Quarterly Technology M&A Review

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1 $ millions $ billions Quarterly Technology M&A Review Q 201 Aggregate deal value for technology M&A totaled just over $72B in Q 201, representing a quarter-overquarter increase of % and the highest quarterly transaction value amount since Q With this value increase, 201 may represent the largest year in technology M&A since The surge in spending was largely driven by the number of deals valued in excess of $1B. There were 1 such transactions during the quarter, representing more than two-thirds of the aggregate deal value, and a 0% quarterly increase in deals of this size versus the first two quarters of 201. Of the 178 deals with announced values during the quarter, 0% were valued over $200M, an increase from 27% in Q2 201 and 18% in Q The increase in median deal size signals a technology M&A market where larger deals are more common due to strong equity and debt capital markets, and the pressure on large strategic acquirers to make substantial acquisitions. There were 807 total deals completed during the quarter, a 7% increase over Q These levels are meaningfully below the 2011 and 2012 averages of 90 and 879, respectively. If activity levels hold through the balance of 201, deal volume will finish at the lowest level since This is another sign that increased price expectations and buyer scrutiny are causing fewer transactions to being consummated. 886 $7. Deal Value Technology M&A Overview¹ Deal Count & Deal Value. Total deal value increased sharply in Q to the highest level since Deal volume increased 7% over Q2, although it is still meaningfully lower than the highs reached in 2011 and $ # of Deals $20.1 $ $40.4 $10.2 $ $6.4 $72.0 Median Multiple & Valuation. The median revenue multiple in Q 201 was 1.x, a 2% decrease versus the prior quarter, and approximately 8% lower than the historical median. Median deal value was $41.2 million in Q 201, in line with the previous quarter, and approximately 8% higher than the historical median. Median Deal Value $6.8 Deals valued at $10B+ Median EV/Rev² $ Median valuation across all sectors for the quarter was 1.x revenue, a 2% decline from Q2 201, and approximately 7% lower than the Q Q 201 median of 1.6x revenue. The Communications sector garnered the highest median valuations at.0x revenue, followed by Software, which was the most active sector during the quarter, at 2.x revenue. 2.0x 1.x 1.8x 2.0x 1.x Venture backed M&A continued to show strength in Q, increasing for the second consecutive quarter. In aggregate, VC-backed M&A value totaled $7B, a 60% increase over Q2, and the highest quarterly total since Q Unlike the technology M&A market as a whole, the increases in venture-backed M&A were driven by strong volumes overall and indeed during the first three quarters of 201 only one transaction exceeded $1B in value (Yahoo s acquisition of Tumblr), compared to five deals completed during the same period in The IPO market for technology companies remained robust during Q, with twelve IPOs on major U.S. exchanges. Of the twelve newly public companies, nine traded at a premium to their IPO price after 0 days of trading, signaling investor confidence in the continued strength and growth prospects of the technology market. In addition, there is a robust IPO pipeline, with several well-known firms preparing to go public, including Box, GoPro, and Lending Club. $0. $.0 $28.4 $41.1 $41.2 Q Disclosed Deal Count and Median Multiple by Deal Size. During the quarter, there were 17 deals with disclosed transaction values. In line with previous quarters, deals valued at greater than $0M generally garnered higher multiples, with the highest multiples paid for deals valued at $200M or above. 0.9x 2.2x 2.x 1.4x x Source detail on last page.

2 Q M&A Overview Active Technology Segments¹ M&A Activity by Segment. Communications Services, Internet & Digital Media, IT Services, Semiconductors, and Software subsegments accounted for 49% of all technology M&A deal value and 80% of total deal count in Q. Of the 1 $1B+ deals during the quarter, seven fell into these categories. The Systems sector was the most active by value, with transactions during the quarter totaling $1B in deal value, followed by the Semiconductors sector, totaling nearly $1B in deal value. For the fourth consecutive quarter, the Software and IT Services segments were the most active by volume, accounting for 29% and 26% of total Q deal count, respectively. Q 201 Median EV/Rev² Sector Total Deal Count Disclosed Value ($B) Median Value ($M) Q 2012 Q2 201 Q 201 Y/Y Delta Q/Q 4 Delta Communications Services x 1.6x 2.x (2%) 44% Internet & Digital Media x 1.8x 1.2x (14%) (%) IT Services x 0.8x 0.7x (42%) (1%) Semiconductors x 2.1x 1.9x 8% (10%) Software x.0x 2.x 0% (17%) Total: Active Sectors x 1.8x 1.9x 6% 6% Total: Overall Technology x 2.0x 1.x (2%) (2%) Q M&A Activity Active Technology Segments¹ Communications Services. Of the 29 deals completed during the quarter, only eight had disclosed values, totaling $8.1B. There were four deals valued at more than $200M, with a median valuation of.2x revenue. This is a significant increase from a median of 1.9x revenue for deals in this range last quarter. The historical median valuation for deals in the Communications Services sub-segment is approximately 1.7x revenue x x $0-2M $2-0M $0-100M $ x - 200M $200M+ Internet & Digital Media. There were 2 Internet & Digital Media deals with disclosed values during Q, totaling $2.B. This value is in line with the first two quarters of the year, but significantly lower than 2011 and 2012 levels for the sector. Similar to Q2, the majority of deals disclosed in Q were under $2M. The median deal value for Q was $26.4M, while the historical median deal value for the sub-segment is approximately 1.6x revenue x 4 1.4x 2 2

