software industry valuations q3 2011

SOFTWARE INDUSTRY EQUITY REPORT

Q3 2011

ABOUT OUR FIRM Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has guided and advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions. Our value proposition is unique and compelling. We are skilled and accomplished investment bankers with extraordinary software, internet and technology domain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model, including Software-as-a Service (SaaS), software on-demand and perpetual license. We have profound understanding of software company finances, operations and valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these deals. We're formidable negotiators and savvy dealmakers who facilitate strategic combinations that enhance shareholder value. Perhaps most important are the relationships we've built and the industry reputation we enjoy. Software Equity Group is known and respected by publicly traded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry Equity Reports are read and relied upon by more than eighteen thousand industry executives, entrepreneurs and equity investors in sixty-one countries, and we have been quoted widely in such leading publications as The Wall Street Journal, Barrons, Information Week, The Daily Deal, The Street.com, U.S. News & World Report, Reuters, Mergers & Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine, Softletter, Software Success, Software CEO Online and Software Business Magazine. Software Equity Group’s senior bankers have keynoted and spoken at more than one hundred software industry conferences and seminars, including Software Business, SoftExpo, Culpepper, VAR Conference, ACETECH, and the Arizona, Colorado, Chicago, Southern California, Denver, San Diego, Washington State and Boulder Software Associations.

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3Q 2011 Software Industry Equity Report Contents

U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS ........................................................................ 2

IT SPENDING ............................................................................................................................................................ 3

INTERNET RETAIL SPENDING AND ADVERTISING ............................................................................................ 4

PUBLIC SOFTWARE/SAAS/INTERNET COMPANY STOCK PERFORMANCE ................................................... 4

PUBLIC SOFTWARE/SAAS/INTERNET COMPANY MARKET VALUATIONS ..................................................... 5

PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ................................................................................... 5

PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE .......................................................................... 6

PUBLIC SOFTWARE COMPANY MARKET VALUATIONS AND FINANCIAL PERFORMANCE BY PRODUCT CATEGORY .............................................................................................................................................................. 7

PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS ........................................... 9

PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE .................................................... 10

PUBLIC INTERNET COMPANY MARKET VALUATIONS .................................................................................... 11

PUBLIC INTERNET COMPANY FINANCIAL PERFORMANCE ........................................................................... 12

PUBLIC INTERNET COMPANY MARKET VALUATIONS AND FINANCIAL PERFORMANCE BY PRODUCT CATEGORY ............................................................................................................................................................ 12

INITIAL PUBLIC OFFERINGS ................................................................................................................................ 14

M&A DEAL VOLUME AND SPENDING: ALL INDUSTRY SECTORS ................................................................. 17

SOFTWARE/SAAS M&A DEAL VOLUME AND SPENDING ................................................................................ 18

IMPORTANT CHANGE IN SOFTWARE AND SAAS M&A DATA ACCOUNTING............................................... 19

SOFTWARE M&A DEAL CURRENCY ................................................................................................................... 19

SOFTWARE M&A VALUATIONS .......................................................................................................................... 19

SOFTWARE M&A VALUATIONS BY OWNERSHIP ............................................................................................. 20

SOFTWARE M&A VALUATIONS BY VERTICAL AND HORIZONTAL MARKETS ............................................. 21

M&A VALUATIONS BY SOFTWARE PRODUCT CATEGORY ............................................................................ 21

SOFTWARE AS A SERVICE (SAAS) M&A DEAL VOLUME AND VALUATIONS .............................................. 23

INTERNET M&A DEAL VOLUME AND VALUATIONS ......................................................................................... 24

APPENDIX A: 3Q11 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 26

APPENDIX B: 3Q11 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ............................................................................................................................................................ 29

APPENDIX C: 3Q11 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS .................. 30

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APPENDIX D: 3Q11 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS ............................................. 31

APPENDIX E: 3Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS ...... 33

APPENDIX F: 3Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ...... 34

APPENDIX G: 3Q11 MERGERS AND ACQUISITIONS – DEAL INSIGHT ........................................................... 35

APPENDIX H: SELECT 3Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS ................................ 37

Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions

2| 3Q11 SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com


U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS We begin with a brief synopsis of U.S. Gross Domestic Product (GDP) performance in 3Q11 based upon the latest data available at this time. GDP is best defined as the total market value of all final goods and services produced in a country in a given year, equal to total consumer, investment and government spending, plus the value of exports, minus the value of imports. In a Wall Street Journal survey of fifty six leading economists in September 2011, the average 3Q 2011 GDP growth rate was estimated to be 2.0%, a modest but encouraging improvement over Q2’s 1.3% growth and Q1’s barely discernable uptick of 0.4%. While 2011’s anemic growth rates and recession predictions are worrisome, growth in Q3 GDP would mark the ninth consecutive quarter of economic expansion (Figure 1). However, the prospect of actually achieving that 2% forecast is increasingly unlikely because of the pall hanging over the world’s financial markets from the European debt crisis, head-spinning stock market volatility, and other macro uncertainty. One in three economists surveyed by the Wall Street Journal now predict the U.S. economy will slip into recession during the next twelve months. The Conference Board’s index of U.S. Leading Economic Indicators (LEI) rose only 0.3% in August, following a 0.6% increase in July and a

0.3% increase in June. Those predicting an impending recession need only point to the dearth of negative economic trends. Only four of the Board’s ten LEI indicators were positive: Real money supply, interest rate spread, building permits and the index of supplier deliveries. The negative contributors, beginning with the largest negative contributor, were stock prices, the index of consumer expectations, average weekly manufacturing hours, average weekly initial claims for unemployment insurance (inverted), manufacturers’ new orders for consumer goods and materials, and manufacturers’ new orders for nondefense capital goods. The recent employment report, released by the U.S. Bureau of Labor Statistics, provided some reason for guarded optimism. The U.S. economy added 103,000 workers in September, sharply beating a Bloomberg News’ survey of economists which projected only 60,000 new workers. The U.S. unemployment rate refused to budge, holding steady at 9.1%. Information services and healthcare accounted for most of Q3’s new jobs. One economists surveyed by Bloomberg probably sums it up best when he said, “The economy isn’t doing well, but it didn’t lose the momentum that the markets feared.”

Figure 1: U.S. Gross Domestic Product and Unemployment Rate

3.9%

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3Q05 3Q06 3Q07 3Q08 3Q09 3Q10 3Q11

GDP % Growth Unemployment Rate




IT SPENDING For those who may be new to our reports, SEG carefully monitors IT spending each quarter as a means of forecasting downstream public software company financial performance and M&A activity. Several of the IT spending analysts we track modified their earlier projections of 5% - 7% growth in global IT spending, but they did not always agree. Example: In early September, Goldman Sachs cut its 2011 IT spending forecast to 5% from 6%, citing lower IT spending in developed markets as a key driver. In late September, Gartner increased its 2011 IT spending forecast to 7.6% from 7.1%, citing currency impacts, rather than any true underlying strength in the global IT spending. Domestically, Goldman and Gartner are forecasting 3% and 5% IT growth, respectively, for all of 2011. The projected domestic slowdown is largely driven by sluggish U.S. GDP growth, which Goldman determined has a 62% correlation with IT spending growth. Another basis for the spending slowdown: projections of lower S&P 500 operating profits. After operating profit growth of over 20% in 2010, Goldman is projecting S&P 500 operating profits will improve a modest 14% in 2011, and only 6% in 2012.

While 3% - 5% growth in IT spending may conform to what Goldman Sachs characterizes as “normal levels,” the wealth is not being spread evenly among IT providers. A more granular analysis reveals the growth is driven mostly by a relatively few product categories, including cloud computing and mobility, that are receiving a rapidly increasing share of the IT budget. Gartner is forecasting tablet spending will grow at a 52% CAGR from 2010 to 2015, boosted by 206% YoY growth from 2010 to 2011. Goldman Sachs estimates the mobile sector, including tablets, will grow at a CAGR of 75% from 2010 to 2014. Investments in public cloud computing and SaaS also continue to rapidly outgrow the broader IT market. Gartner forecasts that spending on public cloud computing and SaaS will grow at a five year CAGR of 19.1% and 14.9%, respectively, from 2010 to 2015, while Goldman Sachs forecasts SaaS spending will see a 20.9% CAGR from 2010 to 2014, driving the percent of SaaS applications in the enterprise to 15% by 2014. The shift in mindset by enterprise CIOs, from rejection to growing acceptance of SaaS deployed solutions, has been clearly noted by large public software companies. Our 2011 buyer survey (published in our 2010 Annual Report and available on our blog) documented a 131% increase in buyers – most larger, public software

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Jan Feb Mar Apr May Jun Jul Aug Sep

DOW S&P NASDAQ SEG SaaS SEG SW Index SEG Internet Index

Figure 2: Major Market Indices Compared to the SEG Software, Internet and SaaS Indices




and IT companies - who declared that in 2011, SaaS deployed solutions were a “very important” requisite for acquisition targets. We’ll poll buyers again in early January, but we expect the trend to continue. Underscoring the shifting attitude of enterprise CIOs toward SaaS solutions, a recent Forrester study on enterprise spending found 44% of surveyed companies are currently implementing or planning to implement SaaS solutions. Moreover, the scope of SaaS deployed enterprise solutions is widening. A recent Gartner report highlighted eight distinct SaaS product categories with notable and growing enterprise penetration. Collaboration and CRM were the most popular enterprise deployments of SaaS, at 46% and 32% respectively. SaaS deployed ERP applications, which have struggled to gain an enterprise foothold due to their mission critical nature and significant back office application integration requirements, reached 7% market penetration. INTERNET RETAIL SPENDING AND ADVERTISING In the Internet sector, we believe online retail sales and Internet advertising spending each quarter presage the downstream financial performance and M&A activity of many public Internet companies. Buoyed by a greater number of shoppers, online retail sales reached $37.5 billion in 2Q11 according to comScore, up 14% from 2Q10. It was the seventh consecutive quarter of growth for online retail, which already accounts for nearly $1 in every $10 of discretionary spending. Online retail categories growing at least 15% in Q2 from the same period a year ago included consumer electronics, computer hardware, computer software and event tickets. Forrester projects online retail sales as a percent of total retail sales will reach 15% by 2015. The Interactive Advertising Bureau (IAB) and PricewaterhouseCoopers (PwC) reported Internet advertising reached record levels in 1H11, with Internet ad revenues rising 23.2% to $14.9 billion from $12.1 billion in 1H10. With such an auspicious first half, it appears highly likely digital advertising by year end will exceed 2010’s record spend of $26 billion.

PUBLIC SOFTWARE/SAAS/INTERNET COMPANY

STOCK PERFORMANCE The major U.S. exchanges and the median stock price performance of public companies comprising our Software, SaaS and Internet Indices all finished lower at the close of Q3 2011. A U.S. credit rating downgrade and European debt fears proved too much for investors, who eventually opted for capital preservation over upside potential. It was a jolting ride. In August and September, the Dow industrials changed by more than 1% on 29 days, and more than 2% on 15 days. The volatility was reminiscent of the market’s extreme volatility in Q4 2008. By the close of the third quarter, the Dow, S&P 500 and NASDAQ were down 5.7%, 10.0% and 9.0%, respectively, from the first trading day of 2011 (Figure 2). During the same period, the SEG Software, SEG SaaS and SEG Internet indices were down 9.5%, 17.9% and 20.5% respectively. The dramatic decline of public Software, SaaS and Internet company stock prices reflects an investor selloff of relatively risky technology stocks and a flight to Treasurys. Across all three SEG tracking indices, 197 (71%) of the 278 public companies comprising our indices reported lower year-to-date (YTD) stock prices, far greater than the 99 companies (35.6%) that saw their stock prices decline by the close of 2Q11. Still, ten outstanding software companies managed to achieve YTD stock market returns on September 30 that exceeded the first trading day 2011 closing price by more than 45% (Figure 3). Included in the group is Internet high flyer, LinkedIn, which posted a 74% YTD return over its first day closing price in May of this year.

Figure 3: High Flyers – YTD Stock Market Return

Company Ticker Category2011 Stock

ReturnMajesco Entertainment Company

COOL Video Games 160%

Liquidity Services LQDT Internet - Retail 128%

LinkedIn LNKD Internet - Services 74%8x8, Inc. EGHT Internet - Infastructure 71%

Autonomy Corp. LSE:AU. Content/Document Management 70%

Merge Healthcare MRGE Healthcare 63%Stamps.com STMP Internet - Services 54%LoopNet, Inc. LOOP Internet - Services 54%Athenahealth ATHN SaaS - Healthcare 45%Cerner Corporation CERN Healthcare 45%

2011 High Flyers - Stock Market Return




PUBLIC SOFTWARE/SAAS/INTERNET COMPANY

MARKET VALUATIONS The median market valuations of public companies comprising the SEG Software, SaaS and Internet indices, measured as a multiple of EV/Revenue, were 2.1x, 4.8x and 2.6x, respectively, at the close of the third quarter (Figure 4). Although these Q3 median EV/Revenue multiples declined across the board from Q2, they were still markedly higher than from a year ago.

Bucking the lower market valuation trend were ten public software, SaaS and Internet companies that closed 3Q11 with stellar EV/Revenue multiples of 12.2x or higher, primarily because investors clearly resonated with their stellar median revenue growth rate of 67% (Figure 5). Baidu, known as “China’s Google”, once again led the pack with a median 3Q11 market valuation of 29.9x EV/Revenue. Baidu reported year-over-year revenue growth of 83.7% (which is extraordinary, considering revenue exceeds $1B), and a remarkable EBITDA margin of 56.9%. Baidu narrowly beat out Qihoo, a Chinese provider of online security that went public in 2011, for top market valuation honors. All told, five of the ten EV/Revenue high flyers are headquartered in China, demonstrating continued investor enthusiasm for the mammoth Chinese domestic market, despite lingering concerns about inflation and slowed growth.

PUBLIC SOFTWARE COMPANY MARKET

VALUATIONS By the close of Q3, the median EV/Revenue multiple of public companies in our SEG Software Index had declined to 2.1x from 2.7x the prior quarter. Although 3Q11’s multiple was the lowest since 3Q10 (also 2.1x), it was still well above the recession valuations of 2008 – 2009. Despite the decline, the median EV/Rev valuation of the SEG Software Index has now been at or above 2.0x for eight consecutive quarters (Figure 6).

Smaller public software companies were viewed by investors in 4Q10 and 1Q11 as well positioned for accelerated growth in a recovering economy. By 3Q11, pummeled by a barrage of bad economic news, investors saw most of these smaller software companies as especially vulnerable to a second recession. Despite revenue growth rates nearly double their peers, the median EV/Revenue multiple of SEG Software Index companies with revenues between $100 million and $200 million dropped from 3.9x at the close of 1Q11 to 2.8x by the

Figure 4: SEG Indices 3Q11 Median EV/Revenue

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ultiple

SEG ‐ SaaS SEG ‐ Software SEG ‐ Internet

Figure 5: High Flyers – Enterprise Value/Revenue

Company Ticker Category EV/RBaidu.com, Inc. BIDU Internet - Search 29.9xQihoo QIHU Internet - Security 26.0xYouku YOKU Internet - Media 24.4xLinkedIn LNKD Internet -Social Network 22.5xRenren RENN Internet - Social Network 21.3xZillow Z Internet - Services 17.6xHomeAway AWAY Internet - Travel 17.5xYandex YNDX Internet - Search 16.3xSINA Corporation SINA Internet - Ad Tech 14.0xCornerstone OnDemand

CSOD SaaS - Workforce Management 12.2x

3Q11 High Flyers - Enterprise Value/Revenue (Median)

Figure 6: SEG Software Index Key Statistics

Measure 3Q10 4Q10 1Q11 2Q11 3Q11

EV/Revenue 2.1x 2.6x 2.7x 2.7x 2.1xEV/EBITDA 12.1x 13.6x 14.6x 13.3x 11.2xEV/Earnings 24.7x 26.5x 26.4x 24.7x 20.9x

Current Ratio 2.0 2.0 2.1 2.1 2.0Cash & Eq ($M) $106.1 $109.1 $127.3 $118.5 $117.4Gross Profit Margin 67.1% 67.4% 67.0% 67.4% 66.8%EBITDA Margin 19.4% 18.9% 19.0% 19.2% 18.4%

Net Income Margin 8.5% 8.4% 8.3% 9.3% 9.1%TTM Revenue Growth 6.3% 9.6% 13.9% 14.1% 14.7%TTM Total Revenue ($M) $278.1 $286.7 $297.9 $295.4 $312.5

TTM Total EBITDA ($M) $43.9 $45.1 $44.7 $45.3 $45.4

Debt / Equity Ratio 24.6% 29.2% 26.8% 25.6% 26.0%

SEG - Software: Median Metrics




close of the third quarter. The sharp decline brought their valuations roughly in-line with their larger counterparts. Public software companies with revenues greater than $1 billion, which have historically been viewed by software investors as a safer harbor during stormy weather, had a median EV/Revenue multiple of 2.6x in 3Q11 - bolstered, no doubt, by a stellar median EBITDA margin of 24.7% (Figure 7). On an EV/EBITDA basis, public software company valuations overall closed 3Q11 with a median 11.2x, well below 2Q11’s 13.3x (Figure 6). In 3Q11, software companies with revenue greater than $1 billion posted a median EV/EBITDA multiple of 7.8x, while software companies with revenue between $100 million and $200 million were valued at 10.8x EV/EBITDA (Figure 7). PUBLIC SOFTWARE COMPANY FINANCIAL

PERFORMANCE The median TTM revenue of the 144 public companies comprising the SEG Software Index grew 14.7% in 3Q11, compared to 14.1% the prior quarter (Figure 6). The 14.7% median TTM growth rate was the highest of any quarter since 2Q07 (16%), and pushed the median TTM revenue of the SEG Software Index above $300 million for the first time ever. The $300 million milestone was achieved less than three years after the median TTM revenue of the SEG Software Index surpassed $200 million in 1Q09 – further evidence that consolidation in the software sector is resulting in not only fewer, but considerably larger, publicly traded software companies.

