cloud insights m&a and capital markets report

21
CLOUD INSIGHTS M&A and Capital Markets Perspective on the Cloud Computing Industries: - Software-as-a-Service - Platform-as-a-Service - Infrastructure-as-a-Service October 2011 Update and Q3 Review Mark McNay Partner & Managing Director [email protected] +1.415.248.5902 Patrick Vihtelic Associate [email protected] +1.415.248.5911 Andrew Arno Director [email protected] +1.415.248.5905 Paul Huber Senior Analyst [email protected] +1.415.248.5901

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Page 1: Cloud insights m&a and capital markets report

CLOUD INSIGHTSM&A and Capital Markets Perspectiveon the Cloud Computing Industries:

- Software-as-a-Service- Platform-as-a-Service- Infrastructure-as-a-Service

October 2011 Update and Q3 Review

Mark McNayPartner & Managing [email protected]+1.415.248.5902

Patrick Vihtelic [email protected]+1.415.248.5911

Andrew [email protected]+1.415.248.5905

Paul HuberSenior [email protected]+1.415.248.5901

William Blair & Company, L.L.C. is a global investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients’ interests first and foremost. We place a high value on the enduring nature of our client relationships, the quality of our products and services, and the continuity and integrity of our people. For more information, please visit www.williamblair.com.

OFFICE LOCATIONS

125 High StreetOliver Street TowerSuite 1901Boston, MA 02110+1.617.235.7500

Headquarters222 West Adams StreetChicago, IL 60606+1.312.236.1600www.williamblair.com

666 Fifth Avenue14th FloorNew York, NY 10103+1.212.237.2700

343 Sansome Street12th FloorSan Francisco, CA 94104+1.415.986.5596

Putnam Place100 Great Meadow RoadSuite 606Wethersfield, CT 06109+1.800.596.2028

500 Delaware AvenueSuite 720Wilmington, DE 19801+1.302.573.5000

3 St. Helen’s PlaceLondon EC3A 6ABEngland+44 20 7868 4400

Stockerstrasse 468002 ZurichSwitzerland+41 44 287 9020

Unit 16-18, 11th FloorBuilding One, Corporate AvenueNo.222 Hubin RoadShanghai 200021, P.R.C.+86 21 2327 2222

CHICAGO BOSTON LONDON NEW YORK SAN FRANCISCO SHANGHAI WILMINGTON ZURICH

Page 2: Cloud insights m&a and capital markets report
Page 3: Cloud insights m&a and capital markets report

Table of Contents

Summary 1 

M&A Overview 3 Transaction Detail 3 M&A Valuations 4 Transaction Analysis 5 

Capital Markets Overview 6 

Public Company Analysis 8 

Venture Capital Activity 11 Transaction Analysis 11 

William Blair & Company Selected Cloud Transactions 13 

SaaS Professional Biographies 14 

William Blair & Company SaaS Equity Research Coverage 15 

Notes 16 

Disclosures 17 

Page 4: Cloud insights m&a and capital markets report
Page 5: Cloud insights m&a and capital markets report

Summary

1

Summary

SAAS MERGERS & ACQUISITIONS While the public equity markets have been volatile over the past quarter, the SaaS M&A environment continues to be robust. During third quarter 2011, 53 SaaS M&A transactions were announced, compared with 29 announced in third quarter 2010. Dollar volume for third quarter 2011 was up year-over-year, with $2.4 billion in total disclosed transaction value, versus $788 million during third quarter 2010. Both the total number of transactions and dollar volume for year-to-date 2011 are up nearly double over the prior period. Year-to-date 2011 has witnessed 123 transactions totaling $4.8 billion in disclosed transaction value compared with the corresponding period in 2010, which witnessed 76 transactions totaling $2.1 billion in disclosed transaction value. Notable M&A transactions in third quarter 2011 included:

Fizzback, a provider of customer feedback management solutions, announced that it is being acquired by NICE Systems for $80 million (or roughly 7.3x LTM revenue).

Ning, a provider of social website and online community creation and management solutions, announced that it is being acquired by Glam Media.

Assistly, a provider of customer service management software, announced that it is being acquired by salesforce.com for $50 million.

Plimus, a provider of e-commerce solutions for the SMB marketplace, announced that it is being acquired by Great Hill Partners for $115 million.

Blackboard, a publicly listed provider of software solutions for the education industry, announced that it is being acquired by Providence Equity Partners for $1.8 billion (or roughly 3.8x LTM revenue).

SAAS EQUITY PERFORMANCE SaaS stocks have underperformed the broader market during 2011. The SaaS index underperformed the NASDAQ and the S&P 500 with Large and Small Cap SaaS groups losing 11.8% and 12.1%, respectively, while the Mid Cap SaaS group lost 18.5% since the beginning of 2011. For September, the SaaS index underperformed the NASDAQ and the S&P 500, losing 9.3%, compared with losses of 6.2% and 5.7%, respectively.

