Quarterly Technology M&A Review

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Quarterly Technology M&A Review

Overall Technology M&A Overview*

Q3 2011

Deal Count & Value Transacted. Total deal count in Q3 increased for the fourth

consecutive quarter, totaling 937. Q3 deal value experienced a slight decrease relative to the prior quarter but is up 41% YoY.

Median Multiple & Valuation. Median revenue multiples increased to 2.2x EV/Rev in

Q3, the highest revenue multiple since Q1 2008, when Pagemill began actively tracking Technology M&A; median deal value decreased 12% versus Q2 2011.

Q3 Disclosed Deal Count and Median Multiple, by Deal Size. Revenue multiples

ranged from 0.8x to 5.1x in Q3, and were highest in transactions valued between $100M and $200M. $44.6 _$36.8 $82.3 _$65.3 $62.8 774 778 889 919 937 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Deal Value # of Deals

$57.2 $38.5 $31.0 $44.4 _$39.2 1.8x 1.5x 1.6x 1.9x 2.2x Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Median Deal Value Median EV/Rev

77 22 31 14 41 0.8x 0.9x 2.2x 5.1x 2.9x $0 - 25M $25 - 50M $50 - 100M $100 - 200M $200M+ # of Deals Median EV/Rev

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Overall Q3 Technology M&A kept pace with a strong Q2 and proved to be an impressive quarter in terms of both aggregate count and value, totaling 937 announced transactions and $62.8 billion in disclosed deal value. The Q3 deal count represented the highest total number of deals since 945 deals were announced in Q2 2007. Equally notable, the Q3 median revenue multiple was 2.2x EV/Rev, the highest revenue multiple since Q3 2007 when it was 2.3x EV/Rev.

Third quarter deal count was relatively evenly split between the months of July, August and September, accounting for 34%, 36% and 30% of the total, respectively. Q3 deal value remained relatively stable compared to the prior quarter, and was the second highest total since Q2 2010 after normalizing Q1 2011 results to remove the effects of the pending $39.0 billion AT&T / T-Mobile transaction. The majority of Q3 deal value of $62.8 billion can be attributed to strong M&A activity in August, which accounted for $41.1 billion, or 66% of the total. In comparison, deals announced in July and September accounted for 21% and 13% of total deal value, respectively. Of the 13 transactions announced in Q3 with valuations in excess of $1 billion, four were announced in July, eight were announced in August and one was announced in September.

Of the five most active technology segments – Communications Services, Internet & Digital Media, IT Services, Semiconductors, and Software – the Software sector accounted for $23.5 billion, or 37% of total Q3 deal value and had the highest median revenue multiple (3.5x EV/Rev). The top five sectors in total represented 74% of total deal value in Q3. There were 178 venture-backed M&A transactions in Q3 representing $5.5 billion in value, the second highest total value since Q4 2009. The Q3 venture-backed median revenue multiple was 4.9x EV/Rev, the highest quarterly multiple since Pagemill began publishing its quarterly newsletter covering venture-backed transactions in Q1 2009. $ m ill io n s

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Q3 M&A Overview – Active Technology Segments*

M&A Activity by Segment. Communications Services, Internet & Digital Media, IT Services, Semiconductors, and

Software accounted for 74% of all technology M&A deal value and 85% of total deal count in Q3 2011. The Software segment accounted for 37% and 26% of total Q3 deal value and deal count, respectively. The median revenue multiple in the Software and IT Services sectors was 3.5x and 0.8x, the highest and lowest revenue multiples of the five active segments analyzed, respectively.

Sector Q3 2011 Median EV/REV Total Deal Count Disclosed Value ($B)* Median Value ($M)* Q3 2011 Q2 2011 Q3 2010 Q/Q Delta Y/Y Delta Communications Services 31 $9.8 $206.8 2.0x 1.4x 2.3x 40% (13)% Internet & Digital Media 221 $2.0 $30.0 3.2x 2.0x 2.2x 57% 43%