The Street strategy of many public software companies in 2011 has been to forecast conservative revenue growth in case of a sharp economic downturn, then beat their guidance if it didn’t materialize. According to our random sample of 28 public software companies with recent earnings calls, 23 (82.1%) exceeded their forecast revenue projections (Figure 8). With only one quarter left for CIOs to spend previously approved IT budget money, look for further improvement in the 4Q11 SEG Software Index median TTM revenue growth rate. Unsurprisingly, public software companies that are focused on the hottest IT spending categories and vertical markets, including mobility, cloud infrastructure and healthcare, grew their 3Q11 TTM revenue far more aggressively than the 14.7% median. Among the most noteworthy: mobility players Trunkbow International Holdings (104.4%), Gree (82.2%) and Opera (32.9%); healthcare players Merge Healthcare (134.4%) and eResearchTechnology (80.3%); and cloud infrastructure and optimization players F5 networks (36.0%) and VMWare (37.8%). Throughout the Great Recession, as growth rates plummeted, public software companies shifted attention to the bottom line and grew their EBITDA margins from a median 11.2% in 4Q07 to a high of 19.4% in 3Q10. The median EBITDA margins of SEG Software Index companies was 18.4% at the close 3Q11, slightly below the peak. In unpredictable times, achieving forecasted profitability is no easy feat. Of the 28 public software companies in our random sample, only six (21.4%) beat their EPS forecast to the Street (Figure 8). Among the industry’s largest players, Microsoft was the only $500+ million revenue company in our random sample to exceed its earnings target.

Figure 7: SEG Software Valuation and Financial Performance by Size of Buyer (TTM Revenue)

Revenue Growth EBITDA Margin

3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11 3Q11 (TTM) 3Q11 (TTM)

Revenue Greater Than $1 billion 2.5x 2.6x 2.8x 2.7x 2.6x 8.7x 8.4x 8.5x 8.7x 7.8x 12.2% 24.7%

Revenue Between $200 million and $1 billion 2.2x 2.7x 2.6x 2.7x 2.1x 13.1x 14.2x 15.1x 15.5x 13.4x 12.8% 18.5%

Revenue Between $100 million and $200 million 2.4x 3.1x 3.9x 3.1x 2.8x 9.8x 12.1x 12.9x 12.6x 10.8x 24.7% 15.4%

Revenue Less Than $100 million 1.2x 1.5x 2.2x 2.2x 1.8x 13.5x 15.2x 15.7x 14.2x 13.1x 12.7% 10.5%

SEG Software Index Companies

EV/Revenue EV/EBITDA




Public software balance sheets remained healthy in 3Q11. Median cash and equivalents were $117.4 million, up 10.7% year-over-year and current ratios remained at a healthy level of 2.0 (Figure 6). The steady increase in the cash reserves of most public software companies over the past few years has undoubtedly been a by-product of their much improved EBITDA margins. Consider that in 3Q07 when the median EBITDA margin was only 11.2%, the median cash and equivalents of the SEG Software Index was $70.5 million. In 3Q11 the median EBITDA margin was 18.4% and median cash and equivalents had grown to $117.4 million, a 60% increase from four years ago (Figure 9). The significant cash reserves and strong balance sheets of most public software companies, particularly the industry’s largest players, bode well for many small and mid-cap software company targets.

PUBLIC SOFTWARE COMPANY MARKET

VALUATIONS AND FINANCIAL PERFORMANCE BY

PRODUCT CATEGORY While median financial performance metrics are useful for assessing the overall health of the software industry and for comparisons to other economic sectors, a deeper analysis of these key metrics by software product category provides greater insight about the software ecosystem. By analyzing how public software companies in discrete product categories are performing, we increase our understanding of market trends, sector health, product lifecycles, M&A valuations, IT spending priorities and stock market biases. As we’ve noted in past reports, the median EV/Revenue valuations and financial results for a particular software category can be stagnant or can fluctuate wildly each quarter. As a result, software category rankings, measured by relative median valuations and financial performance can also be consistent or volatile quarter-to-quarter. That axiom held true, once again, in 3Q11 (Figure 10). We track this data because the current median valuation of companies comprising a particular software category often weighs heavily when buyers value acquisition targets.

Figure 8: Expected vs. Delivered Revenue and EPS Results (as of September 30, 2011)

Company Revenue EPS

Microsoft Corporation

Cisco Systems, Inc.

Oracle Corporation

Google Inc.

Adobe Systems Incorporated

Electronic Arts Inc.

BMC Software, Inc.

Mentor Graphics Corporation

Informatica

MSCI Inc.

TIBCO Software Inc.

Avid Technology Inc.

Open Text Corporation

NICE Systems Ltd.

Manhattan Associates, Inc.

QAD Inc. TeleCommunication Systems, Inc.

MicroStrategy Incorporated

Real Networks

Velti

SS&C Corporation

American Software, Inc.

PCTEL, Inc.

PDF Solutions, Inc.

Scientific Learning Corp.

Geeknet, Inc.

Pervasive Software Inc.

NetSol Technologies Inc.

Company Revenues:

Greater than $1 billion

Company Revenues: $500 million to $1 billion

Company Revenues: $100 - $500

million

Company Revenues: Less than

$100 million

: Exceeded or Met Expectations: Did Not Meet Expectations

Figure 9: SEG Software Historical Median Cash and Median EBITDA Margins

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The SEG Software Index is comprised of 22 software product categories sorted into three broad groups, Infrastructure Software, Application Software and Other. The Infrastructure Software group is comprised primarily of utilities, tools, middleware, systems, platforms and technologies to create, integrate, optimize, deliver, monitor, store and protect enterprise applications. The Application Software group consists primarily of solutions to perform, analyze, design and manage information and data in one, or many, specific industry sectors. The Other Software group is comprised of companies that concentrate on a specific vertical or the emerging class of IT Conglomerates who span numerous product categories, such as Oracle, Microsoft, HP and IBM. In 3Q11, public Infrastructure Software companies outpaced their Application Software counterparts in nearly all metrics tracked (Figure 10). Particularly noteworthy was the Infrastructure group’s median 2.3x EV/Revenue multiple and 18.7% TTM revenue growth in the third quarter, as compared to the Application group’s median

2.1x EV/Revenue multiple and 14.1% revenue growth rate. The Networking and Network Performance Management product category posted the highest median EV/Revenue multiple in the Infrastructure Software segment, 3.8x. Companies comprising the Networking and Network Performance Management product category continued to benefit from strong demand for WAN optimization required to deliver software rapidly over cloud- based architectures. SolarWinds recorded the highest median EV/Revenue of the group at 8.7x while F5 Networks posted the highest year-over-year revenue growth of 36.0%. Development tools & open source achieved the highest median TTM revenue growth rates at 25.0%, led by Magic Software (45.0%), GeekNet (42.6%) and BSQUARE (35.7%). Collectively, the group is driven by unprecedented demand for software solutions and toolsets to create, power and deploy the infrastructure for mobile and cloud computing.

Figure 10: SEG Software Categories

Revenue Growth

EBITDA Growth

EBITDA Margin

YTD Stock Return

3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11 3Q11 (TTM) 3Q11 (TTM) 3Q11 (TTM) 2011

Billing & Service Management 1.7x 1.8x 1.9x 1.9x 1.3x 9.7x 10.5x 8.7x 8.0x 5.8x 18.5% 7.7% 20.4% -27.0%

Content/Document Management 2.5x 2.7x 3.2x 3.4x 2.6x 10.0x 9.7x 11.1x 11.5x 9.8x 14.0% 14.4% 26.6% 9.2%

Data Management & Integration 2.3x 2.9x 3.3x 3.3x 2.9x 9.9x 11.0x 16.0x 14.3x 13.3x 20.9% 26.0% 23.4% 3.3%

Development Tools & Open Source 2.4x 2.8x 3.0x 2.7x 2.2x 8.6x 9.9x 11.4x 10.3x 6.8x 25.0% 30.2% 24.7% -20.3%

Netw orking & Netw ork Performance Management

2.5x 3.1x 4.3x 4.8x 3.8x 15.3x 18.8x 28.0x 24.7x 18.6x 21.2% 30.2% 22.6% -23.4%

Security 2.4x 2.5x 2.4x 2.9x 2.2x 12.9x 14.0x 13.8x 13.9x 11.0x 12.8% 11.9% 20.9% -14.6%

Storage & Systems Management 2.4x 2.7x 3.1x 2.9x 2.1x 9.5x 12.0x 12.1x 11.8x 9.3x 10.8% 29.1% 23.1% -12.8%

Median 2.4x 2.7x 3.1x 2.9x 2.3x 11.3x 12.1x 12.3x 11.8x 8.9x 18.7% 22.3% 22.6% -10.8%

Business Intelligence 2.6x 3.1x 3.7x 4.2x 3.9x 24.6x 29.4x 40.3x 46.2x 33.7x 26.3% 7.1% 9.2% -5.1%

Education & eLearning 2.0x 2.3x 2.3x 2.4x 3.0x 7.5x 9.9x 15.6x 12.5x 11.8x 6.8% 16.3% 29.1% -14.4%

Electronic Design Automation 1.4x 1.6x 2.1x 2.2x 1.6x 17.8x 20.4x 20.8x 20.5x 14.6x 12.0% 110.9% 10.4% -9.5%

Engineering, PLM & CAD/CAM 3.0x 3.7x 3.9x 3.7x 2.6x 15.5x 16.5x 19.2x 16.4x 12.8x 14.2% 25.3% 20.3% -27.3%

Enterprise Resource Planning 1.9x 2.0x 2.1x 2.1x 1.9x 9.9x 10.7x 11.0x 10.9x 8.9x 17.0% 24.1% 16.1% -8.2%

Financial Services 2.0x 2.1x 2.1x 2.4x 2.0x 8.5x 8.8x 9.2x 9.6x 8.4x 2.1% 1.4% 24.0% -7.2%

Healthcare 3.4x 3.5x 3.7x 3.8x 3.2x 16.0x 15.9x 17.5x 18.7x 17.4x 23.9% 34.1% 24.3% 5.3%

Mobile Solutions/Content 2.4x 3.0x 2.7x 2.7x 2.1x 10.4x 13.3x 22.2x 16.6x 15.6x 16.4% -1.9% 9.3% -26.1%

Multimedia, Graphics & Digital Media 3.4x 3.6x 4.0x 3.9x 2.8x 11.3x 17.1x 25.2x 26.5x 17.9x 14.7% 30.6% 21.1% -21.5%

Supply Chain Management & Logistics 1.5x 1.8x 1.8x 2.0x 1.7x 9.3x 10.8x 10.8x 11.5x 10.7x 14.4% 16.3% 9.9% -11.3%

Video Games 0.6x 0.7x 0.9x 1.0x 1.1x 12.0x 10.5x 8.3x 10.9x 8.3x 0.1% 94.1% 8.7% 3.7%

Workforce & Service Management 1.9x 2.2x 2.7x 2.7x 2.2x 16.2x 20.0x 17.3x 17.1x 13.6x 10.3% 31.6% 16.2% -7.3%


IT Conglomerates 2.5x 2.1x 2.1x 2.2x 2.1x 7.3x 7.7x 7.1x 5.9x 6.0x 7.9% 6.8% 25.8% -10.8%

Vertical - Finance 4.4x 4.6x 4.9x 4.4x 3.6x 11.6x 12.9x 13.6x 13.3x 11.1x 15.6% 14.1% 31.7% -22.2%

Vertical - Other 2.0x 2.7x 2.8x 3.1x 2.9x 12.3x 14.2x 14.3x 14.0x 11.9x 15.5% 25.2% 18.6% 6.7%


Category

Other Software

EV/EBITDA

Application Software

Infrastructure Software

EV/Revenue




Every product category within the infrastructure software group achieved median TTM EBITDA margins greater than 20%, led by Content/Document Management’s median TTM EBITDA margin of 26.6%. From the standpoint of market valuation, the only category in the Infrastructure group with a median EV/Revenue multiple below the SEG Software Index median of 2.1x was Billing & Service Management, which dropped from a median EV/Revenue multiple of 1.9x in 2Q11 to 1.3x in 3Q11 after recording the worst YTD stock return (-27%) of any category in the group. Within the Application Software segment, Business Intelligence recorded the highest median EV/Revenue multiple of 3.9x in 3Q11, down slightly from 4.2x in 2Q11. Public companies comprising the Business Intelligence category are benefitting from enterprise demand for data mining, data handling and data analytics solutions that can convert massive amounts of structured and unstructured data into intelligence that can drive both top line growth and profitability. The category leader was Qlik Technologies, boasting an impressive 7.7x median EV/Revenue multiple, and impressive TTM revenue growth (39.2%). Other product categories with median EV/Revenue multiples of 3.0x or higher include Healthcare (3.2x) and Education & eLearning (3.0x). Healthcare software companies continue to benefit from strong market demand for improved revenue management, HIPAA compliance and the growing digitization of patient records. The Education & eLearning product category is struggling with delayed purchases due to budget cuts and regulatory uncertainty - resulting in a paltry 6.8% revenue growth rate, the second lowest among twenty two product categories. But despite these impediments, valuations and M&A activity in this category (more on this below) increased in 3Q11 due to mounting pressure on school districts to improve student and school performance with technology enabled learning.

PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS After dropping to a low of 3.1x median EV/Revenue in 3Q10, public SaaS company median EV/Revenue multiples have risen steadily, reaching a three year high of 5.2x in 2Q11 before falling to 4.5x in the third quarter (Figure 11).

The Q3 decline in market valuation was pervasive, with 24 of 26 companies in the SEG SaaS index reporting a quarter-over-quarter decline in EV/Revenue. Athenahealth and SPS Commerce were the only exceptions (Figure 12). Although Cornerstone OnDemand’s EV/Revenue multiple plummeted from 21.5 in 1Q11 to 17.3x in 2Q11, and then to 12.2x in the third quarter, it was the lone SaaS company trading above 10x median EV/Revenue at the close of Q3. Twelve SaaS companies traded at median EV/Revenue multiples of 5.0x or higher in 3Q11 compared with only six the same quarter a year earlier. Our readers will recall that at the close of 2007, public SaaS companies commanded a breathtaking median EV/Revenue multiple of 6.4x, compared to the much lower, but historically high, 2.7x median valuation multiple of their on-premise counterparts. That equated to a 137% SaaS valuation premium. The median SaaS EV/Revenue multiple for calendar year 2010 dropped to 3.6x, compared to 2.3x for on-premise software companies, narrowing the valuation differential to 57%.

Figure 11: SEG SaaS Index Key Statistics

Measure 3Q10 4Q10 1Q11 2Q11 3Q11EV/Revenue 3.1x 4.2x 4.8x 5.2x 4.5x

EV/EBITDA 30.2x 34.4x 38.3x 40.3x 29.7x

EV/Earnings 76.0x 79.7x 124.2x 86.0x 78.2x

Current Ratio 1.7 1.8 1.8 2.0 2.0

Cash & Eq ($M) $59.0 $61.0 $64.4 $66.3 $83.6

Gross Profit Margin 67.2% 68.1% 68.3% 69.0% 69.3%

EBITDA Margin 9.7% 9.7% 10.1% 8.7% 9.5%

Net Income Margin 1.3% 1.7% 1.3% 0.7% 1.0%

TTM Revenue Growth 14.6% 15.1% 20.5% 23.3% 24.9%

TTM Total Revenue ($M) $151.3 $159.9 $170.3 $177.2 $187.1



SEG - SaaS: Median Metrics




By the close of 3Q11, however, the valuation differential of public SaaS vs. public on-premise software providers grew to 114%, marking the fourth consecutive quarter the SaaS valuation premium widened (Figure 13). Indeed, SaaS valuations outperformed the median on-premise software valuation almost across the board. Of the 25 public SaaS companies comprising the SEG SaaS Index, only five (20%) companies – Convio, DemandTec, Elie Mae, Medidata Solutions and SoundBite Communications - posted median EV/Revenue multiples below the 2.1x median EV/Revenue of the SEG Software Index. It’s clear investors continue to resonate with SaaS’ subscription based revenue model and SaaS’ obvious appeal to the huge small/medium business market. When that market begins to recover, look for many SaaS valuations to skyrocket.

PUBLIC SOFTWARE AS A SERVICE (SAAS) FINANCIAL PERFORMANCE After bottoming out at 13.7% in 2Q10, the SaaS median TTM revenue growth rate reversed course, inching up to 14.6% in 3Q10, ending eleven consecutive quarters of decline. In 4Q10 the TTM median revenue growth rate of public SaaS providers was 15.1%, then climbed to 20.5% in 1Q11 and 23.3% in the second quarter. In 3Q11 the median TTM revenue growth rate ticked up to 24.9%, the highest in eight quarters and the fifth consecutive QoQ increase (Figure 11). Defying the stagnant economy, eight (31%) of twenty six public SaaS companies achieved TTM revenue growth greater than 30% in 3Q11 (Figure 12). Profitability posed more of a problem for public SaaS companies than revenue growth, mostly because of their subscription models, infrastructure investments and heavy spending on sales and marketing. Historically, median SaaS TTM EBITDA margins were dismal in comparison to on-premise EBITDA margins. But as SaaS revenue growth rates slowed during the Great Recession, public SaaS providers focused on improved profitability, and most succeeded in growing their bottom lines through operational improvements, reduced infrastructure spending and subscription renewals.

