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SOFTWARE SECTOR REVIEW3Q 2014TECHNOLOGY MEDIA TELECOM GROUP:BostonTwo International Place24 FloorBoston, MA 02110617-482-7501Jeff Bistrongjbistrong@harriswilliams.comSan FranciscoLondon575 Market Street31 FloorSan Francisco, CA 94105415-288-426063 Brook StLondon, W1K 4HSUnited KingdomPhone: 44 (0) 20 7518 8900Mike Wilkinsmwilkins@harriswilliams.comThierry Monjauzetmonjauze@harriswilliams.comTechnology Media TelecomInvestment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co.Ltd, which is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC andHarris Williams & Co. Ltd conduct business.To subscribe please email:tmt reader@harriswilliams.com
TABLE OF CONTENTS2HW&CO. TMT GROUP OVERVIEW3DEAL SPOTLIGHT4WHAT WE’VE BEEN READING5NOTEWORTHY SOFTWARE TRANSACTIONS6SOFTWARE M&A ACTIVITY8SOFTWARE SECTOR OVERVIEWS12SOFTWARE PRIVATE PLACEMENTS OVERVIEW16SOFTWARE IPO OVERVIEW18MIDDLE MARKET DEBT OVERVIEWTechnology Media Telecom
HARRIS WILLIAMS & CO. OVERVIEWHW&CO. GLOBAL PRESENCEHW&CO. TMT GROUP FOCUS AREAS 20 YEAR HISTORYSOFTWAREINTERNET & DIGITAL MEDIA EIGHT OFFICES APPROXIMATELY 225EMPLOYEES Application and EnterpriseSoftware AdTech and MarketingServices 10 INDUSTRY GROUPS Data and Informatics Consumer Internet Healthcare IT Infrastructure SoftwareDigital Media, Content andGaming IT & Tech-Enabled Services eCommerceTelecom and Data CenterSolutions Education Tech Information and AnalyticsVertical-Specific Applications Mobile STRATEGICRELATIONSHIPS IN ASIAAND INDIATechnology Media Telecom TMT office Boston San Francisco London KEY FOCUS kfurt Big Data / Analytics Network Optimization Cloud SaaS and Subscription Models Mobilization Vertical-Specific SolutionsSELECTED2014 HW&CO.TMT TRANSACTIONSRECENT HW&CO.TMT TRANSACTIONSa portfolio company ofandhas been acquired bya portfolio company ofa portfolio company ofa portfolio company ofhas been acquired bya portfolio company ofhas been acquired byhas merged withhas been acquired bya portfolio company ofhas been acquired bya portfolio company ofa portfolio company ofhas received asignificant investmentfromandhas merged withhas been acquired by2
DEAL SPOTLIGHT – MICROEDGEHW&Co. advised MicroEdge’s shareholders in the company’s sale to Blackbaud(NASDAQ: BLKB), complementing Blackbaud’s offering in the philanthropic giving andcorporate social responsibility sectors. 160,000,000 Acquisition unites MicroEdge’s comprehensive technology solutions forgrantmaking, corporate social responsibility, and foundation managementwith Blackbaud’s portfolio of software and services for nonprofits. Combining Blackbaud’s 33 years of research and development withMicroEdge’s deep experience will position the combined company toexpand its addressable market, while offering unprecedented solutions toaddress the needs of funders, nonprofits, and organizations. The combined company is uniquely positioned to serve the entire spectrum ofthe philanthropic sector worldwide.a portfolio company ofandhas been acquired byOctober 1, 2014FOR MORE INFORMATION, PLEASE CONTACT:Jeff Bistrong, Managing Directorjbistrong@harriswilliams.comMike Wilkins, Managing Directormwilkins@harriswilliams.comTyler Dewing, Directortdewing@harriswilliams.com Leading provider of mission-critical software solutions for the philanthropic givingcommunity. MicroEdge’s SaaS-based solution suite delivers a powerful, integrated and openframework for efficient and effective charitable giving. Longstanding relationships with thousands of philanthropic foundations andcorporations. Successful track record of migrating existing on-premise clients to SaaS-basedsolutions.3