IT Services 274 $5.5 $34.0 0.8x 1.1x 0.5x (23)% 58%

Semiconductors 32 $5.9 $105.0 2.6x 2.5x 1.0x 4% 154%

Software 239 $23.5 $28.0 3.5x 3.1x 4.5x 14% (22)%

Total: Active Sectors 797 $46.7 $34.6 2.9x 2.0x 2.2x 40% 28% Total: Overall Technology 937 $62.8 $39.2 2.2x 1.9x 1.8x 18% 19%

Q3 M&A Activity - Active Technology Segments*

Communications Services. There were 31 transactions in the third quarter including ten with disclosed valuations

(shown below); disclosed deal count was highest for transactions with values greater than $200M

Internet & Digital Media. There were 221 transactions in the third quarter including 21 with disclosed valuations (shown

below). Disclosed deal count was highest for transactions with values below $25M.

3 1 1 5 2.7x 0.8x 2.9x $0 - 25M $25 - 50M $50 - 100M $100 - 200M $200M+

# of Deals Median EV/Rev

10

4 ₄ ₃

1.1x

4.6x

$0 - 25M $25 - 50M $50 - 100M $100 - 200M $200M+

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NA

IT Services. There were 274 IT Services transactions in Q3 2011, the highest of the five sectors analyzed, including 45

with disclosed valuations (shown below). The median revenue multiple for disclosed deals valued above $200M was 1.8x, well above the overall IT Services median revenue multiple of 0.9x.

Semiconductors. There were 32 Semiconductor transactions in Q3 2011 including 15 with disclosed valuations (shown

below). Median revenue multiples increased 154% compared to Q3 2010 and remained relatively flat compared to the prior quarter. Revenue multiples in Q3 2011 were highest for transactions valued between $25M - $50M.

2 5 3 5 2.6x _2.3x $0 - 25M $25 - 50M $50 - 100M $100 - 200M $200M+

# of Deals Median EV/Rev

Software. Software deal count totaled 239 in Q3 2011, the second highest of the segments covered, including 54 with

disclosed valuations (shown below). The median revenue multiple was 3.5x EV, an increase of 14% versus the prior quarter. Median revenue multiples were highest for transactions between $50M and $100M.

23 6 8 3 14 1.0x 5.4x 3.3x $0 - 25M $25 - 50M $50 - 100M $100 - 200M $200M+ # of Deals Median EV/Rev

22 4 10 3 6 0.5x 0.6x 0.8x 0.7x 1.8x $0 - 25M $25 - 50M $50 - 100M $100 - 200M $200M+ # of Deals Median EV/Rev

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M&A Overview – Venture-Backed Companies*

M&A Activity. Q3 Venture-backed M&A deal value totaled $5.5B, a 22% decline compared to the prior quarter, yet the

second highest total since Q4 2009. Deal value increased 20% versus the same quarter last year. Deal count remained strong in Q3, totaling 178, an increase of 7% and 71% compared to Q2 2011 and Q3 2010, respectively.

Median Deal Value & Multiples. Median deal value for venture-backed M&A was $54M in Q3 2011, representing a

quarterly and annual decrease of 44% and 25%, respectively. The median revenue multiple in Q3 was the highest since Q1 2009 and increased 37% compared to the prior quarter.

Venture Exits – Percentage of Total by Count and Deal Value. Q3 2011 venture-backed M&A activity represented

19% of total technology M&A count and 9% of deal value.

$4.6 $4.6 $4.9 $7.0 $5.5 104 142 180 166 178 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

$72.5 $65.0 $39.0 $98.0 $54.3 4.6x _4.4x 3.7x _3.6x 4.9x Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Median Deal Value Median EV/Rev

10% 13% 6% 11% 9% 13% 18% 20% 18% 19% Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Deal Value Deal Count

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NA

Private Equity Participation*

Private Equity-Backed Technology M&A Overview. Private Equity (PE)-backed deal value was $9.9B in the third

quarter of 2011, a 15% decrease versus the prior quarter and a 34% increase versus Q3 2010. The number of PE-backed acquisitions totaled 66, the lowest total since Q4 2010 and a quarterly decrease of 27%. PE-PE-backed acquisitions in Q3 represented 16% of total technology M&A deal value.

Technology M&A Overview by Geography. North America and Western Europe accounted for approximately 88% of

all third quarter technology M&A activity, up from 84% in Q2.