Figure 12: Public SaaS Companies

3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11

Athenahealth (ATHN) Health Care Mgmt 4.0x 5.6x 5.8x 5.5x 6.8x 36.0x 43.5x 42.2x 37.2x 40.1x 34.1% 33.9% 30.2% 29.2% 30.5% 11.2% 12.9% 13.8% 14.9% 16.9%

Concur (CNQR) Accounting & Finance 7.7x 8.0x 7.9x 7.4x 5.6x 33.4x 36.2x 37.7x 44.2x 38.0x 16.6% 18.3% 19.0% 18.6% 18.4% 23.2% 22.2% 21.0% 16.7% 14.7%

Constant Contact (CTCT) CRM 3.1x 3.4x 4.2x 3.6x 2.2x 65.9x 57.6x 59.0x 54.2x 27.1x 41.5% 38.2% 35.0% 31.6% 28.2% 4.7% 5.9% 7.2% 6.6% 8.0%

Convio (CNVO) CRM 1.6x 1.5x 1.8x 2.2x 1.6x 17.2x 15.2x 18.5x 25.5x 18.0x - - 10.6% 9.5% 10.2% 9.1% 9.7% 9.9% 8.6% 8.7%

Cornerstone OnDemand (CSOD) Workforce Mgmt - - 21.5x 17.3x 12.2x - - - - - 49.4% - 49.1% - - -17.0% -19.2% -26.1% -27.1% -33.7%

DealerTrack (TRAK) Vertical - Automotive 2.0x 2.6x 2.7x 3.1x 2.4x 19.4x 23.0x 22.3x 22.6x 15.4x 0.9% 3.5% 8.1% 16.6% 26.3% 10.4% 11.1% 12.1% 13.6% 15.7%

DemandTec (DMAN) SCM 2.0x 3.2x 4.0x 3.0x 1.6x - - - - - 0.6% 1.2% 4.3% 12.0% 13.2% -8.8% -8.8% -8.7% -8.5% -9.5%

Ellie Mae (ELLI) Financial Services - - - 4.3x 1.6x - - - 53.1x 15.7x - - 14.7% 23.3% - 3.6% -0.4% 6.6% 8.0% 10.5%

IntraLinks Holdings (IL) Financial Services 3.1x 6.5x 7.7x 5.9x 2.5x 30.8x 66.7x 43.5x 36.6x 18.1x - - 31.0% 34.8% 30.6% 10.0% 9.7% 17.6% 16.1% 13.9%

Kenexa (KNXA) Workforce Mgmt 1.3x 2.1x 2.8x 3.2x 2.2x 14.2x 26.1x 32.2x 40.3x 29.7x -7.6% 6.5% 24.5% 36.7% 46.9% 9.3% 8.2% 8.6% 7.9% 7.3%

LivePerson (LPSN) CRM 3.1x 4.2x 4.7x 4.9x 4.5x 15.2x 20.6x 23.7x 23.5x 21.7x 24.3% 27.2% 25.6% 23.7% 21.9% 20.3% 20.3% 19.7% 20.6% 20.5%

Medidata Solutions (MDSO) Clinical Mgmt 2.1x 2.5x 3.1x 2.8x 1.8x 13.3x 14.8x 16.1x 14.8x 8.3x 19.0% 16.8% 18.5% 17.4% 19.0% 15.5% 16.8% 19.5% 19.1% 21.4%

Netsuite (N) ERP 5.9x 7.6x 9.0x 10.7x 9.8x - - - - - 7.5% 11.6% 16.0% 19.6% 21.1% -7.9% -6.8% -6.9% -7.1% -7.9%

RealPage (RP) Property Mgmt 7.1x 10.0x 9.7x 9.2x 6.8x 50.8x 70.8x 70.3x 69.3x 51.4x - - 33.6% 36.6% 38.3% 13.9% 14.1% 13.8% 13.3% 13.1%

Responsys (MKTG) Digital Marketing - - - 7.3x 5.3x - - - 40.6x 28.6x 33.0% - 41.2% - - 20.8% 17.6% 19.9% 18.0% 18.5%

RightNow (RNOW) CRM 2.6x 4.0x 4.2x 5.0x 4.6x 29.6x 41.9x 39.8x 45.8x 44.5x 14.6% 19.4% 21.5% 23.3% 24.9% 8.6% 9.5% 10.6% 10.9% 10.3%

Salesforce.com (CRM) CRM 8.7x 9.5x 10.4x 10.3x 9.1x 75.8x 83.2x 108.1x 132.8x 153.1x 22.6% 25.2% 26.9% 29.6% 33.0% 11.5% 11.5% 9.7% 7.8% 5.9%

SciQuest (SQI) SCM 6.6x 5.6x 5.8x 6.6x 5.9x 30.8x 26.3x 29.3x 36.3x 38.7x - - 17.4% 19.0% 19.7% 21.5% 21.3% 19.7% 18.2% 15.3%

SoundBite Communications (SDBT) CRM 0.3x 0.3x 0.3x 0.2x 0.2x - - - - - 0.8% -0.7% -1.7% -4.5% -5.2% -3.2% -4.9% -3.6% -5.1% -3.9%

SPS Commerce (SPSC) SCM 2.4x 2.7x 3.2x 3.3x 3.6x 22.0x 24.0x 31.4x 37.4x 47.2x - 19.0% 18.2% 19.1% 22.5% 10.7% 11.4% 10.2% 8.7% 7.6%

SuccessFactors (SFSF) Workforce Mgmt 6.9x 9.6x 11.2x 9.9x 6.9x - - - - - 29.8% 30.7% 34.5% 40.7% 44.0% -2.5% -5.7% -7.1% -8.3% -11.2%

Taleo (TLEO) Workforce Mgmt 3.7x 4.3x 4.8x 5.2x 3.5x 27.3x 32.5x 38.9x 45.4x 26.5x 10.8% 12.6% 19.6% 23.5% 28.7% 13.4% 13.1% 12.4% 11.4% 13.1%

Tangoe (TNGO) Communication Mgmt - - - - 5.2x - - - - 67.5x - - 22.5% 27.4% 36.0% 7.6% 7.4% 7.3% 7.3% 7.7%

The Ultimate Softw are Group (ULTI) Workforce Mgmt 3.9x 4.7x 5.6x 5.7x 5.1x 66.2x 67.9x 67.6x 70.9x 59.4x 11.1% 13.3% 16.1% 16.5% 16.8% 5.9% 7.0% 8.3% 8.1% 8.6%

Vocus (VOCS) CRM 2.3x 4.2x 4.2x 4.3x 3.1x 135.0x 218.3x 271.9x - 1604.5x 8.6% 11.6% 14.4% 17.4% 19.1% 1.7% 1.9% 1.6% -0.5% 0.2%

Zix Corporation (ZIXI) Security 4.9x 8.0x 7.3x 6.0x 5.5x 13.9x 18.8x 36.2x 24.2x 20.1x -3.7% -3.3% 25.2% 30.9% 31.5% 35.1% 42.3% 20.2% 24.7% 27.2%

3.1x 4.2x 4.8x 5.2x 4.5x 30.2x 34.4x 38.3x 40.3x 29.7x 14.6% 15.1% 20.5% 23.3% 24.9% 9.7% 9.7% 10.1% 8.7% 9.5%

SEG SaaS Index

Median:

TTM Revenue Growth EBITDA Margin Company Category

EV/Revenue EV/EBITDA

Figure 13: Historical EV/Rev multiples for SEG SaaS and SEG Software Indices

3.5x3.8x

3.1x

4.2x

4.8x5.2x

4.5x

2.3x 2.3x2.1x

2.6x 2.7x 2.7x

2.1x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11

Median EV/Revenue M

ultiple

SEG ‐ SaaS SEG ‐ Software




Predictably, SaaS EBITDA margins have eroded somewhat post-Recession, declining to a median 9.5% in 3Q11 from 10.1% in 1Q11. The decline in the median EBITDA margin of the SEG SaaS Index signals a reprioritization by public SaaS companies on growth over profitability, as reflected by their YoY increased spending in 3Q11 on R&D, S&M and G&A as a percent of total revenue (Figure 14).

Profitability among the public SaaS providers varied widely, as they shifted into growth mode at varying speeds. Five (19%) of the twenty six public SaaS companies in our index reported negative EBITDA margins in 3Q11, whereas three public SaaS companies exceeded 20% EBITDA margins. Investors appear to be fully on board with this shift in operating emphasis. At the close of 3Q11, public SaaS companies with TTM revenue growth rates above 30% were rewarded with a median 6.8x EV/Revenue multiple, compared to a median 3.5x EV/Revenue multiple for public SaaS companies with TTM revenue growth rates below 30% (Figure 15).

PUBLIC INTERNET COMPANY MARKET

VALUATIONS The median EV/Revenue multiple for the 85 public companies comprising the SEG Internet Index was 2.6x in 3Q11, down 19% from the 3.2x posted in 2Q11. The median 3Q11 Internet company EV/EBITDA multiple was 13.1x, down markedly from 18.1x in 2Q11 (Figure 16). The second quarter of 2011 marks the fourth consecutive quarter the SEG Internet Index median EV/Revenue multiple has exceeded the SEG Software Index median EV/Revenue multiple. While a similar phenomenon occurred in both 2Q08 and 2Q09, we believe this differential will continue and grow for the foreseeable future, as investors continue to shift their attention from public on-premise software companies to public Internet and SaaS providers.

Relative to their SaaS counterparts, however, Internet EV/Revenue valuations still lag far behind. In 3Q11, the median market valuation of public Internet providers was 43% lower than public SaaS companies, despite being 73% more profitable (Figure 17). As evidenced by the inverse relationship between EBITDA margin and EV/Revenue multiples, investors are clearly not focused on profitability. Internet providers, currently spending a median 21% of all revenue on sales & marketing, might be better served by upping the sales & marketing ante to equal the median 33% of revenue spent by public SaaS providers. Chinese based Internet companies, impacted by hints of a slowing Chinese economy and by accounting irregularities, saw their valuations plummet in 3Q11. In 3Q11, the fourteen

Figure 14: SEG SaaS Median Operating Expenses as a % of Total Revenue

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

R&D S&M G&A

% of Revenue

3Q10 3Q11

Figure 15: 3Q11 Public SaaS EV/Rev Multiples vs. TTM Revenue Growth

6.8x

3.5x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

TTM Revenue Growth Greater than 30%

TTM Revenue Growth Less Than 30%

Median EV/Revenue

Figure 16: SEG Internet Index Key Statistics

Measure 3Q10 4Q10 1Q11 2Q11 3Q11

EV/Revenue 1.9x 2.8x 3.0x 3.2x 2.6x

EV/EBITDA 11.9x 14.7x 15.0x 18.1x 13.1x


Current Ratio 2.4 2.4 2.4 2.4 2.7

Cash & Eq ($M) $102.6 $89.6 $113.3 $105.9 $132.0


EBITDA Margin 16.8% 15.3% 16.8% 15.3% 16.4%


TTM Revenue Growth 17.7% 19.7% 22.6% 20.2% 20.9%

TTM Total Revenue ($M) $246.4 $272.3 $291.7 $312.1 $342.1



SEG - Internet: Median Metrics




companies in our SEG Internet Index with headquarters in China posted a median EV/Revenue multiple of 4.7x, down 37% from the 7.5x posted in 2Q11 (Figure 18). Nevertheless, Chinese based companies still posted 96% higher median EV/Revenue multiples than the remaining 71 public companies in the SEG Internet Index that are trading at a median 2.4x EV/Revenue.

PUBLIC INTERNET COMPANY FINANCIAL

PERFORMANCE Internet providers in the SEG Internet Index closed 3Q11 with a median TTM revenue growth of 20.9%, up slightly from 2Q11’s TTM growth rate of 20.2%. One out of four companies in the SEG Internet Index posted TTM revenue growth rates greater than 35%. Considering the median TTM revenue of public Internet companies is $342 million, the largest among our three tracking indexes, the growth rate is especially impressive. Public SaaS companies had median TTM

revenue of $187.1 million in Q3, yet only a slightly higher TTM revenue growth rate of 24.9%. Equally impressive, Internet companies achieved a median EBITDA margin of 16.4% in 3Q11, modestly less than the 18.4% median EBITDA margin of public on-premise software companies, but considerably greater than the 9.5% median EBITDA posted by public SaaS companies (Figure 17). The solid profitability of these Internet providers contributed to very healthy balance sheets, with median cash and cash equivalent balances greater than $130 million, up 25% QoQ and 29% YoY, and a strong current ratio of 2.7 (Figure 16). The solid EBITDA margins of public Internet companies are particularly extraordinary when taking into account the mashup nature of Internet business models which typically involve significant revenue sharing. The median gross profit margin of Internet providers was 65.2% in 3Q11 compared to a third quarter median 66.8% margin of public software companies and a median 69.3% margin of public SaaS companies. Public Internet companies typically compensate by spending less on Research & Development and Sales & Marketing than their on-premise and SaaS software peers. In 3Q11, Internet companies spent only 9.3% of revenues on R&D whereas their SaaS and on-premise peers spent 15.0% and 13.9% respectively. Similarly, Internet companies spent only 20.6% of revenues on S&M compared to 33.2% and 24.4% by SaaS and on-premise peers respectively. PUBLIC INTERNET COMPANY MARKET

VALUATIONS AND FINANCIAL PERFORMANCE BY

PRODUCT CATEGORY Segmenting the public Internet companies comprising our SEG Internet Index into discrete product categories can provide valuable insight about market trends, sector health, product lifecycles, Internet retail and advertising spending impacts and stock market biases. But perhaps most importantly, we track this data because the current median valuation of companies comprising a particular Internet category often weighs heavily when buyers value acquisition targets.

Figure 17: 3Q11 Median Market Valuation and Financial Performance Comparison of SEG Indices

4.5x

2.6x2.1x

0

0.5

1

1.5

2

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3

3.5

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4.5

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25.0%

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SaaS Internet Software

Median EV/Revenue M

ultiple

TTM Revenue Growth &

EBITDA M

argin

Revenue Growth EBITDA Margin EV/Revenue

Figure 18: 3Q11 Median EV/Revenue Comparison of Chinese and U.S. based firms

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The SEG Software Index is comprised of eight Internet product categories: Ad Tech & Lead Generation – Companies that

provide key elements in the Internet advertising arena such as search marketing services, software to host and manage ads and a network of websites that run ads. Representative companies include ValueClick and SINA.

Infrastructure – Companies that provide key elements in hosting, communications, storage and content delivery. Representative companies include Akamai, Rackspace, Digital River and VeriSign.

Media – Companies that provide or distribute content online. Representative companies include Yahoo, Netflix, Pandora Media, Demand Media and Youku (often referred to as China’s Youtube).

Retail – Companies that facilitate retail transactions online. Representative companies include Amazon, eBay and Mercadolibre.

Search – Companies that operate search engines. Representative companies include Google, Baidu and Yandex.

Services – Companies that provide various services including, but not limited to, photo sharing, social networking and security over the Internet. Representative companies include Shutterfly, LinkedIn, Ancestory.com and Renren (often referred to as China’s Facebook).

Travel – Companies that facilitate ticketing transactions for the travel industry. Representative companies include Priceline, Ctrip and Expedia.

Video Games – Companies that primarily deliver video games through the Internet. Representative companies include Netease, ChangeYou and NCSoft.

Enterprise valuations of companies comprising the SEG Internet Index varied widely by Internet category in 3Q11 (Figure 19). Internet services companies, the only Internet category to experience QoQ growth in median EV/Revenue, led all of its counterparts in 3Q11, posting a median EV/Revenue multiple of 5.1x. The median EV/Revenue multiple was boosted by Qihoo (26.0x), a provider of online security based in China; by LinkedIn (22.5x), the well-known

social media service for business professionals; and by Renren (21.3x), a Chinese social media provider known as the Facebook of China. The Travel product category followed close behind, with a median EV/Revenue of 5.0x in Q3. The Travel product category had been the Internet leader in median EV/Revenue for the prior three quarters, but suffered a dramatic 31% drop in QoQ valuation from 2Q11 to 3Q11, the worst among all product categories. The selloff is most likely attributable to decelerating TTM revenue growth, which declined from 34.5% in 2Q11 to 25.7% in 3Q11. Despite the drop, the category still boasts two companies with median EV/Revenue multiples greater than 10.0x – HomeAway (17.6x) and Ctrip (10.4x). The stark contrast in financial performance and market valuation of on-premise vs. online is especially poignant in the video game category. Video game developers that generate the majority of their revenue through on-line gaming are significantly outperforming those that generate the majority of their revenue through retail. In 3Q11 software companies distributing games through retail channels closed 3Q11 with 0.1% TTM revenue growth rate and a 8.7% EBITDA margin – the lowest among all SEG Software Index product categories. Predictably, these public software companies had a median EV/Revenue of 1.1x in 3Q11, the lowest, as well, of all SEG Software Index product categories. Conversely, public Internet providers that host their games online posted median TTM revenue growth of 29.7%, and staggering EBITDA margins of 49.7%. In response, investors rewarded these Internet game purveyors with a median EV/Revenue multiple of 4.6x (Figure 19), led by Tencent Holdings (11.3x) and NCSoft (9.6x). We expect the disparity among retail vs online gaming developers to increase, given the growing popularity of more community focused games, smart phone gaming enablement and the wild successes of Zynga and a host of other players that have leveraged the Facebook platform and mobile app stores.