WHAT WE’VE BEEN READINGMarketing Tech: 50B inInvestment, But Top Tools OnlyHave 4.1% Penetration Marketing technology tools, platforms and products have grown from only 100 a few years ago toover 1,400 today, with no clear market leader across categories, signifying continuing evolution of thespace in the coming years. P&I reports that large buyout firms, such as The Carlyle Group, are investing in middle market privateequity opportunities. Many believe the combined 16.2 billion in closed middle market funds only scratches the surface ofthe capital seeking to be invested in the middle market. Some investors worry that the flood of new money will continue to increase competition forinvestment opportunities. With 119 billion in M&A transactions registered in the first half of 2014, E&Y estimates that 2014 couldend with 264 billion in total M&A value, 40% above 2013 and the highest in the last seven years. According to E&Y, technology is among the most active sectors in terms of M&A volume andaggregate deal values in 2014. According to Greentech Media, Consumer Analytics technologies represented 61% of all Soft GridDeployments for utilities between 2010 and 2014. Potential drivers for these investments include state mandates for energy efficiency and consumerdata presentation. Further investment is expected as utilities lag behind other private- and publicsector industries when it comes to extending digital technology to their customers. A study conducted by CB Insights revealed that VC investment in FinTech increased by 61% between2010 and 2013.VentureBeat, 10/1/14Big Buyout Firms Are Returning toMiddle MarketPensions & Investments, 9/15/14Tech M&A Conditions Good forBlockbuster YearInvestors.com, 8/21/14Data Analytics: What Utilities AreInvesting in NowGreentech Media, 8/18/14VC Funds Prioritize FinancialTechnology, with 61% Increase inInvestment This YearAn analysis of over 3.2 million businesses finds that, despite significant investments in the space, thetop 25 marketing technology products across 151 industries have only 4.1% penetration, leavingplenty of room for growth in the industry. The largest VC firms appear to be particularly bullish on the personal financial management andpayments technologies. As the Affordable Care Act increases the need to pare down costs and improve efficiencies, healthcare providers and investors are turning to technology companies for solutions.Read thefull articlehere.Read thefull reporthere.Read thefull articlehere.Read thefull articlehere.Read thefull articlehere.LeapRate, 7/28/14Five Technologies Drive HealthCare M&AMergers & Acquisitions, 7/21/14 Five technologies are fueling M&A in the health care sector, including cloud computing, dataanalytics, electronic health records, medical devices, and project management software.Read thefull reporthere.4
OTHER NOTEWORTHY SOFTWARE TRANSACTIONS – 3Q 2014Veritas Capital’s pending acquisition of BeyondTrust SoftwareEnt. Value: 310MRevenue: NAEV / Revenue: NAEV / EBITDA: NABeyondTrust is the leading provider of context-aware solutions for privilege and vulnerability management. BeyondTrust, which has experienced 20% annual revenue growth since 2008, serves the needs of more than halfof the companies listed on the Dow Jones Industrial Average. Veritas plans to leverage the BeyondTrust platform to execute on an investment thesis that involves bolt-onacquisitions and international expansion.Omnitracs’ pending take-private acquisition of XRS CorporationEnt. Value: 