SAAS CAPITAL MARKETS Third quarter 2011 witnessed two SaaS public equity offerings, which included one initial public offering and one follow-on offering, as well as four SaaS initial public offering filings:

ServiceSource International, which provides solutions that drive increased renewals of maintenance, support and subscription agreements for technology companies, completed its follow-on offering of $181 million (including the overallotment). ServiceSource priced its follow-on offering at a 5.5% discount to its filing price and a 0.7% discount to the closing price of its stock on the day of pricing. However, the stock is up 86.7% since its initial public offering in March of this year. William Blair acted as an underwriter for ServiceSource’s IPO and follow-on offering.

Tangoe, which provides communications lifecycle management solutions, completed its initial public offering of $101 million (including the over allotment). Tangoe traded up 17% on its first day of trading and is currently up 16% since pricing.

Demandware, which provides e-commerce solutions, filed for a $100 million IPO. William Blair is acting as an underwriter for Demandware’s initial public offering.

Eloqua, Jive Software and BazaarVoice have also filed for their respective IPOs.

Index 2011 YTD SeptemberLarge-cap SaaS -11.8% -7.9%Midcap SaaS -18.5% -14.9%Small-cap SaaS -12.1% -8.9%All SaaS -13.6% -9.3%NASDAQ -8.3% -6.2%S&P 500 -3.1% -5.7%

Page 6: Cloud insights m&a and capital markets report

Summary (cont'd)

www.williamblair.com 2

Summary (cont'd)

SAAS VENTURE CAPITAL Despite the slowdown in the public equity markets, the SaaS venture funding environment continues to be healthy. During third quarter 2011, 54 SaaS venture transactions were announced, compared with 51 announced in third quarter 2010. Dollar volume for third quarter 2011 was up year-over-year, with $603 million in transaction value, versus $302 million during third quarter 2010. Venture investments for the year-to-date 2011 period are up significantly year-over-year compared with the prior period. Year-to-date 2011 has witnessed 144 transactions totaling $976 million in transaction value, whereas the same period in 2010 witnessed 117 transactions totaling $615 million in transaction value. Notable venture investments in third quarter 2011 included:

Rearden Commerce, an e-commerce platform company, raised $133 million in funding from Citigroup, American Express and JP Morgan Chase. Rearden Commerce has raised $328 million in total funding to date.

Steelwedge Software, which provides sales planning and performance management solutions, raised $16 million from Mainsail Partners.

MINDBODY, which provides business management software for businesses in yoga, pilates, day spa, and fitness markets, raised $21 million from Bessemer Venture Partners and Catalyst Investors.

Box.net, which provides online file storage, sharing and collaboration solutions, raised $50 million from Meritech Capital Partners, Andreessen Horowitz, Emergence Capital Partners, Draper Fisher Jurveston, Scale Venture Partners, U.S. Venture Partners, salesforce.com and others.

Inkling, which provides a prediction market platform for corporations, start-ups, academic, non-profit and government institutions, raised $17 million in funding led by Tenaya Capital.

Cvent, a provider of event management and Web survey solutions, raised $136 million in a minority transaction from New Enterprise Associates and Insight Venture Partners, with Greenspring Associates also participating.

PAAS AND IAAS ACTIVITY Notable events in the PaaS and IaaS sectors in third quarter 2011:

Carbonite, which provides online back-up solutions for consumers, completed its initial public offering of $72 million (including the over allotment). Carbonite traded up 23.5% on its first day of trading and is currently up 48.1% since pricing. William Blair acted as an underwriter for Carbonite’s initial public offering

Cloud.com, a provider of software infrastructure platforms for cloud providers, has been acquired by Citrix Systems for about $190 million.

10gen, a provider of platform-as-a-service technology designed to help developers build Web sites and applications, raised $20 million from Sequoia Capital, Union Square Ventures and Flybridge Capital Partners.

iGware, a provider of software and infrastructure tools that support consumer devices, was acquired by Acer for about $395 million in total consideration.

GoodData Corporation, which provides a business intelligence platform-as-a-service that enables companies to collaborate around data, raised $15 million from Andreessen Horowitz as well as existing investors Windcrest Partners, General Catalyst Partners and Fidelity Growth Partners Europe.

Salesforce.com announced the extension of its social enterprise platform, which offers a real-time multitenant application development environment that enables the creation of cloud, mobile and social apps. Database.com, Salesforce’s on-demand cloud database for developers, has become available to developers and ISVs.

As always, we encourage you to contact us if we may be of assistance. Best regards,

Mark McNay Andrew Arno Patrick Vihtelic Paul Huber Partner & Managing Director Director Associate Senior Analyst [email protected] [email protected] [email protected] [email protected]

Page 7: Cloud insights m&a and capital markets report

M&A Overview

3

M&A Overview Transaction Detail

The number of SaaS M&A transactions announced increased by over two times when comparing LTM 09/11 to LTM 09/10.

LTM 09/11 – 177 transactions (58 with disclosed transaction values totaling $6.5 billion).

LTM 09/10 – 88 transactions (20 with disclosed transaction values totaling $2.7 billion).

53 M&A transactions were announced in third quarter 2011, compared with 29 in third quarter 2010.

M&A Activity Detail

Source: Capital IQ as of September 30, 2011.