As the result of these favorable market dynamics, the Video Game segment led all other Internet product categories in TTM revenue growth (29.7%) and EBITDA margins (49.7%). While their revenue performance was not quite as impressive, most other Internet categories reported solid revenue growth, with seven of eight product categories generating Q3 top line improvement in excess of the SEG Software Index’ 14.7% median TTM growth rate. Profitability varied widely among SEG Internet product categories. Video Game providers generated the highest EBITDA margins at 49.7% while the Retail product category generated the lowest EBITDA margins of 9.4%. The stark contrast in profitability is in large part attributable to the high degree of profit sharing inherent in some Internet business models. Advertising and retail are two product categories heavily reliant on revenue sharing business

models, and consequently posted the two lowest median gross profit margins among the eight product categories we track (Figure 20). Unsurprisingly, both categories also posted median EBITDA margins below the Internet median. INITIAL PUBLIC OFFERINGS After a remarkable 2Q11, the IPO market slowed dramatically in the early part of 3Q11 before grinding to a halt at the end of the quarter due to whiplashing market volatility. All four companies that went public in 3Q11 – Zillow, Tangoe, Carbonite and Tudou Holdings - listed in the first two months of the quarter. Collectively, the four IPOs raised over $375 million at an average of roughly $94 million per IPO, down significantly from the average of $344 million per IPO in the second quarter. Two anxiously awaited IPOs - Groupon and Zynga – opted to delay their coming out parties. As of the close of the third quarter, 17 companies have gone public in 2011, a marked increase from the twelve that initially listed in the first three quarters of 2010. Internet IPO volume has been particular strong, with 13 newly listed companies, compared to only one through three quarters of 2010. By the close of Q3, 2011’s seventeen newly public software/SaaS/Internet companies had a median stock return of -27.3%. Three of the four companies that listed in 3Q11 fared far worse, off 49.4% or more from their initial IPO price. Only four of the 17 posted positive YTD stock returns: Zillow, HomeAway, LinkedIn and Ellie Mae. The best performer was LinkedIn, returning 73.5% by the quarter’s close. While the allure of investing in social networking was partially responsible, LinkedIn’s 102.4% revenue growth and 13% EBITDA margin was undoubtedly received by investors as proof positive of the company’s value

Figure 19: SEG Internet Index Median Metrics by Category

Revenue Growth (TTM)

EBITDAGrowth(TTM)

EBTIDA Margin (TTM)

YTD Stock Return

3Q10 4Q10 1Q11 2Q11 3Q11 3Q10 4Q10 1Q11 2Q11 3Q11 3Q11 3Q11 3Q11 2011Ad Tech & Lead Gen 1.4x 2.3x 2.7x 2.3x 1.9x 24.9x 18.8x 14.5x 11.2x 13.0x 24.1% 32.0% 10.5% -24.5%

Infrastructure 1.7x 2.9x 3.2x 2.8x 2.8x 12.4x 16.4x 19.1x 19.2x 11.8x 21.5% 19.1% 16.2% -12.4%

Media 1.5x 2.8x 3.0x 3.6x 2.7x 11.6x 14.4x 14.1x 13.1x 10.8x 16.3% 25.5% 15.2% -30.7%

Retail 1.3x 2.1x 1.8x 1.7x 1.4x 10.6x 22.4x 12.7x 12.6x 13.9x 12.6% 9.3% 9.4% -18.5%

Search 1.1x 1.3x 1.4x 1.5x 1.4x 8.5x 8.9x 9.6x 10.0x 11.2x 26.1% 30.7% 12.2% -18.7%

Services 2.0x 2.4x 3.0x 5.0x 5.1x 12.9x 14.6x 16.5x 25.8x 31.8x 21.9% 43.0% 15.1% 7.1%

Travel 3.7x 5.8x 6.5x 7.3x 5.0x 12.3x 24.8x 26.3x 32.5x 23.4x 25.7% 45.5% 23.8% -19.4%

Video Games 4.2x 4.2x 4.3x 4.8x 4.6x 6.2x 6.6x 6.9x 10.0x 7.1x 29.7% 28.1% 49.7% -18.4%

SEG - Internet Index

CategoryEV/Revenue EV/EBITDA

Figure 20: Gross Profit Margins of Internet Product Categories

80% 78% 76%68%

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proposition. Interestingly, the five Chinese companies that IPO’d in 2011 had YTD stock returns at or below the median for the group. Renren posted the worst result, down 63.6% from its initial IPO price. In the current climate, IPO aspirants must demonstrate significant market traction, given investors’ demonstrated preference for revenue growth over profitability. The seventeen newly when they listed, well above the Q3 median of public software, SaaS and Internet companies. companies had median revenue growth of 63.9% Five of the newly listed companies achieved TTM revenue growth rates above 100%. Yet even these outperformers fell victim to the market’s volatility, as only one (LinkedIn) of these overachievers generated a positive YTD stock return as of the close of the third quarter. Ten software companies filed S-1’s in 3Q11, bringing the U.S. software IPO queue up to seventeen (Figure 22). The IPO pipeline consists of a healthy group of software companies across the on-premise software, SaaS and Internet sectors. Internet companies in the pipeline are much larger and growing considerably faster than their on-premise software company counterparts, with median TTM revenue of $127 million (vs. $66 million) and a median revenue growth rate of

201% (vs.32%), and only slightly less profitable when measured by median EBITDA margin (7.8% vs. 8.6%). If the GDP begins to grow and investors regain their appetite for newly listed companies with strong revenue growth and growth potential, Internet IPOs should continue to outperform their software counterparts.

Figure 21: 2011 YTD U.S. Software IPOs

Company (Ticker) Category IPO Date Offering Amount Enterprise Value EV / RevEV /

EBITDARevenue

Revenue Growth

EBITDA Margin

First Day Return

YTD Return

Tudou Holdings Limited (NASDAQ: TUDO)

Online Media 8/17/11 $120,000,000 $676,946,250 13.2x n/a $51,294,280 221.1% (85.5%) 32.5% (49.4%)

Carbonite(NASDAQ:CARB)

Online Services 8/11/11 $100,000,000 $280,158,300 5.7x n/a $49,120,000 101.8% (31.2%) 32.5% (55.4%)

Tangoe(NASDAQ: TNGO)

Communication Management

7/27/11 $87,700,000 $390,345,770 4.6x n/a $84,201,880 22.5% 7.7% 32.5% (58.1%)

Zillow(NASDAQ:Z)

Online Services 7/20/11 $69,240,000 $947,018,920 21.1x n/a $44,907,000 74.2% 2.8% 32.5% 1.3%

HomeAway(NASDAQ:AWAY)

Online Travel 6/29/11 $216,000,000 $3,601,208,300 19.6x 121.2x $183,741,000 39.6% 17.1% 48.9% 24.5%

Pandora(NYSE:P)

Online Media 6/15/11 $234,940,000 $2,746,176,760 16.4x 609.4x $167,205,000 174.8% (0.3%) 8.9% (8.4%)

The Active Network(NYSE:ACTV)

Online Services - Event Management

5/25/11 $165,000,000 $1,225,649,700 4.2x 87.7x $289,090,000 15.1% 5.2% 6.0% (1.7%)

Yandex(NASDAQ:YNDX)

Online Search 5/24/11 $1,304,350,000 $12,242,319,710 24.8x 62.2x $493,891,010 43.2% 47.7% 56.0% (18.2%)

LinkedIn(NYSE:LNKD)

Online Services - Social Network

5/19/11 $175,000,000 $8,800,435,590 30.1x 247.4x $292,315,000 102.4% 13.0% 109.4% 73.5%

FriendFinder Networks(NASDAQ:FFN)

Online Services 5/11/11 $50,000,000 $701,031,870 2.0x 6.6x $343,312,000 5.6% 32.3% (21.5%) (81.6%)

Jiayuan.com International(NASDAQ:DATE)

Online Services 5/11/11 $78,000,000 $184,928,560 5.7x 43.7x $32,538,870 162.3% 21.5% (4.4%) (27.3%)

Renren(NYSE:RENN)

Online Services - Social Network

5/4/11 $743,000,000 $2,189,859,750 26.4x 149.2x $83,067,000 63.9% 13.4% 28.6% (63.6%)

Ellie Mae(AMEX:ELLI)

Document and Business Process Management

4/15/11 $86,250,000 $121,317,000 2.7x 42.4x $44,958,000 14.7% 8.0% 35.4% 11.2%

Qihoo 360 Technology(NYSE:QIHU)

Online Services - Security 3/30/11 $175,610,000 $3,936,371,720 68.3x 379.8x $57,665,000 78.5% 18.0% 25.9% (39.5%)

Cornerstone OnDemand(NASDAQ: CSOD)

Workforce Management 3/17/11 $136,500,000 $975,737,520 22.3x n/a $43,731,000 49.1% (26.1%) 46.7% (3.5%)

Demand Media (NYSE: DMD)

Online Media 2/26/11 $151,300,000 $2,223,332,400 8.8x 43.7x $252,936,000 27.5% 20.1% 25.9% (70.4%)

Trunkbow International Holdings(NASDAW: TBOW)

Mobile 2/3/11 $20,000,000 $164,518,050 6.7x 11.9x $24,387,920 81.6% 56.8% (5.2%) (55.6%)

$136,500,000 $975,737,520 13.2x 75.0x $83,067,000 63.9% 13.0% 32.5% (27.3%)Median

All financial numbers are latest data from CapIQ on offering date.First day return compares listed offering price to first day close.Bold denotes SaaS companies.




Company (Ticker) Category Filing Date

Offering Amount RevenueRevenue

Growth (YoY)EBITDA Margin

Guidewire Insurance Management 9/2/11 $100,000,000 $144,700,000 70.7% 15.7%

MobiTV Mobile Content 8/31/11 $75,000,000 $66,824,000 7.0% 1.1%

Jive Software Social Media 8/24/11 $100,000,000 $46,268,000 54.3% (55.3%)

Exa Corporation Engineering 8/3/11 $86,250,000 $37,732,000 6.0% 11.8%

Tim w.e. SGPS, S.A. Mobile 7/28/11 $181,130,000 $309,900,000 30.1% 10.0%

Greenway Medical Technologies

Healthcare 7/15/11 $100,000,000 $64,600,000 39.0% 7.1%

Imperva(NYSE:IMPV)

Security 6/17/11 $75,000,000 $60,500,000 34.0% (17.9%)

Tripwire, Inc. (NASDAQ: TPWR)

Security 5/28/10 $86,250,000 $74,006,000 18.6% 13.5%

$93,125,000 $65,712,000 32.1% 8.6%

Bazaarvoice(TBD)

Social Media 8/26/11 $86,250,000 $64,482,000 66.8% (20.7%)

BrightCove(NASDAQ: BCOV)

Video Publishing 8/24/11 $50,000,000 $43,716,000 20.8% (33.7%)

Demandware(NYSE: DWRE)

eCommerce 7/15/11 $100,000,000 $36,690,000 71.5% (7.6%)

TrustWave Holdings(TBD)

Security 4/21/11 $100,000,000 $111,503,000 52.5% 4.4%

$93,125,000 $54,099,000 59.7% (14.2%)

Zynga Games 7/1/11 $1,000,000,000 $597,500,000 391.9% 65.7%

CafePress(TBD)

Retail 6/10/11 $80,000,000 $127,900,000 23.6% 7.8%

Groupon(TBD)

Services - Local Deals 6/2/11 $750,000,000 $1,313,900,000 1784.8% (24.5%)

Cloudary Coporation(NYSE:READ)

Media 5/24/11 $200,000,000 $60,018,000 201.9% (18.6%)

Kayak Software Corporation (TBD)

Travel 11/17/10 $50,000,000 $112,698,000 0.6% 14.4%

$200,000,000 $127,900,000 201.9% 7.8%

$83,125,000 $93,352,000 28.8% -5.0%

SaaS Category

SaaS Category Median:

Total Median:

Financial data is most recent TTM numbers from S-1 or F-1 .EBITDA margin estimated when not stated explicitly in S-1 or F-1

Software Category

Software Category Median:

Internet Category

Internet Category Median:

Figure 22: U.S. Software IPO Pipeline




M&A DEAL VOLUME AND SPENDING: ALL

INDUSTRY SECTORS Globally, the third quarter’s 12,142 M&A transactions across all industry sectors eclipsed the previous post recession peak of 11,722 transactions set in 1Q11. 3Q11’s tally represents a 23% YoY increase from 3Q10’s 9,872 M&A transactions, and a 5% gain over 2Q11’s 11,515 M&A transactions. Despite the record number of worldwide M&A transactions, the total spend of $606 billion in 3Q11 was 10% lower than 2Q11’s $671 billion, and 12% off 1Q11’s post-recession peak of $691 billion. Domestically, 4,089 M&A transactions were announced across all industry sectors in the third quarter of 2011 (Figure 23). The 3Q11 U.S. deal total was down slightly from 2Q11’s 4,202 transactions, but up 21% year over year. Mirroring the rapid pace of transactions internationally, domestic M&A transactions are also heading for record volume this year. In 1Q11, there were more than 4,000 domestic deals, the highest domestic deal volume we’ve reported since we began tracking this metric in 2001. The second and third quarters each exceeded 4,000 transactions, as well. Perhaps as

important, buyers loosened their purse strings over the past year. In 3Q11, acquirers’ spent an aggregate $304 billion on 4,089 transactions, a whopping 35% more than 3Q10’s total price tag of $225 billion. Average deal size also jumped, reaching $75 million in 3Q11, up from $67 million in 3Q10. There were 622 worldwide leveraged buyouts in 3Q11, totaling $20.8 billion, compared to 658 worldwide LBOs worth $32.1 billion in 2Q11, and 695 in 1Q11 aggregating $25.5 billion. The number of U.S. LBOs dropped to 213 in 3Q11 from 240 in 2Q11 and 233 in 1Q11. The total spend on U.S. LBOs in the third quarter was $15.3 billion, down from $17.3 billion in 2Q11 but still considerably greater than the $13.1 billion total spent in 1Q11. The drop in deal volume suggests PE buyers may be having a difficult time finding attractively priced targets in the face of rising valuations. The largest LBO in 3Q11 was Apax Partners’ $5.8 billion acquisition of Kinetic Concepts, at 2.7x TTM revenue, a relatively high valuation of for a financial buyer.

7,762

9,2969,941

11,769

12,586

11,254

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2003 2004 2005 2006 2007 2008 2009 2010 2011

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Deals ValueSource: Capital IQNote: 2011 data is annualized

Figure 23: U.S. Mergers & Acquisition Activity




SOFTWARE/SAAS M&A DEAL VOLUME AND

SPENDING To date, there were 405 reported software M&A transactions in 3Q11, virtually the same as in the second quarter (409) and third 3Q10 (407) (Figure 24). Since M&A data for the quarter is often revised and released well into the following quarter, we anticipate the final deal tally for 3Q11 will exceed 420, the highest quarterly tally this year. M&A deal volume has been above or very near its historically healthy level of 400 for six of the past seven quarters, following five consecutive quarters of sub-400 M&A transactions (4Q08 to 4Q09). In the first three quarters of 2011, there have been 1,242 software M&A transactions, up 1.7% YoY for the same nine month period, and 30% higher than the 957 software deals reported for the first nine months of 2009. A total of $23.8 billion was spent on 3Q11 transactions with announced price tags, 13% higher than 2Q11’s $21.0 billion, and the highest software M&A spend since 2Q07. Software mega deals are in large part responsible, as nearly half of the total spend in each of 3Q11 and 2Q11 came from transactions greater than $500 million:

In 3Q11, HP acquired Autonomy for an enterprise value of $10.3 billion; in 2Q11 Microsoft acquired Skype for an enterprise value of $9.1 billion. Considering the irregular fluctuations in total M&A spend each quarter, YoY comparisons of TTM data are a more reliable measure to discern M&A spending trends. And the trend over the past year is encouraging. On a TTM basis, total software transaction dollars aggregated $70.6 billion at the close of 3Q11, 49% greater than the $47.4 billion spent on software M&A deals at the close of 3Q10. Similarly, on a TTM basis, the average deal size increased for the sixth consecutive quarter to $42 million (Figure 25).