178MRevenue: 54MEV / Revenue: 3.3xEV / EBITDA: 28.9xEV / Revenue: 2.9xEV / EBITDA: 24.5xXRS Corporation provides compliance and fleet management solutions to the commercial trucking industry in theUnited States and Canada. The acquisition enhances Omnitracs’ solution suite, enabling the company to advance its position as the leadingprovider of software to the transportation and logistics industry. Omnitracs hopes to build on their recent acquisition of Roadnet Technologies from December of 2013.EV / Revenue: NAEV / EBITDA: NACompuware Corporation provides software solutions for information technology departments of largeorganizations worldwide. As a private-equity backed company, Compuware is now best suited to focus on its core mainframe and APMbusinesses where it can continue to serve customers in a competitive environment with greater flexibility to take along-term approach.EV / Revenue: NAEV / EBITDA: NAAnnounced 7/31/14 TOA Technologies provides cloud-based field service solutions that manage and optimize the last mile of customerservice for enterprises by coordinating activities between dispatchers, mobile employees and customers. TOA’s solutions manage over 120 million service events annually in more than 20 countries. The addition of TOA expands Oracle's ability to provide end-to-end personalized customer service solutions,enabling visibility into customer history throughout the customer relationship lifecycle.Hexagon AB acquires Vero SoftwareEnt. Value: NARevenue: NAAnnounced 9/2/14 Oracle’s pending acquisition of TOA TechnologiesEnt. Value: NARevenue: NAAnnounced 9/2/14 Thoma Bravo’s pending acquisition of CompuwareEnt. Value: 2.5BRevenue: 714MAnnounced 9/3/14 Announced 7/21/14 UK-based Vero Software is a leading provider of computer aided design and manufacturing software, with aportfolio of several well-known brands such as Alphacam, Cabinet Vision, Edgecam, Radan, SURFCAM, VISI, andWorkNC. The acquisition strengthens Hexagon’s CAD/CAM software offering, enabling it to integrate all data and processesacross the manufacturing lifecycle.5
STRATEGIC SOFTWARE ACQUISITION ACTIVITY In 2014, Google has been themost active strategic acquirerof software assets, completing17 acquisitions to date.IBM and Oracle continue toexhibit strong appetites forM&A, as they supplement theirglobal growth and expandproduct portfolios.Autodesk and Dassaultcontinue to driveconsolidation in the PLM anddesign software sectors. Global strategic softwareM&A continued at levelsconsistent with the previous 18months. Substantial cash balancesand attractive public equityperformance are providingstrong strategic currency.MOST ACTIVE STRATEGIC SOFTWARE M&A ACTIVITY BY VOLUME (1)(2)691712582014 10543248666523224GLOBAL STRATEGIC ACQUIRER SOFTWARE M&A ACTIVITY BY VOLUME (2)3563Q '103544Q '103771Q '113752Q '113643Q '113614Q '113723301Q '124083573102Q '123Q '124Q '12(1) This analysis compiles software M&A transactions for the most active strategic acquirers from 2010 to 3Q 2014.(2) Non-control, private placement transactions are excluded from this analysis.Source: Capital IQ and HW&Co. research.1Q '133432Q '133693253163173Q '134Q '131Q '143092Q '143Q '146