3 Q M&A Activity - Active Technology Segments (continued)¹ IT Services. IT Services was the second most active sector in the second quarter in terms of deal volume, with 206 total transactions, of which had disclosed values. The median deal value was $16.4M, while the median revenue multiple was 0.7x, the lowest of the active sectors x 7 0.8x 0.4x 0.4x - Semiconductors. The Semiconductor sector was the second most active sector in terms of deal value, with 29 deals totaling $12.8B. This is the highest quarterly deal value amount since Q2 2011, driven by two large transactions: Applied Materials $9.2B acquisition of Tokyo Electron, and Tsinghua Holdings $1.8B acquisition of Spreadtrum Communications. The median valuation for the quarter was 1.9x, in line with previous quarters, and approximately 2% higher than the historical median of 1.x revenue x 0.0x 0.4x Software. The Software segment was the most active sector of the quarter, accounting for 29% of total technology deal volume and 11% of total deal value. The median revenue multiple for Software deals was 2.x, slightly lower than the historical median of approximately 2.7x. There were a total of three $1B+ transactions in the Software sector this quarter, compared to five in the second quarter and zero in the first quarter. 22.x 4.8x.x 0.9x x NA 10

4 $ millions $ billions M&A Overview Venture-Backed Companies¹ M&A Activity. Venture-backed M&A increased by 1% compared to the previous quarter, while deal volume was up modestly. While there were no transactions valued above $1.0B during the quarter, there were 1 deals valued above $200M, and four deals valued above $00M. Deal Value # of Deals $6. $4.8 $2.9 $.4 $7.0 Median Deal Value & Multiples. Venture-backed M&A median deal value decreased to $70M during the quarter, but remained significantly higher than historical median of approximately $6M. Median revenue multiples remained flat at their highest level since Q 2011, and well above the historical median of.x. Median Deal Value Median EV/Rev² 4.7x 4.7x.7x 1.7x 1.9x $41.2 $41.8 $28.4 $90.0 $70.0 Venture Exits Percentage of Total M&A Activity by Count and Deal Value. Venture-backed M&A exits comprised 22% of total deal count, and 10% of total disclosed deal value. While deal count as a percent of total M&A has remained relatively stable over the past several quarters, deal value as a percent of total M&A has reverted to levels over the past two quarters. 20% Disclosed Deal Value 24% Deal Count 22% 22% 22% 17% 8% 12% 10% % 4

5 $ billions Private Equity Participation¹ Private Equity-Backed Technology M&A Overview. Private equity-backed acquisitions totaled $6.4B during the quarter, or 9% of aggregate technology M&A value, down significantly versus Q1 201 and Q2 201 levels. Total volume of PE-backed transactions increased for the third consecutive quarter. Key deals of the third quarter include Vista Equity s $1.0B take private of The Active Network (2.1x revenue) and Thoma Bravo s $1.0B acquisition of Intuit s Financial Services division (.4x revenue). Deal Value # of Deals $10.6 $.9 $28.8 $12.8 $6.4 Q M&A Geographic Distribution 1 Technology M&A Overview by Geography. North America s share of technology M&A increased to 67.7% from 6.% in Q2 201 and 64.2% in Q 2012, respectively. Western Europe s share of M&A deal activity fell approximately %, while deal activity in Asia has increased nearly 1.% since mid Western Europe, 18.4% Asia,.% Australia,.8% Eastern Europe, 1.% North America, 67.7% South America, 1.% Other, 1.% NA