402

345

316 311330

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407421 428 409

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e (B

Illions)

Number of Deals

Deals Value

Figure 24: U.S. Software Merger & Acquisition Activity

Figure 25: TTM Average M&A Deal Size

$38

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IMPORTANT CHANGE IN SOFTWARE AND SAAS

M&A DATA ACCOUNTING Historically, we have aggregated M&A data for both on-premise and SaaS software company transactions because of the relative dearth of pure-play SaaS deals. However, the considerably higher median valuation of these SaaS deals, though few in number, tended to skew upward the median M&A multiple. Since SaaS is no longer a nascent part of the overall software M&A market and SaaS transactions now constitute a meaningful percentage of total software M&A, we begin this quarter to analyze and separately report M&A data for SaaS and on-premise software deals - except for total deal volume and spending. To ensure our historical and current comparisons are consistent, the historical M&A data for the prior four quarters referenced in our charts this issue have been recalculated to exclude SaaS M&A transactions. SOFTWARE M&A DEAL CURRENCY As in years past, cash-only deals predominated in 3Q11, comprising 71% of all M&A transactions, down from 76% in 2Q11. By contrast, only 7% of 3Q11’s sellers received only stock, unchanged from 2Q11 (Figure 26). The overwhelming preference for cash-only as deal currency is a longstanding phenomenon that’s attributable to a host of factors: PE owned private buyers are reluctant to dilute their pre-IPO equity; the seller’s founders want retirement income manageability, and the seller’s investors are anxious for a real IRR. However, while the percentage of all-cash deals has fluctuated from quarter to quarter (mostly inversely with public market performance), it remains elevated from pre-recession levels when it was frequently below 70%. Contributing to the strong, cash-only preference: continuing macro-economic uncertainty, record amounts of cash on buyer balance sheets, and market volatility. SOFTWARE M&A VALUATIONS The software industry’s benchmark median exit valuation fell to 2.2x TTM revenue in 3Q11 from 2.5x in 2Q11, but remained notably higher than the median 1.9x TTM M&A multiple reported for 1Q11 and 4Q10 (Figure 27). The 12% drop in median exit multiple, combined with record software M&A volume, suggests that while buyers

are still actively shopping for acquisitions, lingering uncertainty about the economy has made some more circumspect and is putting more pressure on valuations.

Lest every software entrepreneur who reads this report multiply his/her company’s TTM revenue by 2.2 to determine current fair market value, we must emphasize that the 3Q11 median exit multiple for software and SaaS deals is simply that - a median – the midpoint of a very broad range of exit valuations. Perhaps more useful is our calculation that in 3Q11, 44.4% of M&A deals with reported EV/Revenue exit multiples had a 2.0x EV/Revenue multiple or less. By contrast, 13.9% of M&A deals with reported EV/Revenue exit multiples had a 5.0x EV/Revenue multiple or more (Figure 28). Since very few software transactions publicly identify a private software seller’s TTM EBITDA, we lacked sufficient data to ascertain the median

73% 79%78%

71%

21% 9% 15%21%

6% 12% 7% 7%

Q4 2010 Q1 2011 Q2 2011 Q3 2011

Stock Cash & Stock Cash

Figure 26: Software M&A Deal Currency

Figure 27: Median Software M&A Valuation as a Multiple of Revenue

1.9x 1.9x2.5x

2.2x

Q4 2010 Q1 2011 Q2 2011 Q3 2011




EBITDA exit multiple paid in 3Q11 for private software company sellers. We did, however, determine 3Q11’s median exit multiple for public software company sellers was 15.7x TTM EBITDA, a healthy improvement over 2Q11’s 14.7x and 1Q11’s 13.9x TTM EBITDA exit multiples (Figure 29).

SOFTWARE M&A VALUATIONS BY OWNERSHIP While a variety of factors impact exit valuation, one important driver is the seller’s equity structure. As a result, we analyzed all 2011 year-to-date (YTD) M&A transactions with ascertainable revenue multiples to determine how exit valuations varied by type of equity ownership (private vs. public company). Public company sellers received a median 1.8x TTM revenue exit valuation, while privately held software company sellers commanded a median of 2.5 x TTM revenue multiple (Figure 30). The higher exit multiples paid to private sellers continued a trend that began about four years ago when larger software companies and private equity firms virtually exhausted the supply of highly leveragable public software company

targets with lots of cash and recurring revenue, and focused, instead, on private targets that were often venture-backed, growing rapidly and, consequently, expensive. The latest examples are Riverbed ’s acquisition of Zeus Technology ($140 million, 7.5x TTM revenue) and Compuware’s acquisition of dynaTrace software GmbH ($231 million, 9.9x TTM revenue), both in Q3. The high multiples paid for Zeus Technology and dynaTrace, providers of application delivery and application performance management software, respectively, demonstrate how

Figure 28: Software Revenue Multiple by Quarter

19.4%

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0.00%

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<= 1.0x > 1.0x&

<= 2.0x

> 2.0x&

<= 3.0x

> 3.0x&

<= 4.0x

> 4.0x&

<= 5.0x

> 5.0x

% of Deals in 3Q11

Figure 29: Median Software M&A Valuation as a Multiple of EBITDA

12.4x13.9x 14.7x 15.7x

Q4 2010 Q1 2011 Q2 2011 Q3 2011

Public Sellers 1.8x Median Multiple

Private Sellers 2.5x Median Multiple

76%

24%

Public Buyers 2.4x Median Multiple

Private Buyers 1.9x Median Multiple

63%37%

Buyer Less Than $200 million 1.8x Median Multiple

Buyer Greater Than $200 million 2.8x Median Multiple

Seller Less Than $20 million: 2.4x


Seller Greater Than $20 million: 1.5x






60%40%

Figure 30: YTD Median Multiples – Segmentation (Enterprise Value/Revenue)




expensive private companies competing in rapidly growing and transformative software categories can be. As a next step, we separated public and private software company buyers to ascertain any difference in median purchase price paid in 3Q11. Historically, public buyers have paid higher exit multiples than private buyers: 2.5x vs. 2.0x TTM revenue in 2007; 2.0x vs.1.7x in 2008; 1.9x vs.1.2x in 2009; and 2.4x vs.1.8x in 2010. In 1Q11 we saw a significant expansion in premiums public companies were paying (3.3x vs. 1.5x), corresponding with a spike in their own public market trading multiples, which continued into 2Q11. The trend moderated somewhat in 3Q11 as public valuations declined. In 3Q11, public buyers paid a median 2.4x TTM revenue multiple, while private buyers pad a median 1.9x TTM revenue multiple. SOFTWARE M&A VALUATIONS BY VERTICAL AND

HORIZONTAL MARKETS Another important determinant of exit valuation is the seller’s target market focus and related domain expertise. We analyzed 3Q11’s median software M&A multiple horizontally and vertically, segregating software company sellers with vertical market solutions (e.g. retail, financial services, telecom, manufacturing, etc.) from sellers with horizontal software solutions (infrastructure, enterprise applications, etc.).

In 3Q11, providers of vertical software accounted for 37% of all software M&A, confirming vertical providers remain attractive acquisition targets primarily because of their predictable and substantial recurring revenue, domain expertise,

and highly defensible market positions. Horizontal solution providers accounted for the remaining 63% of sellers (Figure 31). During the third quarter, vertical market sellers received a median 2.1x TTM revenue multiple, while their horizontal market counterparts were paid a median exit multiple of 2.3x TTM revenue multiple. The higher horizontal multiple follows three consecutive quarters of higher median exit multiples paid to vertical software company sellers (Figure 32).

M&A VALUATIONS BY SOFTWARE PRODUCT

CATEGORY While a software company’s target market, revenue, equity structure and delivery model can demonstrably impact its exit valuation, the nature of it product offering – its software product category - continued to be the single most important M&A valuation driver in 3Q11. For most software product categories, there is often an insufficient number of transactions each quarter that publicly report both seller TTM revenue and buyer purchase price, essential in determining the median exit value for the category. Consequently, we aggregate the data each quarter for each category on a TTM basis. As a result, it may take several quarters to detect changing product category valuation trends, as certain outlier transactions consummated nine or twelve months ago may have a residual impact on their product category multiples. Among the 27 product categories we tracked in 3Q11, nine had both sufficient deal activity and deal data to ascertain a TTM revenue multiple (Figure 33). Software company sellers that were vertically focused on Education garnered the highest median TTM revenue multiple in 3Q11

Figure 31: 3Q11 Median Multiples Segmentation (Ev/Revenue)

63.4%

36.6%

horizontal vertical

Figure 32: Horizontal vs. Vertical Software M&A Multiples

Horizontal Vertical3Q11 2.3x 2.1x2Q11 2.6x 3.2x1Q11 1.7x 1.9x4Q10 1.5x 2.3x3Q10 2.6x 1.7x




(3.6x TTM revenue). The underlying drivers here are the same as those boosting the market valuations of public software companies focused on Education: an emphasis on improving the ROI of K-12 education with software tools that enhance learning and facilitate accountability. Q3’s most notable Education transactions included Permira Advisers’ acquisition of Renaissance Learning ($476 million, 3.5x TTM revenue), and Datatel’s acquisition of SunGard’s Higher Education business ($1.8 billion). Other software product categories with relatively high exit valuation multiples in Q3 were Financial Services (3.1x) and Healthcare (2.4x). Regular readers of our reports will note a drastic change in the 3Q11 median TTM exit multiple for the CRM, Marketing and Sales product category, which plummeted to 1.3x from 4.1x in 2Q11. The sharp drop occurred after we deleted and separately reported the median exit multiple for SaaS providers of CRM/Sales/Marketing software (e.g., Salesforce.com) which have enjoyed acceptance and success among both enterprise and SMB customers at the expense of their behind-the firewall counterparts. The few remaining on-premise CRM software providers are being acquired for customers and cash flow, assets that yield far lower multiples. From a deal activity standpoint, the Mobile product category led all others, accounting for 18% of 3Q11’s transactions, up from 2Q11’s 14% (Figure 34). Mobile computing and mobile

applications comprise a somewhat complex and evolving ecosystem, and have become top priorities for many public software company buyers. Software providers focused on Financial Services and Healthcare comprised 11% and 7%, respectively, of the third quarter’s transactions. While many software categories in our top five most active come and go, Healthcare, Mobile and Financial Services continue to be the most acquired in 2011, just as they were in 2010.

3.6x3.1x

2.4x 2.4x 2.4x 2.3x1.8x 1.8x

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Figure 33: Software M&A by Product Category




SOFTWARE AS A SERVICE (SAAS) M&A DEAL

VOLUME AND VALUATIONS In 3Q11, 48 SaaS companies were acquired, compared to 45 in 2Q11 and 39 SaaS acquisitions in the first quarter. The growing number of SaaS acquisitions each quarter is consistent with the results of our 2011 Software Company Buyer Survey, in which public software company corp dev heads indicated SaaS targets had finally become a priority. As a result, SaaS company acquisitions accounted for 11.9% of all software industry acquisitions in 3Q11, compared to only 2.6% of all deals just two years ago (Figure 35). SaaS exit valuations are also ramping. The median EV/Revenue exit multiple for SaaS providers in the third quarter was 3.7x, up from 3.5x in 2Q11. The 3.7x median EV/Revenue exit multiple represents a 76% valuation premium over the median 2.1x TTM EV/Revenue exit multiple of on-premise software companies in Q3 (Figure 36). Notable SaaS acquisitions in the quarter

include Oracle’s acquisition of InQuira ($230 million, 4.0x TTM revenue); NICE Systems’ acquisition of The Fizzback Group ($80 million, 4.0x TTM revenue); and Augme Technologies’ acquisition of HipCricket, a SaaS based mobile marketing and advertising platform for $44.5 million in cash and stock ($6 million in cash and $38.5 million in common stock), and a $27.5 million earnout (which combined would yield a 7.7x TTM revenue multiple). Additional details about 3Q11’s SaaS M&A transactions can be found in Appendix E.

Figure 34: Software M&A by Product Category

Accounting 1%

Billing & Service Provisioning2%

Business Intelligence3%

Content/Document Mgmt4%

CRM, Marketing & Sales Software 2%

Database & File Mgmt1%

Dev. Tools, IT Asset Mgmt & App. Testing

4%

Electronic Commerce2%

Electronic Design Automation1%

Engineering, PLM & CAD/CAM 4%

Enterprise Application Integration2%

Enterprise Resource Planning1%

Entertainment2%

HR & Workforce Mgmt3%

Messaging, Conferencing & Communications

2%

Multimedia, Graphics, Digital Media3%

Networking & Connectivity1%

Security5%

Storage & Systems Mgmt1%

Supply Chain Mgmt & Logistics2%

Web Analytics0.5%

Mobile18%

Education2%

Financial Services11%

Gov't / A&D1%

Healthcare7%

Legal1%

Manufacturing & Asset Mgmt2%

Other Verticals11%

Retail1%

Insurance1%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

0

10

20

30

40

50

60

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

SaaS M

&A Deals as %

of Total Software

M&A Deals

# of SaaS M

&A Transactions

SaaS Transactions SaaS as % Software

Figure 35: SaaS M&A Deals as % Total Software M&A Deals




The CRM, Marketing and Sales product category accounted for 17% of all SaaS transactions in 3Q11 (Figure 37). By contrast, on-premise CRM/Sales/Marketing software companies constituted only 2% of all on-premise software M&A transactions in 3Q11. The attractiveness of SaaS CRM to larger software companies is simply a reflection of how popular SaaS CRM has become with enterprise customers. The HR and workforce management category, which has also moved mostly to the SaaS model, accounted for 13% of all SaaS transactions in 3Q11, while on-premise HR/WFM providers comprised only 3% of all on-premise software

M&A deals in the same quarter. SaaS providers focused on Education represented 10% of all SaaS transactions in Q3, while those in the SaaS Messaging and Legal vertical categories accounted for 6% each. INTERNET M&A DEAL VOLUME AND VALUATIONS Internet M&A activity increased again in Q3 for the fifth consecutive quarter. There were 216 Internet companies acquired in 3Q11, a 9% increase over the prior quarter, and a whopping 55% jump YoY (Figure 38). By comparison, on-premise software M&A volume in the third quarter dropped 1% YoY. Internet M&A transactions now comprise nearly half the number of on-premise software M&A deals, compared to only one third in 3Q10. By far, the most active Internet M&A category was Ad Tech, with 62 transactions in the third quarter, signaling consolidation in this space is now well underway. On a YoY basis, Ad-Tech M&A deal volume has mushroomed a remarkable 182% Figure 38). Notable transactions in this product

Figure 37: SaaS M&A by Product Category

Accounting 4%

Billing & Service Provisioning

4%

BI Risk & Compliance2%

CRM, Marketing & Sales Software 17%

Dev. Tools, IT Asset Mgmt & App. Testing

4%

Electronic Commerce2%

HR & Workforce Mgmt13%

Messaging, Conferencing & Communications

6%

Multimedia, Graphics, Digital Media

2%

Security4%

Supply Chain Mgmt & Logistics

2%

Mobile4%

Education10%

Financial Services4%

Healthcare2%

Legal6%

Manufacturing & Asset Mgmt2%

Other Verticals8%

Insurance2%

Figure 36: Median SaaS M&A Valuation as a Multiple of Revenue

3.2x

3.4x3.5x

3.7x

4Q10 1Q11 2Q11 3Q11




category include ValueClick’s acquisition of Dotomi ($278.2 million); Demand Media’s acquisition of IndieClick Media Group ($14 million); Google’s acquisition of Daily Deal GmbH; comScore’s acquisition of AdXpose ($19.4 million); and Local.com’s acquisition of Screaming Media Group ($32.7 million, 13.8x TTM revenue). Local.com, faced with slow growth in 1H11 due to difficulties generating revenue from its 20 million visitors, paid a premium to enter the lucrative but highly competitive daily deals space. Digital ad agencies, seeking to supplement creative services with technology enabled services, were active buyers of Ad-Tech Internet companies in the third quarter: VivaKi acquired Big Fuel Communications; WPP Digital acquired Rockfish Interactive; and iCrossing acquired Wallaby Group.

The E-commerce Internet category accounted for 36 M&A transactions in Q3, the second highest among all Internet categories, but 35% lower than the 56 transactions reported the prior quarter. As

of the close of Q3, the E-commerce category registered 153 M&A transactions on a TTM basis, the highest among the ten Internet categories we track (Figure 38).

The Social Technologies Internet category tallied 35 acquisitions in the third quarter, following 25 deals in Q2 and 36 in Q1. Especially notable was Glam Media’s acquisition of Ning ($150 million estimate), a social networking platform that enabled consumers to quickly create social media groups around any area of common interest. Glam Media serves as a platform for 2,500 publishers who were clamoring for closer social contact with readers. Another notable Social Tech seeking to marry social media with content was KIT Digital’s acquisition of KickApps in 1Q11.

Have valuations kept pace with escalating Internet deal volume? The median Internet TTM EV/Revenue exit valuation was 2.6x in 3Q11, marking the fourth consecutive quarterly increase in exit multiple, and a remarkable comeback from 4Q10’s lackluster 1.6x median valuation (Figure 40). The increase is in part attributable to greater demand as reflected in the growing number of Internet transactions, and in part due to the growing financial strength of public Internet companies that have prospered, diversified, and amassed significant cash reserves.