PRIVATE EQUITY SOFTWARE ACQUISITION ACTIVITY Vista Equity and Thoma Bravoremain among the mostactive in acquiring newsoftware platform companies.NEW PLATFORM PRIVATE EQUITY SOFTWARE ACQUISITION VOLUME(1)(2)7 There is an active set of otherprivate equity firms that areadding new software platforminvestments, often with addon acquisition strategies as acore component to futuregrowth.2014 YTD201356201233201169201021 Overall, global private equitysoftware M&A registered astrong quarter in 3Q 2014. SaaS-based, subscriptionmodels in key growth verticalsremain among the mostsought after acquisitiontargets for private GLOBAL NEW PLATFORM PRIVATE EQUITY SOFTWARE ACQUISITION VOLUME (2)604947343Q '104Q '1037381Q '112Q '11333Q '114Q '1140391Q '122Q '123Q '12434Q '12(1) This analysis compiles software M&A transactions for the most active, financial acquirers from 2010 to 3Q 2014.(2) Non-control, private placement and portfolio company transactions are excluded from this analysis.Source: Capital IQ and HW&Co. research.4837381Q '132Q '13424741333Q '134Q '131Q '142Q '143Q '147
APPLICATION SOFTWARE – M&A MARKET SUMMARYAPPLICATION SOFTWARE M&A VOLUME3.0xValuations for ApplicationSoftware transactions remainat historically high levels in2014.Oracle’s acquisition of MICROSSystems is the company’slargest since it acquired BEASystems in 2008. The acquisitionwill deepen Oracle’s presencein the hospitality and retailsectors, providing significantcross-selling opportunities.296288285267 271260245268286266256245 245 251 2482432322.4x2.3x2.3x2.0x1.8x1.9x1.5x1.5x 3Q1'14Q1'11Q2'11.6x1.3x1.1x3Q2.3x2.1x2.1x1.7x3Q MEDIAN M&A REVENUE MULTIPLESGLOBAL'10 Application Softwarecontinues to be a hot area ofinterest for both strategic andfinancial buyer acquisitions.1Q NOTABLE APPLICATION SOFTWARE M&A dingSage Software, Inc.PAI Serv ices, LLC (Great Hill Partners)Application performance and mainframe management software solutions.09/08/14Oracle CorporationMICROS Systems, Inc.Hotel and retail enterprise software solutions.09/04/14Heartland Payment Systems, Inc.TouchNet Information Systems, Inc.Commerce management software for higher education institutions.08/19/14Trimble Nav igation LimitedManhattan Software Group LimitedProperty, asset, and facility management software and systems.08/18/14Changepoint CorporationDaptiv , Inc.08/07/14Hexagon AB07/28/14EnterpriseValue ( mm)RevenueMultipleApplication Software 158NA 4,6043.4x 375NANANAPortfolio management software solutions.NANAVero Software LimitedComputer aided design and computer aided manufacturing software.NANAThoma Brav o, LLCSparta Systems, Inc.Enterprise quality management software solutions.NANA07/25/14Accellos, Inc.HighJump Software Inc.Supply chain management software solutions. 2382.5xConfidential07/16/14W EX Inc.Ev olution1, Inc.Electronic payment, on-premise, and cloud computing healthcare solutions. 5336.0x06/16/14Intuit Inc.Check, Inc.Mobile finance applications. 360NA06/16/14Cadence Design Systems Inc.Jasper Design Automation, Inc.Semiconductor design and v erification software. 170NA06/03/14Deltek, Inc.Axium XTS CorporationProject-focused software for architectural and engineering firms.NANA06/03/14The Carlyle Group LPTalent Partners, Inc.Talent payment software.05/02/14SAP AG (nka:SAP SE)Fieldglass, Inc.Human capital management solutions.04/28/14Dassault Systemes SAAccelrys Inc.Scientific business intelligence software and solutions.Median 1142.2xConfidential 1,000NA 6834.1x 3683.4xSource: Capital IQ and HW&Co. proprietary information.8