Annual M&A Detail

2006 2007 2008 2009 2010 LTM

09/10 LTM 09/11

Transaction Value $2,302 $6,005 $1,854 $2,826 $3,432 $2,654 $6,457

Number of Transactions 32 46 31 39 112 88 177

Source: Capital IQ as of September 30, 2011.

($ in millions) Number of Transactions Dollar Value

2008 2009 2010LTM09/10

LTM09/11 2008 2009 2010

LTM09/10

LTM09/11

AnnualDisclosed 13 14 30 20 58 $1,854 $2,826 $3,432 $2,654 $6,457Undisclosed 18 25 82 68 119 - - - - -TOTAL 31 39 112 88 177 $1,854 $2,826 $3,432 $2,654 $6,457

Transaction Value LTM Transaction Value # of Transactions

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

020406080100120140160180

Number of Transactions

Transaction Value($ in millions)

Page 8: Cloud insights m&a and capital markets report

M&A Overview (cont'd)

www.williamblair.com 4

M&A Valuations M&A Overview (cont'd)

The volume and number of announced M&A transactions are both up during the last 12 months when compared with the corresponding period in 2010.

On a monthly basis, September 2011 witnessed 17 SaaS M&A transactions totaling $326.5 million in disclosed transaction value compared with 11 transactions totaling $167.5 million in September 2010.

While revenue multiples are down slightly during LTM 09/11, M&A activity has increased significantly over the prior period.

M&A Valuation Analysis

Source: Capital IQ as of September 30, 2011.

($ in millions)

2008 2009 2010LTM09/10

LTM09/11

VolumeNumber of Announced Transactions 31 39 112 88 177Number of Disclosed Transactions 13 14 30 20 58Total Dollar Volume $1,854 $2,826 $3,432 $2,654 $6,457Average Transaction Size $143 $202 $114 $133 $111

EV/LTM RevenuesNumber of Disclosed Transactions 7 3 8 7 21Mean 2.88x 4.03x 5.04x 5.64x 4.13xMedian 2.80x 4.60x 2.83x 3.90x 3.31x

EV/LTM EBITDANumber of Disclosed Transactions 3 2 1 2 2Mean 15.9x 47.7x 19.0x 34.5x 15.9xMedian 18.5x 47.7x 19.0x 34.5x 15.9x

Annual

Page 9: Cloud insights m&a and capital markets report

M&A Overview (cont'd)

5

M&A Overview (cont'd) Transaction Analysis

Private venture-backed companies account for nearly half of the acquisition targets, while private independent targets account for the majority of acquisition targets over the last 12 months.

Cash continues to be the most common form of consideration disclosed during the last 12 months, making up 69% of transactions with a disclosed consideration.

M&A Activity by Target Ownership

2006 2007 2008 2009 2010 LTM 09/10 LTM 09/11

Private – V.C. Backed 60% 57% 52% 62% 50% 45% 44%

Private – Independent 34% 26% 35% 31% 48% 52% 56%

Public 6% 17% 13% 7% 2% 2% 1%

M&A Activity by Consideration

2006 2007 2008 2009 2010 LTM 09/10 LTM 09/11

Not Disclosed 47% 50% 42% 43% 73% 75% 69%

Cash 34% 33% 39% 50% 21% 22% 22%

Stock 19% 17% 16% 7% 5% 3% 10%

Source: Capital IQ as of September 30, 2011.

Private – V.C. Backed Private – Independent Public

0%

25%

50%

75%

Percent of Transactions

Not Disclosed Cash Stock

0%

25%

50%

75%

100%

Percent of Transactions

Page 10: Cloud insights m&a and capital markets report

Capital Markets Overview

www.williamblair.com 6

Capital Markets Overview

Tangoe priced its IPO during third quarter 2011, raising $100.9 million in total.

ServiceSource International priced its follow-on offering during third quarter 2011, raising $181.1 million in total.

Annual SaaS Public Offering Activity ($ Volume by IPO, Follow-On and Convertible Debt)

2006 2007 2008 2009 2010 LTM 09/10 LTM 09/11

Initial Public Offerings $145.0 $805.0 - $194.9 $486.5 $486.5 $537.2

Follow-Ons Offerings $439.4 $934.8 $177.0 $457.9 $631.3 $521.7 $1,220.0

PIPEs - - $251.0 - - - -

Convertible Debt Offerings - - - - $1,029.6 $854.6 $175.0

Source: Capital IQ and Dealogic as of September 30, 2011.

Initial Public Offerings Follow-On Offerings PIPEs Convertible Debt Offerings

$0

$500

$1,000

$1,500

$2,000

$2,500 Initial Public Offerings Follow-On Offerings PIPEs Convertible Debt Offerings($ in millions)

Page 11: Cloud insights m&a and capital markets report

Capital Market Overview (cont'd)

7

Capital Market Overview (cont'd)

LTM SaaS Public Equity Offering Detail

Note: William Blair clients highlighted. Source: FactSet and Dealogic as of September 30, 2011.