1.6x1.8x

2.0x

2.6x

4Q10 1Q11 2Q11 3Q11

Category Q3 2011 Q2 2011 Q1 2011 Q4 2010 Q3 2010 Total

Social Tech. 35 25 36 23 14 133Ad Tech & Svcs 62 34 33 21 22 172eCommerce 36 56 32 29 22 175Content 29 29 26 34 26 144Video/Photos 12 5 18 12 15 62Infrastructure 21 19 16 17 14 87Gaming 6 15 7 6 10 44Search 5 8 6 12 6 37Communications 6 6 1 1 4 18Music 4 2 1 2 6 15

Total 216 199 176 157 139 887

Figure 38: Internet Deal Volume By Category

16.7%

2.3%

9.7%

28.7%1.9%

16.2%

5.6%

13.4%

2.8% 2.8%

e‐Commerce

Search

infrastructure

Ad‐Tech & Services

Music

Social Tech

Video/Photos

Content

Communications

Gaming

Figure 39: 3Q11 Internet M&A by Category

Figure 40: Median Internet M&A Valuation as a Multiple of Revenue




APPENDIX A: 3Q11 PUBLIC SOFTWARE MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Billing & Service Management 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 9.7x 10.5x 8.7x 8.0x 5.8x


Gross Prof it Margin 53.6% 47.0% 44.0% 39.9% 51.2%

EBITDA Margin 22.5% 21.9% 22.7% 22.4% 20.4%


TTM Revenue Grow th (YoY) 6.0% 10.3% 11.4% 13.1% 18.5%

TTM EBITDA Grow th (YoY) 6.4% 2.4% 12.5% 18.1% 7.7%

TTM Earnings Grow th (YoY) -5.4% 44.0% 0.9% -0.5% -5.0%

Current Ratio 2.7 2.4 2.4 2.4 2.8

Cash as Percent of Market Cap 16.3% 22.9% 21.8% 20.9% 23.6%

Enterprise Value Grow th (YoY) 33.5% 17.4% 15.1% 22.0% 5.0%

Business Intelligence 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 24.6x 29.4x 40.3x 46.2x 33.7x



EBITDA Margin 15.4% 15.5% 12.8% 10.0% 9.2%


TTM Revenue Grow th (YoY) -13.1% -6.0% -3.6% 0.4% 7.1%

TTM EBITDA Grow th (YoY) -13.1% -6.0% -3.6% 0.4% 7.1%

TTM Earnings Grow th (YoY) 47.8% 42.6% 38.2% 76.4% -5.4%

Current Ratio 1.6 1.8 1.8 2.2 2.0



Content & Document Management 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 10.0x 9.7x 11.1x 11.5x 9.8x



EBITDA Margin 26.9% 27.8% 28.1% 27.4% 26.6%




TTM Earnings Grow th (YoY) -14.6% -39.5% -47.9% -38.9% -35.4%

Current Ratio 1.7 1.7 1.3 1.2 1.2



Data Management & Integration 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 9.9x 11.0x 16.0x 14.3x 13.3x



EBITDA Margin 22.5% 22.9% 23.0% 23.2% 23.4%





Current Ratio 1.5 1.4 1.5 2.0 1.9



Development Tools & Open Source 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 8.6x 9.9x 11.4x 10.3x 6.8x



EBITDA Margin 23.9% 24.7% 25.2% 25.3% 24.7%





Current Ratio 2.2 2.4 2.7 2.8 2.7



Education & eLearning 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 7.5x 9.9x 15.6x 12.5x 11.8x



EBITDA Margin 26.7% 26.2% 28.2% 26.9% 29.1%




TTM Earnings Grow th (YoY) -70.0% 0.6% 164.0% -10.7% -6.5%

Current Ratio 1.2 1.2 0.9 1.0 1.0


Enterprise Value Grow th (YoY) -10.2% 2.8% -26.8% -19.6% -14.4%

Electronic Design Automation 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 17.8x 20.4x 20.8x 20.5x 14.6x



EBITDA Margin 8.1% 6.9% 8.2% 10.3% 10.4%

Net Income Margin -1.8% -1.7% -1.7% -1.6% -0.1%

TTM Revenue Grow th (YoY) -1.1% 4.5% 9.2% 13.2% 12.0%



Current Ratio 1.4 1.4 1.5 1.5 1.6



Engineering, PLM & CAD/CAM Software 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 15.5x 16.5x 19.2x 16.4x 12.8x



EBITDA Margin 18.5% 19.8% 19.9% 20.2% 20.3%





Current Ratio 2.0 2.0 2.2 2.2 2.2



Enterprise Resource Planning 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 9.9x 8.8x 9.2x 9.6x 8.4x



EBITDA Margin 18.5% 21.8% 21.5% 20.5% 6.3%



TTM EBITDA Grow th (YoY) 6.4% 5.8% 7.6% 0.9% -4.3%

TTM Earnings Grow th (YoY) -0.2% -1.5% -2.8% 11.0% 8.3%

Current Ratio 1.5 1.9 1.8 1.8 1.7



Financial Services Software 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 8.5x 8.8x 9.2x 9.6x 8.4x



EBITDA Margin 23.1% 23.3% 23.1% 23.1% 24.0%




TTM Earnings Grow th (YoY) -10.8% -4.0% -7.0% 8.5% 6.0%

Current Ratio 1.8 1.8 1.8 1.9 1.7


Enterprise Value Grow th (YoY) -3.1% 4.8% 13.3% 13.2% 31.3%





Healthcare 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 16.0x 15.9x 17.5x 18.7x 17.4x



EBITDA Margin 21.9% 22.3% 22.8% 23.3% 24.3%




TTM Earnings Grow th (YoY) -5.7% 1.8% -8.5% -18.1% -20.7%

Current Ratio 2.2 2.3 2.3 2.4 2.5



IT Conglomerates 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 7.3x 7.7x 7.1x 5.9x 6.0x



EBITDA Margin 28.0% 27.7% 26.1% 26.0% 25.8%





Current Ratio 2.1 2.3 2.5 2.8 2.6


Enterprise Value Grow th (YoY) 1.8% -13.4% -11.3% -17.4% -1.2%

Mobile Solutions/Content 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 10.4x 13.3x 22.2x 16.6x 15.6x



EBITDA Margin 19.4% 13.7% 15.2% 11.9% 9.3%

Net Income Margin 2.1% 2.1% 2.3% 2.1% -1.6%


TTM EBITDA Grow th (YoY) 15.1% 26.1% 20.1% -3.0% -1.9%


Current Ratio 2.5 3.0 3.2 3.1 2.7


Enterprise Value Grow th (YoY) -10.0% 20.4% 28.7% 17.7% 7.2%

Multimedia, Graphics, Digital Media 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 11.3x 17.1x 25.2x 26.5x 17.9x



EBITDA Margin 21.7% 21.3% 20.6% 20.1% 21.1%





Current Ratio 2.4 2.3 2.3 2.4 2.7


Enterprise Value Grow th (YoY) 13.3% 19.9% 23.5% 22.4% -4.8%

Networking & Network Perf Mgmt 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 15.3x 18.8x 28.0x 24.7x 18.6x



EBITDA Margin 23.4% 22.8% 23.1% 24.7% 22.6%





Current Ratio 2.2 2.2 2.6 2.5 2.5



Security 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 12.9x 14.0x 13.8x 13.9x 11.0x



EBITDA Margin 21.0% 22.5% 21.4% 22.1% 20.9%





Current Ratio 2.2 2.4 2.4 2.5 2.5


Enterprise Value Grow th (YoY) 7.3% 7.6% -0.4% 10.9% 14.0%

Storage & Systems Management 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 9.5x 12.0x 12.1x 11.8x 9.3x



EBITDA Margin 22.8% 22.6% 21.7% 21.8% 23.1%





Current Ratio 1.5 1.6 1.6 1.5 1.4



Supply Chain Management & Logistics 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 9.3x 10.8x 10.8x 11.5x 10.7x



EBITDA Margin 11.2% 11.2% 11.0% 11.1% 9.9%





Current Ratio 2.0 2.0 2.2 2.1 2.1



Vertical - Finance 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 11.6x 12.9x 13.6x 13.3x 11.1x



EBITDA Margin 30.8% 31.0% 31.3% 31.6% 31.7%





Current Ratio 1.1 1.1 1.2 1.2 1.1



Vertical - Other 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 12.3x 14.2x 14.3x 14.0x 11.9x



EBITDA Margin 18.3% 18.1% 18.4% 18.8% 18.6%





Current Ratio 1.1 1.1 1.2 1.3 1.4







Video Games 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 12.0x 10.5x 8.3x 10.9x 8.3x



EBITDA Margin 2.4% 5.9% 9.3% 9.3% 8.7%

Net Income Margin -3.8% -4.0% -3.4% -3.1% 3.6%

TTM Revenue Grow th (YoY) -8.8% -5.8% -1.6% -1.0% 0.1%



Current Ratio 2.6 2.2 2.3 2.3 2.6


Enterprise Value Grow th (YoY) -17.5% -3.1% 15.5% 25.6% 48.3%

Workforce & Service Management 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 16.2x 20.0x 17.3x 17.1x 13.6x



EBITDA Margin 10.8% 11.8% 15.5% 16.1% 16.2%




TTM Earnings Grow th (YoY) 1.6% -41.0% -24.7% -26.6% -17.8%

Current Ratio 1.2 1.2 1.3 1.2 1.4






APPENDIX B: 3Q11 PUBLIC INTERNET MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY

Ad Tech & Lead Generation 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 24.9x 18.8x 14.5x 11.2x 13.0x



EBITDA Margin 13.0% 10.3% 9.1% 10.1% 10.5%





Current Ratio 3.4 3.0 2.9 3.1 2.5



Infrastructure 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 12.4x 16.4x 19.1x 19.2x 11.8x



EBITDA Margin 15.5% 13.2% 13.1% 14.5% 16.2%





Current Ratio 2.1 2.0 2.1 2.1 2.2



Media 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 11.6x 14.4x 14.1x 13.1x 10.8x



EBITDA Margin 14.7% 14.8% 14.9% 15.3% 15.2%

Net Income Margin -0.7% -0.6% -0.6% -0.6% 4.1%




Current Ratio 2.0 2.3 2.2 3.1 2.6


Enterprise Value Grow th (YoY) -9.1% 1.6% 26.2% 4.9% -7.8%

Retail 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 10.6x 22.4x 12.7x 12.6x 13.9x



EBITDA Margin 8.5% 8.6% 8.6% 9.0% 9.4%




TTM Earnings Grow th (YoY) -33.7% -31.2% -4.7% -1.4% 17.6%

Current Ratio 1.6 1.5 2.1 2.3 2.3



Search 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 8.5x 8.9x 9.6x 10.0x 11.2x



EBITDA Margin 10.4% 12.5% 12.1% 11.3% 12.2%





Current Ratio 3.8 3.6 4.0 3.9 3.7



Services 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 12.9x 14.6x 16.5x 22.0x 30.1x



EBITDA Margin 15.4% 16.6% 18.0% 17.0% 16.8%





Current Ratio 3.0 3.0 2.3 2.4 3.1



Travel 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 12.3x 24.8x 26.3x 32.5x 23.4x



EBITDA Margin 19.3% 20.5% 22.6% 24.0% 23.8%




TTM Earnings Grow th (YoY) -101.9% -39.3% -10.4% -10.8% 2.8%

Current Ratio 1.4 2.4 2.4 1.6 2.0



Video Games 3Q10 4Q10 1Q11 2Q11 3Q11


EV/EBITDA 6.2x 6.6x 6.9x 10.0x 7.1x



EBITDA Margin 52.2% 50.6% 50.4% 43.4% 49.7%




TTM Earnings Grow th (YoY) -13.2% 2.3% -12.3% 2.6% 3.6%

Current Ratio 3.9 3.6 4.1 4.2 2.8


Enterprise Value Grow th (YoY) -25.2% -14.1% -5.0% 33.5% 20.3%




APPENDIX C: 3Q11 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS

Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Growth

Hew lett-Packard Company Autonomy Corp. plc (LSE:AU.) $11,036,800,000 $10,300,590,000 11.1x 25.2x 12.2%

PLATO Learning, Inc. Renaissance Learning Inc. (NasdaqGS:RLRN) $493,880,000 $484,570,000 3.6x 12.3x 6.8%

ACI Worldw ide S1 Corporation (NasdaqGS:SONE) $510,390,000 $438,670,000 1.9x 35.8x 2.1%

BServ, Inc. Fundtech Ltd. (NasdaqGS:FNDT) $382,410,000 $308,260,000 2.0x 15.5x 15.1%

HarbourVest Partners; Nova Capital Parseq plc (AIM:PSQ) $43,170,000 $60,210,000 2.3x 9.0x n/a

Francisco Partners Management LLC eFront SA (ENXTPA:ALEFT) $55,740,000 $57,240,000 1.5x 12.8x n/a

Better Capital Limited Clarity Commerce Solutions plc (AIM:CCS) $14,710,000 $14,740,000 0.5x - 4.1%




APPENDIX D: 3Q11 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS

Buyer SellerPurchase

PriceEnterprise

ValueSeller

Revenue EV/Rev

AFS Technologies Ross Computer Systems - - - -

Synectics Group, Inc. and Answ ers Systems - - - -

Allocate Softw are RosterOn $3,210,000 $3,210,000 $3,210,000 1.0x

Zircadian $11,400,000 $9,770,000 $4,070,800 2.4x

Augme Technologies HipCricket $57,850,000 $57,420,000 $8,790,000 6.5x

JAGTAG $5,550,000 $5,550,000 $1,300,000 4.3x

Bitzio Bitzio $2,750,000 $2,750,000 - -

Thinking Drone $2,580,000 $2,580,000 - -

Callidus Softw are iCentera $7,900,000 $7,900,000 - -

Rapid Intake - - - -

Cisco Systems Axiom Systems Limited, Axioss Softw are $30,650,000 $30,650,000 - -

TaskDock - - - -

CVC Capital Partners ConvergEx - - - -

Raet B.V. - - - -

Electronic Arts Bight Interactive - - - -

PopCap Games $1,250,000,000 $1,250,000,000 $167,000,000 7.5x

GB Group Advanced Checking Services $8,170,000 $8,170,000 - -

Data Discoveries $974,000 $974,000 -

Glu Mobile Blammo Games $21,870,000 $21,870,000 - -

Griptonite $68,040,000 $57,840,000 - -

Google Punchd Labs - - - -

Zave Netw orks - - - -

HaiVision Systems Kulabyte - - - -

MontiVision Imaging Technologies - - - -

Intel CoFluent Design SA - - - -

Telmap $300,000,000 $300,000,000 - -

*Revenue estimate




APPENDIX D: 3Q11 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS (CONTINUED)

Buyer SellerPurchase

PriceEnterprise

ValueSeller

Revenue EV/Rev

Nuance Communications Loquendo - $75,460,000 - -

Webmedx - - - -

Open Text Global 360 $260,000,000 $260,000,000 $89,965,398 2.9x

Operitel - - - -

Oracle Corporation GoAhead Softw are - - - -

InQuira* - $230,000,000 $45,000,000 5.1x

Ksplice - - - -

Salesforce.com Assistly $50,000,000 - - -

Navajo Systems - - - -

SAP Crossgate AG - - - -

Right Hemisphere - - - -

Sirius Corporation Chameleon Technology $5,330,000 $5,330,000 $3,200,000 1.7x

Pinnacle Softw are $1,070,000 $1,070,000 $1,600,000 0.7x

The Riverside Company Centiv Services - - - -

TRANSPOREON - - - -

Thomson Reuters Corporation IGD Systems - - - -

Lanw orth - - - -

Sistemas Bejerman - - - -

Solcara $4,020,000 $4,020,000 $1,200,000 3.3x

Unit 4 N.V. Exie $8,920,000 $8,920,000 - -

Unit4 Prosoft - - - -

Verint Systems GMT $42,000,000 $42,000,000 - -

Vovici $75,400,000 $75,400,000 - -

VIP Tone EdPay - - - -

Global Grid for Learning - - - -

Vista Equity Partners Sage Softw are Healthcare $314,680,000 $314,680,000 $240,200,000 1.3x

Thomson Reuters, Trade and Risk Management Business - - - -

*Revenue estimate




APPENDIX E: 3Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE INDUSTRY MEGA-DEALS

Date Buyer Seller Purchase Price Enterprise Value EV/Rev EV/EBITDATTM Rev Grow th

08/18/2011 Hew lett-Packard Company Autonomy Corp. plc (LSE:AU.) $11,036,800,000 $10,300,590,000 11.1x 25.2x 12.2%

08/04/2011 Datatel, Inc. SunGard Higher Education, Inc. $1,775,000,000 $1,775,000,000 - - -07/11/2011 Electronic Arts Inc. PopCap Games, Inc. $1,250,000,000 $1,250,000,000 7.5x - -07/11/2011 NCR Corp. Radiant Systems Inc. $1,241,720,000 $1,139,110,000 3.1x 20.7x -07/05/2011 Western Union Co. Travelex Global Business Payments, Inc. $975,300,000 $975,300,000 4.3x 13.6x -08/05/2011 Welsh, Carson, Anderson & Stow e Triple Point Technology, Inc. $500,000,000 $500,000,000 - - -07/26/2011 IHS Inc. Seismic Micro-Technology, Inc. $500,000,000 $500,000,000 - - -