SAAS – M&A MARKET SUMMARY SaaS acquisition volumedecreased in 3Q 2014 overthe prior quarter but remainsin line with with 2012 and 2013averages.SAAS M&A VOLUMEMEDIAN M&A REVENUE MULTIPLESGLOBAL8.2x525047413934Growing SaaS companiescontinue to trade at highlyattractive 5x2.1x2.4x2.6x 2'123Q2Q'11'121Q4Q'11'113Q2Q'10'111Q'10SAP’s acquisition of Concurand Zillow’s acquisition ofTrulia join Priceline’sacquisition of OpenTable asrecent multi-billion dollar SaaStransactions with double-digitrevenue multiples.4Q3Q Q4'13Q4'1NOTABLE SAAS M&A erpriseValue ( mm)RevenueMultiplePendingInsight Venture PartnersiParadigms, LLCCloud-based educational technologies. 752NAPendingOmnitracs, LLCXRS CorporationCompliance and fleet management solutions. 1783.3xPendingSalesforce.com, IncRelateIQ, Inc.Online relationship management platform. 391NAPendingZillow, Inc.Trulia, Inc.Software tools to research homes and neighborhoods. 3,09114.8x 7,65211.5xSaaSPendingSAP America, Inc.Concur Technologies, Inc.Integrated trav el and expense management solutions.10/01/14Blackbaud Inc.MicroEdge, LLCGrants management and employee engagement software solutions. 1604.5xConfidential09/09/14Dassault Systèmes BVQuintiq Holding B.V.Supply chain planning and optimization software platform. 3373.3x08/11/14PTC Inc.Axeda CorporationCloud-based serv ice and software for managing connected products and machines. 170NA07/31/14Oracle CorporationTOA Technologies, Inc.On-demand mobile workforce management and field serv ice management solutions.NANA07/30/14GTCR, LLCXIFIN, Inc.Health economics optimization solutions.NANA07/24/14The Priceline Group Inc.OpenTable, Inc.Restaurant reserv ation solutions. 2,49612.6x07/21/14Emdeon Inc.Capario, Inc.Rev enue cycle management solutions.07/09/14Vista Equity PartnersSocial Solutions, Inc.Performance management software for human serv ice organizations.NANA06/04/14E2open, Inc.Serus CorporationIntelligent operations management solutions. 26NA06/02/14Marin Software IncorporatedNowSpots, Inc.Digital adv ertisement platform. 23NA05/30/14GTCR, LLCVocus Inc.Marketing and public relations software. 4422.4x 3373.9xMedian 1152.8xConfidentialSource: Capital IQ and HW&Co. proprietary information.9
DATA AND ANALYTICS – M&A MARKET SUMMARY Data and Analytics softwareM&A volume in 3Q 2014remains in line with priorquarters.DATA AND ANALYTICS M&A VOLUME3.2x913.0x82Median M&A revenuemultiples for Data andAnalytics companies remainabove historical averages.747363612.7x767270 MEDIAN M&A REVENUE x1.4x1.4x1.3x1.0x 1.0x0.9x 0.9x0.9x Strategic buyers are prioritizingdata-oriented acquisitiontargets as customers remainhungry for ways to capitalizeon ever increasing data.Oracle continues to beamong the most active Dataand Analytics software buyers,completing three transactionsin 23Q2Q'11'121Q4Q'11'113Q2Q'10'111Q3Q E DATA AND ANALYTICS M&A dingVista Equity PartnersTIBCO Software Inc.Data integration and business intelligence software.PendingOracle CorporationCollectiv e Intellect, Inc.W eb-based, automated, real-time text mining and analytics software.09/03/14Teradata CorporationThink Big Analytics, Inc.07/21/14Vista Equity Partners07/01/14EnterpriseValue ( mm)RevenueMultiple 4,056NANANABig data and adv anced analytics consulting serv ices.NANAAGDATA LPAgricultural and animal health data and analytical solutions.NANAAcxiom CorporationLiv eRamp, Inc.Data onboarding platform. 310NA06/13/14Informatica CorporationStrikeIron, Inc.Cloud-based infrastructure for deliv ering business data.NANA06/03/14Cloudera, Inc.Gazzang, Inc.Cloud-enabling data encryption and protection solutions.NANA06/02/14Oracle CorporationGreenBytes, Inc.Inline data deduplication data storage solutions.NANA04/28/14TIBCO Software Inc.Jaspersoft CorporationOpen source business intelligence software. 185NA04/17/14Actis Capital, LLPUpstream S.A.Mobile marketing and analytics technology platform.Confidential 1614.2x03/28/14Meter Readings Holding, LLCAclara Technologies LLCUtility management communications software. 