Offer Price Discount to

CompanyFilingDate

PricingDate Filing Range

OfferPrice

Offering Size

($ in MM)

Primary as % of Offering Dilution

FirstDay

First Week To Date Filing Price Last Sale

09/30/2011IPOFiledBazaarvoice 08/26/11 - - - 86.3$ - - - - - - - -

Jive Software 08/24/11 - - - 100.0$ - - - - - - - -

Eloqua 08/24/11 - - - 100.0$ - - - - - - - -

Demandware 07/15/11 - - - 100.0$ - - - - - - - -

WageWorks 04/25/11 - - - 49.0$ - - - - - - - -

Trustwave 04/21/11 - - - 100.0$ - - - - - - - -

PricedTangoe 04/16/10 07/26/11 $9.00 - $11.00 10.00$ 100.9$ 74.4% 23.9% 314.0$ 16.5% 19.2% 13.1% - -

Responsys 12/23/10 04/20/11 $8.50 - $10.00 12.00$ 91.4$ 85.3% 14.4% 529.3$ 28.3% 33.0% (10.2%) - -

Ellie Mae 04/30/10 04/14/11 $9.00 - $11.00 6.00$ 50.7$ 59.2% 24.5% 122.4$ 12.8% 19.0% (7.3%) - -

ServiceSource International 12/20/10 03/24/11 $7.50 - $ 9.00 10.00$ 137.3$ 71.3% 14.6% 655.1$ 21.8% 21.8% 32.1% - -

Cornerstone OnDemand 09/29/10 03/16/11 $9.00 - $11.00 13.00$ 157.0$ 62.1% 16.1% 606.3$ 46.7% 38.0% (3.5%) - -

Follow-OnPricedServiceSource International 07/18/11 07/28/11 - 17.50$ 181.1$ 13.3% 2.0% 1,202.2$ (8.0%) 2.0% (24.5%) -8.6% -0.7%

SPS Commerce 06/08/11 06/09/11 - 16.50$ 19.9$ 100.0% 0.0% 211.8$ (9.7%) (0.1%) (1.3%) -6.9% -6.9%

Kenexa 05/16/11 05/19/11 - 27.75$ 95.7$ 100.0% 12.9% 739.1$ 16.6% 11.4% (43.6%) -1.6% -0.9%

IntraLinks Holdings 03/25/11 04/06/11 - 25.50$ 219.9$ 16.7% 2.7% 1,372.0$ (0.8%) 10.8% (70.5%) -11.1% -0.3%

SciQuest 03/09/11 03/30/11 - 14.25$ 77.3$ 21.2% 5.2% 319.7$ (2.9%) 0.2% 4.8% -5.3% -2.4%

RealPage 11/17/10 12/06/10 - 25.75$ 266.5$ 38.6% 6.0% 1,736.0$ 9.4% 8.7% (20.6%) -1.2% -0.4%

IntraLinks Holdings 11/19/10 12/06/10 - 20.00$ 200.0$ 20.0% 3.8% 1,067.6$ (4.8%) (4.1%) (62.5%) -2.9% -2.1%

SPS Commerce 11/12/10 12/02/10 - 12.25$ 35.2$ 3.5% 0.9% 151.9$ 0.7% 15.3% 33.0% -8.3% -5.4%

Synchronoss Technologies 11/12/10 11/17/10 - 25.40$ 124.4$ 90.1% 12.1% 930.1$ (1.0%) 3.5% (1.9%) -3.1% -2.3%

Market Cap Post

Offering($ in MM)

% Change Pricing to

Page 12: Cloud insights m&a and capital markets report

Public Company Analysis

www.williamblair.com 8

Public Company Analysis

Since the beginning of 2011, the SaaS Index has underperformed against the NASDAQ composite, losing 13.6%, while the NASDAQ has lost 8.3% for the year.

Since the beginning of 2011, the Large and Small Cap SaaS groups have lost 11.8% and 12.1%, respectively, while the Mid Cap SaaS group lost 18.5%.

Valuation Overview

Source: FactSet as of September 30, 2011. Note: Market cap groupings based on September 30, 2011 stock price. Data points represent median multiples.

$1 B+ Market Cap $500 MM to $1 B Market Cap <$500 MM Market Cap

6.2x

41.3x

49.7x

3.8x

23.0x 25.9x

2.0x

15.1x

32.3x

EV / 2011E Revenue EV / 2011E EBITDA EV / 2011E FCF

SaaS Indexed Stock Price Performance

Note: Market cap groupings based on December 31, 2010, stock price Mkt. Cap > $1 B consists of: ATHN, BBBB, CNQR, CRM, LOGM, N, RP, SFSF, TLEO, ULTI Mkt. Cap $500 MM to $1B consists of: CTCT, CSOD, IL, LPSN, MDSO, MKTG, RNOW, SNCR, SREV, TRAK, VOCS Mkt. Cap < $500 MM consists of: CNVO, DMAN, ELLI, KNXA, SDBT, SPSC, SQI, TNGO Source: FactSet as of September 30, 2011.