APPENDIX F: 3Q11 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS

Date Buyer SellerEnterprise

ValueSeller

Revenue EV/Rev

09/29/2011 Salesforce.com Navajo Systems - - -

09/28/2011 Vantage Media BrokersWeb - - -

09/26/2011 Automatic Data Processing Asparity Decision Solutions - - -

09/25/2011 AA DriveTech Intelligent Data Systems - - -

09/23/2011 Callidus Softw are Rapid Intake - - -

09/22/2011 Watchdog Dataview - - -

09/21/2011 Salesforce.com Assistly - - -

09/21/2011 Infomedia Different Aspect Softw are $5,150,000 - -

09/19/2011 NICE Systems The Fizzback Group* $80,000,000 $20,000,000 4.0x

09/19/2011 GTCR Bserv - - -

09/15/2011 Pearson Connections Education $400,000,000 - -

09/14/2011 Intech Hotel Solutions Magic Rooms Solutions India - - -

09/13/2011 ExactTarget Frontier Digital Business - - -

09/11/2011 8x8 Contactual $27,500,000 $8,300,000 3.3x

09/08/2011 VIP Tone EdPay - - -

09/08/2011 CVC Capital Partners Raet B.V. - - -

09/08/2011 CPA Global Ipendo - - -

09/08/2011 iControl ESI Firefly Dataw orks - - -

09/07/2011 ConnectEdu EducationDynamics, Enrollment/Retention Division - - -

09/07/2011 BroadSoft ilinc Communications $3,470,000 - -

09/02/2011 The Riverside Company Centiv Services - - -

08/26/2011 Connelly, Carlisle, Fields & Nichols Triton HR - - -

08/26/2011 GVA Acuity Acuity Management Solutions - - -

08/24/2011 Xero Limited Paycycle Australia $1,630,000 - -

08/23/2011 Engine Yard Orchestra Platform - - -

08/17/2011 R.R. Donnelley & Sons LibreDigital - - -

08/15/2011 Drake Enterprises Copanion - - -

08/12/2011 Premiere Global Services V-cube - - -

08/09/2011 Nielsen Holdings Marketing Analytics - - -

08/08/2011 Great Hill Partners Plimus $115,000,000 - -

08/03/2011 Augme Technologies HipCricket $57,420,000 $8,790,000 6.5x

08/02/2011 Questback AS Globalpark - - -

07/29/2011 Transcend Services Salar $11,000,000 $4,000,000 2.8x

07/28/2011 Oracle InQuira* $230,000,000 $45,000,000 5.1x

07/28/2011 Arbitron Arbitron Mobile $23,700,000 $2,600,000 8.9x

07/27/2011 Act-On Softw are Marketbright - - -

07/27/2011 VIP Tone Global Grid for Learning - - -

07/26/2011 CCH SpeedTax - - -

07/26/2011 Retalix MTXEPS $24,950,000 - -

07/25/2011 Ivrnet Gymsmart - - -

07/21/2011 Oracle Ksplice - - -

07/19/2011 Verint Systems Vovici $75,400,000 - -

07/13/2011 The Riverside Company TRANSPOREON - - -

07/11/2011 WhatCounts Blue Sky Factory - - -

07/08/2011 Planon Site Alpha SA - - -

07/05/2011 Callidus Softw are iCentera $7,900,000 - -

07/04/2011 Thomson Reuters Solcara $4,020,000 $1,200,000 3.3x

07/01/2011 Thomson Reuters IGD Systems - - -

*Revenue Estimate




APPENDIX G: 3Q11 MERGERS AND ACQUISITIONS – DEAL INSIGHT Hewlett-Packard (NYSE:HPQ) acquires Autonomy (LSE:AU) Category: Content Management Purchase Price: $10,300,590,000 EV

Seller Revenue (TTM): $931,100,000 Seller EBITDA (TTM): $409,190,000 Revenue Multiple: (TTM): 11.1xEV

EBITDA Multiple (TTM): 25.2xEV Payment terms: Cash SEG’s Perspective: Technology giant Hewlett-Packard, acquires Autonomy, Britain’s highest publicly valued software provider. With Gartner estimating enterprise content growth at a CAGR of 50-60%, the acquisition brings HP market leading products to analyze structured and unstructured enterprise data, and continues HP’s desired shift away from increasingly commoditized hardware and towards higher margin software and services. Additionally, Autonomy’s SaaS e-discovery and content archiving solutions are highly complementary to HP’s infrastructure management products. HP’s $42.02 per share tender offer to acquire Autonomy represents a 59.3% premium over Autonomy’s pre-announcement average 30 days closing stock price. NCR Corp. (NYSE:NCR) acquires Radiant Systems (NASDAQ:RADS) Category: Point-of-Sale Systems Purchase Price: $1,139,110,000EV Seller Revenue (TTM): $367,220,000 Seller EBITDA (TTM): $55,100,000 Revenue Multiple (TTM): 3.1xEV EBITDA Multiple (TTM): 20.7xEV Payment Terms: Cash SEG’s Perspective: NCR, a provider of financial services oriented self-service technologies, acquires Radiant Systems, a leading provider of point-of-sale systems and ancillary solutions for the hospitality and retail sectors. The acquisition provides NCR a strong presence in the hospitality and specialty retail markets, provides down-market penetration via Radiant’s high growth SMB SaaS solution suite, and expands NCR’s addressable market by approximately $8 billion. Furthermore, Radiant will leverage NCR’s strong international channel presence for growth, as Radiant currently garners only 13% international revenue versus NCR’s international sales of 55%. NCR’s $28 per share tender offer to acquire Radiant Systems represents a 36.6 % premium over Radiant’s pre-announcement average 30 days closing stock price.




APPENDIX G: 3Q11 MERGERS AND ACQUISITIONS – DEAL INSIGHT (CONTINUED) NICE Systems (TASE:NICE) acquires The Fizzback Group Category: Customer Experience Management Purchase Price: $80,000,000 Seller Revenue (estimate): $20,000,000 Revenue Multiple (estimate): 4.0x Payment Terms: Cash SEG’s Perspective: Nice Systems, a provider of enterprise customer service, risk and security software and hardware, acquires The Fizzback Group, a provider of SaaS-based multi-channel natural language analytics solutions for customer experience and engagement management. The acquisition bolsters NICE Systems’ customer experience management offering by adding natural language processing of unstructured customer data to enhance customer experiences and interactions at the point of engagement. The acquisition follows on the heels of NICE Systems’ competitor Verint announcing the purchase of customer experience management vendor, Vovici ($75 million), in July 2011, and continues a trend of strategic acquisitions in the social and CRM unstructured data analytics sectors in 2011. Open Text (NASDAQ:OTEX) acquires Global 360 Category: Business Process Management Purchase Price: $260,000,000 Seller Revenue (estimate): $90,000,000 Revenue Multiple (estimate): 2.9x Payment Terms: Cash SEG’s Perspective: Enterprise software provider, Open Text, acquires Global 360, a leading provider of business process management (BPM) applications. With the acquisition, Open Text strengthens its position as the dominant provider of Microsoft-based business process management suites, a highly fragmented market with many low-cost SharePoint providers, and shores up the Company’s position against IBM and EMC in the growing BPM segment. Global 360 also provides Open Text with a stronger public sector presence via its well-regarded case management products, an industry segment Open Text strengthened earlier this year via its acquisition of Metastorm. Global 360 marks Open Text’s third BPM acquisition in recent years, following purchases of Metastorm ($182 million, 2.4x TTM revenue estimate) in February 2011 and Captaris ($109.5EV million, 1.0xEV TTM revenue) in September 2008.




APPENDIX H: SELECT 3Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS Date Buyer Seller

09/30/2011 Sunquest Information Systems, Inc. Elekta AB, Anatomic Pathology Information System

09/30/2011 Exec-U-Store LLC Datafiche

09/29/2011 Project Oda, Inc. Watchpoints, Inc.

09/29/2011 Visi Inc PLC (DB:VZJ) VIA3 Corporation

09/29/2011 Ultra Electronics Holdings plc (LSE:ULE) AEP Netw orks, Inc.

09/29/2011 Intel Corporation (NasdaqGS:INTC) Telmap, Ltd.

09/29/2011 Red Gate Softw are Ltd. Cocoa Controls

09/28/2011 Greenw ay Medical Technologies, Inc. CySolutions, Inc.

09/28/2011 Unity Technologies SF Unity Canada

09/28/2011 eCommerce Industries, Inc. Digital Gatew ay Inc.

09/28/2011 Meru Netw orks, Inc. (NasdaqGM:MERU) Identity Netw orks Ltd.

09/28/2011 VMw are, Inc. (NYSE:VMW) PacketMotion, Inc.

09/28/2011 WWB Corporation RealCom, Inc. (TSE:3856)

09/27/2011 GBS Enterprises Incorporated (OTCBB:GBSX) Synaptris, Inc.

09/27/2011 China ITS (Holdings) Co., Ltd. (SEHK:1900) eSOON Holdings Corp.

09/27/2011 IMImobile Pvt Ltd. Skinkers Limited

09/27/2011 California Regional Multiple Listing Service, Inc. SoCalMLS Inc.

09/26/2011 IT Mídia S.A. Catálogo Hospitalar

09/26/2011 vw d Vereinigte Wirtschaftsdienste AG (XTRA:BSJ) Il Sole 24 ORE S.p.A., Business Unit Finanza

09/26/2011 iPractice Group Inc. Doctors Access, Inc.

09/23/2011 FFastf ill plc (AIM:FFA) Spread Intelligence LLP

09/23/2011 AT&T Corp. Superclick, Inc. (OTCBB:SPCK)

09/23/2011 HarbourVest Partners, LLC; Nova Capital Management Ltd. Parseq plc (AIM:PSQ)

09/23/2011 Mercer LLC Censeo Corporation

09/23/2011 SNL Financial LC Highline Data LLC

09/23/2011 zipLogix, Inc. Realfast, Inc.

09/23/2011 Martin Daw es Group Martin Daw es Systems Limited

09/22/2011 Velti Plc (NasdaqGS:VELT) Air2Web, Inc.

09/22/2011 Vista Equity Partners Sage Softw are Healthcare, Inc.

09/22/2011 PulsePoint, Inc. Datran Media Corp.

09/22/2011 Keynectis S.A. OpenTrust S.A

09/22/2011 Oracle Corporation (NasdaqGS:ORCL) GoAhead Softw are, Inc.

09/22/2011 QuoteMedia Inc. (OTCPK:QMCI) Stockgroup Media Inc., Mobile Operations

09/21/2011 U1 Game Digital Entertainment (Beijing) Co., Ltd. Tw o Studios of iOS

09/21/2011 Wolfson Microelectronics plc (LSE:WLF) Dynamic Hearing Pty Ltd.

09/21/2011 Tagged Inc. WeGame.com, Inc.

09/21/2011 Cardtronics USA, Inc. LocatorSearch, LLC

09/21/2011 Cassiopae SAS Field Solutions Limited

09/21/2011 AVAST Softw are a.s. ITAgents interactive softw are solutions GmbH

09/21/2011 Siemens AG (DB:SIE) Active SA




APPENDIX H: SELECT 3Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED)

Date Buyer Seller09/21/2011 Unit 4 N.V. (ENXTAM:UNIT4) Unit4 Prosoft Pte Ltd.

09/20/2011 Warburg Pincus LLC; Vestar Capital Partners International Asset Systems USA Limited

09/20/2011 PFU Limited ABBYY Group

09/20/2011 Change.Org, Inc. The Actuable Netw ork SL

09/20/2011 Donovan Data Systems, Inc. MediaBank, LLC

09/20/2011 Litéra Corp. CitationWare LLC

09/20/2011 SAP AG (DB:SAP) Crossgate AG

09/19/2011 Geodata AS GIS partner AS

09/19/2011 f1 colour limited st8us group limited

09/19/2011 EMSystems, LLC Collaborative Fusion, Inc.

09/19/2011 Soprano Oyj (HLSE:SNO1V) Pipfrog AS

09/19/2011 Electronics for Imaging, Inc. (NasdaqGS:EFII) Prism Group Holdings Pty Ltd

09/16/2011 Capita Secure Information Systems Cedar HR Softw are Limited

09/16/2011 Linx Sistemas E Consultoria Ltda. Spress Informática S/A

09/16/2011 Global Geophysical Services, Inc. (NYSE:GGS) Sensor Geophysical Ltd.

09/15/2011 LINK Mobility AS Aspiro Mobile Solutions AS

09/15/2011 Silverback Enterprise Group Inc. Visionael Corporation

09/14/2011 Bitzio, Inc. (OTCBB:BTZO) Thinking Drone, Inc.

09/14/2011 Smartlogic Semaphore Limited SchemaLogic, Inc.

09/14/2011 FXDD Malta Ltd. Frontier FX Limited

09/14/2011 WebTrends Corporation Reinvigorate

09/13/2011 Verint Systems Inc. (NasdaqGS:VRNT) GMT Corporation

09/13/2011 Bio Data, Inc. LabLife Softw are, Inc.

09/13/2011 Revolution Capital Group, LLC CAP XG LLC

09/12/2011 Bigpoint GmbH 49Games Gesellschaft für Softw areentw icklung

09/12/2011 Tradar Limited Odyssey Financial Technologies S.A., InvestmentManager

09/12/2011 Dena Co. Ltd. (TSE:2432) Punch Entertainment (Vietnam), Inc.

09/09/2011 Nepro Japan Co. Ltd. (JASDAQ:9421) MOBILE & GAMESTUDIO Inc.

09/09/2011 eVestment Alliance, LLC Channel Capital Group, Inc.

09/09/2011 Arena Interactive oy Steam Communications Oy

09/09/2011 AFS Technologies, Inc. Ross Computer Systems, Inc.

09/08/2011 Pendrell Corporation (NasdaqGM:PCO) ContentGuard, Inc.

09/08/2011 Betgenius Limited Boolabus Limited

09/08/2011 MarkitSERV LLC Logicscope Limited

09/08/2011 Hellman & Friedman LLC OpenLink Financial, Inc.

09/08/2011 Thought Equity Motion, Inc. Panvidea, Inc.

09/08/2011 Inbaltech Ltd. BackupMyTree LLC

09/08/2011 Adobe Systems Inc. (NasdaqGS:ADBE) Iridas, Certain Assets

09/08/2011 Imtech NV (ENXTAM:IM) Techsol Marine, Inc.

09/07/2011 Attunity, Inc. RepliWeb, Inc.





Date Buyer Seller09/07/2011 Audatex North America, Inc. See Progress, Inc.

09/07/2011 Gild Coderloop Inc.

09/07/2011 Vostu, Ltd. MP Game Studio

09/06/2011 International Oncology Netw ork IntrinsiQ, LLC

09/06/2011 Educational Testing Service, Inc. Edusoft Ltd.

09/06/2011 MSC.Softw are Corporation Free Field Technologies S.A.

09/06/2011 CareerBuilder Inc. JobScout24 GmbH

09/06/2011 Confirmit ASA Techneos Systems Inc.

09/06/2011 Parametric Technology Corporation (NasdaqGS:PMTC) 4CS Solutions, Inc.

09/06/2011 SAP AG (DB:SAP) Right Hemisphere Limited

09/03/2011 AFORE Solutions, Inc. Comsecw are Inc.

09/02/2011 Ellie Mae, Inc. (AMEX:ELLI) Del Mar Datatrac, Inc.

09/02/2011 Law son Softw are Americas, Inc. Approva Corporation

09/02/2011 Ascentium Corporation Cactus Commerce Inc.

09/02/2011 Visualization Sciences Group, Inc. Noesis

09/02/2011 Fynske Medier P/S Woerk ApS

09/02/2011 Google Inc. (NasdaqGS:GOOG) Zave Netw orks, Inc.

09/01/2011 International Business Machines Corp. (NYSE:IBM) Algorithmics, Inc.

09/01/2011 All Covered, Inc. LAN Solutions, Inc.

09/01/2011 UNICOM Systems, Inc. illustro Systems International, LLC

08/31/2011 Backs Group Inc. (JASDAQ:4306) Cross Concept Corporation

08/31/2011 SMA Alliance, Inc. (OTCPK:SMAA.D) USAutoplex.com

08/31/2011 Better Capital Limited (AIM:BCAP) Clarity Commerce Solutions plc (AIM:CCS)

08/31/2011 DiCentral Corporation Emanio, Inc., Trading Partner and Unite!

08/31/2011 BEWA DeLaagsteRekening B.V.

08/31/2011 Core Gaming Limited Betlow Limited

08/30/2011 DG FastChannel, Inc. (NasdaqGS:DGIT) chors GmbH And EyeWonder, Inc.

08/30/2011 Prognosis Health Information Systems LLC Creative Healthcare Systems Inc.

08/30/2011 Cable New s Netw ork LP, LLLP Zite, Inc.

08/30/2011 TAKE 5 SOLUTIONS, LLC. Digital Reach Group Limited

08/30/2011 TIBCO Softw are Inc. (NasdaqGS:TIBX) Nimbus Partners Limited

08/30/2011 Intel Corporation (NasdaqGS:INTC) CoFluent Design SA

08/29/2011 The Limerock Group LLC iGrafx, Inc.

08/29/2011 Lokion, Inc. Resolute Games & Apps

08/29/2011 PennWell Corporation eMarket Softw are, Inc.

08/26/2011 Calypto Design Systems, Inc. Mentor Graphics Corporation, Catapult C Synthesis Tool

08/26/2011 General Dynamics C4 Systems, Inc. Innovative Security Systems, Inc.

08/26/2011 Xceedium, Inc. Irdeto B.V., Cloakw are Passw ord Management Business

08/25/2011 Autodesk, Inc. (NasdaqGS:ADSK) NUMENUS GmbH

08/25/2011 State Street Corp. (NYSE:STT) Digital Vega FX Ltd.





Date Buyer Seller08/24/2011 LMS International NV SAMTECH S.A.

08/24/2011 CityPockets Inc. DealBurner, Inc.

08/24/2011 Millennium Healthcare, Inc. (OTCPK:MHCC) Premier Technology Resources, LLC

08/23/2011 Canto, Inc. Vitras GmbH

08/23/2011 Vitec Multimedia Assistance Technique, Defense and Security Business

08/23/2011 BinBit S.A de C.V Forest Media International PT

08/22/2011 PLATO Learning, Inc. Renaissance Learning Inc. (NasdaqGS:RLRN)

08/22/2011 Banc of America Strategic Investments Corporation Tora Trading Services Ltd.

08/22/2011 New Mountain Capital, LLC SNL Financial LC

08/22/2011 NYSE Technologies, Inc. Metabit Co Ltd.

08/22/2011 Ignite Health LLC Syndicated Methods, Inc.

08/22/2011 ADERANT Holdings, Inc. CompuLaw LLC and Client Profiles, Inc.

08/21/2011 Bain Capital, LLC MYOB Limited

08/21/2011 Thomson Reuters Corporation (TSX:TRI) Sistemas Bejerman SA

08/21/2011 Skype Global S.à r.l. GroupMe, Inc.