130NA03/14/14GSI Group CorporationJADAK Technologies, Inc.Data collection technologies. 93NA03/14/14Oracle CorporationBlue Kai, Inc.Cloud-based data management platform for marketing applications. 400NA02/03/14Verint Systems Inc.KANA Software, Inc.Cloud-based customer serv ice solutions. 514NA10/29/13NeuStar, Inc.Aggregate Knowledge, Inc.Campaign and audience analytics for adv ertisers, trading desks, and publishers. 117NA10/25/13inVentiv HealthCatalina HealthPersonalized health data driv ing medication adherence and improv ed outcomes.08/28/13Datawatch CorporationPanopticon Software ABVisual data monitoring and analysis software tools.Data and AnalyticsMedianNAConfidentialNA 275.5x 1734.8xSource: Capital IQ and HW&Co. proprietary information.10
INFRASTRUCTURE SOFTWARE – M&A MARKET SUMMARYINFRASTRUCTURE SOFTWARE M&A VOLUME80786964Recent private equityinvestments in InfrastructureSoftware have gone tosupport platforms withacquisition-driven growthstrategies.4.8x 4.8x69676061584.0x5655545249Over the last 12 months,reported InfrastructureSoftware transaction multipleshave increased nearlythreefold, driven by strongactivity in the IT security Q'12'123Q2Q'11'121Q4Q'11'113Q2Q'104Q'110.7x3Q MEDIAN M&A REVENUE MULTIPLESGLOBAL'10 In 3Q 2014, InfrastructureSoftware M&A volume wasslightly below historical levels,while in line with the priorquarters.1Q Q2'11Q3'12Q3'13Q3'14Q3'11Q4'12Q4'13Q4'1NOTABLE INFRASTRUCTURE SOFTWARE M&A dingSphere 3D CorporationOv erland Storage Inc.Unified data management and data protection solutions.PendingMarlin Equity Partners, LLCCA Technologies (Arcserv e Business)Backup and recov ery software solutions.PendingGemalto NVSafeNet, Inc.Data protection and software monetization solutions.PendingThoma Brav o, LLCCompuware CorporationSoftware solutions and application practices for information technology organizations.BeyondTrust Software, Inc.Priv ileged account management and v ulnerability management software.EnterpriseValue ( mm)RevenueMultiple 841.6xNANAInfrastructure Software 890NA 2,0912.9x 310NANANAPendingVeritas Capital08/13/14Hitachi Data Systems Corporation Sepaton, Inc.Disk-based data protection solutions.05/28/14Automic Software GmbHORSYP S.A.S.IT operations management solutions.05/20/14Proofpoint, Inc.NetCitadel, Inc.Security orchestration platform for dev elopment of security infrastructure. 24NA04/16/14HGGC, LLCSerena Software, Inc.Software products for mainframe change management. 4362.4x03/24/14Synopsys Inc.Cov erity, Inc.Source code analysis tools. 350NA03/21/14Sphere 3D CorporationV3 Systems, Inc.Desktop cloud management solutions. 16NA03/04/14Zayo Colocation, Inc.CoreXchange, Inc.Data center and networking solutions. 18NA02/24/14VMware, Inc.AirW atch, LLCMobile security and enterprise mobility management solutions. 1,545NA02/18/14Akamai Technologies, Inc.Prolexic Technologies, Inc.Distributed denial of serv ice (DDoS) detection solutions. 403NA01/07/14Juniper Networks, Inc.W ANDL, Inc.Network planning and management software. 29NA01/06/14JDS Uniphase CorporationNetwork Instruments, LLCNetwork troubleshooting and performance management software. 2005.0x 2552.4xMedian 95Confidential1.8xSource: Capital IQ and HW&Co. proprietary information.11
