Greg Ager

Henry Sage
ManagingDirector hsage@signalhill.com

Signal Hill

ManagingDirector gager@signalhill.com

Chase Sanders
ManagingDirector csanders@signalhill.com

David Dolan
VicePresident ddolan@signalhill.com

Enterprise Application Software: Q1 2012 M&A Review

The Enterprise Application Software sector witnessed significant growth over the last 12 month period, yet certain Q1 2012 deal metrics are showing weakness after a particularly strong Q3 and Q4. For instance, while total announced enterprise value (EV) grew over 60% from Q1 2011 to Q1 2012, deal volume declined sequentially by 44% from Q4 2011 and EV slipped just over 60%. With much of the backlog in the sector taken care of during 2H 2011, it may take a bit for the pipeline to get back up and running as these deals are integrated. With that, a lack of billion dollar transactions in the sector weighed down total EV in Q1, with only one transaction valued over $1 billion (Taleo/Oracle). Median deal size is the one metric that rose sequentially in Q1 2012 (up about 5.5% over Q4 2011). However, this is still well below median sizes witnessed throughout last year. While there were few deals valued over 4.0x revenue, highly valued deals such as Taleo (6.1x revenue), First Businesspost/Basware (5.0x) and Archipelago Learning/PLATO Learning (4.1x) show buyers are still willing to pay a healthy amount for solid, growing, and strategic targets.
Figure 1: Quarterly Enterprise Application Software M&A Deal Analysis, Q1 2011 - Q1 2012 Source:SignalHill Q1 2011 Number of Deals %changefrompriorperiod Total Enterprise Value ($M) %changefrompriorperiod Median Announced Deal Size ($M) %changefrompriorperiod Median EV/TTM Revenue Multiple %changefrompriorperiod 89 $2,386.8 $35.3 3.1x Q2 2011 111 24.7% $8,084.7 238.7% $60.0 70.0% 4.0x 29.0% Q3 2011 108 -2.7% $22,084.3 173.2% $76.4 27.3% 2.9x -27.5% Q4 2011 126 16.7% $9,873.1 -55.3% $23.5 -69.2% 3.7x 27.6% Q1 2012 70 -44.4% $3,875.3 -60.7% $21.9 -6.8% 1.9x -48.6% LTM Q1 2010 278 $29,698.7 $26.0 2.0x LTM Q1 2011 292 5.0% $18,949.9 -36.2% $61.1 135.0% 2.7x 35.0% LTM Q1 2012 414 41.8% $42,738.6 125.5% $39.0 -36.2% 2.9x 7.4%

Figure 2: Enterprise Application Software Public Company Valuation Metrics, Q1 2012

Source:SignalHill PricingDate04/05/12 MedianMetrics SaaS: Software as a Service BA: Business Analytics CRM: Customer Relationship Management ECM: Enterprise Content Management ERP: Enterprise Resource Planning HCM: Human Capital Management PLM: Product Lifecycle Management SCM: Supply Chain Management Vertical All Enterprise Apps Companies
(1)EBITDAexcludesallone-timechargesandexpenses

Stock Price % of 52 Week High 90% 88% 93% 87% 88% 92% 92% 87% 92% 90%

Financial Data Q/Q LTM Margins Rev Growth YoY Seq. Gross EBITDA 26% 20% 19% 18% 6% 26% 16% 19% 11% 16% 5% 12% 7% 11% 4% 6% 7% 2% 1% 5% 68% 69% 59% 64% 61% 65% 80% 56% 54% 64% 12% 16% 15% 26% 19% 11% 21% 15% 21% 17%

Valuation Data EV/Revenues LTM CY2012E CY2013P 5.6x 3.2x 3.0x 2.8x 3.6x 4.9x 3.7x 2.2x 3.6x 3.5x 5.6x 3.3x 3.0x 2.8x 3.7x 5.0x 3.7x 3.5x 3.6x 3.6x 4.7x 2.9x 2.5x 2.4x 3.2x 4.3x 2.9x 3.1x 3.3x 3.1x EV/EBITDA1 LTM CY2012E CY2013P 32.6x 26.6x 19.3x 12.1x 12.8x 39.0x 15.7x 15.0x 14.3x 17.1x 23.2x 20.6x 15.5x 11.4x 12.8x 30.3x 13.6x 15.0x 14.0x 15.0x 19.1x 16.9x 16.1x 9.9x 10.9x 24.1x 10.1x 12.3x 12.1x 13.0x