08/19/2011 AFS Technologies, Inc. Synectics Group, Inc. and Answ ers Systems Inc.

08/19/2011 SuperBox, Inc. (OTCPK:SBOX) Novamira Corp.

08/19/2011 Cisco Systems, Inc. (NasdaqGS:CSCO) TaskDock, Inc.

08/18/2011 Hew lett-Packard Company (NYSE:HPQ) Autonomy Corp. plc (LSE:AU.)

08/18/2011 Autologue Computer Systems, Inc. SBC Solutions, Inc

08/17/2011 Gimmal Group, Inc. ERP-Link Corporation

08/17/2011 GasthuisZusters Antw erpen CellCura ART Lab Solution

08/17/2011 Onsoft Computer Systems AS Emisoft AS

08/16/2011 CSDC Systems Inc. Privasoft Corp.

08/16/2011 AXIOM Systems, Inc. Ivertexo Internet Solutions Inc.

08/16/2011 ESI Group SA (ENXTPA:ESI) ICIDO GmbH

08/15/2011 World Energy Solutions, Inc. (NasdaqCM:XWES) Co-eXprise, Inc., Energy Procurement Business

08/15/2011 Apollo Group Inc. (NasdaqGS:APOL) Carnegie Learning, Inc.

08/15/2011 iEnvision Technology Inc. Geller Data Solutions, Inc.

08/15/2011 Deloitte Consulting Intrasphere Technologies, Inc.

08/15/2011 Group Commerce Inc. Socialight, Inc.

08/15/2011 Digital Chocolate, Inc. Sandlot Games Corporation

08/15/2011 Electronic Arts Inc. (NasdaqGS:ERTS) Bight Interactive Inc.

08/14/2011 RJT Compuquest, Inc. Kogent Corporation, Canadian Operations

08/13/2011 Nuance Communications, Inc. (NasdaqGS:NUAN) Loquendo S.p.A.

08/12/2011 Prophecy International Holdings Ltd. (ASX:PRO) InterSect Alliance Pty Ltd.

08/12/2011 Allocate Softw are plc. (AIM:ALL) Zircadian Ltd.

08/11/2011 Boeing Integrated Defense Systems, Inc. Solutions Made Simple, Inc

08/10/2011 BServ, Inc. Fundtech Ltd. (NasdaqGS:FNDT)

08/10/2011 Huaw ei Technologies Co., Ltd. International Turnkey Systems, Business Support Division





Date Buyer Seller08/10/2011 MIH Allegro B.V. NetDirect s.r.o.

08/10/2011 Momentum Advanced Solutions Inc. Novator Systems Ltd., Certain Strategic Assets

08/10/2011 Terremark Worldw ide, Inc. CloudSw itch, Inc.

08/09/2011 Cisco Systems, Inc. (NasdaqGS:CSCO) Axiom Systems Limited, Axioss Softw are

08/09/2011 MWI Veterinary Supply Co. Micro Beef Technologies, Ltd.

08/09/2011 Schneider Electric S.A. (ENXTPA:SU) 7-Technologies A/S

08/08/2011 Pansoft Company Limited (NasdaqCM:PSOF) Hefei Langji Technology Co., Ltd.

08/08/2011 Wave Systems Corp. (NasdaqCM:WAVX) Safend Ltd.

08/08/2011 Francisco Partners Management LLC eFront SA (ENXTPA:ALEFT)

08/08/2011 Symphony Corporation The Janis Group, Inc.

08/08/2011 Telekinesys Research Limited Trinigy Gmbh

08/08/2011 WebTrends Corporation Reinvigorate

08/08/2011 Silicon Graphics International Corp. (NasdaqGS:SGI) SGI OpenFOAM

08/08/2011 Baker Hughes Incorporated (NYSE:BHI) Verdande Energy AS

08/05/2011 NCC Group plc. (LSE:NCC) Axzona Ltd.

08/05/2011 Welsh, Carson, Anderson & Stow e Triple Point Technology, Inc.

08/05/2011 CCH New Zealand Limited Business Fitness NZ Limited

08/05/2011 Intergraph Corporation Augusta Systems, Inc.

08/05/2011 PREMIER Biosoft International, Inc. Redasoft Corporation

08/05/2011 Platinum Equity, LLC Quark, Inc.

08/05/2011 TriTech Softw are Systems Inc. VisionAIR, Inc.

08/05/2011 TMX Group Inc. (TSX:X) TMX Atrium

08/05/2011 OPT, Inc. (JASDAQ:2389) MCN Asia Holdings,Pte. Ltd.

08/04/2011 Datatel, Inc. SunGard Higher Education, Inc.

08/04/2011 Abidance Consulting Corporation Fortech Softw are Consulting, Inc.

08/04/2011 In-Touch Insight Systems Inc. Service Intelligence, Inc.

08/04/2011 ai-one, Inc. Auto-Semantics

08/04/2011 TransVoyant LLC ObjectFX Corporation

08/04/2011 Trubiquity, Inc. ECbridges, Inc.

08/03/2011 Broadridge Securities Processing Solutions, Inc. Paladyne Systems, Inc.

08/03/2011 Vista Equity Partners Thomson Reuters, Trade and Risk Management Business

08/03/2011 Red Bee Media Limited TV Genius Ltd.

08/03/2011 Galaxy4Gamers LLC 1337pw n

08/03/2011 SaveDaily, Inc. (OTCBB:SAVY) Nine Mile Softw are, Inc.

08/02/2011 Market Leader, Inc. (NasdaqGS:LEDR) SharperAgent Inc.

08/02/2011 Glu Mobile, Inc. (NasdaqGM:GLUU) Griptonite Inc.

08/02/2011 Compact Information Systems, Inc. AccuData Holdings, Inc.

08/02/2011 Topcon Positioning Systems, Inc. AGCO, SGIS Agronomic Desktop Softw are Business

08/02/2011 Sony Computer Entertainment Worldw ide Studios Sucker Punch Productions, L.L.C.

08/02/2011 InMobi ChipIn, Inc.





Date Buyer Seller08/02/2011 Multi Brasil S/A Ofertas X

08/01/2011 InvestorFirst Limited (ASX:INQ) MarketsPlus Holdings Pty Ltd

08/01/2011 Dillistone Group Plc (AIM:DSG) Woodcote Softw are Limited

08/01/2011 Beijing Shiji Information Technology, Co. Shanghai Bestech Softw are Co., Ltd.

08/01/2011 Digital Barriers plc (AIM:DGB) Keeneo SAS

08/01/2011 HTC America Inc. Dashw ire, Inc.

08/01/2011 Glu Mobile, Inc. (NasdaqGM:GLUU) Blammo Games Inc.

08/01/2011 The Carlyle Group LP ITRS limited

08/01/2011 Globant, Inc. Nextive

08/01/2011 YapStone, Inc. PropertyBridge, LLC

08/01/2011 LGS Global Ltd (BSE:532368) Ybrant Digital Limited

08/01/2011 EMC Corporation (NYSE:EMC) Asankya, Inc.

08/01/2011 Mphasis Limited (BSE:526299) Wyde Corporation

07/31/2011 GE Healthcare Ltd. SerphyDose SARL

07/29/2011 RealPage, Inc. (NasdaqGS:RP) Senior-Living.com, Inc.

07/29/2011 Nimsoft, Inc. Watchmouse B.V.

07/29/2011 Bechtle AG (XTRA:BC8) HanseVision GmbH

07/29/2011 Crealogix Holding AG (SWX:CLXN) Cordys Deutschland AG

07/29/2011 Thomson Reuters Corporation (TSX:TRI) Lanw orth, Inc.

07/28/2011 GB Group plc (AIM:GBG) Advanced Checking Services Limited

07/28/2011 Docu Group Sw eden AB Norge Bygges AS and Sverige Bygger AB

07/28/2011 Intermolecular, Inc. Symyx Technologies Inc., Certain Assets

07/28/2011 Rakuten Europe s.a.r.l Tradoria GmbH

07/28/2011 Sopra Group (ENXTPA:SOP) Delta-informatique SA

07/27/2011 Vringo, Inc. (AMEX:VRNG) Zlango, Ltd.

07/27/2011 Kroll Risk & Compliance Solutions CVM Solutions, LLC

07/27/2011 mediba Inc. Nobot Inc.

07/27/2011 SoMo Technologies, Inc. Gotta Go Text, LLC and Hot Deals Netw ork

07/26/2011 ACI Worldw ide, Inc. (NasdaqGS:ACIW) S1 Corporation (NasdaqGS:SONE)

07/26/2011 IHS Inc. (NYSE:IHS) Seismic Micro-Technology, Inc.

07/26/2011 Bodhtree Solutions Inc. e2e Analytix Inc.

07/26/2011 Talaris Ltd. LUTZWOLF Systems GmbH

07/26/2011 NextGen Healthcare Information Systems, Inc. CQI Solutions, Inc.

07/26/2011 DIMOCO Direct Mobile Communications GmbH the agent factory GmbH

07/26/2011 MOKO.mobi Limited (ASX:MKB) mbuzzy, Inc.

07/25/2011 Elevate Marketing Group, LLC Zipadi Technologies, LLC

07/25/2011 QUALCOMM Incorporated (NasdaqGS:QCOM) GestureTek, Inc., Certain Assets

07/22/2011 Capita Hartshead Limited NorthgateArinso UK Limited, Pension Business

07/22/2011 Bain Capital Ventures ZeroTurnaround OÜ

07/22/2011 Experian plc (LSE:EXPN) VIRID Interatividade Digital Ltda




APPENDIX H: SELECT 3Q11 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS (CONTINUED).

Date Buyer Seller07/22/2011 Google Inc. (NasdaqGS:GOOG) Pittsburgh Pattern Recognition, Inc.

07/21/2011 I'LL inc. (JASDAQ:3854) WEB BASE Co., Ltd.

07/21/2011 HaiVision Systems, Inc. Kulabyte Corporation

07/21/2011 HaiVision Systems, Inc. MontiVision Imaging Technologies

07/21/2011 Friedman Corporation Logimax Inc.

07/21/2011 Open Text Corp. (NasdaqGS:OTEX) Operitel Corporation

07/21/2011 Citrix Systems, Inc. (NasdaqGS:CTXS) RingCube Technologies, Inc.

07/20/2011 Augme Technologies, Inc. (OTCBB:AUGT) JAGTAG, Inc.

07/20/2011 Patsystems plc (AIM:PTS) MIXIT, Inc.

07/20/2011 Playtech Limited (AIM:PTEC) Mobenga AB

07/20/2011 CVC Capital Partners Ltd. ConvergEx Inc.

07/20/2011 Veronis Suhler Stevenson Strata Decision Technology, LLC

07/20/2011 Stratos B.V. Blue Ocean Wireless Limited

07/20/2011 VOIP PAL.com, Inc. (OTCPK:VPLM) MyPointsPhone.com

07/19/2011 LogMeIn, Inc. (NasdaqGS:LOGM) Connected Environments Ltd.

07/19/2011 Riverbed Technology, Inc. (NasdaqGS:RVBD) Zeus Technology Limited

07/19/2011 Data Impact, Inc. Transactis, Inc.

07/19/2011 Vensi, Inc. New Edition Softw are, LLC

07/19/2011 Winshuttle, Inc. ShareVis, Inc.

07/19/2011 Ascendum Solutions, LLC TinyBrick, LLC

07/19/2011 AMX Corporation SchoolView Technologies, LLC

07/19/2011 Teachers' Private Capital Flexera Softw are, Inc.

07/19/2011 Sapientnitro USA, Inc. CLANMO GmbH

07/19/2011 Tibanne Co., Ltd. MtGoxLive.com

07/19/2011 Komli Media Private Limited mobile-w orx inc.

07/19/2011 Vertafore, Inc. StoneRiver FSC, Inc.

07/18/2011 3D Systems Corp. (NYSE:DDD) Alibre, Inc.

07/18/2011 Robert Bosch GmbH inubit AG

07/18/2011 Tw elve Court Inc. Aegom Interactive, Inc.

07/18/2011 Editorial Aranzadi S.A. Jurisoft Sistemas de Informatica Juridica S.L.

07/18/2011 Rolta India Ltd. (BSE:500366) ACLS Systems, FZC

07/17/2011 Navigant Consulting Inc. (NYSE:NCI) Ignited Solutions, LLC

07/15/2011 Century Softw are Holdings Berhad (KLSE:CENSOF) PT. Praisindo Teknologi

07/15/2011 Unit 4 N.V. (ENXTAM:UNIT4) Exie AS

07/15/2011 IndustrialSAVER IndustrialMRO

07/15/2011 Blackbern Partners LLC Cadec Global, Inc.

07/14/2011 iAccel Limited Rubicon Softw are Limited

07/14/2011 Mobile Intelligence Solutions, Inc. Umber Systems, Inc.

07/14/2011 Piped Bits Co. Ltd. (TSE:3831) Business On Line Inc., specif ic business units

07/14/2011 Nuance Communications, Inc. (NasdaqGS:NUAN) Webmedx, Inc.





Date Buyer Seller07/14/2011 Energy King, Inc. (OTCPK:ENKG) Venue Media LLC

07/14/2011 Accenture plc (NYSE:ACN) Duck Creek Technologies, Inc.

07/13/2011 Bitzio, Inc. (OTCBB:BTZO) Bitzio Corp.

07/13/2011 Open Text Corp. (NasdaqGS:OTEX) Global 360, Inc.

07/13/2011 ZookaWare, LLC BluePenguin Softw are, Inc.

07/13/2011 One to One Interactive, Inc. Renu Mobile, Inc.

07/13/2011 ICON plc (NasdaqGS:ICLR) Firecrest Clinical Ltd.

07/12/2011 Main Capital Partners BV; Dolf in Capital EuroSystems Group BV

07/12/2011 Pariveda Solutions, Inc. Softagon Corporation

07/12/2011 DNA Finland Oy Forte Netservices Oy

07/11/2011 Sirius Corporation Limited (ASX:SIU) Pinnacle Softw are Pty Ltd.

07/11/2011 DORO SAS Prylos SAS

07/11/2011 Sirius Corporation Limited (ASX:SIU) Chameleon Technology Pty. Ltd.

07/11/2011 Yell Group plc (LSE:YELL) Znode, Inc.

07/11/2011 NCR Corp. (NYSE:NCR) Radiant Systems Inc.

07/11/2011 Electronic Arts Inc. (NasdaqGS:ERTS) PopCap Games, Inc.

07/11/2011 Environmental Systems Research Institute, Inc. Procedural Inc.

07/11/2011 GDS Link, LLC Modellica SL

07/11/2011 CPI-HR, Inc. Summit Payroll Services, LLC

07/11/2011 Agile Sports Technologies, Inc. Digital Sports Video, Inc.

07/11/2011 Cadence Design Systems Inc. (NasdaqGS:CDNS) Azuro, Inc.

07/11/2011 Linedata Services SA (ENXTPA:LIN) Fimasys S.A.

07/11/2011 Google Inc. (NasdaqGS:GOOG) Punchd Labs Inc

07/08/2011 Zynga, Inc. Zynga Toronto, Inc.

07/08/2011 Verdane Capital; Via Venture Partners A/S Dolphin Softw are AS

07/08/2011 Nexus AG (XTRA:NXU) Optim SAS

07/08/2011 Capita PLC (LSE:CPI) Beat Systems Limited

07/07/2011 GB Group plc (AIM:GBG) Data Discoveries Limited

07/07/2011 InterAmerican Gaming, Inc. (OTCPK:IAGM) Now phit Inc.

07/07/2011 Regular Accomplishment Sdn Bhd Customer Loyalty Solutions Sdn. Bhd.

07/07/2011 SumTotal Systems, Inc. CyberShift, Inc.

07/07/2011 MTI France S.A.S Global Secure Systems Limited

07/07/2011 BMC Softw are Inc. (NasdaqGS:BMC) BMC Mobility for IT Service Management

07/06/2011 Adw ays Co., Ltd. (TSE:2489) L'AVION Social CO., LTD.

07/05/2011 LeCroy Corp. (NasdaqGM:LCRY) Bogatin Enterprises L.L.C.

07/05/2011 Allocate Softw are plc. (AIM:ALL) RosterOn Pty. Ltd.

07/05/2011 Western Union Co. (NYSE:WU) Travelex Global Business Payments, Inc.

07/05/2011 SiteCore A/S Pectora

07/05/2011 SmartBear Softw are, Inc. eviw are softw are AB

07/05/2011 Tektronix, Inc. Veridae Systems Inc.



Copyright © 2011 Software Equity Group, L.L.C., All Rights Reserved


Date Buyer Seller07/05/2011 Allen Systems Group, Inc. The Information Systems Manager Inc.

07/04/2011 Computer Services Inc. (OTCPK:CSVI) HEIT, Inc.

07/01/2011 Wolters Kluw er Transport Services Transics International NV, Transport Management System

07/01/2011 Interactive Intelligence, Inc. (NasdaqGS:ININ) Pyxis Group Limited

07/01/2011 Irdeto USA, Inc. Rovi Corporation, BD+ Business

07/01/2011 Compuw are Corporation (NasdaqGS:CPWR) dynaTrace softw are GmbH

07/01/2011 Xtralis Pty Ltd. HeiTel Digital Video GmbH

07/01/2011 DST Health Solutions, Inc. Intellisource Healthcare Solutions, Inc.

07/01/2011 Seven Principles AG (XTRA:T3T) Eydolon Mobile Solutions GmbH

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