 $58.1 $63.4 $66.0 $62.5 Debt / Equity Ratio 28.2% 22.8% 22.5% 21.6% 22.5% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 8. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsProviders of mobile solutions proved to be an Many of the most profitable companies are largeexception. Of the top ten software companies software behemoths that have the scale to drivewith the largest TTM revenue growth in 1Q12, five high margins, including Oracle (42% EBITDAderive all or a substantial part of their revenue margin), Microsoft (42%) and SAP (37%).from mobile software solutions. The list includesQihoo (191% TTM revenue growth), Gree (133%), However, a few smaller software companies alsoMillennial Media (117%), Zynga (91%) and Velti demonstrated they could drive the bottom line.(63%). Besides mobile, other SEG Software Example: SolarWinds, a small cap shooting starIndex high flyers reporting exceptional revenue focused on IT management software, leveragedgrowth in 1Q12 included Merge Healthcare (66%), its unique and highly cost effective sales model toAllscripts Healthcare (56%), VASCO Data post EBITDA margins (48%) even the behemothsSecurity (56%) and Majesco (51%). would envy.The first quarter’s growth rate helped drive the Public software companies continued to growmedian TTM revenue of the SEG Software Index cash and equivalents on their balance sheets,above $370 million for the first time ever (Figure which is undoubtedly a by-product of their much5). Indeed, Q1’s median TTM revenue is more improved EBITDA margins. Consider that inthan twice the median TTM revenue of the SEG 1Q08, the median cash and equivalents of theSoftware Index in 1Q08. Over this same time SEG Software Index was $79.5 million and theperiod, the number of public software companies median EBITDA margin was only 13.0%. Inhas declined from 221 to 145 - further evidence 1Q12, median cash and equivalents had grown tothat consolidation in the software sector is $146.5 million, an 85% increase over four years,resulting in not only fewer, but considerably and the median EBITDA margin, as noted above,larger, publicly traded software companies. was 20.6% (Figure 6). The significant cash reserves and strong balance sheets of mostFigure 5: SEG Software Index TTM Revenue vs. public software companies, particularly theCompany Count industry’s largest players, bode well for many small and mid-cap software company M&A 250 $400 targets. $350# of Public  Software Companies  200 $300 Figure 6: SEG Software Historical Median in SEG  Software Index Median TTM Revenue 150 $250 Cash and Median EBITDA Margins ($ millions) $200 100 $150 Cash EBITDA Margin 180 25% $100 160 50 140 20% $50 Median EBITDA Margin Median Cash Balance 120 15% 0 $0 ($ millions) 100 1Q08 1Q09 1Q10 1Q11 1Q12 80 10% 60 40 5%Public software companies were especially adept 20 0 0%at improving their already healthy EBITDA 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11margins. In 1Q12, the median EBITDA margin ofthe on-premise public software companies in ourSoftware Index was 20.6%, up slightly from4Q11’s 20.5% and 3Q11’s 20.4% (Figure 4). PUBLIC SOFTWARE COMPANY MARKETAlthough revenue growth rates have returned to VALUATIONShistorical norms, the steadily increasing EBITDAmargins indicate a continuing emphasis on At the close of 1Q12, the median EV/Revenueprofitability brought on by plummeting growth multiple of public companies in our SEG Softwarerates during the Great Recession. Index had grown to 2.6x from 2.4x in both 4Q11 and 3Q11. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 9. Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions Although the first quarter’s median multiple was Size (i.e., annual revenue) wasn’t the only slightly lower than 1Q11’s 2.9x, it was 117% higher important determinant of public software company than the Great Recession low of 1.2x. The median market valuation. EBITDA margins clearly had a EV/Revenue multiple of the SEG Software Index major factor in public software company has now been at or above 2.0x for ten consecutive EV/Revenue multiples, which explains the quarters (Figure 7). aforementioned profitability focus. Public software companies with 40% or higher EBITDA Figure 7: SEG Software Median EV/Revenue margins were awarded with a median Multiples EV/Revenue multiple of 4.6x, whereas those with EBITDA margins below 10% were punished with 3.5x a 1.5x (Figure 9). 3.0xMedian EV/Revenue Multiple 2.5x Figure 9: 1Q12 EV/Revenue Multiple vs. 2.0x EBITDA Margin 1.5x 1.0x 5.0x 4.6x 4.5x 0.5x 4.0x 3.8x 0.0x 3.5x Median EV/Revenue 3.0x 2.7x 2.4x 2.5x 2.0x 1.5x 1.5x As the economic concerns that plagued the 1.0x second half of 2011 abated in 1Q12, investors 0.5x increased their risk appetite and bid up valuations 0.0x of smaller public software companies (Figure 8). < 10% > 10% <= 20% > 20% <= 30% > 30% <= 40% > 40% As testament, in 1Q12, the median EV/Revenue multiple of SEG Software Index companies with TTM revenues between $100 million and $200 PUBLIC SOFTWARE COMPANY FINANCIAL million skyrocketed to 2.7x, a 69% increase from PERFORMANCE: BY PRODUCT CATEGORY 4Q11’s 1.6x. However, investors continued to eschew smaller public companies. Those with Median TTM revenue in six of our SEG Software revenues under $100 million saw their median Index product categories grew 20% or more in EV/Revenue decline from 1.8x in 4Q11 to 1.5x in 1Q12 (Figure 10). Security posted an impressive 1Q12. 26% TTM revenue growth rate, the highest among the seventeen product categories we Figure 8: SEG Software Valuation by Size of track. The category was led by VASCO (55.7% Buyer TTM revenue growth), Imperva (41.4%) and Fortinet (33.5%). Business Intelligence, driven by 4.5x demand for analytics in the era of Big Data, 4.0x achieved a 24% TTM revenue growth rate. Other 3.5x hot product categories with TTM revenue growth 3.0x above 20% included Healthcare (23%), Median EV/Revenue 2.5x Networking & Network Performance Management 2.0x (21%), Vertically Focused software providers 1.5x (20%), Billing & Service Management (20%) and 1.0x Systems Management (20%). 0.5x 0.0x 1Q11 2Q11 3Q11 4Q11 1Q12 Revenue Greater Than $1 billion Revenue Between $200 million and $1 billion Revenue Between $100 million and $200 million Revenue Less Than $100 million This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 10. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 10: SEG Software Index Median Metrics by Product Category SEG Softw are Index Revenue EBITDA EBITDA YTD Stock EV/Revenue EV/EBITDA Category Grow th Grow th Margin Return 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q12 (TTM) 1Q12 (TTM) 1Q12 (TTM) 2012Billing & Service Management 2.0x 2.2x 1.3x 1.0x 1.3x 10.1x 8.9x 4.7x 4.2x 5.9x 19.8% 12.1% 21.8% 2.9%Business Intelligence 3.3x 3.2x 2.9x 2.4x 2.3x 37.8x 43.0x 40.3x 36.5x 39.2x 23.7% (5.3%) 8.9% 27.5%Development Platforms 2.9x 2.6x 1.8x 1.9x 2.3x 11.3x 10.7x 8.0x 9.0x 10.1x 7.7% 2.4% 22.2% 13.7%Engineering & PLM 2.5x 2.3x 1.9x 2.0x 2.6x 19.2x 16.4x 12.8x 13.4x 14.2x 13.5% 43.8% 18.5% 20.1%Enterprise Resource Planning 2.8x 2.7x 2.4x 2.8x 3.0x 11.4x 11.1x 8.7x 9.6x 10.0x 12.4% 17.0% 29.5% 13.7%Financial & Accounting 2.8x 2.7x 2.2x 2.5x 2.8x 9.6x 9.7x 8.5x 9.0x 9.7x 4.7% 14.1% 25.4% 18.6%Gaming 0.9x 1.0x 1.1x 1.2x 1.1x 8.9x 10.7x 8.3x 7.4x 6.4x 5.6% 41.0% 6.2% (1.9%)Healthcare 4.0x 3.9x 3.3x 2.9x 3.2x 18.7x 19.6x 17.7x 16.2x 15.2x 22.9% 41.5% 22.1% 18.5%IT Conglomerates 3.2x 3.0x 2.6x 2.5x 3.1x 8.6x 8.7x 8.7x 9.0x 8.2x 8.0% 15.4% 40.1% 13.7%Mobile Solutions/Content 3.4x 3.1x 1.9x 2.0x 2.5x 25.2x 23.2x 17.8x 23.3x 18.1x 10.6% (13.9%) 5.2% 22.2%Netw orking & Netw ork Performance 4.4x 4.2x 3.1x 2.7x 3.1x 25.2x 21.6x 16.1x 15.7x 16.4x 20.7% 49.6% 18.7% 18.2%Security 3.4x 3.1x 2.6x 2.8x 3.2x 16.7x 16.4x 13.3x 14.5x 13.5x 26.1% 19.0% 20.8% 21.5%Storage, Data Management & Integration 3.0x 2.6x 2.1x 2.2x 2.5x 10.7x 12.6x 9.9x 9.8x 10.3x 7.8% 15.4% 22.8% 23.4%Supply Chain Management & Logistics 2.0x 2.1x 1.8x 1.9x 1.9x 11.6x 11.6x 11.0x 11.4x 12.1x 14.9% 26.5% 20.1% 17.9%Systems Management 6.4x 7.3x 5.2x 5.5x 5.9x 19.6x 21.7x 18.7x 20.9x 22.2x 17.7% 26.2% 26.4% 35.1%Vertical - Finance 4.9x 4.6x 3.9x 3.8x 3.8x 15.3x 15.3x 13.6x 12.7x 11.6x 15.1% 16.7% 36.6% 8.4%Vertical - Other 2.4x 3.1x 2.7x 2.8x 3.2x 13.4x 15.1x 14.2x 15.7x 18.5x 20.4% 30.5% 18.4% 19.3% Median 2.9x 2.8x 2.4x 2.4x 2.6x 14.5x 13.5x 11.6x 12.2x 12.2x 14.2% 19.3% 20.6% 18.6%Given the buzz around Mobile, it’s surprising to stellar EBITDA margins of 36.6%, demonstratingsee the category finishing 1Q12 with a paltry strength from top to bottom, with every company10.6% median TTM revenue growth rate. The generating EBITDA margins above 31.5%.lackluster growth rate is largely attributable toproviders of legacy solutions to wireless carriers The product category with the lowest EBITDAthat have been adversely impacted by the likes of margin was Mobile, closing 1Q12 at 5.2%.Apple, Google and others that are beginning to Reflecting the wide ranging prospects ofdominate the mobile ecosystem. These legacy companies within this category, EBITDA marginsmobile solution providers include Smith Micro (- vary drastically from one company to another.55.7% TTM revenue growth), Access (-45.1%), Gree, an emerging provider of mobile socialMyriad Group (-35.3%), RealNetworks (-16.4%), games, finished 1Q12 with EBITDA margins ofMotricity (-8.8%), and Openwave (-1.6%). Growth 53.0%. By contrast, Smith Micro, a legacywas particularly strong among the new wave of provider of phone tools to mobile OEMs andmobile gaming and mobile advertising providers, wireless carriers, finished 1Q12 with EBITDAincluding Gree (133.0% TTM revenue growth), margins of -68.2%.Millennial Media (116.8%), and Velti (62.7%). PUBLIC SOFTWARE COMPANY MARKETFive software product categories posted TTM VALUATIONS: BY PRODUCT CATEGORYrevenue growth rates below 10%: ITConglomerates (8.0%), Storage, Data Public software companies in eight of ourManagement & Integration (7.8%), Development software product categories achieved a medianPlatforms (7.7%), Gaming (5.6%) and Financial & EV/Revenue multiple of 3.0x or higher in 1Q12.Accounting (4.7%). The Systems Management category posted a whopping EV/Revenue multiple of 5.9x, led byThe IT Conglomerate category led all other companies who are spearheading the cloudproduct categories with a median EBITDA margin revolution, namely: SolarWinds (12.9xof 40.1%. As the name implies, the category EV/Revenue), VMWare (9.9x), RedHat (7.6x) andconsists of the largest software providers in the Citrix Systems (5.9x). Over the past four quarters,world such as the aforementioned Oracle (42% EV/Revenue multiples in the SystemsEBITDA margin), Microsoft (42%) and SAP (37%). Management category have ranged from 5.2x toSoftware providers vertically focused on the 7.3x.finance industry (Vertical – Finance) also posted This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 11. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsComing in a distant second, the Vertical – perennial laggard and the majority of companiesFinance category closed 1Q12 with a median in the category are struggling to reinventEV/Revenue multiple of 3.8x, no doubt bolstered themselves. A lone standout is Synchronossby the category’s strong EBITDA margins. The Technologies, which posted an EV/RevenueHealthcare category finished 1Q12 with a 3.2x multiple of 4.9x, nearly four times the productmedian EV/Revenue multiple, down from 4.0x in category median. With a TTM revenue growth1Q11 as a consequence of legislative and rate of 38%, two times higher than the categoryregulatory uncertainty. median, Synchronoss’ provides best of class solutions to service providers struggling toInterestingly, TTM revenue growth appeared to manage and synchronize the barrage of mobilehave little impact on the median EV/Revenue devices connecting to their networks.multiple of the software product category (Figure11). The product category with the highest TTM PUBLIC SOFTWARE AS A SERVICE (SAAS)revenue growth rate (Security), finished 1Q12 with FINANCIAL PERFORMANCEa median EV/Revenue multiple of 3.2x, while thecategory with the lowest TTM revenue growth rate The median TTM revenue growth rate of public(Financial & Accounting), closed 1Q12 with a SaaS companies in 1Q12 was 27.8%, a 10%modestly lower median EV/Revenue multiple of increase over the prior quarter (Figure 12). The2.8x. Overall, comparative market valuations median TTM revenue growth rate of our SaaSamong different software product categories did Index constituents has now remained above 20%not vary widely: three out of four categories were for five consecutive quarters. With SaaS adoptionwithin 25% of the median EV/Revenue multiple of growing once again, we anticipate the medianthe SEG Software Index. SaaS TTM revenue growth rate will surpass 30% by year end. Indeed, as of the close of 1Q12,Figure 11: SEG Software Median EV/Revenue vs. more than 40% of the public companies in theTTM Revenue Growth SEG SaaS index boasted TTM revenue growth 7.0x above 30% and not one public SaaS company 6.0x 11 reported TTM revenue growth below 10% (Figure TTM Revenue has virtually no impact 13). Median EV/Revenue 5.0x on the median EV/Revenue multiple of software product categories 10 4.0x 1 5 7 13 14 15 17 Figure 12: SEG SaaS Index Median Metrics 3.0x 6 8 4 3 9 16 SEG - SaaS: Median Metrics 2.0x 2 12 Measure 1Q11 2Q11 3Q11 4Q11 1Q12 1.0x EV/Revenue 5.6x 5.7x 4.5x 4.2x 5.1x 0.0x EV/EBITDA 39.8x 38.9x 29.4x 25.8x 31.5x 0% 5% 10% 15% 20% 25% 30% EV/Earnings 102.6x 92.1x 73.2x 67.4x 31.0x TTM Revenue Growth Current Ratio 1.6 1.7 1.9 1.8 1.7 1. Financial & Accounting 7. Engineering & PLM 12. Billing & Service Management 2. Gaming 8. Enterprise Resource Planning 13. Vertical – Other Cash & Eq ($M) $50.1 $53.3 $72.5 $66.6 $71.7 3. Development Platforms 9. Supply Chain Management & Logistics 14. Healthcare 4. 5. Storage, Data Management & Integration IT Conglomerates 10. 11. Vertical - Finance Systems Management 15. 16. Networking & Network Performance Business Intelligence Gross Profit Margin 68.3% 69.0% 70.0% 70.5% 71.1% 6. Mobile Solutions/Content 17. Security EBITDA Margin 10.1% 8.7% 9.6% 9.1% 10.1% Net Income Margin 2.8% 1.8% 1.8% 1.8% 3.4% TTM Revenue Growth 25.4% 23.7% 26.9% 25.5% 27.8%Only four product categories improved their TTM Total Revenue ($M) $121.0 $124.6 $128.8 $146.6 $154.2median EV/Revenue in 1Q12 from a year earlier: TTM Total EBITDA ($M) $14.9 $17.1 $19.4 $20.8 $21.9Engineering & PLM, ERP, Gaming and Vertical Debt / Equity Ratio 10.9% 5.0% 6.2% 5.1% 6.6%(Miscellaneous). The Vertical (Miscellaneous)product category had the highest YoY jump in Unsurprisingly, the growth of these SaaSmedian EV/Revenue, finishing 33% above 1Q11, companies has been driven in large part by theirled by insurance industry focused Guidewire enhanced investment in sales and marketing,Software (5.5x EV/Revenue), and public sector which has grown from 22% of total revenue infocused Tyler Technologies (3.7x EV/Revenue). 1Q11, to 31% in 1Q12 (Figure 14). In fact, all 28 public SaaS companies in the SEG SaaS IndexThe Billing & Service Management product increased S&M spend as a percent of totalcategory experienced the largest YoY decline in revenue.market valuation. The category has been a This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 12. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 13: Public SaaS Companies SEG SaaS Index EV/Revenue EV/EBITDA TTM Revenue Growth EBITDA Margin Company Category 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12Archipelago Learning, Inc. (ARCL) Vertically Focused 5.4x 4.3x 4.1x 4.2x 4.0x 18.4x 16.1x 13.1x 14.1x 13.4x 37.1% 39.7% 39.8% 32.3% 24.9% 29.4% 26.9% 31.3% 29.6% 29.9%Ariba, Inc. (ARBA) ERP & Supply Chain 7.3x 7.5x 6.2x 6.1x 5.6x 81.0x 102.9x 86.9x 85.0x 76.1x 2.3% 14.5% 26.9% 38.5% 42.7% 9.0% 7.3% 7.1% 7.2% 7.4%Athenahealth, Inc. (ATHN) Vertically Focused 5.9x 5.5x 6.7x 6.2x 6.8x 42.3x 37.3x 39.9x 36.2x 45.4x 30.2% 29.2% 30.5% 30.5% 32.0% 13.8% 14.9% 16.9% 17.1% 15.0%Bazaarvoice, Inc. (BV) Other SaaS - - - - 11.0x - - - - - 72.0% 66.8% - - - -17.8% -27.9% -24.1% -20.8% -20.4%Callidus Software Inc. (CALD) Workforce Mgmt 2.4x 2.6x 1.9x 2.2x 2.8x - - - - - -12.6% 4.5% 17.6% 19.6% 18.2% -8.5% -3.1% -3.1% -4.3% -7.0%Concur (CNQR) Other SaaS 7.9x 7.4x 5.7x 6.4x 7.8x 37.7x 44.2x 38.5x 48.4x 68.6x 19.0% 18.6% 18.4% 19.3% 21.0% 21.0% 16.8% 14.8% 13.1% 11.4%Constant Contact (CTCT) Other SaaS 4.2x 3.6x 2.2x 2.5x 3.4x 58.9x 54.5x 28.2x 27.9x 33.5x 35.0% 31.6% 28.2% 25.2% 23.1% 7.2% 6.6% 7.8% 9.0% 10.2%Convio (CNVO) CRM & Marketing 1.8x 2.2x 1.6x 1.8x 3.0x 18.2x 25.6x 18.3x 20.2x 31.5x 10.6% 9.5% 10.2% 12.2% 15.2% 10.0% 8.6% 8.7% 8.7% 9.6%Cornerstone OnDemand (CSOD) Workforce Mgmt 21.5x 17.4x 12.3x 10.6x 11.3x - - - - - 49.1% - - 51.9% 67.0% -26.1% -27.1% -33.7% -30.9% -24.0%DealerTrack (TRAK) Vertically Focused 2.7x 3.0x 2.4x 2.9x 3.2x 22.9x 23.2x 15.7x 17.7x 21.0x 8.1% 16.6% 26.3% 37.9% 44.9% 11.6% 13.1% 15.2% 16.3% 15.3%Demandware, Inc (DWRE) Other SaaS - - - - 14.6x - - - - 386.9x 71.5% - - - 54.1% 7.5% 4.8% 2.9% 1.5% 3.8%Ebix Inc. (EBIX) Vertically Focused 7.1x 5.8x 4.3x 4.1x 5.2x 16.5x 13.0x 9.7x 9.3x 12.0x 35.3% 29.5% 27.3% 24.6% 27.8% 43.2% 44.2% 44.1% 43.9% 43.5%Ellie Mae (ELLI) Other SaaS 7.1x 5.8x 4.3x 4.1x 5.2x 16.5x 13.0x 9.7x 9.3x 12.0x 35.3% 29.5% 27.3% 24.6% 27.8% 43.2% 44.2% 44.1% 43.9% 43.5%ExactTarget, Inc. (ET) CRM & Marketing - - - - 7.9x - - - - - 40.7% 40.7% 40.7% - 54.5% -5.1% -5.1% -5.1% -6.0% -3.3%IntraLinks Holdings (IL) Other SaaS 7.3x 6.0x 2.6x 1.7x 1.7x 41.3x 37.3x 18.3x 15.5x 12.5x 31.0% 34.8% 30.6% 23.7% 15.5% 17.6% 16.1% 13.9% 11.2% 13.9%Kenexa (KNXA) Workforce Mgmt 2.8x 3.2x 2.2x 2.3x 2.4x 43.6x 40.4x 29.9x 29.4x 28.2x 24.5% 36.7% 46.9% 52.4% 44.1% 6.3% 7.9% 7.3% 7.8% 8.5%LivePerson (LPSN) CRM & Marketing 4.7x 4.8x 4.5x 4.6x 5.3x 23.7x 23.3x 21.9x 22.7x 25.8x 25.6% 23.7% 21.9% 20.8% 21.1% 19.7% 20.6% 20.5% 20.4% 20.5%Medidata Solutions (MDSO) Other SaaS 3.1x 2.8x 1.8x 2.0x 2.3x 16.1x 14.9x 8.4x 9.2x 11.1x 18.5% 17.4% 19.0% 17.9% 10.8% 19.5% 19.1% 21.4% 21.7% 20.4%Netsuite (N) ERP & Supply Chain 9.0x 10.7x 10.0x 11.5x 12.8x - - - - - 16.0% 19.6% 21.1% 21.9% 22.4% -6.9% -7.1% -7.9% -7.3% -7.4%OpenTable, Inc. (OPEN) Other SaaS 19.6x 18.7x 11.7x 6.7x 7.2x 80.7x 74.0x 41.5x 23.7x 24.0x 44.3% 50.9% 54.3% 52.3% 40.9% 24.3% 25.2% 28.2% 28.1% 30.2%RealPage (RP) Vertically Focused 9.7x 9.3x 7.2x 7.5x 6.9x 70.3x 69.6x 54.5x 62.4x 60.9x 33.6% 36.6% 38.3% 39.8% 37.0% 13.8% 13.3% 13.1% 12.0% 11.3%Responsys (MKTG) CRM & Marketing - 7.3x 5.3x 2.7x 3.4x - 40.6x 28.9x 14.1x 21.6x 41.2% - - 54.1% 43.4% 19.9% 18.0% 18.5% 19.0% 15.7%Salesforce.com (CRM) CRM & Marketing 10.5x 10.3x 9.2x 8.0x 7.7x 108.4x 132.1x 154.6x 183.3x 165.1x 26.9% 29.6% 33.0% 34.6% 36.8% 9.7% 7.8% 5.9% 4.3% 4.7%SciQuest (SQI) ERP & Supply Chain 5.6x 6.2x 5.9x 5.3x 5.0x 28.7x 34.2x 38.7x 38.1x 37.1x 17.4% 19.0% 19.7% 22.0% 25.8% 19.7% 18.2% 15.3% 14.0% 13.5%SPS Commerce (SPSC) ERP & Supply Chain 3.2x 3.3x 3.6x 4.2x 4.7x 31.4x 37.2x 47.2x 62.7x 68.5x 18.2% 19.1% 22.5% 26.7% 30.0% 10.2% 8.7% 7.6% 6.7% 6.9%The Ultimate Software Group, Inc. (ULTI) Workforce Mgmt 5.6x 5.7x 5.1x 6.2x 6.5x 67.6x 71.0x 59.5x 67.8x 65.9x 16.1% 16.5% 16.8% 17.0% 18.2% 8.3% 8.1% 8.6% 9.2% 9.9%Vocus (VOCS) CRM & Marketing 4.2x 4.3x 3.3x 2.7x 2.6x 241.2x 19818.5x 464.8x 156.4x 130.8x 14.4% 17.4% 19.1% 18.9% 18.7% 1.8% 0.0% 0.7% 1.7% 2.0%Zix Corporation (ZIXI) Other SaaS 7.4x 6.0x 5.5x 4.2x 4.6x 38.3x 24.1x 20.2x 14.5x 14.6x 25.2% 30.9% 31.5% 31.7% 15.4% 19.4% 24.7% 27.2% 29.3% 31.3% Median: 5.6x 5.7x 4.5x 4.2x 5.1x 39.8x 38.9x 29.4x 25.8x 31.5x 25.4% 23.7% 26.9% 25.5% 27.8% 10.1% 8.7% 9.6% 9.1% 10.1%In 1Q12, four SaaS providers spent more than The steadily improving TTM revenue growth rates50% of their revenues on S&M: Vocus (50.1%), and EBITDA margins of public SaaS providers areNetsuite (50.9%), Salesforce (51.6%) and creating a force to be reckoned with, a sizableCornerstone OnDemand (62.7%). and growing group of companies with scale, a strong financial model, and strong balanceThese sizable investments in S&M to drive growth sheets. The median TTM revenue for the SEGhad a predictable impact on profitability. Of the SaaS Index is now $154M, up 27% YoY; medianfour SaaS providers spending 50% or more of Cash & Equivalents ended 1Q12 at $71M, uptheir revenues on S&M, each posted EBITDA 43% YoY.margins of 4.6% or less. By contrast, most publicSaaS companies continued to balance revenue PUBLIC SOFTWARE AS A SERVICE (SAAS)growth and profitability. In 1Q12, the median COMPANY MARKET VALUATIONSEBITDA margin of the SEG SaaS Index was10.1%, up slightly from 4Q11. Six outperformers In 1Q12, the median EV/Revenue multiple of thereported EBITDA margins above 20%: Medidata 28 pure-play public SaaS providers comprising(20%), LivePerson (21%), Archipelago Learning our SEG SaaS Index rose markedly to 5.1x from(30%), OpenTable (30%), Zix Corporation (31%) 4.2x in 1Q11 (Figure 12). Four public SaaSand EBIX (43%). companies had EV/Revenue multiples above 10x at the close of 1Q12: BazaarVoice (11.0x), Cornerstone OnDemand (11.3x), Demandware Figure 14: Public SaaS Company (14.6x) and NetSuite (12.8x). All but NetSuite S&M Spend as % of Total Revenue went public within the last year. Investors are 35% 31% clearly favoring growth over profitability in the 30% current market, as three of the four SaaS S&M as a % of Total Revenue 25% providers with the highest market valuations had 22% negative EBITDA margins; the fourth, 20% Demandware, reported a paltry 3.8% EBITDA. 15% Indeed, there was a clear, causal relationship in 10% 1Q12 between SaaS company market valuations 5% and TTM revenue growth rates (Figure 15). 0% Public SaaS companies with TTM revenue growth 1Q11 1Q12 rates between 10%-20% registered a median EV/Revenue of 2.8x, while those generating TTM revenue growth rates above 40% boasted a This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 13. Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitionsmedian EV/Revenue multiple of 7.2x. By increased. SaaS companies in this category arecontrast, there was very little relationship between benefitting from growing enterprise and SMBEBITDA margins and public SaaS company acceptance of cloud-based, remotely hostedmarket valuations (Figure 16). As testament, applications. Vertically focused SaaS providersSaaS providers with negative EBITDA margins achieved EBITDA margins of 15.3% in 1Q12,were awarded with a median EV/Revenue 52% higher than the SaaS sector median ofmultiple of 11.0x, no doubt boosted by their 10.1%. The strong EBITDA margins reflect themedian TTM revenue growth rate of 54.5%. pricing power associated with highly specialized applications for a particular vertical.Figure 15: SEG SaaS Median EV/Revenue vs.TTM Revenue Growth PUBLIC SOFTWARE AS A SERVICE (SAAS) 8 7.2x COMPANY MARKET VALUATIONS: BY PRODUCT 7 6.9x CATEGORY 6Median EV/Revenue 5 5.0x ERP & Supply Chain finished 1Q12 with the 4 highest median EV/Revenue multiple: 5.3x. The 3 2.8x category was bolstered by strong performance 2 from NetSuite (12.8x) and Ariba (5.6x). Workforce No companies with 1 TTM revenue growth less than 10% Management was the only product category of the 0 four with a higher YoY market valuation in 1Q12, <= 0% > 0% > 10% > 20% > 30% > 40% benefitting from strong performances by Callidus <= 10% <= 20% <= 30% <= 40% TTM Revenue Growth and Ultimate Software, which grew their YoY median EV/Revenue multiples 16.8% and 16.9%, Figure 16: SEG SaaS Median respectively. CRM & Marketing, posted the EV/Revenue vs. EBITDA Margins lowest median EV/Revenue multiple in 1Q12, as declines in the market valuations of 12.0x 11.0x Salesforce.com, Vocus and Responsys were not 10.0x offset by newly listed ExactTarget, which closed 1Q12 with a 7.9x EV/Revenue multiple. Median EV/Revenue 8.0x 5.9x 6.0x 4.7x 5.2x PUBLIC INTERNET COMPANY FINANCIAL 4.2x 4.0x 4.0x PERFORMANCE 2.0x Public companies comprising the SEG Internet 0.0x Index posted a stellar median TTM revenue <= 0% > 0% > 10% > 20% > 30% > 40% growth of 29.3% in 1Q12, the highest of our three <= 10% <= 20% <= 30% <= 40% EBITDA Margins tracking Indices (Figure 18). 