PRIVATE PLACEMENT ACTIVITY BY SOFTWARE SECTOR Software private placementsremained active during 3Q2014 with 773 deals and over 6.1bn invested.PRIVATE PLACEMENTS BY SOFTWARE SECTOR AND NEW CAPITAL RAISED IN MILLIONS100 0921900800 SaaS and InfrastructureSoftware assets continue tocommand premium premoney valuations.In 3Q 2014, 84% of privateplacements and 52% of totalprivate capital raised wasdeployed in early stagerounds (Seed – Series B).700600728687672732651763756911869886 14 ,000903863783773683 12 ,000 10 ,000578 8,000500 6,000400300 4,000200 2,0001000 03Q-1 0 4Q-1 0 1Q-1 1 2Q-1 1 3Q-1 1 4Q-1 1 1Q-1 2 2Q-1 2 3Q-1 2 4Q-1 2 1Q-1 3 2Q-1 3 3Q-1 3 4Q-1 3 1Q-1 4 2Q-1 4 3Q-1 4Application SoftwareSaaSData & Analytics3Q 2014 PRIVATE PLACEMENT VOLUME BY ROUNDSeedSeries ASeries BSeries CSeries D / or laterInfrastructure SoftwareTotal New Capital (Reported)3Q 2014 PRIVATE PLACEMENT CAPITAL RAISED BY ROUNDSeedSeries ASeries BSeries C3%8%23%7%25%31%17%Series D / or later773Transactions44% 6.1bn(reported)17%24%Source: Capital IQ and HW&Co. proprietary information.12
SELECTED RECENT SOFTWARE PRIVATE PLACEMENTSDate9/22/2014CompanySectorRoundRoundSize ( M)TotalRaised( M)InfrastructureB 12.0 17.0Software9/16/2014ApplicationC 400.0 414.1SoftwareInvestorsCommentaryBenchmark Capital, Google Ventures, Radar Partners, TrueProv ides two-factor authentication as a serv ice toVenturesprev ent account takeov er and data theft.Brighton Health Partners LLC, Cardinal Partners, Goldman SachsPhysician-based wellness and care managementGroup, Merchant Banking Div ision, Health Enterprise Partners,company that partners with doctors to keep peopleMorgan Noble Healthcare Partners, Pamplona Capitalhealthy and better manage care in-between office v isits.Management, Llc9/16/2014InfrastructureC 40.0 ge 35.0 142.0Benchmark Capital, Greylock Partners, Insight Venture Partners,Prov ides dotCloud multi-language Platform-as-a-Serv iceSequoia Capital, Trinity Venturesfor software dev elopers.Appian Ventures Inc., Draper Fisher Jurv etson, General CatalystProv ides cloud-based identity security and managementPartners, Kohlberg Krav is Roberts & Co. L.P., SAP Ventures, Tensolutions.Elev en Ventures, Triangle Peak Partners, LP, Volition Capital LLC,W Capital Partners9/3/2014Data &A 23.3 23.3AnalyticsLemhi Ventures Fund II, L.P., Lemhi Ventures, Inc., North TexasProv ides health information exchange (HIE) and dataSpecialty Physicians, Santa Rosa Holdings, LLCanalytics tools and serv ices for streamlining data sharingbetween prov iders, hospital systems, and health plans.8/27/2014ApplicationLateSoftwareStage 60.0 137.3Goldman Sachs Group, Kaiser Permanente Ventures, Sagev iewProv ides enterprise gov ernance, risk, compliance, (GRC)Capital LPand quality management software, content, andconsulting serv tageApplicationC 145.0 40.0 318.0 50.0Fidelity Inv estments, Wellington Management, and other non-Dev elops conv erged compute and storage infrastructuredisclosed inv estorsfor v irtualized data centers.Prov idence Equity, Susquehanna CapitalProv ides warehouse management system that offers real-Softwaretime inv entory v isibility, purchase order creation, emailedtracking numbers, and report generation/analytics.8/18/2014SaaSB 50.0 85.0Sequoia CapitalProv ides Software-as-a-Serv ice customer experiencemanagement solutions.8/13/2014InfrastructureLateSoftwareStage 150.0 281.0Accel Partners, Andreessen Horowitz LLC, Bezos Expeditions, LLC,Prov ides cloud-connected applications that offer solutionsGoldman Sachs Group, Index Ventures, Khosla Ventures, Mithrilto protect mobile phones from v iruses, malware, spyware,Capital Management LLC, Morgan Stanley Inv estmentfraud, hackers, and identity theft.Management, T. Rowe Price Associates, Inc.8/5/2014ApplicationB 21.0 30.6Lightspeed Venture Partners, Sequoia CapitalSoftwareProv ides clinical data reporting and v isualization tools forthe pharmaceutical industry.Source: Capital IQ, PitchBook, and HW&Co. proprietary information.13