Figure 3: 1-Year Relative Stock Price Performance, LTM Q1 2012

Figure 4: Largest Enterprise Appplication Revenue Multiples, Q1 2012

Source:SignalHill Target Taleo Corporation First Businesspost GmbH Archipelago Learning Convio, Inc. Buyer Oracle Corporation Basware Oyj PLATO Learning Blackbaud, Inc. EV ($M) $1,882.1 $15.5 $302.7 $275.0 $169.0 $50.0 Revenue Multiple 6.1x 5.0x 4.1x 3.6x 3.5x 2.5x

iContact Corporation Vocus

Source:SignalHill

CaseCentral, Inc.

Guidance Software

Enterprise Application Software: Q1 2012 M&A Review

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Selected Transactions: Q1 2012

Taleo Acquired by Oracle Enterprise Value:$1,882.1 million Revenue Multiple:6.1x Oracle is paying $46 per share, a 30% premium over the 30-day trading price.. Oracle acquired Taleo, a cloud-based talent management solutions provider. Taleos products help organizations attract, motivate and retain human capital. The company boasts 5,000 clients, including JP Morgan Chase, Starbucks, Best Buy, United Airlines, Dell and HP, and services nearly 16 billion transactions per year. Oracle expects Taleos portfolio of products to complement its existing offerings as the need for human capital management has become a strategic initiative for organizations. The acquisition will expand Oracles cloud capabilities by adding a large base of customers running Taleos cloud solutions and will also fill a recruiting functionality gap within Oracles Human Capital Management Fusion offering. The transaction follows in the footsteps of the industrys largest SaaS acquisition ever SuccessFactors acquisition by SAP at the end of 2011.

Target Sector:Human Capital Management / Software-as-a-Service

Archipelago Learning acquired by PLATO Learning Enterprise Value:$302.7 million Revenue Multiple:4.1x PLATO is paying $11.10 per share, a 11.0% premium over the 30-day trading price

Target Sector:e-Learning / Software-as-a-Service

Thoma Bravo-backed PLATOLearning, an education technology company, agreed to acquire Archipelago Learning, a subscription-based, SaaS provider of education products in the United States, Canada and the United Kingdom. The acquisition create a strong presence in online core curriculum that is highly complementary to PLATOs online supplemental curriculum. The addition of Archipelago will also allow PLATO to cover the entire spectrum of learning needs from pre-k through post secondary; as well as to reach a broader group of students and educators with a product portfolio that sets a rigorous standard in online education. The deal will bring the two education companies' combined customer base to over 50,000 schools when completed. Blackbaud Inc., a maker of business software for nonprofit organizations, agreed to acquire rival nonprofit software maker Convio Inc. The companies sell packages of products and services that help nonprofits keep track of donors and allows various types of donor outreach; manages and organizes events like bike- and walk-a-thons online; and analyzes and tracks fund-raising via social media and other technology. The deal will bolster Blackbauds online fund-raising offerings by capturing the business of large organizations conducting fund-raising over the Webthe fastest-growing channel for donations. The acquisition is expected to better position both companies to cover and integrate the multiple channels nonprofit organizations use today to connect with and cultivate their donors. Vocus, a provider of cloud-based marketing and PR software, acquired iContact, a provider of cloud-based email marketing services for small and medium sized businesses. iContacts email marketing software automates the process of creating, sending and tracking email communications for businesses, as well as allows users to track email campaign effectiveness, accessing data around opens, clicks, etc. The acquisition adds email to the Vocus marketing suite, which already includes search marketing, social marketing and publicity modules, centered around a recommendation engine. Vocus stock sank 40% after the acquisition was announced, as Vocus said it would pay much of the acquisition price in cash, and the market noted the purchase price was nearly three times as large as similar acquisitions in the space.

Convio acquired by Blackbaud Enterprise Value:$275.0 million Revenue Multiple:3.6x Blackbaud is paying $16 per share, a 58.4% premium over the 30-day trading price.

Target Sector:Customer Relationship Management / Software-as-a-Service

iContact Corporation acquired by Vocus Enterprise Value:$169.0 million Revenue Multiple:3.5x

Target Sector:Customer Relationship Management / Marketing Automation

Signal Hill 2012

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