1Q12’s revenue growth compares quite favorably to 1Q11’s 23.4%PUBLIC SOFTWARE AS A SERVICE (SAAS) revenue growth rate, and is even more impressiveFINANCIAL PERFORMANCE: BY PRODUCT considering the SEG Internet Index has theCATEGORY highest median TTM Revenue ($393.6 million) of the three SEG indices. By comparison, publicThe SEG SaaS Index, consisting of 28 pure play software companies had median TTM revenue ofSaaS providers, now has sufficient critical mass to $370.8 million in 1Q12, but a considerably lowerestablish and track four distinct subcategories: TTM revenue growth rate of 14.2%. Of the 15CRM & Marketing; ERP & Supply Chain; public Internet companies with TTM revenue of $1Workforce Management; and Vertically Focused billion or more, nearly three out of four generatedproviders (Figure 17). Each category posted a TTM revenue growth rates of more than 20% inTTM revenue growth rate above the median 1Q12. The high performing Internet companies27.8% growth rate for the overall Index. ERP & span an array of Internet categories, includingSupply Chain had the most improved TTM eCommerce (Amazon, eBay), Search (Google,revenue growth rate in 1Q12 measured YoY, the Baidu), Gaming (Tencent, Zynga) and Travelfifth consecutive quarter growth rates have (Priceline, Expedia). This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 14. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 17: SEG SaaS Index Median Metrics by Product Category SEG SaaS Index EV/Revenue EV/EBITDA TTM Revenue Grow th EBITDA Margin Category 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12CRM & Marketing 4.4x 4.8x 4.5x 2.7x 4.3x 66.0x 40.6x 28.9x 22.7x 31.5x 26.2% 23.7% 21.9% 20.8% 29.0% 9.8% 8.2% 7.3% 6.5% 7.2%ERP & Supply Chain 6.5x 6.8x 6.0x 5.7x 5.3x 31.4x 37.2x 47.2x 62.7x 68.5x 16.7% 19.1% 21.8% 24.3% 27.9% 9.6% 8.0% 7.4% 6.9% 7.1%Vertically Focused 5.9x 5.5x 4.3x 4.2x 5.2x 22.9x 23.2x 15.7x 17.7x 21.0x 33.6% 29.5% 30.5% 32.3% 32.0% 13.8% 14.9% 16.9% 17.1% 15.3%Workforce 4.2x 4.5x 3.7x 4.3x 4.7x 55.6x 55.7x 44.7x 48.6x 47.1x 20.3% 16.5% 17.6% 35.7% 31.1% -1.1% 2.4% 2.1% 1.7% 0.7% Median: 5.6x 5.7x 4.5x 4.2x 5.1x 39.8x 38.9x 29.4x 25.8x 31.5x 25.4% 23.7% 26.9% 25.5% 27.8% 10.1% 8.7% 9.6% 9.1% 10.1%In 1Q12 there were significant disparities in Jive Software is a good example, listing in 2011revenue growth rates among consumer focused and posting a 67% TTM revenue growth rate andpublic Internet companies, thanks to the virtually -49% EBITDA margins in 1Q12. Nevertheless, anunlimited number of prospects and the extended period of consistent profitability hasdemonstrated ability of some to grow bolstered the balance sheets of Internet providers.exponentially by “going viral”. Indeed, the SEG For most Internet providers, however, revenueInternet index has the widest distribution of growth appeared to compensate for lowerrevenue growth rates among our three tracking margins. By the close of the first quarter, theindices (Figure 19). Nearly ten percent of public median Cash & Equivalents of companiesInternet companies achieved TTM revenue comprising the SEG Internet Index was $161.8M,growth at or above 100% in 1Q12, including up 32.2% from 1Q10 (Figure 18).Groupon (415%), Qihoo (191%), Youku (131%),Zillow (117%), LinkedIn (115%), KIT Digital Figure 19: SEG Internet Index Revenue(102%), and Pandora (100%). At the other end of Growth Distributionthe spectrum, over 10% of SEG Internet providers 500%posted negative revenue growth, includingTree.com (-71%), Yahoo (-21%), and AOL (-9%). 400%Yahoo and AOL are great examples on how TTM Revenue Growth 300%quickly leading consumer Internet companies cango out of favor, something, Groupon, and other 200%high flyers, should monitor closely. 100%Figure 18: SEG Internet Index Median Metrics 0% SEG - Internet: Median Metrics Measure 1Q11 2Q11 3Q11 4Q11 1Q12 ‐100%EV/Revenue 3.0x 3.2x 2.7x 2.5x 2.5xEV/EBITDA 18.9x 19.6x 13.8x 12.5x 13.1xEV/Earnings 33.2x 34.0x 28.9x 22.8x 26.4xCurrent Ratio 2.4 2.4 2.7 2.6 2.5 PUBLIC INTERNET COMPANY MARKETCash & Eq ($M) $122.4 $117.3 $139.2 $159.4 $161.8 VALUATIONSGross Profit Margin 67.5% 67.0% 66.7% 67.6% 67.7%EBITDA Margin 16.8% 15.1% 15.2% 15.1% 13.7% The median EV/Revenue multiple for the 87Net Income Margin 6.3% 4.4% 4.7% 4.1% 4.4%TTM Revenue Growth 23.4% 19.5% 21.9% 26.0% 29.3% public companies comprising the SEG InternetTTM Total Revenue ($M) $300.9 $319.2 $345.4 $375.7 $393.6 Index was 2.5x in 1Q12, the same as the priorTTM Total EBITDA ($M) $46.5 $43.5 $51.3 $53.9 $52.2 quarter, but down 16.7% from 3.0x in 1Q11Debt / Equity Ratio 9.3% 9.4% 10.6% 20.8% 15.0% (Figure 18). The exception was Internet companies with revenues under $100 million which experienced strong YoY growth in marketThe median EBITDA margin of public Internet valuation – quite a contrast from their sub-$100companies declined to 13.7% in 1Q12, down million software counterparts who couldn’tsharply from 16.8% in 1Q11. The drop can be stimulate nearly as much investor enthusiasmlargely attributed to higher sales and marketing (Figure 20).expenses to drive market adoption and a numberof newly public Internet providers that had eye-popping revenue growth but weak profitability. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 15. Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions Figure 20: SEG Internet Valuation by Size of Buyer (TTM Revenue) SEG Internet Index Companies EV/Revenue EV/EBITDA Revenue Growth EBITDA Margin 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q12 (TTM) 1Q12 (TTM) Revenue Greater Than $1 billion 3.4x 3.6x 2.8x 3.6x 3.4x 14.2x 13.1x 17.5x 16.8x 18.5x 29.3% 16.3% Revenue Between $200 million and $1 billion 2.8x 3.4x 2.4x 2.2x 2.2x 14.3x 14.5x 10.7x 9.6x 11.2x 28.4% 17.7% Revenue Between $100 million and $200 million 3.2x 2.9x 2.6x 2.1x 2.5x 9.5x 15.1x 8.8x 8.5x 9.8x 44.4% 11.6% Revenue Less Than $100 million 2.0x 1.8x 2.2x 3.4x 3.1x 19.4x 21.2x 20.2x 16.0x 16.3x 16.2% -3.0% Investors were clearly focused on Internet PUBLIC INTERNET COMPANY FINANCIAL category winners, awarding premium valuations to PERFORMANCE: BY PRODUCT CATEGORY those that exceeded their high TTM revenue hurdle rate, but largely ignoring the rest. As Driven by the need to first scale rapidly then testament, public Internet providers with TTM monetize, the Social product category earned the revenue growth rates between 30% and 40% had highest TTM revenue growth (70.8%) and lowest a relatively modest median EV/Revenue multiple EBITDA margins (1.8%) among our eight Internet of 2.6x, while those above 40% were awarded a product categories (Figure 23). Four of the six whopping 6.7x multiple (Figure 21). companies within this category posted TTM revenue growth two times higher than the Internet As in the case of SaaS, investors had no problem sector median of 29.3%: LinkedIn (115.1%), betting on unprofitable Internet investors that Mail.ru Group (95.6%), Yelp (75.7%) and Jive reported rapid growth and appeared to have (67.3%). extraordinary upside. In 1Q12, Internet providers with negative EBITDA margins had a median TTM Four other product categories finished 1Q12 with revenue growth rate of 67.4% and a whopping TTM revenue growth above the Internet sector median EV/Revenue multiple of 6.6x (Figure 22). median: Ad Tech & Lead Gen (32.2%), Gaming The list of companies in this group include new (35.7%), Services (42.7%) and Travel (31.5%). IPOs Jive Software (-49.2% EBITDA margins, The Services product category, the best 13.3x EV/Revenue), Angie’s List (-47.3%, 8.2x), performer of the four, was boosted by strong TTM Zynga (-27.5%, 6.6x), Groupon (-13.7%, 7.0x) revenue growth from Qihoo (191.2%), Bankrate and Yelp (-9.3%, 16.3x). (92.3%), Shutterfly (54.0%), and Angie’s List (53.1%). Companies within the Ad Tech & Lead But unlike SaaS investors who showed complete Gen category continue to benefit from the indifference to ranges of profitability (Figure 16), dramatic growth in advertising dollars migrating Internet investors rewarded profitable Internet from offline to online, as well as from increased providers as well. Public Internet companies that spending on lead generation services. Notable were able to achieve EBITDA margins in excess examples in this category include Groupon of 40% in 1Q12 received a premium median (414.6% TTM revenue growth), LinkedIn (114.8%) market valuation of 5.8x, in contrast to those with and Baidu (83.2%). 0% - 10% EBITDA margins that had a median 1.4x EV/Revenue multiple (Figure 22). Figure 22: SEG Internet Median EV/Revenue vs. EBITDA Margin 7.0x Figure 21: SEG Internet Median EV/Revenue vs. 6.6x TTM Revenue Growth 6.0x 5.8x 8.0x 5.2x 6.7x 5.0x 7.0x Median EV/Revenue 6.0x 4.0xMedian EV/Revenue 3.4x 5.0x 4.0x 3.0x 3.0x 2.4x 2.6x 2.0x 1.8x 1.4x 1.5x 2.0x 0.9x 0.9x 1.0x 1.0x 0.0x <= 0% > 0% > 10% > 20% > 30% > 40% 0.0x <= 10% <= 20% <= 30% <= 40% <= 0% > 0% > 10% > 20% > 30% > 40% TTM Revenue Growth <= 10% <= 20% <= 30% <= 40% EBITDA Margins This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 16. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 23: SEG Internet Index Median Metrics by Product Category SEG - Internet Index Revenue EBITDA EBTIDA YTD EV/Revenue EV/EBITDA Growth Growth Margin Stock Category (TTM) (TTM) (TTM) Return 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12 1Q12 1Q12 1Q12 2012Ad Tech & Lead Gen 3.0x 3.6x 3.0x 3.5x 3.6x 14.2x 16.7x 13.8x 11.9x 16.7x 32.2% 27.0% 15.6% 15.2%Commerce 1.9x 1.9x 1.4x 1.1x 0.9x 22.7x 19.3x 13.6x 13.1x 16.6x 14.3% -0.3% 8.6% 21.4%Content & Media 2.5x 3.4x 2.7x 2.2x 2.0x 13.5x 18.1x 11.0x 10.6x 10.5x 25.8% 11.2% 13.4% 15.2%Gaming 4.1x 4.8x 4.7x 3.1x 3.2x 9.8x 9.8x 8.1x 6.1x 4.2x 35.7% 34.7% 44.2% 29.5%Infrastructure 2.9x 2.8x 2.6x 1.7x 1.9x 20.5x 19.7x 17.3x 12.8x 14.1x 22.8% 21.5% 11.2% 17.0%Services 3.0x 4.9x 5.0x 4.2x 4.2x 19.7x 22.0x 23.4x 16.5x 18.1x 42.7% 22.9% 13.3% 24.6%Social 20.6x 22.5x 20.2x 12.4x 14.3x 86.1x 137.9x 116.6x 58.5x 63.9x 70.8% -14.5% 1.8% 61.9%Travel 6.5x 7.1x 5.1x 5.4x 4.7x 26.2x 29.6x 23.4x 16.8x 15.3x 31.5% 25.9% 22.1% 2.2% Median: 3.0x 3.2x 2.7x 2.5x 2.5x 18.9x 19.6x 13.8x 12.5x 13.1x 29.3% 15.7% 13.7% 19.3% EV/Revenue multiple included Mail.ru GroupGaming turned in arguably the best overall (17.7x), Yelp (16.3x), and LinkedIn (15.2x).financial performance among all Internet Besides a median growth rate in 1Q12 exceedingcategories, posting a stellar median EBITDA 70%, investor enthusiasm for Social plays wasmargin of 44.2% and an impressive 35.7% bolstered by the success of Facebook and othermedian revenue growth rate. The category high flying, yet still private, social mediacontinues to benefit from lower customer companies that are generating tremendous buzz.acquisition costs and a viral distribution channel.As a result, Gaming was the most profitable While less spectacular than Social, the TravelInternet category, far surpassing the 1Q12 product category also had an impressive marketmedian EBITDA margins of Commerce (8.6%), valuation in 1Q12, posting a median 4.7xContent & Media (13.4%), Infrastructure (11.2%), EV/Revenue multiple. Key market performers inServices (13.3%) and Social (1.8%). the Travel category included HomeAway (8.9x EV/Revenue), TripAdvisor (7.1x) and PricelineCompanies within the Commerce and Content & (6.2x).Media categories have historically had lowEBITDA margins due to significant revenue Figure 24: SEG Internet Index Product Categorysharing inherent in their advertising and/or content Median EV/Revenue vs. TTM Revenue Growthdistribution business models. As testament, 16.0xAmazon, included in the Commerce product 8 14.0xcategory, posted an EBITDA margin of 3.6% in1Q12. From the Content & Median category, 12.0x Median EV/RevenuePandora - a largely advertising funded business 10.0xmodel - posted an EBITDA margin of -2.4%. 8.0x 6.0x 4 7PUBLIC INTERNET COMPANY MARKET 4.0x 3 5 6 2VALUATIONS: BY PRODUCT CATEGORY 2.0x 1 0.0xThe public market valuations of companies 0% 10% 20% 30% 40% 50% 60% 70% 80% TTM Revenue Growthcomprising the SEG Internet Index varied widely 1. Commerce 5. Ad Tech & Lead Gen 2. Infrastructure 6. Gamingby Internet category in 1Q12 (Figure 23). Yet, 3. 4. Content & Media Travel 7. 8. Services Socialthere appears to be a strong relationship betweenthe revenue growth of the product category andits median EV/Revenue multiple (Figure 24). The Commerce category was widely eschewed by investors, closing 1Q12 with a highlyThe outlier, on both TTM revenue growth and disappointing 0.9x EV/Revenue multiple, by farmedian EV/Revenue multiple, is Social Media the lowest of our Internet categories. Lacklusterwhich racked up a median EV/Revenue multiple revenue growth, well below the Internet median, isof 14.3x - nearly six times higher than the overall surely to blame here. The notable exception wasInternet median of 2.5x. Companies with market Mercardolibre, which posted a medianvaluations exceeding the median Internet EV/Revenue multiple of 13.7x, over fifteen times This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 17. Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitionsthe Commerce category median for 1Q12. for AVG technologies (NYSE:AVG), which isMercardolibre, Latin America’s eBay, was based in Norway.favorably looked upon by investors enamored with The stock prices of these 11 newly listedemerging markets, particularly in light of its 38% companies performed exceptionally well in Q1,TTM revenue growth rate. increasing a median 65.6% by the close of the quarter. Five of the new public market entrantsINITIAL PUBLIC OFFERINGS advanced 80% or more by March 31, led by Brightcove which rewarded investors with aThe software IPO market began the year with a 125.5% return. The median revenue growth ratebang, as eleven software/SaaS and Internet of the eleven was a noteworthy 49.8%. Four ofcompanies went public in 1Q12, compared to only the eleven companies grew revenue by more thanfour in the first quarter of 2011 (Figure 25). 50%, led by Millennial Media (116.8%) and Yelp,Collectively, these eleven newly listed companies Inc. (74.5%).touted a median TTM revenue growth rate of49.8% and a median TTM EBITDA margin of The vast majority of IPOs had strong first day3.8%. In aggregate, they raised nearly $1 billion, performances, as investors bid up prices inranging individually from $22.7 million to $147 contemplation of substantial future growth.million. Millennial Media debuted at $13 and closed theThe two biggest IPOs of the quarter were first day of trading at $25, up 92.3%. Yelp, initiallyMillennial Media (NYSE:MM), an online mobile priced at $15 per share, closed its first day atadvertising solution that raised over $123 million $24.58, up 69.3%. Other strong first dayand ExactTarget (NYSE:ET), an email marketing performances were turned in by Demandwareprovider for Fortune 500 companies that raised (47.4%) and ExactTarget (32.2%). All but one of$147 million. Of the 11 newly trading companies the first quarter’s IPOs (Millennial Media) werein 1Q12, all are headquartered in the US except able to achieve 1Q12 stock returns above their first day return. Figure 25: U.S. Software, SaaS and Internet IPOs in 2012 EV / Revenue EBITDA First Day Company (Ticker) Category IPO Date Net Proceeds Enterprise Value EV / Rev Revenue YTD Return EBITDA Growth Margin Return Millennial Media Inc Mobile Solutions/Content 3/29/12 $123,318,000 $1,855,543,000 17.9x n/a $103,678,000 116.8% (0.1%) 92.3% 80.8% (NYSE: MM) ExactTarget, Inc. SaaS - CRM & Marketing 3/22/12 $147,000,000 $1,571,645,470 7.6x n/a $207,493,000 54.5% (3.3%) 32.2% 36.8% (NYSE: ET) Demandware, Inc. SaaS - Other 3/15/12 $81,840,000 $737,949,470 13.1x 346.8x $56,547,000 54.1% 3.8% 47.4% 86.3% (NYSE:DWRE) Yelp, Inc. Internet - Social 3/2/12 $99,742,500 $1,449,946,790 17.4x n/a $83,285,000 74.5% (8.5%) 63.9% 79.3% (NYSE:YELP) Bazaarvoice, Inc SaaS - Other 2/24/12 $105,844,740 $950,055,560 10.1x n/a $93,986,000 n/a (20.4%) 37.6% 65.6% (NASDAQ:BV) Brightcove Inc. Infrastructure 2/17/12 $51,150,000 $368,043,500 5.8x n/a $63,563,000 45.4% (22.1%) 30.0% 125.5% (NASDAQ:BCOV) Synacor, Inc Infrastructure 2/13/12 $22,700,000 $127,286,620 1.4x 19.0x $91,060,000 37.5% 7.4% (4.5%) 40.5% (NASDAQ:SYNC) FX Alliance Vertical - Finance 2/9/12 $58,032,000 $270,796,960 2.3x 5.9x $118,265,000 19.4% 39.0% 1.0% 15.3% (NYSE: FX) AVG Technologies N.V. Security 2/3/12 $119,040,000 $1,055,689,120 3.9x 13.1x $272,392,000 25.4% 29.5% (2.5%) 11.3% (NYSE: AVG) Greenway Medical Technologies, Healthcare 2/2/12 $62,000,000 $348,719,740 3.3x 63.4x $105,784,180 n/a 5.2% 28.7% 51.3% Inc Guidewire Software, Inc. Vertical - Other 1/25/12 $106,996,500 $842,377,160 4.4x 32.5x $190,182,000 n/a 13.6% 2.2% 83.8% (NYSE: GWRE) Median $99,742,500.00 $842,377,160 5.8x 25.8x $103,678,000 49.8% 3.8% 30.0% 65.6% Financial data is the latest available from CapIQ on offering date. First day return compares listed offering price to first day close. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 18. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 26: U.S. Software Mergers & Acquisition Activity 500 $25 453 $21.3 440 450 431 426 430 421 407 $23.7 401 400 383 $20 372 $17.9 $17.7 350 330 316 311 $17.3 Number of Deals 300 $13.5 $15 Value (BIllions) $13.1 $12.7 250 $11.9 200 $10 $7.6 150 $4.6 100 $3.3 $5 $2.9 50 0 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 Deals ValueSOFTWARE/SAAS M&A DEAL VOLUME AND SPENDINGAs we went to press, there were 401 software Software/SaaS mega deals in the first quarterindustry M&A transactions reported in the first included Cisco’s acquisition of NDS Group ($4.9quarter (Figure 26). We expect the final tally for billion EV, 5.0x TTM Revenue); Vista EquityQ1 to reach 420, since M&A data for the quarter Partners’ acquisition of Misys ($2.0 billion EV,is often revised and released well into the 3.2x TTM Revenue); Insight Venture Partners’following quarter. Indeed, the updated tally for acquisition of Quest Software ($1.9 billion EV,4Q11 is 440 software/SaaS transactions, 2.3x TTM Revenue); and Oracle Corporation’ssignificantly greater than the 400 deals referenced acquisition of Taleo Corp ($1.8 billion EV, 5.7xin our last report. If our projection holds true, TTM Revenue). It is noteworthy that two of the1Q12 deal volume will be in line with 4Q12’s 440 four mega-deals for the quarter involved privatedeals and 1Q11’s 426 deals. The quarterly equity firms, reflecting the large cash stockpilesoftware/SaaS M&A tally has now exceeded the many private equity firms currently have at theirhistorically healthy benchmark of 400 for seven disposal. Also noteworthy, 1Q12 marks thestraight quarters. second consecutive quarter in which the list of mega-deals included a SaaS target, furtherA total of $17.7 billion was spent in Q1 on those evidence that SaaS market adoption is growingsoftware/SaaS transactions with announced price and more SaaS providers are achieving criticaltags, 49% higher than 4Q11’s $11.9 billion, and mass to attract the largest public softwarethe third highest quarterly software M&A spend companies.since 1Q09. Software and SaaS mega deals arein large part responsible, as nearly 60% of the Since aggregate M&A spending fluctuates widelyaggregate M&A price tag in 1Q12 came from each quarter, we rely upon TTM data to provide atransactions greater than $500 million. more reliable measure of M&A spending trends. And on a TTM basis, the steady increase in total M&A dollars paid is encouraging. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 19. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsTotal software transaction dollars were $74.6 Lest every software entrepreneur who reads thisbillion as of the close of the first quarter, 22% report multiply his/her company’s TTM revenue byhigher than the $60.9 billion spent on software 1.9 to determine current fair market value, weM&A deals at the close of 1Q11. Similarly, on a must emphasize that the 1Q12 median exitTTM basis, the average deal size increased to multiple for software and SaaS deals is simply$43.3 million, a 16% YoY increase (Figure 27). that - a median – the midpoint of a very broad range of exit valuations. Perhaps more useful isFigure 27: TTM Average M&A Deal Size our calculation that in 1Q12, 71.9% of M&A deals with reported EV/Revenue exit multiples had a $50 3.0x EV/Revenue multiple or less (Figure 29). $45 $42 $41 $43 $40 $40 $37TTM  Average Deal Value  $33 Figure 28: Median Software M&A Valuation as a $35 $31 $28 Multiple of Revenue (top) and EBITDA (bottom) $30 (Millions) $25 $22 $20 $20 $20 2.5x $20 $16 2.2x 1.9x 1.8x 1.9x $15 $10 $5 $0 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 1Q11 2Q11 3Q11 4Q11 1Q12IMPORTANT CHANGE IN SOFTWARE AND SAAS 13.9x 14.7x 13.4x 13.4xM&A DATA ACCOUNTING 12.2xHistorically, we aggregated M&A data for both on-premise and SaaS software companytransactions because of the relative dearth ofpure-play SaaS deals. However, the considerably 1Q11 2Q11 3Q11 4Q11 1Q12higher median multiple of these SaaS dealstended to skew the median M&A multiple higher.Since SaaS is no longer a nascent part of the Nevertheless, buyers continued to ascribe veryoverall software M&A ecosystem, and SaaS significant exit valuations to targets they deemedtransactions now constitute a meaningful highly strategic. In the first quarter, 9.4% of M&Apercentage of total software M&A, we began in deals with ascertainable exit multiples had a 5.0x3Q11 to analyze and separately report M&A data or greater EV/Revenue multiple.for SaaS and on-premise software deals. Toensure our historical and current comparisons areconsistent, all historical M&A data referenced in Figure 29: 1Q12 Median Software M&Aour charts this issue has been recalculated to EV/Revenue Multiple Distributionexclude SaaS M&A transactions.SOFTWARE M&A VALUATIONSThe software industry’s benchmark median exitmultiple inched up to 1.9x TTM revenue in 1Q12from 1.8x in 4Q11 (Figure 28). While the exitmultiple is virtually the same as the softwareindustry’s ten year average of 2.0x TTM revenue,it does suggest that buyers are reticent tooverpay for a target, most likely because oflingering concerns about IT spending and theeconomy. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 20. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAmong these transactions were Cisco’s SOFTWARE M&A VALUATIONS BY SIZEacquisition of NDS Group ($4.9 billion EV, 5.0xTTM revenue); Playtech Limited’s purchase of Another key driver of exit multiples is size – ofGeneity Limited ($23.4 million EV, 6.5x TTM both buyer and seller. As testament, in 1Q12,revenue); Monitise’s acquisition of Clairmail buyers with TTM revenue greater than $200($174.3 million EV, 10.0x TTM revenue); and million paid a median EV/Revenue multiple ofIBM’s purchase of WorkLight (estimated $70 3.0x, while buyers with TTM revenue less thanmillion EV, 20x TTM revenue). $200 million paid only 1.3x TTM revenue (Figure 31). Equally noteworthy - sellers with less thanCisco’s acquisition of NDS strengthens its position $20 million TTM revenue received a medianin the global video market, while bolstering its EV/Revenue multiple of 4.6x from buyers withsoftware and services revenue, both vital to $200 million of revenue or more, while sellers withCisco’s future. The Monitise and IBM acquisitions, greater than $20 million TTM revenue were paid aboth for breathtaking multiples, reflect the median exit valuation of 2.9x. Why?strategic value of certain mobile solutions to largerpublic software companies that are anxious to Figure 30: 1Q12 Median EV/Revenue Exitacquire enabling technology and quickly fill Multiple by Ownership Structureproduct gaps in the face of an exploding mobilemarket. Private Buyers 1.3x Median MultipleSince very few software transactions publiclyidentify a private software seller’s TTM EBITDA,we lacked sufficient data to ascertain the median 34%EBITDA exit multiple paid in 1Q12 for private 66%software company sellers. We did, however,determine 1Q12’s median exit multiple for publicsoftware company sellers was 12.2x TTMEBITDA, a moderate decline from 3Q11’s and4Q11’s 13.4x TTM EBITDA exit multiples (Figure Public Buyers28). 2.5x Median MultipleSOFTWARE M&A VALUATIONS BY EQUITY Figure 31: 1Q12 Median EV/Revenue ExitSTRUCTURE Multiples by SizeWhile a variety of factors impact exit valuation, Buyer Greater Buyer Less Thanone important driver is the seller’s equity Than $200 million $200 millionstructure. We separated public and private 3.0x Median 1.3x Mediansoftware company buyers to ascertain any Multiple Multipledifference in median purchase price paid in 1Q12.Historically, public buyers have paid higher exitmultiples than private buyers: 2.5x vs. 2.0x TTM 50% 50%revenue in 2007; 2.0x vs.1.7x in 2008; 1.9xvs.1.2x in 2009; 2.4x vs.1.8x in 2010, and 2.4x vs.2.0x in 2011. That trend continued in 1Q12 aspublic buyers paid a median 2.5x TTM revenue,while private buyers paid only 1.3 x TTM revenue(Figure 30). The significant premium paid bypublic buyers can be attributed, at least in part, to Seller Greater Seller Greaterthe sizable amounts of cash on their balance Than $20 Than $20sheets, and their preference for larger targets that million: 0.8x 2.9x million: 1.5x 1.3xtypically yield a higher multiple and higher pricetag. Seller Less Seller Less Than $20 Than $20 million: 2.0x 4.6x million: 2.4x 1.3x This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 21. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsA number of sellers with sub $20 million in TTM Both verticals continued to see heightened dealrevenue were offering a best of breed solution to activity, mostly due to regulatory changes,a rapidly adopting market deemed by larger public growing scrutiny and evolving market conditions.buyers to be highly strategic. Case in point: The Education vertical accounted for 8% of Q1’sWorklight, a small but respected provider of deal total, driven by high demand for softwaremobile enterprise application platforms based in solutions that address demands for greaterIsrael, was deemed vital to IBM’s mobile solution accountability and leverage more cost-effectivestrategy and was gobbled up for an estimated 20x learning.TTM revenue. While vertical software companies remain inSOFTWARE M&A BY VERTICAL AND HORIZONTAL demand, horizontal solution providers (i.e., non-MARKETS industry specific) have comprised a growing percentage of software/SaaS transactions overAnother important determinant of exit valuation is the past year (Figure 33). The number ofthe seller’s target market focus and related horizontal targets accounted for 57% of total M&Adomain expertise. We analyzed 1Q12’s median transactions in 1Q11, jumped to 63% in 2Q11 andsoftware M&A multiple horizontally and vertically, 3Q11, and reached 70% in 4Q11. In 1Q12,segregating software company sellers with horizontal transactions accounted for 68% of allvertical market solutions (e.g. retail, financial software/SaaS acquisitions.services, telecom, manufacturing, etc.) fromsellers with horizontal software solutions(infrastructure, enterprise applications, etc.). Figure 33: Horizontal & Vertical M&A VolumeIn 1Q12, providers of vertical software accounted 100% 90%for 32% of all software M&A, confirming vertical 80% 37% 37% 30% 32% 43%providers remain attractive acquisition targets 70%primarily because of their predictable recurring 60%revenue, deep domain expertise, and highly 50% 40%defensible market positions. The most active 30% 63% 63% 70% 68% 57%verticals in 1Q12 were Healthcare and Financial 20%Services, each garnering 18% of total vertical 10%M&A volume (Figure 32). 0% 1Q11 2Q11 3Q11 4Q11 1Q12 Vertical HorizontalFigure 32: 1Q12 M&A Volume by Vertical Figure 34: Horizontal & Vertical M&A Median EV/Revenue Exit Multiples Automotive Utilities 3% 3.5x 4% Retail  3.0x Education 8% 3.0x 8% Real Estate 2.5x 6% 2.5x 2.3x 2.3x 2.0x 1.9x Financial Services 2.0xPublic Sector 18% 8% 1.5x 1.3x 1.0x 1.0x 0.5x Other Verticals Healthcare 0.0x 19% 18% 2Q11 3Q11 4Q11 1Q12 Vertical Horizontal Manufacturing Insurance 4% 4% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 22. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsDuring the first quarter, vertical market sellers Sellers within this product category are benefittingwere paid a median 1.3x TTM revenue, while their from the accelerating shift to cloud and mobilehorizontal counterparts received a median exit computing which are transforming the ITmultiple of 2.3x (Figure 34). In 4Q11, the median infrastructures of both large enterprises andEV/Revenue multiple paid to horizontal targets SMBs. The growing market adoption of Systemwas three times that of vertical targets. It appears Management solutions is attracting savvy privatethat after surpassing horizontal providers in equity investors such as Insight Venture Partnersmedian TTM EV/Rev exit multiples in 4Q10, and which acquired Quest Software ($1.9B EV, 2.3xthe first three quarters of 2011, vertical market TTM Revenue). Strategic acquirers continue tosolution providers are out of vogue with larger pay up for System Management companies, aspublic software companies that acquired a good well. In 1Q12, BMC acquired Numara Softwaremany in 2010 and 2011 in an effort to more ($300M EV, 3.8x TTM Revenue) to enhance itseffectively penetrate key vertical markets. reach into the SMB segment of the market.M&A VALUATIONS BY SOFTWARE PRODUCT Other software product categories with medianCATEGORY EV/Revenue multiples above the general software median of 1.9x in 1Q12 were Manufacturing &When a software company’s target market, Asset Mgmt (2.5x); Healthcare (2.5x); BI, Risk andrevenue, equity structure and delivery model can Compliance (2.4x); and Security (2.2x). Softwaredemonstrably impact its exit valuation, the nature product categories lagging the general softwareof it product offering – its software product median include ERP (1.2x); Other Verticals (1.6x);category - continued to be the single most Mobile (1.6x); and Digital Media (1.8x).important M&A valuation driver in 1Q12. For mostsoftware product categories, there is often an From the standpoint of deal activity, the Mobileinsufficient number of transactions each quarter product category led all others, accounting forthat publicly report both seller TTM revenue and 19.8% of 1Q12’s transactions, up markedly frombuyer purchase price, essential in determining the 1Q11’s 8.4% (Figure 36). While mobile M&Amedian exit value for the category. Consequently, volume is relatively high and growing rapidly, thewe aggregate the data each quarter for each majority of mobile transactions involve smallercategory on a TTM basis. As a result, it may take private companies with interesting products andseveral quarters to detect changing product technology platforms that are relatively unprovencategory valuation trends, as certain outlier in the marketplace and garner low mediantransactions consummated nine or twelve months EV/Revenue exit multiples (median 1.6xago may have a residual impact on their product EV/Revenue in 1Q12). That said, the categorycategory multiples. also produces shocking exit multiples, as evidenced by the IBM/Worklight andAmong the 32 product categories we tracked in Monitise/Clairmail transactions. For a more1Q12, ten had both sufficient deal activity and detailed discussion of Mobile M&A, visit our blogdeal data to ascertain a TTM revenue multiple at:(Figure 35). Software company sellers that were http://softwareequitygroup.wordpress.com/2012/0focused on System Management garnered the 2/28/what-you-need-to-know-about-mobile-ma-highest median TTM revenue multiple, 3.0x. trends-hot-sectors-deal-structures-and-more/.Figure 35: Median EV/Revenue Multiple by Software Product Category 3.0x 2.5x 2.5x 2.4x 2.2x 1.9x 1.8x 1.6x 1.6x 1.2x Healthcare Graphics, Digital ERP Management Manufacturing & Security Financial Services Mobile Other Verticals BI, Risk and Compliance (A&D, Telco, Retail, etc.) Systems Asset Mgmt Multimedia, Software Media This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 23. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 36: Software M&A by Product Category Content & Document  Development Tools &  Billing & Service Mgmt 1.4% Business  Mgmt CRM & Marketing Application Testing Accounting & Finance Intelligence 2.4% 1.4% 4.1% 1.4% 3.8% eCommerce Utilities 0.3% Engineering, PLM & CAD/CAM 1.4% 6.1% Retail  ERP  2.4% 1.4% Real Estate Gaming 1.7% 2.4% Public Sector Messaging,  2.4% Conferencing &  Other Verticals Vertical Deals Communications 6.8% 1.7% Manufacturing 1.4% Insurance Mobile 1.4% 19.8% Healthcare 5.8% Multimedia, Graphics & Digital  Financial Services Media 5.8% 4.1% Education 2.4% Automotive 1.0% Networking & Network  Security Performance Mgmt Web Analytics 6.1% 1.4% 0.7% Storage, Data Mgmt &  Talent & Workforce Mgmt Systems Mgmt Integration 3.1% Supply Chain & Logistics 1.7% 2.4% 2.0%Of the remaining 31 product categories we viable deployment model and strategic imperative.tracked, no other product category garnered more SaaS company acquisitions accounted for 16.2%than 6.1% of total M&A transactions, which serves of all software industry acquisitions in 1Q12,to affirm both the breadth and vibrancy of the compared to only 2.3% of all software M&A dealssoftware M&A market. The most active M&A just two years ago (Figure 37). The results of ourproduct categories in Q1 included Engineering, 2012 Annual Buyer Survey, available on our blog,PLM & CAD/CAM (6.1%); Security (6.1%), portend the number of SaaS acquisitions willHealthcare (5.8%), and Financial Services (5.8%). accelerate further in 2012:Security, Healthcare and Financial Services http://softwareequitygroup.wordpress.com/2012/0consistently make our most active product 3/30/segs-2012-software-buyer-survey-results/.categories list.Engineering, rarely a most active category, is Figure 37: SaaS M&A Deals as % of Totalexperiencing a resurgence, mostly due to an Software M&A Dealsimproved manufacturing sector, and the SaaS M&A Deals   SaaS as % of Softwaresemiconductor industry’s rapid shift to smaller 80 18%chipsets which require sophisticated software for SaaS M&A Deals as a % of Total  70 16%designing, testing, and optimizing. 14% Software M&A Deals # of SaaS M&A Deals 60 12% 50SOFTWARE AS A SERVICE (SAAS) M&A DEAL 40 10% 8%VOLUME AND VALUATIONS 30 6% 20 4%The number of SaaS M&A transactions continues 10 2%to soar. In 1Q12, 64 SaaS companies were 0 0%acquired, a 61% increase from 39 transactions in1Q11 (See Appendix G for a complete list ofSaaS M&A transactions). A good number ofthese 1Q12 SaaS acquisitions involved some ofthe industry’s largest on-premise software SaaS exit valuations are also ramping. Thecompanies that finally began to view SaaS as a median EV/Revenue exit multiple for SaaS providers in the first quarter was 3.9x, up 54% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 24. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsQoQ, and 15% YoY (Figure 38). 1Q12’s median blockbuster acquisition of SuccessFactors inexit valuation is more than double the median 4Q11 ($3.5B EV, 12x TTM Revenue).1.9x TTM EV/Revenue exit multiple of on-premisesoftware companies in Q1. The Taleo and SuccessFactors acquisitions are evidence the HR management (HRM) market, a superset of talent management, has become Figure 38: Median SaaS M&A Valuation as a sizable enough to regain the attention of the Multiple of Revenue 3.9x largest ERP providers that are losing sales to 3.7x 3.7x emerging SaaS providers. Oracle’s acquisition of 3.5x Taleo will not only enhance Oracle’s legacy HR 3.4x product suite with state-of-the-art talent management capabilities, but also provide a proven SaaS platform that can host other Oracle 1Q11 2Q11 3Q11 4Q11 1Q12 offerings. A full recap of the transaction can be found on the SEG blog: http://softwareequitygroup.wordpress.com/2012/0And size is beginning to matter. An analysis of 2/09/oracle-acquires-taleo/SaaS M&A transactions over the prior two yearsreveals that the revenue of SaaS targets seemed Another notable SaaS transaction wasto dramatically impact their exit valuations. SaaS Blackbaud’s controversial acquisition of Conviosellers with TTM revenue below $10 million ($274M EV, 3.4x TTM revenue). The acquisitionreceived a median EV/Revenue multiple of 2.5x, would create a major force in the onlinewhile those with TTM revenue greater than $50 fundraising sector but was initially challenged bymillion were awarded a median EV/Revenue the DOJ. The merger has now been approved,multiple of 5.6x (Figure 39). enabling Blackbaud to expand its product suite by adding Convio’s market leading online and socialThe premium paid to larger SaaS targets is fundraising platform – and a substantial amount oftestament to the emergence of SaaS leaders with recurring revenue.sufficient bulk and market presence to pose alegitimate threat to large, incumbent, on-premise The broad based adoption of SaaS is evident insoftware providers. the number of product categories with transactions in 1Q12. All told, a total of fifteen Figure 39: Median SaaS M&A EV/Revenue product categories and eight verticals had at least Multiples by TTM Revenue one SaaS M&A transaction. 