Corum Group Ltd' www'corumgroup'com

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SaaS in the Economic Storm
Bellevue Boston Houston London
Mexico City Munich Oslo Paris
Philadelphia Phoenix Portland Santa
Clara Toronto Zurich
SIIA - On-demand Europe 2008 Software Industry
MA Market Update June 10, 2008

• Corum Group Ltd.www.corumgroup.com

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Middle Market Software MA Specialists

• MA specialists since 1985
• Software and IT experts mostly former CEOs
• Publisher of industry-leading MA research
• Host of Selling Up Selling Out conferences / MA
  workshop series
• Dominant North American and European presence
• 60 cross-border transactions
• Platinum sponsor of World Financial Symposiums
  Silicon Valley, Boston, London
• 6 billion in wealth created
• 200 transactions completed

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Headlines Tell the Story
Can MAs Best Times Get Better? Wall Street
Journal, January 2007 Money is Everywhere But
for How Long? Wall Street Journal, January
2007 Stock Surge Bond Boom MA Magic Wall
Street Journal, April 2007 As Deal Barriers
Fall, Takeover Bids Multiply Wall Street
Journal, May 2007 MA The Best Investment
Game in Town Moneyextra.com UK, May
2007 Market Pressures Test Resilience of Buyout
Boom Wall Street Journal, June 2007 Dry-Up in
Debt Wont Deter Tech Deals Barrons, September
2007
Time to Celebrate 2007 Breaks MA Record Wall
Street Journal, October 2007 MA Seen on the
Brink After Record 2007 Reuters, December
2007 Tech Cos Seen Going MA Route, Not IPO in
2008 Reuters, December
2007 IT Spending Growth Expected to Slow in
08 InformationWeek, December 2007 Bear
Stearns No. 1 Foe Fear Itself CNN Money, March
2008 Deal Making It Shall Return Wall
Street Journal, May 2008 Lets Still Make a
Deal Business Week, June 2008
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Current Market Conditions

• Global economic infrastructure in disarray
• Difficultly borrowing money
• IPO markets are dead
• Many are struggling
• Worries about depth of recession
• Concern over inflation
• Price of oil up
• Troubled housing market
• Consumer confidence low
• Unemployment up
• Cost of food and consumer goods rising

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The Silver Lining

• On the plus side
• Technology revenues remain strong
• Earnings remain positive
• Forward analyst estimates look good
• Lending requirements loosening
• PE buyers see opportunity in the coming months
• PE and VC investors raising new funds
• International markets remain strong
• No buyers saying were pulling back
• Large cap stocks up
• Strong cash reserves
• MA has become operational

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Large Cap Tech Stocks
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Reality Check

• Dont take the current market for granted.
• Volatile public markets
• Long, deep recession, Warren Buffet
• Price of oil continues to rise
• Political change
• Global conflicts

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Why Does MA Prevail?

• The need to buy is stronger than ever
• Acquisitions add more growth
• Counter takeover attempts
• Consolidation
• Speed time to market
• Buy talent and domain expertise
• Fill product gaps
• Get ahead of a technology curve
• Tap into emerging consumer markets
• Cost of being public and complying with SOX
• Need for international presence
• Only true liquidity event for managing
  shareholders

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Global MA Activity

• Cross-border transactionlevels remain strong
  while international MA activity contributed
  over 40 to the
• total of announced deals for 2007
• Europe and Asia both set records for deal volume
  in 2007
• U.S. sellers continue to look overseas for buyers
• Weak dollar attracting non-U.S. buyers
• Strong makes European targets attractive to
  acquisitive international buyers looking to
  increase revenues and profits based in stronger
  currency
• 67 international tech cos on BusinessWeeks
  InfoTech 100 list up from 25 in 1998

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Emerging International Markets