80

90

100

110

120

130

12/31/10 1/31/11 3/3/11 4/3/11 5/3/11 6/3/11 7/3/11 8/3/11 9/3/11

Mkt. Cap >$1B (-11.8%) Mkt. Cap $500 MM to $1B (-18.5%)

Mkt. Cap <$500M (-12.1%) NASDAQ (-8.3%)

Page 13: Cloud insights m&a and capital markets report

Public Company Analysis (cont'd)

9

Public Company Analysis (cont'd)

Stock Price and Revenue Multiple Over Time

Source: FactSet as of September 30, 2011. Note: Low point and high point reflect data since December 31, 2008.

StockPrice

EV/LTMRev

StockPrice

EV/LTMRev

StockPrice

EV/LTMRev

StockPrice

EV/LTMRev

12/31/08 to 9/30/11

Low Point to 9/30/11

High Point to 9/30/11

athenahealth Inc. $2,207.3 $ 37.62 9.33 x $22.05 3.04x $69.25 9.48x $59.55 7.50x 58.3% 170.1% -14.0%

Blackboard Inc. $1,573.8 $26.23 2.98 x $23.00 2.51x $48.80 4.23x $44.66 3.53x 70.3% 94.2% -8.5%

Concur Technologies Inc. $2,092.3 $ 32.82 6.21 x $18.20 3.00x $57.87 8.93x $37.23 5.34x 13.4% 104.6% -35.7%

Constant Contact Inc. $519.9 $13.25 3.44 x $12.60 1.69x $35.60 5.48x $17.29 2.12x 30.5% 37.2% -51.4%

Convio Inc. $153.6 NA NA $6.95 1.09x $12.91 2.51x $8.41 1.39x NA 21.0% -34.9%

Cornerstone OnDemand Inc. $642.6 NA NA $12.13 9.32x $22.74 26.23x $12.54 9.84x NA 3.4% -44.9%

DealerTrack Holdings Inc. $677.1 $ 11.89 1.13 x $9.28 0.71x $25.49 3.75x $15.67 2.08x 31.8% 68.9% -38.5%

DemandTec Inc. $196.9 $8.07 2.09 x $5.40 1.33x $14.07 4.62x $6.54 1.50x -19.0% 21.1% -53.5%

Ellie Mae Inc. $116.1 NA NA $3.80 0.88x $7.30 4.73x $5.56 1.68x NA 46.3% -23.8%

IntraLinks Holdings Inc. $430.6 NA NA $6.64 1.83x $31.76 9.76x $7.51 2.69x NA 13.1% -76.4%

Kenexa Corp. $444.1 $ 7.98 0.75 x $3.83 0.30x $32.87 4.11x $15.64 1.66x 96.0% 308.4% -52.4%

LivePerson Inc. $556.4 $1.82 0.87 x $1.68 0.73x $14.71 6.16x $9.95 4.00x 446.7% 492.3% -32.4%

LogMeIn Inc. $803.4 NA NA $15.43 3.57x $47.22 10.56x $33.21 5.64x NA 115.2% -29.7%

Medidata Solutions Inc. $415.1 NA NA $13.64 1.48x $27.11 3.69x $16.44 1.85x NA 20.5% -39.4%

NetSuite Inc. $1,908.3 $ 8.44 2.67 x $6.74 1.94x $42.64 13.39x $27.01 8.40x 220.0% 300.7% -36.7%

RealPage Inc. $1,470.2 NA NA $14.52 5.71x $32.80 12.79x $20.45 6.34x NA 40.8% -37.7%

Responsys Inc. $534.1 NA NA $10.44 3.87x $17.80 7.67x $10.78 3.87x NA 3.3% -39.4%

RightNow Technologies Inc. $1,117.9 $7.73 1.20 x $5.84 0.73x $36.18 5.64x $33.05 5.01x 327.6% 465.9% -8.7%

salesforce.com Inc. $16,199.0 $ 32.01 3.31 x $25.77 2.46x $159.32 12.55x $114.28 8.36x 257.0% 343.5% -28.3%

SciQuest Inc. $300.5 NA NA $10.65 4.74x $17.90 8.04x $14.94 5.31x NA 40.3% -16.5%

ServiceSource $923.8 NA NA $11.75 4.53x $22.29 9.05x $13.21 4.85x NA 12.4% -40.7%

SoundBite Communications Inc. $38.7 $14.60 NMF $1.30 0.02x $3.41 0.47x $2.50 0.27x -82.9% 92.3% -26.7%

SPS Commerce Inc. $203.7 NA NA $8.60 1.52x $18.71 3.90x $16.29 3.48x NA 89.4% -12.9%

SuccessFactors Inc. $1,974.0 $5.74 2.25 x $4.98 1.61x $40.27 13.55x $22.99 6.84x 300.5% 361.6% -42.9%

Synchronoss Technologies Inc. $977.4 $ 10.66 2.23 x $8.23 1.59x $35.20 7.03x $24.91 4.05x 133.7% 202.7% -29.2%

Taleo Corp. $1,106.9 $7.83 1.20 x $7.09 1.06x $37.94 5.66x $25.72 3.50x 228.5% 262.8% -32.2%

Tangoe Inc $371.2 NA NA $8.75 2.59x $13.98 4.78x $11.31 3.90x NA 29.3% -19.1%

Ultimate Softw are Group Inc. $1,263.3 $14.60 1.97 x $12.95 1.67x $60.37 6.60x $46.72 4.94x 220.0% 260.8% -22.6%

Vocus Inc. $356.1 $ 18.21 3.51 x $11.66 1.74x $32.67 5.36x $16.76 2.26x -8.0% 43.7% -48.7%

MarketCap

($ MM)

12/31/08 Low Point High Point 9/30/11 % Change in Stock Price

Page 14: Cloud insights m&a and capital markets report

Public Company Analysis (cont'd)

www.williamblair.com 10

Public Company Analysis (cont'd)

Comparable Company Analysis

*Indicates excluded from mean and median calculation due to low enterprise value. Source: FactSet as of September 30, 2011.