6 Q 201 Notable Transactions¹ Acquirer Target Date Segment EV EV/Rev 2 EV/EBITDA Twitter MoPub 09/09/1 Mobile Advertising $0M.x NA On September 9 th, Twitter announced the acquisition of MoPub for approximately $0M in pre-ipo stock. Twitter s largest acquisition to date, MoPub provides an exchange for mobile advertisements that allows publishers to manage their inventory and optimize multiple sources of advertising. For Twitter, the acquisition is an entry point into two of the biggest trends in digital marketing: programmatic ad purchasing and mobile advertising. According to the press release, Twitter will implement this technology to build real-time bidding into the Twitter ads platform, helping advertisers scale and automate their purchases. This is the fifth mobile-related acquisition (out of nine total) by Twitter in the past 12 months. Mobile now accounts for 70% of Twitter s revenue (compared to 0% of Facebook revenue from mobile). MoPub was founded in 2010 and had raised $16.M in capital from Accel Partners, Harrison Metal Capital, JAFCO Ventures, and Iris Capital. Acquirer Target Date Segment EV EV/Rev 2 EV/EBITDA Microsoft Nokia (Devices) 09/0/1 Mobility $.0B NA NA On September rd, Microsoft announced that it would acquire Nokia s device and services business for $.0B. As part of the deal, Microsoft agreed to a $2.2B licensing deal which included use of Nokia s patents and mapping service for 10 years. In early 2011, Microsoft and Nokia entered into a partnership where the device vendor would build its smartphone products designed for the Windows Phone OS. While several hardware vendors including HTC, Samsung, LG, and Toshiba currently license Microsoft s mobile OS, Nokia produces roughly 80% of all devices running Windows Phone OS. From a strategic perspective, the acquisition strengthens Microsoft s mobile strategy for both phones and tablets, a market where the Windows OS has struggled to gain market share. From a financial perspective, the deal will allow Microsoft to capture four times more gross income on Nokia devices than it does today. In addition, there are a number of IP-related and technological synergies driving the deal. The acquisition is Microsoft s third-largest acquisition in its history, following the $8.B purchase of Skype in 2011, and the $6.0B purchase of aquantive in Acquirer Target Date Segment EV EV/Rev 2 EV/EBITDA AOL Adap.tv 08/07/1 Marketing Automation SaaS $46M 6.2x NA On August 7 th, AOL acquired Adap.tv, an online and mobile video advertising network for businesses, advertising agencies, and content publishers. AOL paid a total of $46M for the company, paid approximately 70% in cash and 0% in stock and stock options. Adap.tv reported 2012 calendar year revenue of $7M, valuing the deal at 6.2x revenue. Adap.tv provides programmatic video technology across all different screen types, as well as video advertising campaign SaaS to enable advertisers to manage and measure video advertising effectiveness. Adap.tv will operate as part of AOL s video organization, and will help solidify AOL s position in the digital video and programmatic advertising market. In fact, with Adap.tv, AOL currently serves more Web video ads than anyone else in the U.S., including Google. The acquisition is also indicative of AOL s shift from a high-touch person-to-person sale of advertising to scalable model of automated trading of ad inventory. Adap.tv was founded in 2006, and raised approximately $49M from Gemini Israel Ventures, Redpoint Ventures, Spark Capital, and Bessemer Venture Partners. Acquirer Target Date Segment EV EV/Rev 2 EV/EBITDA Cisco Sourcefire 07/2/1 Security $2.7B 10.9x NM On July 2 rd, Cisco acquired Sourcefire, a provider of information security software, for $76 per share, or approximately $2.7B. The bid represents a premium of nearly 0% over Sourcefire s trading price the day before the announcement, and will be the third-largest acquisition in the security market behind Intel s $7.7B acquisition of McAfee in 2010, and Juniper Networks $4.0B stock swap with Netscreen Technologies in Sourcefire provides intelligent cybersecurity solutions to protect enterprises and government organizations from malware threats to their networks, mobile devices, and other endpoints, and will be Cisco s fifth enterprise security acquisition since With $247M of TTM revenue as of July 201, the deal was valued at approximately 10.9x revenue. Sourcefire grew approximately 4% in 2012, and was projected to grow another 26% in Limited to transactions with disclosed values as of 09/0/1; variances due to rounding; sources used throughout the report include The 41 Group, Capital IQ, Company Filings and other Wall Street Research 2. EV/Rev = Enterprise Value / Revenue. Y/Y = Year on Year 4. Q/Q = Quarter on Quarter. EBITDA earnings before interest, taxes, depreciation, and amortization 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 security reasonably sufficient to form the basis for any investment decision. The information herein is based in part on third party sources. While we believe the information to be reliable, it has not been verified by us to be accurate. As such, we do not guarantee that the information is accurate or complete. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Investment banking services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a division of Duff & Phelps Securities, LLC. Transaction opinions are provided by Duff & Phelps, LLC. 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