5.6x The talent/workforce management product 6.0x category accounted for a whopping 20% of all 5.0x 4.2x SaaS M&A transactions in 1Q12. We believe this 4.0x 3.5x flurry of M&A activity signals the last notable 3.0x 2.5x round of consolidation in this product category, 2.0x with larger vendors seeking to bulk up after taking 1.0x careful note of the rapid market adoption of SaaS 0.0x deployed talent/workforce management apps Revenue < $10M < $21M < Revenue > among enterprises and SMBs (Figure 40). $10M Revenue< Revenue< $50M $20M $49M Notable Q1 transactions in this category include: Saba Software’s acquisition of Humanconcepts ($23.5M EV) for workforce planning/analytics;Speaking of SaaS leaders, the largest SaaS deal Cornerstone’s acquisition of Sonar ($33.8M EV)of the quarter was Oracle’s acquisition of Taleo to provide SMBs with performance management;($1.8B EV, 5.7x TTM Revenue), a leading Kenexa’s acquisition of Outstart ($38.9M EV) forprovider of talent management software. Oracle’s LMS & LCMS; and PeopleFluent’s acquisition ofacquisition follows on the heels of SAP’s Strategia for LMS. This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 25. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsFigure 40: SaaS M&A by Product Category Billing & Service Mgmt Business Intelligence Content & Document  5% 6% Mgmt 2% Retail CRM & Marketing 2% 13% Other Verticals eCommerce 5% 5% Non‐Profit 2% Engineering, PLM &  CAD/CAM Legal 5% Vertical Deals 2% Messaging, Conferencing  & Collaboration Insurance 6% 2% Mobile Healthcare 2% 6% MultiMedia, Graphics &  Digital Media Financial Services 2% 5% Education Security 3% 3% Storage, Data Mgmt &  Integration 2% Web Analytics Talent & Workforce  Supply Chain Mgmt &  2% Mgmt Systems Mgmt Logistics 20% 3% 2%There was also significant M&A activity in the significant government and industry regulationCRM & Marketing product category of our SaaS and oversight where security and privacy areIndex which accounted for approximately 13% of mandated. Given the rapid growth of SaaSthe Q1 SaaS M&A tally. CRM and providers in these verticals, and the level of M&ATalent/Workforce Management were the earliest activity, it appears customers and buyers alike areSaaS deployed applications to gain a significant becoming more comfortable with the security offoothold among enterprises, and they are in third-party hosted applications.demand by larger on-premise software providersunder pressure to add SaaS to their product mix. INTERNET M&A DEAL VOLUME AND VALUATIONSOther SaaS categories with relatively robust dealactivity in Q 1 included Business Intelligence (6% Internet M&A activity in the first quarter wasof all SaaS M&A), and Messaging, Conferencing robust. Q1’s 220 Internet transactionsand Collaboration (6%). represented a 25% YoY increase (Figure 41). In 3Q10, there were only a third as many InternetCollectively, vertical solution providers (pure-play M&A sellers as on-premise software companySaaS and hybrid) accounted for 27% of all SaaS sellers; today, they’re half as many as the on-M&A transactions. SaaS sellers targeting premise software deal total.Healthcare and Financial Services finished 1Q12with 6% and 5%, respectively, of all SaaS M&A By far, the most active Internet M&A category intransactions respectively. The activity is 1Q12 was Ad Tech & Lead Gen, which accountednoteworthy as both verticals are subject to for 65 transactions in Q1 (Figure 42). A good This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 26. Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitionsnumber of the sellers in this category were daily Kodak’s assets ($23M EV) and Scripps Networks’deal sites that hoped to emulate Groupon and acquisition of RealGravity.Living Social but were unsuccessful due to theirinability to scale quickly and massively, making It is surprising to see Social Media M&A volumethem ripe for consolidation. relatively low given the valuations and dynamic activity among public Social Media companies.Groupon was a particularly active acquirer in Q1, Facebook was noticeably quiet in 1Q12, acquiringseeking to expand its product offering and only one company (Caffeinated Mind). Googlegeographical footprint by purchasing Kima Labs, made no acquisitions in 1Q12, noteworthy in lightAdku and Six Times Seven. Other notable Q1 of its one-a month acquisition pace in 2011. Afteracquisitions in the Ad Tech and Lead Gen merely five acquisitions in all of 2011, Twittercategory included Home Depot’s acquisition of acquired three companies in 1Q12 (Posterous,Red Beacon and Constant Contact’s acquisition Dasient, Context Media).of MobManager. Figure 42: Internet M&A Volume by Product CategoryFigure 41: Internet M&A Volume Category Q1 2011 Q2 2011 Q3 2011 Q4 2011 1Q 2012 Ad-Tech & Lead Gen 39 42 67 60 65 Commerce 32 56 36 38 36 Content & Media 45 36 45 48 51 220 216 Gaming 7 15 6 14 13 Infrastructure 17 25 27 27 31 203 199 Social Tech 36 25 35 16 24 Total 176 199 216 203 220 176 And so, consolidation in AdTech & Lead Gen, sensitivity to overpaying in Content & Media, and a dearth of Social Media acquisitions by the 1Q11 2Q11 3Q11 4Q11 1Q12 category’s high flying, deep pocket leaders resulted in an overall Internet M&A median exit multiple of 2.1x in 1Q12, a sharp drop fromContent & Media was also among the most active 4Q11’s 2.8x (Figure 43). Given a new andInternet categories from an M&A perspective, dynamic group of public Internet companiesclosing Q1 with 51 transactions, including the trading at lofty valuations, a vibrant and growinglargest acquisition of the quarter, Youku’s addressable market, and rapidly evolvingacquisition of Tudou Holdings ($1.0 billion EV, technologies, we expect Internet valuations will12.4x TTM Revenue). That merger combined two recover nicely during the remainder of 2012.of China’s largest publicly traded online videocompanies, hoping to drive down contentacquisition costs by offering a substantially larger Figure 43: Median Internet M&Asubscriber base. As Netflix and others in the U.S. Valuations as Multiple of Revenuehave discovered, content licensees/distributors, 2.8x 2.6xunder pressure to generate profits, can beseverely compromised by content 2.0x 2.1x 1.8xlicensors/owners seeking higher returns. Othernotable Internet deals in the Content categoryinclude Shutterfly’s acquisition of Eastman 1Q11 2Q11 3Q11 4Q11 1Q12 This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 27. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX A: 1Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY Billing & Service Managem ent 1Q11 2Q11 3Q11 4Q11 1Q12 Financial & Accounting 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.0x 2.2x 1.3x 1.0x 1.3x EV/Revenue 2.8x 2.7x 2.2x 2.5x 2.8xEV/EBITDA 10.1x 8.9x 4.7x 4.2x 5.9x EV/EBITDA 9.6x 9.7x 8.5x 9.0x 9.7xEV/Earnings 22.1x 20.2x 11.3x 10.4x 8.2x EV/Earnings 22.5x 23.3x 21.0x 23.4x 25.0xGross Profit Margin 50.2% 45.6% 41.8% 39.0% 51.9% Gross Profit Margin 69.4% 67.5% 66.3% 65.0% 66.0%EBITDA Margin 22.8% 22.4% 20.4% 19.7% 20.2% EBITDA Margin 27.3% 27.4% 26.3% 26.6% 25.4%Net Income Margin 12.4% 12.3% 11.4% 11.2% 13.5% Net Income Margin 13.3% 12.9% 12.8% 12.6% 12.2%TTM Revenue Grow th (YoY) 11.4% 13.1% 16.8% 36.5% 19.8% TTM Revenue Grow th (YoY) 7.4% 9.9% 7.3% 7.9% 4.7%TTM EBITDA Grow th (YoY) 11.8% 18.1% 18.7% 0.0% 6.5% TTM EBITDA Grow th (YoY) 5.9% 12.5% 14.5% 10.1% 14.1%TTM Earnings Grow th (YoY) 0.9% -0.5% -10.3% -35.8% -18.4% TTM Earnings Grow th (YoY) -20.7% -15.0% -14.3% -9.7% -6.7%Current Ratio 2.4 2.4 2.8 3.4 2.3 Current Ratio 1.5 1.4 1.3 1.4 1.3Cash as Percent of Market Cap 21.8% 21.2% 27.8% 39.0% 33.3% Cash as Percent of Market Cap 12.6% 15.1% 15.7% 14.7% 13.7%Enterprise Value Grow th (YoY) 15.1% 22.0% 9.6% -5.6% -29.1% Enterprise Value Grow th (YoY) 26.6% 32.7% 9.3% 3.5% 9.1% Business Intelligence 1Q11 2Q11 3Q11 4Q11 1Q12 Gam ing 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.3x 3.2x 2.9x 2.4x 2.3x EV/Revenue 0.9x 1.0x 1.1x 1.2x 1.1xEV/EBITDA 37.8x 43.0x 40.3x 36.5x 39.2x EV/EBITDA 8.9x 10.7x 8.3x 7.4x 6.4xEV/Earnings 23.1x 25.4x 23.8x 23.5x 65.5x EV/Earnings 18.0x 17.8x 23.6x 24.1x 11.3xGross Profit Margin 80.0% 76.8% 71.6% 66.6% 78.9% Gross Profit Margin 47.4% 48.9% 48.6% 51.1% 47.5%EBITDA Margin 12.8% 10.0% 7.3% 8.0% 8.9% EBITDA Margin 7.8% 9.3% 8.7% 7.3% 6.2%Net Income Margin 7.0% 6.7% 6.4% 6.3% 4.9% Net Income Margin 3.4% 3.3% 3.2% 3.0% 0.5%TTM Revenue Grow th (YoY) 15.2% 18.2% 21.6% 25.2% 23.7% TTM Revenue Grow th (YoY) -1.6% -1.0% 0.1% 4.4% 5.6%TTM EBITDA Grow th (YoY) -18.2% -31.2% -6.8% -4.9% -5.3% TTM EBITDA Grow th (YoY) 149.7% 173.7% 80.0% 53.9% 41.0%TTM Earnings Grow th (YoY) 38.2% 76.4% -6.2% -14.3% -5.0% TTM Earnings Grow th (YoY) -253.6% -231.0% -81.3% -36.8% -50.2%Current Ratio 2.0 2.1 1.9 1.8 1.8 Current Ratio 2.3 2.3 2.6 2.1 2.2Cash as Percent of Market Cap 18.3% 14.0% 14.8% 15.9% 14.6% Cash as Percent of Market Cap 24.9% 22.2% 23.9% 23.7% 27.9%Enterprise Value Grow th (YoY) 16.4% 32.1% 53.5% 14.9% 17.1% Enterprise Value Grow th (YoY) 15.5% 25.6% 47.8% 47.4% 11.8% Developm ent Platform s 1Q11 2Q11 3Q11 4Q11 1Q12 Healthcare 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.9x 2.6x 1.8x 1.9x 2.3x EV/Revenue 4.0x 3.9x 3.3x 2.9x 3.2xEV/EBITDA 11.3x 10.7x 8.0x 9.0x 10.1x EV/EBITDA 18.7x 19.6x 17.7x 16.2x 15.2xEV/Earnings 20.1x 20.1x 14.6x 15.5x 18.7x EV/Earnings 35.8x 41.0x 43.8x 34.7x 30.5xGross Profit Margin 75.4% 72.7% 71.0% 70.2% 76.4% Gross Profit Margin 63.4% 60.0% 57.2% 53.4% 65.9%EBITDA Margin 21.7% 21.6% 22.0% 22.4% 22.2% EBITDA Margin 20.2% 20.1% 22.6% 22.8% 22.1%Net Income Margin 12.1% 11.8% 11.5% 11.1% 12.9% Net Income Margin 3.7% 3.5% 3.2% 2.9% 5.1%TTM Revenue Grow th (YoY) 31.5% 23.2% 15.0% 11.0% 7.7% TTM Revenue Grow th (YoY) 16.4% 18.6% 20.4% 19.5% 22.9%TTM EBITDA Grow th (YoY) 32.4% 38.9% 21.8% 10.8% 2.4% TTM EBITDA Grow th (YoY) 12.9% 20.7% 29.2% 39.2% 41.5%TTM Earnings Grow th (YoY) -31.3% -33.8% -26.5% -17.3% -10.2% TTM Earnings Grow th (YoY) 17.6% -18.1% -25.8% -52.9% -46.3%Current Ratio 2.2 2.3 2.4 2.0 2.2 Current Ratio 2.2 2.1 1.9 2.0 2.0Cash as Percent of Market Cap 17.8% 16.2% 20.8% 19.9% 19.8% Cash as Percent of Market Cap 9.6% 8.8% 8.4% 9.2% 8.8%Enterprise Value Grow th (YoY) 44.8% 34.7% 15.0% -10.0% -17.1% Enterprise Value Grow th (YoY) 33.7% 42.2% 36.6% 16.4% 11.8% Engineering & PLM 1Q11 2Q11 3Q11 4Q11 1Q12 IT Conglom erates 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.5x 2.3x 1.9x 2.0x 2.6x EV/Revenue 3.2x 3.0x 2.6x 2.5x 3.1xEV/EBITDA 19.2x 16.4x 12.8x 13.4x 14.2x EV/EBITDA 8.6x 8.7x 8.7x 9.0x 8.2xEV/Earnings 34.4x 35.0x 27.9x 30.7x 25.1x EV/Earnings 20.2x 21.0x 17.2x 18.3x 13.7xGross Profit Margin 83.3% 78.7% 75.2% 75.3% 83.0% Gross Profit Margin 70.4% 63.9% 60.6% 63.5% 71.5%EBITDA Margin 12.8% 15.5% 16.3% 16.5% 18.5% EBITDA Margin 37.9% 38.3% 38.9% 39.5% 40.1%Net Income Margin 7.6% 7.3% 6.9% 6.4% 8.3% Net Income Margin 14.9% 14.6% 14.2% 13.9% 24.2%TTM Revenue Grow th (YoY) 13.9% 12.9% 14.2% 15.5% 13.5% TTM Revenue Grow th (YoY) 16.8% 20.4% 20.6% 14.7% 8.0%TTM EBITDA Grow th (YoY) 13.9% 32.9% 36.9% 38.4% 43.8% TTM EBITDA Grow th (YoY) 23.0% 34.3% 30.4% 16.3% 15.4%TTM Earnings Grow th (YoY) -55.2% -64.4% -22.3% -54.6% -33.6% TTM Earnings Grow th (YoY) -9.0% -13.9% -22.3% -28.2% -34.7%Current Ratio 2.0 2.1 2.1 1.7 1.7 Current Ratio 2.5 2.8 2.6 2.3 2.3Cash as Percent of Market Cap 17.9% 18.1% 18.6% 19.3% 18.2% Cash as Percent of Market Cap 9.3% 8.0% 9.1% 10.3% 9.2%Enterprise Value Grow th (YoY) 60.2% 40.8% 18.6% 3.9% 4.2% Enterprise Value Grow th (YoY) 29.7% 34.7% 22.1% 10.8% 4.4% Enterprise Resource Planning 1Q11 2Q11 3Q11 4Q11 1Q12 Mobile Solutions/Content 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.8x 2.7x 2.4x 2.8x 3.0x EV/Revenue 3.4x 3.1x 1.9x 2.0x 2.5xEV/EBITDA 11.4x 11.1x 8.7x 9.6x 10.0x EV/EBITDA 25.2x 23.2x 17.8x 23.3x 18.1xEV/Earnings 22.8x 25.6x 26.2x 28.1x 16.6x EV/Earnings 39.1x 25.0x 17.5x 24.9x 16.0xGross Profit Margin 70.4% 63.9% 60.6% 63.5% 71.5% Gross Profit Margin 66.9% 65.4% 62.7% 59.0% 65.8%EBITDA Margin 27.6% 27.7% 27.7% 29.5% 29.5% EBITDA Margin 18.1% 9.3% 6.4% 5.8% 5.2%Net Income Margin 14.5% 13.2% 12.5% 13.1% 14.2% Net Income Margin 2.5% 2.5% 2.4% 2.5% -3.4%TTM Revenue Grow th (YoY) 5.3% 13.7% 17.9% 16.3% 12.4% TTM Revenue Grow th (YoY) 17.3% 16.7% 20.3% 10.6% 10.6%TTM EBITDA Grow th (YoY) 28.3% 39.1% 36.2% 36.0% 17.0% TTM EBITDA Grow th (YoY) 15.1% 0.9% 13.9% -7.5% -13.9%TTM Earnings Grow th (YoY) -11.4% -16.6% -24.4% -28.2% -42.0% TTM Earnings Grow th (YoY) -15.5% -26.7% -13.5% -2.7% 12.2%Current Ratio 1.4 1.3 1.4 1.8 1.5 Current Ratio 3.0 3.0 3.0 2.6 2.7Cash as Percent of Market Cap 14.5% 18.0% 18.6% 18.7% 20.6% Cash as Percent of Market Cap 15.3% 17.3% 22.9% 25.0% 21.5%Enterprise Value Grow th (YoY) 28.1% 37.0% 18.6% 0.6% 4.4% Enterprise Value Grow th (YoY) 26.1% 13.8% 19.3% -2.8% -22.4% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 28. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX A: 1Q12 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY Netw orking & Netw ork Perf Mgm t 1Q11 2Q11 3Q11 4Q11 1Q12 Vertical - Finance 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.4x 4.2x 3.1x 2.7x 3.1x EV/Revenue 4.9x 4.6x 3.9x 3.8x 3.8xEV/EBITDA 25.2x 21.6x 16.1x 15.7x 16.4x EV/EBITDA 15.3x 15.3x 13.6x 12.7x 11.6xEV/Earnings 41.4x 40.9x 30.4x 36.3x 31.1x EV/Earnings 52.6x 52.1x 45.5x 45.1x 28.4xGross Profit Margin 69.2% 65.2% 61.8% 60.6% 67.8% Gross Profit Margin 69.8% 69.8% 69.8% 69.8% 69.2%EBITDA Margin 15.6% 17.0% 18.9% 19.3% 18.7% EBITDA Margin 36.7% 36.7% 36.6% 36.8% 36.6%Net Income Margin 6.4% 6.1% 5.7% 5.5% 12.1% Net Income Margin 13.9% 13.7% 13.4% 13.2% 14.6%TTM Revenue Grow th (YoY) 27.9% 23.4% 21.2% 23.3% 20.7% TTM Revenue Grow th (YoY) 20.3% 18.1% 15.6% 15.0% 15.1%TTM EBITDA Grow th (YoY) 15.1% 22.5% 34.0% 41.1% 49.6% TTM EBITDA Grow th (YoY) 32.0% 17.7% 15.3% 10.3% 16.7%TTM Earnings Grow th (YoY) -47.7% -49.4% -50.5% -41.9% -28.7% TTM Earnings Grow th (YoY) -13.4% -15.9% -11.6% -19.9% -16.7%Current Ratio 2.4 2.9 3.1 2.8 2.7 Current Ratio 1.2 1.2 1.2 1.2 1.1Cash as Percent of Market Cap 12.7% 14.9% 18.5% 19.3% 14.2% Cash as Percent of Market Cap 4.9% 4.0% 4.7% 6.6% 9.4%Enterprise Value Grow th (YoY) 107.8% 72.5% 11.1% -16.1% -10.7% Enterprise Value Grow th (YoY) 44.0% 24.4% 11.2% -7.2% -5.5% Security 1Q11 2Q11 3Q11 4Q11 1Q12 Vertical - Other 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.4x 3.1x 2.6x 2.8x 3.2x EV/Revenue 2.4x 3.1x 2.7x 2.8x 3.2xEV/EBITDA 16.7x 16.4x 13.3x 14.5x 13.5x EV/EBITDA 13.4x 15.1x 14.2x 15.7x 18.5xEV/Earnings 22.8x 28.6x 23.3x 22.6x 18.0x EV/Earnings 31.3x 35.7x 34.4x 39.0x 35.0xGross Profit Margin 81.7% 77.2% 72.7% 68.4% 80.8% Gross Profit Margin 54.8% 53.4% 51.7% 46.9% 56.2%EBITDA Margin 19.7% 20.5% 20.6% 20.0% 20.8% EBITDA Margin 18.0% 18.4% 17.9% 17.8% 18.4%Net Income Margin 11.4% 10.9% 10.3% 9.7% 11.2% Net Income Margin 8.7% 8.6% 8.3% 8.0% 8.9%TTM Revenue Grow th (YoY) 19.5% 19.4% 18.8% 16.8% 26.1% TTM Revenue Grow th (YoY) 12.0% 10.5% 15.5% 20.1% 20.4%TTM EBITDA Grow th (YoY) 19.7% 24.8% 9.9% 10.6% 19.0% TTM EBITDA Grow th (YoY) 7.9% 7.9% 23.3% 24.7% 30.5%TTM Earnings Grow th (YoY) -37.2% -14.4% -13.6% -25.5% -16.0% TTM Earnings Grow th (YoY) -7.0% -9.1% -20.2% -20.6% -13.9%Current Ratio 1.6 1.4 1.5 1.6 2.1 Current Ratio 0.9 1.2 1.2 1.2 1.2Cash as Percent of Market Cap 15.2% 15.2% 15.7% 15.9% 12.0% Cash as Percent of Market Cap 5.1% 9.5% 10.2% 9.5% 12.4%Enterprise Value Grow th (YoY) 7.9% 46.3% 37.3% -3.4% 15.9% Enterprise Value Grow th (YoY) 38.6% 47.3% 34.3% 37.8% 62.1%Storage, Data Managem ent & Integration 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.0x 2.6x 2.1x 2.2x 2.5xEV/EBITDA 10.7x 12.6x 9.9x 9.8x 10.3xEV/Earnings 22.6x 23.7x 20.9x 19.7x 19.8xGross Profit Margin 73.5% 71.3% 71.0% 70.6% 72.9%EBITDA Margin 21.3% 21.8% 22.4% 21.5% 22.8%Net Income Margin 13.3% 12.6% 12.0% 11.4% 12.3%TTM Revenue Grow th (YoY) 17.7% 15.2% 11.9% 8.5% 7.8%TTM EBITDA Grow th (YoY) 19.4% 23.7% 19.0% 10.8% 15.4%TTM Earnings Grow th (YoY) -27.7% -19.9% -26.2% -19.0% -14.7%Current Ratio 2.3 2.1 1.9 2.2 2.3Cash as Percent of Market Cap 14.9% 15.8% 21.1% 18.7% 19.8%Enterprise Value Grow th (YoY) 25.7% 46.5% 18.9% 0.0% 4.2% Supply Chain Managem ent & Logistics 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.0x 2.1x 1.8x 1.9x 1.9xEV/EBITDA 11.6x 11.6x 11.0x 11.4x 12.1xEV/Earnings 22.1x 24.3x 24.8x 28.4x 18.9xGross Profit Margin 60.1% 57.1% 55.1% 53.1% 60.4%EBITDA Margin 17.6% 15.9% 17.3% 18.8% 20.1%Net Income Margin 7.5% 6.9% 6.6% 6.3% 10.6%TTM Revenue Grow th (YoY) 20.5% 13.7% 19.1% 20.4% 14.9%TTM EBITDA Grow th (YoY) 23.0% 29.7% 29.0% 54.8% 26.5%TTM Earnings Grow th (YoY) -37.2% -25.7% -32.7% -30.8% -37.6%Current Ratio 2.2 2.2 2.2 2.4 2.6Cash as Percent of Market Cap 17.5% 21.4% 18.5% 20.4% 14.7%Enterprise Value Grow th (YoY) 25.4% 21.4% 29.1% 35.3% 31.2% System s Managem ent 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 6.4x 7.3x 5.2x 5.5x 5.9xEV/EBITDA 19.6x 21.7x 18.7x 20.9x 22.2xEV/Earnings 30.4x 35.9x 33.5x 41.7x 36.3xGross Profit Margin 83.5% 78.7% 78.0% 77.1% 84.2%EBITDA Margin 24.6% 25.2% 25.5% 26.1% 26.4%Net Income Margin 14.8% 14.2% 13.7% 13.1% 19.2%TTM Revenue Grow th (YoY) 16.1% 17.6% 17.3% 17.9% 17.7%TTM EBITDA Grow th (YoY) 16.1% 23.8% 20.6% 19.6% 26.2%TTM Earnings Grow th (YoY) -23.3% -24.3% -20.8% -22.2% -14.9%Current Ratio 1.7 1.8 1.8 1.6 1.5Cash as Percent of Market Cap 10.2% 10.3% 10.9% 11.5% 11.0%Enterprise Value Grow th (YoY) 57.7% 52.2% 13.6% 2.3% 8.3% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 29. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX B: 1Q12 PUBLIC SAAS MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY CRM & Marketing 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.4x 4.8x 4.5x 2.7x 4.3xEV/EBITDA 66.0x 40.6x 28.9x 22.7x 31.5xEV/Earnings 55.3x 74.5x 65.5x 51.6x 57.3xGross Profit Margin 70.2% 68.6% 67.0% 60.4% 70.6%EBITDA Margin 9.8% 8.2% 7.3% 6.5% 7.2%Net Income Margin 4.4% 4.2% 4.0% 3.8% 2.7%TTM Revenue Grow th (YoY) 26.2% 23.7% 21.9% 20.8% 29.0%TTM EBITDA Grow th (YoY) 14.6% 4.9% 5.3% 4.7% 11.7%TTM Earnings Grow th (YoY) -25.7% -15.2% -25.1% 16.5% 20.3%Current Ratio 2.2 2.0 2.5 2.3 2.3Cash as Percent of Market Cap 15.8% 12.8% 13.3% 21.4% 15.0%Enterprise Value Grow th (YoY) 88.6% 75.3% 56.2% 14.4% -52.3% ERP & Supply Chain 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 6.5x 6.8x 6.0x 5.7x 5.3xEV/EBITDA 31.4x 37.2x 47.2x 62.7x 68.5xEV/Earnings 49.7x 53.0x 62.4x 78.6x 57.2xGross Profit Margin 69.9% 66.5% 62.8% 58.9% 71.8%EBITDA Margin 9.6% 8.0% 7.4% 6.9% 7.1%Net Income Margin 5.3% 5.0% 4.7% 4.4% 1.7%TTM Revenue Grow th (YoY) 16.7% 19.1% 21.8% 24.3% 27.9%TTM EBITDA Grow th (YoY) 1.4% -4.9% -18.6% -18.5% -13.1%TTM Earnings Grow th (YoY) -3.1% 15.5% 88.0% -44.6% -35.3%Current Ratio 1.5 1.4 1.6 1.6 1.6Cash as Percent of Market Cap 10.2% 11.8% 11.3% 10.0% 8.1%Enterprise Value Grow th (YoY) 135.4% 148.6% 76.7% 74.5% 500.5% Vertically Focused 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 5.9x 5.5x 4.3x 4.2x 5.2xEV/EBITDA 22.9x 23.2x 15.7x 17.7x 21.0xEV/Earnings 102.6x 96.7x 114.9x 116.4x 21.0xGross Profit Margin 60.7% 57.1% 53.1% 49.5% 62.1%EBITDA Margin 13.8% 14.9% 16.9% 17.1% 15.3%Net Income Margin 5.2% 4.9% 4.5% 4.2% 16.3%TTM Revenue Grow th (YoY) 33.6% 29.5% 30.5% 32.3% 32.0%TTM EBITDA Grow th (YoY) 16.7% 23.0% 31.3% 23.2% 28.8%TTM Earnings Grow th (YoY) -30.6% -31.7% -53.7% -33.3% -17.7%Current Ratio 1.8 1.9 1.6 1.1 1.3Cash as Percent of Market Cap 6.9% 7.2% 6.1% 6.1% 5.2%Enterprise Value Grow th (YoY) 22.2% 50.4% 32.3% 1.9% 88.5% Workforce Managem ent 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.2x 4.5x 3.7x 4.3x 4.7xEV/EBITDA 55.6x 55.7x 44.7x 48.6x 47.1xEV/Earnings 589.9x 626.8x 584.5x 742.3x 410.2xGross Profit Margin 60.8% 56.7% 52.7% 47.9% 58.6%EBITDA Margin -1.1% 2.4% 2.1% 1.7% 0.7%Net Income Margin -10.5% -9.9% -9.4% -9.0% -10.9%TTM Revenue Grow th (YoY) 20.3% 16.5% 17.6% 35.7% 31.1%TTM EBITDA Grow th (YoY) 52.2% 54.0% 30.6% 33.8% 22.2%TTM Earnings Grow th (YoY) -121.3% -110.7% 15.1% 20.7% -33.4%Current Ratio 1.1 1.2 1.9 1.6 1.5Cash as Percent of Market Cap 7.4% 10.4% 12.4% 14.9% 12.5%Enterprise Value Grow th (YoY) 141.5% 162.1% 83.7% 44.7% -35.3% Other SaaS 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 7.4x 6.0x 2.6x 2.5x 4.6xEV/EBITDA 39.8x 44.2x 20.2x 21.2x 24.2xEV/Earnings 137.9x 141.7x 100.6x 89.2x 31.0xGross Profit Margin 71.1% 67.3% 63.6% 61.8% 71.6%EBITDA Margin 17.6% 16.1% 13.9% 11.2% 11.4%Net Income Margin 1.8% 1.7% 1.7% 1.6% 6.5%TTM Revenue Grow th (YoY) 31.0% 31.2% 29.4% 25.2% 22.0%TTM EBITDA Grow th (YoY) 31.0% 41.3% 46.3% 23.2% 16.0%TTM Earnings Grow th (YoY) -105.1% -85.6% -91.8% -34.7% -32.9%Current Ratio 1.8 2.1 2.0 2.2 2.2Cash as Percent of Market Cap 11.0% 15.4% 18.5% 22.1% 15.4%Enterprise Value Grow th (YoY) 87.6% 52.5% 22.7% -22.1% -38.6% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 30. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX C: 1Q12 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY Ad Tech & Lead Generation 1Q11 2Q11 3Q11 4Q11 1Q12 Services 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 3.0x 3.6x 3.0x 3.5x 3.6x EV/Revenue 3.0x 4.9x 5.0x 4.2x 4.2xEV/EBITDA 14.2x 16.7x 13.8x 11.9x 16.7x EV/EBITDA 19.7x 22.0x 23.4x 16.5x 18.1xEV/Earnings 17.0x 20.2x 19.5x 18.8x 28.8x EV/Earnings 39.4x 43.7x 39.3x 38.8x 56.5xGross Profit Margin 68.2% 63.8% 57.2% 51.9% 69.7% Gross Profit Margin 70.8% 69.5% 57.4% 50.6% 77.5%EBITDA Margin 25.3% 23.8% 21.1% 18.2% 15.6% EBITDA Margin 16.0% 10.9% 10.3% 10.8% 13.3%Net Income Margin 6.6% 6.2% 6.0% 5.9% 3.5% Net Income Margin 1.0% 1.0% 0.9% 0.8% 2.7%TTM Revenue Grow th (YoY) 24.0% 23.9% 26.1% 30.6% 32.2% TTM Revenue Grow th (YoY) 24.9% 22.6% 35.1% 35.9% 42.7%TTM EBITDA Grow th (YoY) 23.5% 26.1% 26.4% 22.0% 27.0% TTM EBITDA Grow th (YoY) 34.5% 32.2% 15.7% 4.4% 22.9%TTM Earnings Grow th (YoY) -13.3% -20.1% -8.3% -10.0% -8.1% TTM Earnings Grow th (YoY) -16.5% -15.8% -10.8% -29.5% -13.1%Current Ratio 3.2 3.2 3.2 3.0 3.0 Current Ratio 2.3 2.2 2.3 2.5 2.4Cash as Percent of Market Cap 16.7% 14.6% 13.7% 14.8% 18.4% Cash as Percent of Market Cap 8.7% 10.2% 12.7% 15.0% 13.1%Enterprise Value Grow th (YoY) 49.6% 58.1% 46.2% 1.4% -6.9% Enterprise Value Grow th (YoY) 44.9% 40.0% 34.2% -23.6% -29.6% Com m erce 1Q11 2Q11 3Q11 4Q11 1Q12 Social 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 1.9x 1.9x 1.4x 1.1x 0.9x EV/Revenue 20.6x 22.5x 20.2x 12.4x 14.3xEV/EBITDA 22.7x 19.3x 13.6x 13.1x 16.6x EV/EBITDA 86.1x 137.9x 116.6x 58.5x 63.9xEV/Earnings 51.7x 44.4x 35.8x 35.3x 15.4x EV/Earnings 43.6x 256.0x 284.2x 244.0x 42.5xGross Profit Margin 41.3% 41.1% 39.3% 38.1% 36.9% Gross Profit Margin 77.2% 70.4% 66.7% 62.6% 76.7%EBITDA Margin 7.9% 8.0% 9.7% 9.3% 8.6% EBITDA Margin 16.9% 13.2% 13.4% 12.8% 1.8%Net Income Margin 3.5% 3.3% 3.1% 2.9% 3.8% Net Income Margin -16.3% -16.3% -16.3% -12.9% -3.6%TTM Revenue Grow th (YoY) 12.7% 9.2% 9.3% 13.2% 14.3% TTM Revenue Grow th (YoY) 84.9% 84.9% 84.9% 94.5% 70.8%TTM EBITDA Grow th (YoY) 3.7% 3.1% 5.9% 7.3% -0.3% TTM EBITDA Grow th (YoY) 67.7% 70.6% 81.0% 4.2% -14.5%TTM Earnings Grow th (YoY) 7.1% 4.5% 28.6% 24.6% 8.4% TTM Earnings Grow th (YoY) -29.7% -29.7% 8.6% 29.2% -3.4%Current Ratio 2.2 2.3 2.3 2.2 1.8 Current Ratio 1.9 1.8 2.6 2.4 2.6Cash as Percent of Market Cap 12.3% 16.8% 14.0% 15.6% 17.0% Cash as Percent of Market Cap 3.0% 9.1% 10.8% 36.8% 11.0%Enterprise Value Grow th (YoY) 33.2% 39.5% 24.4% -14.6% -26.5% Enterprise Value Grow th (YoY) #NUM! #NUM! #NUM! -15.8% 0.9% Content & Media 1Q11 2Q11 3Q11 4Q11 1Q12 Travel 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.5x 3.4x 2.7x 2.2x 2.0x EV/Revenue 6.5x 7.1x 5.1x 5.4x 4.7xEV/EBITDA 13.5x 18.1x 11.0x 10.6x 10.5x EV/EBITDA 26.2x 29.6x 23.4x 16.8x 15.3xEV/Earnings 51.5x 47.7x 31.1x 26.5x 21.7x EV/Earnings 36.5x 41.6x 47.1x 31.1x 25.4xGross Profit Margin 48.1% 43.8% 44.7% 45.4% 52.0% Gross Profit Margin 80.0% 77.6% 73.3% 68.3% 79.9%EBITDA Margin 10.5% 12.0% 12.8% 12.6% 13.4% EBITDA Margin 22.0% 24.5% 24.2% 24.4% 22.1%Net Income Margin -1.3% -1.1% -0.9% -0.7% 0.6% Net Income Margin 12.8% 11.5% 10.8% 10.2% 8.2%TTM Revenue Grow th (YoY) 21.9% 12.4% 12.6% 25.6% 25.8% TTM Revenue Grow th (YoY) 26.0% 28.2% 25.7% 28.7% 31.5%TTM EBITDA Grow th (YoY) 14.5% 24.5% 24.7% 17.2% 11.2% TTM EBITDA Grow th (YoY) 28.1% 37.1% 24.0% 30.2% 25.9%TTM Earnings Grow th (YoY) -32.2% -68.9% -13.0% -27.5% -14.3% TTM Earnings Grow th (YoY) -10.4% -10.8% -4.4% -16.3% -16.3%Current Ratio 2.2 2.3 2.6 2.6 2.6 Current Ratio 1.8 1.6 1.9 1.9 2.0Cash as Percent of Market Cap 29.2% 16.4% 25.9% 27.3% 23.4% Cash as Percent of Market Cap 8.8% 9.5% 9.4% 10.9% 9.3%Enterprise Value Grow th (YoY) 37.2% 16.5% -7.9% -44.3% -22.7% Enterprise Value Grow th (YoY) 12.5% 14.6% 6.2% -20.6% -21.8% Gam ing 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 4.1x 4.8x 4.7x 3.1x 3.2xEV/EBITDA 9.8x 9.8x 8.1x 6.1x 4.2xEV/Earnings 12.6x 13.2x 13.5x 11.1x 8.8xGross Profit Margin 76.1% 73.4% 68.0% 63.1% 74.6%EBITDA Margin 46.2% 41.6% 45.4% 44.9% 44.2%Net Income Margin 37.3% 34.6% 31.6% 29.1% 34.4%TTM Revenue Grow th (YoY) 20.9% 24.3% 29.7% 34.2% 35.7%TTM EBITDA Grow th (YoY) 14.1% 23.4% 24.8% 25.8% 34.7%TTM Earnings Grow th (YoY) -19.0% -20.8% -22.0% -15.1% -8.3%Current Ratio 3.8 4.1 3.2 2.7 2.7Cash as Percent of Market Cap 26.8% 23.3% 23.1% 30.0% 27.3%Enterprise Value Grow th (YoY) 9.3% 41.6% 28.8% -26.2% -11.1% Infrastructure 1Q11 2Q11 3Q11 4Q11 1Q12EV/Revenue 2.9x 2.8x 2.6x 1.7x 1.9xEV/EBITDA 20.5x 19.7x 17.3x 12.8x 14.1xEV/Earnings 32.8x 32.3x 30.6x 22.9x 29.4xGross Profit Margin 66.1% 62.4% 59.8% 54.0% 67.2%EBITDA Margin 12.2% 10.8% 11.7% 11.0% 11.2%Net Income Margin 5.6% 5.3% 5.0% 4.8% 4.3%TTM Revenue Grow th (YoY) 14.9% 17.1% 20.1% 24.6% 22.8%TTM EBITDA Grow th (YoY) 17.5% 13.3% 19.3% 19.1% 21.5%TTM Earnings Grow th (YoY) -48.5% -20.4% -17.9% -14.8% -8.1%Current Ratio 2.8 3.1 2.9 2.8 2.7Cash as Percent of Market Cap 14.0% 15.4% 19.1% 19.5% 17.4%Enterprise Value Grow th (YoY) 95.9% 55.5% 32.0% -14.5% -23.3% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 31. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX D: 1Q12 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS TTM RevBuyer Seller Purchase Price Enterprise Value Ev/Rev EV/EBITDA Grow thInsight Venture Partners Quest Softw are Inc. (NasdaqGS:QSFT) $2,176,260 $1,947,330 2.3x 12.7x 11.8%Vista Equity Partners Misys plc (LSE:MSY) $2,141,030 $2,042,200 3.2x 16.1x 17.9%Oracle Corporation (NasdaqGS:ORCL) Taleo Corp. (NasdaqGS:TLEO) $1,921,440 $1,805,470 5.7x 60.9x 32.9%Blackbaud Inc. (NasdaqGS:BLKB) Convio, Inc. (NasdaqGS:CNVO) $326,320 $274,420 3.4x 35.5x 15.2%Myriad Group AG (SWX:MYRN) Synchronica PLC (AIM:SYNC) $50,520 $49,230 2.7x - 98.7%Siemens Beteiligungen Inland GmbH IBS AG (XTRA:IBB) $28,910 $43,890 1.3x 11.5x 16.9%Clausal Computing Oy Tectia Oyj (HLSE:TEC1V) $11,290 $17,210 1.6x - 11.4% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 32. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX E: 1Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS Purchase Price Enterprise ValueBuyer Seller (m m ) (m m ) TTM Rev EV/RevBlackboard Inc. Moodlerooms, Inc. - - - - NetSpot Pty. Ltd. - - - -Brady plc (AIM:BRY) Navita Systems AS $27.3 $27.3 - - syseca AG $2.0 $2.0 $3.0 0.7xClarkHuot/Cocoon Cocoon Branding Inc. - - - - Spacecadet Design Inc. - - - -Constant Contact, Inc. (NasdaqGS:CTCT) CardStar, Inc. $5.8 $5.0 - - MobManager - - - -Constellation Softw are Inc. (TSX:CSU) AMI Education Solutions Ltd. $1.0 $1.0 - - Capital Computer Aossicates - - Computer Softw are Innovations Inc. - - - - Kestral Computing Pty Ltd. - - - - Volo Innovations - - - -Dell Inc. (NasdaqGS:DELL) AppAssure Softw are, Inc. - - - - SonicWALL, Inc. - - $260.0 -Expansion VC, LLC Pricing Engine, Inc. - - - - Tailored Inc. - - - -Fab.com, Inc. Fab.de - $10.0 - - FashionStake, Inc. - - - -Fortunate Bear, LLC Creastoric - - - - Pagehand.com, Pagehand Word Processor - - - -Green Dot Corporation (NYSE:GDOT) eCommLink, Inc. $2.5 $2.5 - - Loopt, Inc. $43.4 $43.4 - -Groupon, Inc. (NasdaqGS:GRPN) Adku, Inc. $10.0 $10.0 - - Hyperpublic - - - - Kima Labs, Inc. - - - - Six Times Seven Inc. - - - - Transparent Financial Services Inc - - - - UpTake Netw orks, Inc. - - - -IHS Inc. (NYSE:IHS) BDW Automotive GmbH $8.0 $8.0 - - PartMiner WorldWide Inc., Computer Assisted Product - - - -International Business Machines Corp. (NYSE:IBM) S l ti Hat Softw are Limited Green - - - - WorkLight Ltd. - $70.0 - 20.0xInternational Game Technology (NYSE:IGT) Double Dow n Interactive, LLC $415.0 $415.0 - - Law rence Gaming, LLC - - - -j2 Global, Inc. (NasdaqGS:JCOM) Landslide Technologies, Inc. - - - - Offsite Backup Solutions, LLC - - - -Kabam, Inc. Fearless Studios - - - - Gravity Bear LLC - - - -Kronos Incorporated OptiLink Inc. - - $6.4 - WebApps, Inc. - - - -Manheim Auctions Ltd. Motors.co.uk Ltd. - - - - Motors.co.uk Ltd. - - - -McKesson Corporation (NYSE:MCK) peerVue, Inc. - - - - Proventys, Inc., CDS Oncology Assets - - - -MenschDanke GmbH Mein-Deal - - - - Schnäppchenfuchs - - - -Opera Softw are ASA (OB:OPERA) 4th Screen Advertising Ltd. $14.5 $14.5 - - Mobile Theory, Inc. $50.0 $50.0 - -Oracle Corporation (NasdaqGS:ORCL) ClearTrial, LLC - - - - This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 33. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX E: 1Q12 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONT…) Purchase Price Enterprise ValueBuyer Seller (m m ) (m m ) TTM Rev EV/Rev Taleo Corp. (NasdaqGS:TLEO) $1,921.4 $1,805.5 $315.4 5.7xRingier Axel Springer d o.o Media Sw iss d.o.o. - - - - Mojauto.rs - - - -Rocket Softw are, Inc. International Business Machines Corp., iCluster - - - - B i Zephyr Development Corporation - - - -Symantec Corporation (NasdaqGS:SYMC) LiveOffice LLC $115.0 $115.0 - - Nukona, Inc. - - - - Nukona, Inc. - - - - Odyssey Softw are, Inc. - - - -Tangoe, Inc. (NasdaqGS:TNGO) Anomalous Netw orks, Inc. $8.9 $8.9 - - ttMobiles Limited $8.7 $8.7 - -Thomson Reuters Corporation (TSX:TRI) FISCOSoft Editora Ltda - - - - RedEgg Solutions, Inc. - - - - Dr Tax Softw are Inc. - - - -Tw itter, Inc. Context Media Technologies, Inc. - - - - Dasient, Inc. - - - - Posterous, Inc. - - - -Vista Equity Partners CDC Softw are Corporation (OTCPK:CDCS.Y) $250.5 $264.8 $219.0 1.2x Misys plc (LSE:MSY) $2,141.0 $2,042.2 $638.6 3.2xVivox, Inc. Droplets, Inc. - - - - Droplets, Inc. - - - -Warrior Girl Corp. (OTCPK:WRGL) ChooseCreditCards.com - - - - HostWire.com LLC - - - - This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 34. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX F: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS TTM Rev Date Buyer Seller Purchase Price Enterprise Value Ev/Rev EV/EBITDA Grow th 03/15/12 Scientific-Atlanta, LLC NDS Group Ltd. $5,022,330 $4,964,760 5.0x 17.5x 7.7% 03/09/12 Insight Venture Partners Quest Softw are Inc. (NasdaqGS:QSFT) $2,176,260 $1,947,330 2.3x 12.7x 11.8% 02/20/12 Vista Equity Partners Misys plc (LSE:MSY) $2,141,030 $2,042,200 3.2x 16.1x 17.9% 02/09/12 Oracle Corporation (NasdaqGS:ORCL) Taleo Corp. (NasdaqGS:TLEO) $1,921,440 $1,805,470 5.7x 60.9x 32.9% This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 35. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX G: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS Enterprise TTM Date Buyer Seller Value Revenue EV/Rev 03/29/12 OMERS Ventures HootSuite Media, Inc. - - - 03/29/12 Oracle Corporation (NasdaqGS:ORCL) ClearTrial, LLC - - - 03/28/12 Kronos Incorporated WebApps, Inc. - - - 03/27/12 ICG Group, Inc. (NasdaqGS:ICGE) MSDSonline Inc. - - - 03/26/12 Blackboard Inc. Moodlerooms, Inc. - - - 03/22/12 Trackn Inc.; PFS, LLC Spireon Inc. - - - 03/20/12 MD On-Line, Inc. MD Technologies Inc. (OTCPK:MDTO) - - - 03/19/12 Saba Softw are, Inc. (NasdaqGM:SABA) HumanConcepts, LLC $23,500,000 - - 03/13/12 SalesCrunch, Inc. WebEx Communications, Inc. - - - 03/09/12 Cybertow ers Bhd (KLSE:CYBERT) King Arts Limited - - - 03/08/12 Cornerstone OnDemand, Inc. Sonar Limited $33,800,000 - - 03/07/12 PrimePay, Inc. Ready Set Work, LLC - - - 03/06/12 AccuData Holdings, Inc. DaVinci Marketing Technologies - - - 03/04/12 JEDFam Group LLC Broadsign International, Inc. $5,500,000 - - 03/02/12 Sargas Capital Kontexto Inc. $20,600,000 - - 03/02/12 Youbill, Inc. Volo Innovations Inc - - - 02/29/12 TeamSystem S.p.A. Digita s.r.l. - - - 02/29/12 AULtec, Inc. e-autobusiness, LLC - - - 02/28/12 Haufe-Lexw are GmbH & Co. KG umantis AG - - - 02/27/12 Talent Technology Corporation HR Integrations LLC - - - 02/24/12 Vocus Inc. (NasdaqGS:VOCS) iContact Corporation* $178,700,000 $48,000,000 3.8x 02/22/12 LinkedIn Corporation (NYSE:LNKD) Rapportive, Inc. - - - 02/21/12 Ivrnet, Inc. (TSXV:IVI) NeatWorx Web Solutions Inc. - - - 02/21/12 ebay motors WHI Solutions, Inc. - - - 02/17/12 Pender Grow th Fund Monexa Solutions Inc.* $4,150,000 $4,000,000 1.0x 02/16/12 Envestnet, Inc. (NYSE:ENV) Tamarac, Inc. $54,000,000 $12,000,000 4.5x 02/15/12 Quest Softw are Inc. (NasdaqGS:QSFT) BlueFolder, Inc. - - - 02/14/12 Silverback Enterprise Group Inc. Pow erSteering Softw are, Inc. - - - 02/14/12 Pow erSteering Softw are, Inc. Tenrox, Inc. - - - 02/13/12 Juniper Netw orks, Inc. (NYSE:JNPR) Mykonos Softw are, Inc.* $80,000,000 $1,000,000 80.0x 02/12/12 Ingenico SA (ENXTPA:ING) ROAM Data, Inc. - - - 02/09/12 S&P Capital IQ R2 Financial Technologies Inc. - - - 02/08/12 Oracle Corporation (NasdaqGS:ORCL) Taleo Corp. (NasdaqGS:TLEO) $1,805,500,000 $315,000,000 5.7x 02/08/12 General Atlantic LLC FNZ (UK) Ltd. - - - 02/08/12 API Healthcare Corporation Concerro, Incorporated - - - 02/07/12 Ceridian Corporation Dayforce, Inc. - - - 02/07/12 Akamai Technologies, Inc. Blaze Softw are Inc. - - - 02/07/12 Guidance Softw are, Inc. CaseCentral, Inc. $54,000,000 - - 02/06/12 j2 Global, Inc. (NasdaqGS:JCOM) Landslide Technologies, Inc. - - - 02/03/12 Sequoia Capital Evernote Corporation - - - 02/02/12 Emergis Inc. Wolf Medical Systems Corporation - - - 02/02/12 Xero Limited. (NZSE:XRO) Max Solutions Limited $6,000,000 - - 01/31/12 Kenexa Corp. (NYSE:KNXA) OutStart, Inc. $38,900,000 - - 01/31/12 Morneau Shepell Ltd. SBC Systems, Inc. - - - 01/31/12 Peoplefluent, Inc. Strategia Communications Inc. - - - 01/24/12 Reliance Communications, Inc. AnComm, Inc. - - - 01/23/12 BearingPoint, Inc. Effiscience, Inc. - - - 01/23/12 - Foederis SA - - - This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 36. Software Equity Group, L.L.C. Investment Banking / Mergers & AcquisitionsAPPENDIX G: 1Q12 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS (CONT…) Enterprise TTM Date Buyer Seller Value Revenue EV/Rev 01/23/12 Cornerstone Softw are, Inc. Makana Solutions, Inc. - - - 01/23/12 Tw itter, Inc. Dasient, Inc. - - - 01/18/12 Dimension Data Holdings plc Xigo, LLC - - - 01/17/12 Project X Labs Ltd. BigDataLabs Inc. - - - 01/16/12 Blackbaud Inc. (NasdaqGS:BLKB) Convio, Inc. (NasdaqGS:CNVO) $274,400,000 $80,000,000 3.4x 01/16/12 PivotLink Corp. Acteea, Inc. - - - 01/13/12 Evisions, Inc. Cayuse, Inc. - - - 01/12/12 SAI Global Limited (ASX:SAI) Compliance 360, Inc. $42,300,000 - - 01/11/12 Grupo Linx Microvix Softw are Matriz - - - 01/10/12 Tangoe, Inc. (NasdaqGS:TNGO) Anomalous Netw orks, Inc. $8,900,000 - - 01/09/12 Symantec Corporation LiveOffice LLC* $115,000,000 $40,000,000 2.9x 01/06/12 LogMeIn, Inc. (NasdaqGS:LOGM) Bold Softw are, LLC $16,500,000 - - 01/05/12 OpenSpan, Inc. Triangle BPA, LLC - - - 01/04/12 Tengelmann E-Commerce Beteiligungs MAC IT-Solutions GmbH - - - 01/03/12 Callidus Softw are Inc. (NasdaqGM:CALD) LeadFormix Inc. $9,000,000 - - 01/01/12 TeleTech Holdings Inc. (NasdaqGS:TTEC) OnState Communications, Inc. $3,300,000 - - This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2012 Software Equity Group, L.L.C., All Rights Reserved
  • 37. To keep your finger on the pulse of the software equity markets, subscribe to our Monthly and Quarterly Reportsat http://www.softwareequity.com/research_reports.aspx.Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors.Since 1992, our firm has represented and guided private companies throughout the United States and Canada,as well as Europe, Asia Pacific, Africa and Israel. We have advised public companies listed on the NASDAQ,NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also represents several ofthe worlds leading private equity firms. For a confidential consultation without obligation, please contact KrisBeible, Director, Business Development (858 509-2800, kbeible@softwareequity.com).CONTACT INFORMATION:Software Equity Group, L.L.C.12220 El Camino Real, Suite 320San Diego, CA 92130www.softwareequity.comp: (858) 509-2800f: (858) 509-2818The information contained in this Report is obtained from sources we believe to be reliable, but no representationor guarantee is made about the accuracy or completeness of such information, or the opinions expressed herein.Nothing in this Report is intended to be a recommendation of a specific security or company or intended toconstitute an offer to buy or sell, or the solicitation of an offer to buy or sell, any security. Software Equity GroupLLC may have an interest in one or more of the securities or companies discussed herein.Financial data provided by Capital IQ.This Report may not be reproduced in whole or in part without the expressed prior written authorization ofSoftware Equity Group, L.L.C.Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces itsintellectual property rights. Copyright © 2012 by Software Equity Group, L.L.C., All Rights Reserved

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