Market Enterprise '10 - '11 2011Close Cap Value Enterprise Value / Revenue Enterprise Value / EBITDA Enterprise Value / FCF Revenue EBITDA

Name 09/30/11 ($ MM) ($ MM) LTM 2011E 2012E LTM 2011E 2012E LTM 2011E 2012E Growth Margin

athenahealth Inc. $59.55 $2,207.3 $2,102.9 7.50x 6.55x 5.08x 41.3x 33.2x 24.4x 57.2x nmf 46.7x 30.8% 19.7%

Blackboard Inc. $44.66 $1,573.8 $1,700.2 3.53x 3.15x 2.83x 20.8x 13.6x 10.9x 23.8x 17.5x 15.2x 20.7% 23.2%

Concur Technologies Inc. $37.23 $2,092.3 $1,771.3 5.34x 4.83x 3.97x 30.7x 18.3x 13.7x 44.7x 36.5x 27.4x 20.0% 26.4%

Constant Contact Inc. $17.29 $519.9 $413.8 2.12x 1.93x 1.60x 23.8x 11.8x 8.4x 32.3x 20.7x 14.3x 23.1% 16.4%

Convio Inc. $8.41 $153.6 $102.7 1.39x 1.29x 1.12x 14.5x 9.7x 7.3x 44.1x 14.2x 9.2x 14.5% 13.2%

Cornerstone OnDemand Inc. $12.54 $642.6 $556.7 9.84x 7.65x 5.16x nmf nmf nmf nmf nmf 37.6x 66.5% nmf

DealerTrack Holdings Inc. $15.67 $677.1 $606.9 2.08x 1.79x 1.61x 10.3x 8.6x 7.0x 15.8x 51.7x 21.0x 38.7% 20.8%

DemandTec Inc. $6.54 $196.9 $132.7 1.50x 1.46x 1.30x nmf 45.3x 21.9x 24.5x 21.3x 14.7x 12.9% 3.2%

Ellie Mae Inc. $5.56 $116.1 $78.5 1.68x 1.56x 1.27x 16.0x 10.6x 6.4x nmf 19.1x 12.9x 16.4% 14.7%

IntraLinks Holdings Inc. $7.51 $430.6 $553.7 2.69x 2.55x 2.28x 7.7x 7.8x 6.8x 11.4x 12.9x 9.4x 17.9% 32.9%

Kenexa Corp. $15.64 $444.1 $399.8 1.66x 1.42x 1.26x 15.7x 8.9x 7.3x 41.3x 16.3x 11.9x 41.3% 16.0%

LivePerson Inc. $9.95 $556.4 $482.0 4.00x 3.60x 2.98x 19.2x 14.0x 11.5x 34.8x 28.4x 19.3x 21.8% 25.7%

LogMeIn Inc. $33.21 $803.4 $619.3 5.64x 5.18x 4.25x 33.8x 19.7x 15.8x 20.6x 19.9x 15.6x 18.4% 26.2%

Medidata Solutions Inc. $16.44 $415.1 $321.3 1.85x 1.73x 1.56x 9.4x 7.2x 5.9x 32.3x 10.0x 8.9x 11.4% 24.2%

NetSuite Inc. $27.01 $1,908.3 $1,790.0 8.40x 7.64x 6.42x nmf nmf 57.0x nmf nmf 45.1x 21.2% 9.6%

RealPage Inc. $20.45 $1,470.2 $1,403.0 6.34x 5.35x 4.22x 46.2x 24.5x 18.0x 56.2x 39.2x 27.2x 39.4% 21.8%

Responsys Inc. $10.78 $534.1 $452.2 3.87x 3.40x 2.79x 20.9x 19.6x 15.2x nmf 32.1x 24.3x 41.4% 17.4%

RightNow Technologies Inc. $33.05 $1,117.9 $1,036.9 5.01x 4.57x 3.87x 43.8x 32.9x 20.8x nmf nmf 27.8x 22.2% 13.9%

Salesforce.com Inc. $114.28 $16,199.0 $16,196.5 8.36x 7.43x 5.92x 57.8x 42.4x 30.9x nmf 41.6x 30.1x 34.3% 17.5%

SciQuest Inc. $14.94 $300.5 $250.5 5.31x 4.62x 3.95x 34.2x 23.3x 16.9x 32.2x 19.1x 14.9x 27.8% 19.8%