• Regions to watch
• China
• Brazil
• Israel
• India
• Eastern Europe
• Russia

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Sectors
2008 sector stats looking good
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Public Valuation Revenue Multiples
TTM EV/S Multiples
Increased
Decreased
N/A
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Looking Back Valuation Multiples
MA Transaction Revenue Multiples Software
Industry
2008 is starting off stronger than 2007
finishedQ1 P/S multiple of 2.6x
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SaaS is Mainstream
40 surveyed use hosted CRM (AMR) 49 will
expand use of SaaS (AMR) 25 of business
software revenue by 2011 (Gartner) 29 annual
growth (IDC)
70 plan to use SaaS (Aberdeen Group) 5 to 55
cost savings (Springboard Research) 30 new
soft licenses will be deployed as SaaS by 2012
(Saugatuck) 50 software revenues from
subscription by 2015 (Needham)
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Waves of SaaS Evolution
SaaS 1.0
SaaS 2.0
Wave I 2001-2006Cost-effective Software Delivery
Wave II 2005-2010Integrated Business Solutions
Wave III 2008-2014Workflow-enabled Business
Transformation
High
Ubiquitous AdoptionOptimized Bus.
EcosystemsIT-targeted EcosystemsInter-enterprise
CollaborationIT Utility / SaaS
InfrastructureCustomized, Personalized
WorkflowFocus on Business Transformation
Early AdoptionStand-alone AppsMulti-tenancyLimi
ted ConfigurabilityFocus on TCO / rapid
deployment
Mainstream AdoptionIntegrated w/ Business
PortfolioSaaS Integration PlatformsBusiness
Marketplaces and SaaS ecosystems
Adoption
SaaS Tipping-Point
Low
2003 2004 2005 2006 2007
2008 2009 2010 2011
2012 2013 2014
A platform for mission-critical application
workloads
Source Saugatuck Technology
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The SaaS Value Chain Drivers
Customer Satisfaction Margin
Solve customer business needs
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Valuation over 9 months

• Multiples
• In September 07
• EV / Sales 6.33 forward multiples 4.19
  (12months later)
• In January 08
• EV / Sales 3.69 forward multiples 2.65
• In May 08
• EV / Sales 3.14 forward multiples 2.35
• Relevant MA Transactions

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SaaS Public Valuation Multiples
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SaaS transaction multiple
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SaaS in the heart of the 5 revolutions

• Unified communications
• NGNetworks, IPT, SIP Presence, conferencing
• Devices
• What devices is right for particular application
  / activity
• Datacenters
• Virtualized and distributed architectures
  multithreading
• SOA achitectures
• Matching IT to business process core apps easy
  tailored
• Application delivery
• SaaS business model
• All of them are interelated !!

• John Chapman IT Europa

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Investors / Acquirers Attracted to

• SaaS is not only a matter of business model
  part of a wider vision
• SaaS is reccession proof cutting costs and
  increasing flexibility
• Predictable recurring cash flow
• Revenue visibility this year and beyond
• Low churn / high user satisfaction
• Solves cutomer business needs or theyll leave
• Easier to plan and manage growth / scalability
• Higher margins at scale
• Cash flow is what gives a company value
• License models are difficult to project
• If it is not predictable it may be more volatile
• Markets doesnt like whats volatile

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Seller Motivation

• Timing personal, business, market
• Have been approached
• Need a larger partner to achieve vision
• Capitalize on current success
• Investors want out
• Running out of cash
• Founder age
• Facing a build vs. sell decision
• Tough to compete with larger players
• Lacking resources to expand internationally
• Lack of liquidity
• Time for change

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What Do Buyers Really Buy?

• Vision
• Research
• Management
• Business Model
• Planning RD Process
• Patents
• Documentation
• Pricing
• Support
• Market Share
• Staff
• User Base

• Marketing Channels
• Alliances
• Competitive Position
• Technology
• Sales Process
• Capital Structure
• Growth
• Profitability
• Domain Expertise

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Buyers Prioritize Acquisition Opportunities

• Target Size
• Product prioritization which new products /
  markets do they want to own?
• Product leadership compared to competition
• Market size addressable market large /
  expandable?
• Can product port into other verticals, market
  segments?
• Cultural and technical compatibility
• Management team

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Will the Numbers Pencil?

• Financial Considerations Will the acquisition
  improve financial performance?
• Return on Equity
• EBITDA multiples
• Impact of deal on revenue growth rate and EBITDA
• Recurring revenue
• Accretion / dilution to GAAP Earnings Per Share
  (public buyer) cash flow (private buyer)
• Dont forget -- third party analysts and / or
  lenders need to bless the deal

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Corums Weekly MA Update
Weekly MA Update Complete
list of weeks deals
(Registration)
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Contact Information
Corum Group Ltd. 10500 NE 8th Street, Suite
1500Bellevue, WA 98004USA1 425-455-8281
Corum Group International S.à.r.l.Beim
ParadeplatzBasteiplatz 78001 ZurichSwitzerland
41 44 251 82 65

• www.corumgroup.com

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