PUBLIC SOFTWARE VALUATION MULTIPLES BY SECTOR Over the last 12 months, severalhigh growth sectors such as HCM,SaaS, and Data and Analyticshave experienced slight decreasesin median revenue multiples, whichis due in part to the larger scaleand slower relative revenue growthof certain high flying companies(e.g., Workday, Marketo, SPS, andSplunk).For example, within the growthminded HCM sector, Workdayexperienced 104% growth for theyear ended January 2013, versus71% for the year ended January2014, thus contributing to thedecline in the sector’s medianrevenue multiple. HCM EBITDAmultiples remain high as this sectorcontinues to invest in revenuegrowth at the expense of earningsgeneration.For mature software sectors (e.g.,enterprise software and SCM),EBITDA multiples experiencedmodest increases. Enterprisevalues for larger tech companies –Oracle, SAP, and IBM – havegenerally increased along withhigher overall enterprise softwarespending growth (6.9% in 2014E vs.4.9% in 2013, according toGartner).REVENUE MULTIPLE ANALYSIS 3Q 2013 VS. 3Q 20143Q '1314. 1x3Q '1410.5x8.4x8.1x4.6x 4.8x3.9x3.1x2.3x2. 8x 3.0xSoftware EnterpriseBellwethers Software3.8x3.5x5.0x4. 8x4.3x3.1x3.4x6.5x5. 8x5. 4x5.8x4.8x4.0x4.4x3.7x3.4x4. 0x3.1x2.3xFinancialSoftwareHCITHCMMarke tingSoftwarePLM andDesignSoftwarePublicSectorSCMLarg e-Cap Small-Cap Data andSaaSSaaSAnalyticsDataStorageIT SecurityNetworkMgmtEBITDA MULTIPLE ANALYSIS 3Q 2013 VS. 3Q 201487.3x90.8x3Q '133Q '1481.0x59.7x53.3x48.8x38.2x32.0x18.7x 17. 7x8.4x 9.0x18.3x29.1x17.7x15. 7x 14.9x10.8x 11.9xSoftware EnterpriseBellwethers alSoftwareHCITHCMMarke tingSoftwarePLM andDesignSoftwarePublicSectorSCMLarg e-Cap Small-Cap Data andSaaSSaaSAnalyticsDataStorageNote: Large-Cap SaaS companies have market capitalizations greater than 2.0bn, while Small-Cap SaaS companies have market capitalizations less than 2.0bn.Source: Capital IQ and HW&Co. proprietary information. Trading multiples are as of 9/30/2014.16.2x 16.7x11.6x 11.1xIT SecurityNetworkMgmt14
KEY METRICS BY SECTOR – PUBLIC SOFTWARE COMPANIESEV / LTM Revenue Multiple8.4xHCM8.1xLarg e-Cap SaaS5.8xIT Security5.4xSCMLTM RevenueGrowthCorrelation withEV/R MultipleLTM EBITDAGrowthCorrelation withEV/R MultipleLTM EBITDAMarginCorrelation withEV/R %3%8%21%-68%17%66%26%68%10%-8%Financial Software4.8x6%20%27%29%21%58%Small-Cap SaaS4.8x25%80%16%-14%NMNM24%97%NMNMNMNM4.3xMarke ting Software Public Sector4.0x13%31%9%45%15%57%Network .5xPLM and DesignSoftware3.4x6%-36%5%-32%21%74%Data and Analytics3.4x17%91%2%78%5%-71%Data Storage3.1x16%92%6%-81%16%-87%Software Bellwet se Software3.0xNote: Large-Cap SaaS companies have market capitalizations greater than 2.0bn, while Small-Cap SaaS companies have market capitalizations less than 2.0bn.Source: Capital IQ and HW&Co. proprietary information, data shown as of 9/30/2014.15
SUMMARY OF TECHNOLOGY IPOS RECENT U.S. IPO ACTIVITY (BY OFFERING SIZE)2014 continues to be a solidyear for technology IPOs,despite a notable slowdownin 3Q. 0 - 50M18131313121111119998766651Q-10OFFERING SIZE AT IPO19% 250M 16Over the last four quarters,over 60% of technology IPOsraised over 100 million. 50 - 100M 100 - 250M1835 tech companies havegone public on U.S.exchanges in 2014. 0 - 50M 50 - ARKET CAP AT IPO 100 - 250M 250M 0-50M 50-500M3
with Blackbaud’sportfolio of software and services for nonprofits. Combining Blackbaud’s 33 years of research and development with MicroEdge’s deep experience will position the combined company to expand its addressable market, while offering unprecedented solutions to add