ServiceSource $13.21 $923.8 $852.0 4.85x 4.44x 3.62x nmf nmf 38.0x nmf nmf nmf 25.6% 5.8%

SoundBite Communications Inc.* $2.50 $38.7 $10.3 0.27x 0.26x 0.24x nmf nmf 17.9x nmf nmf nmf 2.3% nmf

SPS Commerce Inc. $16.29 $203.7 $173.9 3.48x 3.08x 2.56x 45.1x 34.5x 20.9x nmf 52.8x 22.8x 26.6% 8.9%

SuccessFactors Inc. $22.99 $1,974.0 $1,724.1 6.84x 5.49x 4.36x nmf nmf nmf 49.7x 37.1x 25.5x 49.9% 2.2%

Synchronoss Technologies Inc. $24.91 $977.4 $820.9 4.05x 3.60x 3.01x 26.1x 13.5x 10.9x nmf 28.3x 18.7x 34.0% 26.8%

Taleo Corp. $25.72 $1,106.9 $958.5 3.50x 2.97x 2.54x 28.3x 13.3x 11.8x 38.5x 34.7x 18.3x 33.5% 22.3%

Tangoe Inc $11.31 $371.2 $328.2 3.90x na na nmf 27.5x 18.1x nmf 41.2x 21.9x na na

Ultimate Software Group Inc. $46.72 $1,263.3 $1,215.8 4.94x 4.50x 3.76x 54.8x 26.4x 17.9x 59.6x 48.6x 28.6x 18.6% 17.1%

Vocus Inc. $16.76 $356.1 $239.6 2.26x 2.09x 1.80x nmf 13.7x 9.6x 14.9x 13.9x 9.1x 17.3% 15.3%

Page 15: Cloud insights m&a and capital markets report

Venture Capital Activity

11

Venture Capital Activity Transaction Analysis

The total number of venture investments increased 28% when comparing LTM 09/11 with LTM 09/10, while dollar volume also was up 53% for the same periods.

Year-over-year, third quarter 2011 was up in venture capital activity; third quarter 2011 witnessed 55 venture investments totaling $622 million, while third quarter 2010 witnessed 51 venture investments totaling $302 million.

On a monthly basis, September 2011 witnessed 21 SaaS venture transactions totaling $235.5 million in disclosed transaction value compared with 21 transactions totaling $125.6 million in September 2010.

Annual Venture Capital SaaS Activity

2008 2009 2010 LTM 09/10 LTM 09/11

Transaction Value $1,296 $961 $901 $997 $1,530

Number of Transactions 133 134 157 163 208

Quarterly Venture Capital SaaS Activity

Q3'08 Q4'08 Q1'09 Q2'09 Q3'09 Q4'09 Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11

Transaction Value $257 $129 $132 $228 $219 $382 $176 $133 $302 $290 $312 $290 $622

Number of Transactions 31 15 22 21 45 46 27 38 51 41 51 58 55

Source: Capital IQ and VentureSource as of September 30, 2011.

Transaction Value LTM Transaction Value # of Transactions

0

50

100

150

200

250

$0

$400

$800

$1,200

$1,600

$2,000

Number ofTransactions

Transaction Value($ in millions)

Number ofTransactions

Transaction Value($ in millions)

Transaction Value Number of Transactions

$0

$100

$200

$300

$400

$500

$600

$700

0

10

20

30

40

50

60

70

Number ofTransactions

Transaction Value($ in millions)

Page 16: Cloud insights m&a and capital markets report

Venture Capital Activity (cont'd)

www.williamblair.com 12

Transaction Analysis (cont’d) Venture Capital Activity (cont'd)

The number of early- and later-stage investments for LTM 09/11 increased significantly compared with levels seen in LTM 09/10; however, the number of series B and series C transactions have remained relatively flat.

The median transaction size has remained relatively flat for series A, series C, and Later Stage transactions, while Series B transactions have seen a slight increase in median transaction size.

Number of SaaS Transactions by Round

Series A Series B Series C Later Stage

Median SaaS Transaction Size by Round

($ in millions)

Series A Series B Series C Later Stage

Source: Capital IQ, VentureSource and William Blair estimates as of September 30, 2011.

4034

2721

54

3328

35

0

10

20

30

40

50

60

$2

$6

$9

$12

$2

$9 $9

$12

0

5

10

15

LTM 09/10 LTM 09/11

LTM 09/10 LTM 09/11

Page 17: Cloud insights m&a and capital markets report

William Blair & Company Selected Cloud Transactions

13

William Blair & Company Selected Cloud Transactions

\

has been acquired by

Selected M&A Transactions

Selected Private Placement Transactions

$50,000,000

Convertible Preferred Stock

$54,000,000

Convertible Preferred Stock

Selected Public Equity Transactions

$126,500,000

Initial Public Offering

$120,081,000

Initial Public Offering& Follow-on

$303,514,000

Follow-on Offerings

$708,860,000

Initial Public Offering& Follow-ons

$10,000,000

Series E Preferred Stock

from existing investors and

has been acquired by has been acquired byhas been acquired by has acquired has been acquired by