North America, 64% Western Europe, 24% Asia, 4% Australia, 2% Eastern Europe, 2% South America, 2% Other, 2% $7.4 $12.1 $3.2 $11.6 $9.9 91 66 81 91 66 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011

Q3 M&A Geographic Distribution

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Disclaimer

The information provided is for general informational purposes only and should not be considered legal or investment advice. Pagemill Partners LLC, recommends you seek advice from qualified legal counsel for specific questions you may have regarding M&A transactions. In addition, nothing contained herein is to be construed as an offer or recommendation, or the solicitation of an offer, to sell or buy a specific security, nor is any of the information contained here intended to constitute an analysis of any company or

Q3 2011 Notable Transactions

Google (GOOG) announced its intent to acquire Motorola Mobility on September 15th_{for $40/share, representing a 65%}

premium over the prior day close and an enterprise value and equity value of $9.6B and $12.5B, respectively. The total cost of the $9.6B mobility play is more than three times larger than GOOG’s second largest acquisition in company history (DoubleClick) and nearly as much collectively as the 100+ acquisitions the Company has completed since its inception. Motorola Mobility provides GOOG and the Android platform with a broad patent portfolio (17,000+ issued patents) that will enable a strong defense against competing vendors as IP infringement battles in the mobile space continue to heat up on a global scale. Subject to regulatory review, the transaction is expected to close in Q4 2011 or Q1 2012.

Acquirer Target Date Segment Enterprise Value EV/Rev EV/EBITDA

Google Motorola Mobility 9/15/2011 Carrier Infrastructure $9.6 Billion 0.8x 31.7x

HP Autonomy 8/18/2011 Software $11.0 Billion 11.8x 25.3x

On July 12th_{Citrix announced the acquisition of cloud infrastructure platform solutions provider, Cloud.com for $158.8}

million in cash, net of $5.6 million of cash acquired. Trailing revenue was estimated at $6.0M, implying a 26.5x revenue multiple at the time the transaction was announced. Estimated future twelve month revenue of $15.0M implies a somewhat more reasonable 10.6x revenue multiple. Cloud.com’s product portfolio includes CloudStack and XenServer, which helps providers deploy and manage cloud services that are scalable, secure and open by design. Citrix continues to grow and enhance its cloud offerings on multiple fronts and is experiencing increasing competition from VMWare and Red Hat. The Cloud.com acquisition will help Citrix build out its platform-as-a-service offering and could act as a catalyst for increased consolidation in the cloud infrastructure space.

Citrix Cloud.com 7/12/2011 Software (IAAS) $158.8 Million 26.5x N/A

Hewlett-Packard’s (HPQ) acquisition of information management software provider Autonomy for $11.0 billion was the largest technology transaction of Q3 2011 as well as the largest software transaction in the past seven years. The acquisition underscores HP’s intent to grow their software business, specifically in the archiving, e-discovery and enterprise search businesses. HP is paying $42.11/share in cash, representing a one day premium of 64% and a 58% premium to Autonomy's prior one month average closing price. The $11.0 billion enterprise value implies trailing revenue and EBITDA multiples of 11.8x and 25.3x, respectively. Since the transaction HP has been the subject of intense criticism on behalf of analysts and shareholders. Then CEO Leo Apotheker announced HP’s intent to spin-off the PC business. Within a month of replacing Apotheker, Meg Whitman, HP’s current CEO, publically announced that HP will not be exiting the PC business.

On July 20th_{, Microsemi announced an unsolicited offer to acquire all the outstanding shares and debentures of Zarlink}

Semiconductor for $3.50/share in cash, which the Zarlink board rejected. Microsemi subsequently made a tender offer directly to Zarlink’s shareholders but eventually increased its offer to $4.01/share, or an enterprise value of $525 million, which the Zarlink Board unanimously approved. The amended offer represented a 67% premium over the closing price of Zarlink’s shares and a 48% premium over the closing price of its debentures relative to the day prior to Microsemi’s initial proposal to acquire Zarlink. The Zarlink transaction is Microsemi’s seventh disclosed acquisition in the past twelve months and is expected to expand Microsemi’s reach into the communications and medical markets.