$66,000,000

Initial Public Offering

$206,816,000

Initial Public Offering& Follow-on

$91,673,000

Initial Public Offering& Follow-on

$53,124,000

Initial Public Offering

has been acquired byhas been acquired by has been acquired byreceived a significant

investment from

$422,108,000

Initial Public Offering& Follow-on

$132,781,530

Initial Public Offering& Follow-on

$318,436,530

Initial Public Offering& Follow-on

$156,975,000

Initial Public Offering

$51,750,000

Initial Public Offering

$91,351,224

Initial Public Offering

$71,875,000

Initial Public Offering

Page 18: Cloud insights m&a and capital markets report

SaaS Professional Biographies

www.williamblair.com 14

SaaS Professional Biographies

SaaS Professional Biographies

Mark McNay Partner and Group Head, San Francisco Mark McNay joined William Blair & Company in 2000 as Group Head of the West Coast Investment Banking Team based in San Francisco. Prior to joining William Blair & Company, he was a Managing Director and Head of the Internet Banking Group at Volpe Brown Whelan & Company and a Managing Director at Smith Barney, where at various times he headed the Consumer/Retailing Group and the Los Angeles Corporate Finance Office. He is a graduate of Georgetown University (B.S.) and Columbia University (M.B.A.).

Andrew Arno Director, San Francisco Andrew Arno is a Director in William Blair & Company’s West Coast Investment Banking Team based in San Francisco. He joined William Blair & Company in 2004. From 2000 to 2002, he was an Investment Banking Associate at WR Hambrecht+Co. in the technology group. From 1997 to 2000, he worked at The Shattan Group LLC, a boutique investment bank focused on private equity placements. He is a graduate of Columbia University (B.A.) and the Haas School of Business at UC Berkeley (M.B.A.).

Patrick Vihtelic Associate, San Francisco Patrick Vihtelic is an Associate in William Blair & Company’s West Coast Investment Banking Team based in San Francisco. While at William Blair & Company, Patrick has been focused on executing mergers & acquisitions, public equity offerings and private equity placements for technology companies. He joined William Blair & Company in 2008 after spending time at a boutique investment bank in San Francisco. Before investment banking, Patrick spent a summer working at Motorola as a Financial Analyst in the mobile division. He is a graduate of Indiana University (B.S.).

Paul Huber Senior Analyst, San Francisco Paul Huber is a Senior Analyst in William Blair & Company’s West Coast Investment Banking Team based in San Francisco. He joined William Blair & Company in 2010 and is focused primarily on supporting transaction execution. Before joining William Blair & Company, he was an Investment Banking Analyst at Financial Technology Partners LP, a boutique investment bank in San Francisco. He is a graduate of Brown University (A.B.).

Page 19: Cloud insights m&a and capital markets report

William Blair & Company SaaS Equity Research Coverage

15

William Blair & Company SaaS Equity Research Coverage

SaaS Equity Research

Company Ticker Analyst

athenahealth, Inc. ATHN Daniels, Ryan

Blackboard Inc. BBBB Dobell, Brandon

Concur Technologies, Inc. CNQR Lederman, Laura

Constant Contact, Inc. CTCT Lederman, Laura

Convio, Inc. CNVO Lederman, Laura

Cornerstone OnDemand, Inc. CSOD Lederman, Laura

DemandTec, Inc. DMAN Lederman, Laura

Ellie Mae, Inc. ELLI Dobell, Brandon

Kenexa Corporation KNXA Lederman, Laura

NetSuite Inc. N Lederman, Laura

RealPage, Inc. RP Lederman, Laura

Responsys, Inc. MKTG Lederman, Laura

RightNow Technologies, Inc. RNOW Lederman, Laura

salesforce.com, inc. CRM Lederman, Laura

SciQuest, Inc. SQI Lederman, Laura

ServiceSource International, Inc. SREV Lederman, Laura

SPS Commerce, Inc. SPSC Lederman, Laura

Ultimate Software Group, Inc. ULTI Lederman, Laura

Vocus, Inc. VOCS Lederman, Laura

Page 20: Cloud insights m&a and capital markets report

Notes

www.williamblair.com 16

Notes

Page 21: Cloud insights m&a and capital markets report

OFFICE LOCATIONS

[Banker][[email protected]]+1.312.XXX.XXXX

[Banker][[email protected]]+1.312.XXX.XXXX

[TITLE]

[Date]

An Overview of Current Industry Trends, Consolidation Drivers, and M&A Activity

[Banker][[email protected]]+1.312.XXX.XXXX

[Banker][[email protected]]+1.312.XXX.XXXX

[Banker][[email protected]]+1.312.XXX.XXXX

[Banker][[email protected]]+1.312.XXX.XXXX

M&A

William Blair & Company, L.L.C. is a global investment firm offering investment banking, asset management, equity research, institutional and private brokerage, and private capital to individual, institutional, and issuing clients. Since 1935, we have been committed to helping clients achieve their financial objectives. As an independent, employee-owned firm, our philosophy is to serve our clients’ interests first and foremost. We place a high value on the enduring nature of our client relationships, the quality of our products and services, and the continuity and integrity of our people. For more information, please visit www.williamblair.com.

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