VC-BACKED M&A SNAPSHOT

Q3 2011
OCTOBER 2011

VC-BACKED M&A SNAPSHOT

OVERVIEW COMMENTARY
Consistent with Q3 2011 overall M&A activity, the VC-backed M&A activity also shows a good overall tone, albeit a slight deceleration due to caution that emerged from general economic worries. There were 23 VC-backed M&A exits within the $25mm and $1b range, compared to 27 in Q2 2011. Summary observations for the quarter include: 1. Electronic Arts $1b+ acquisition of PopCap Games represents by far the largest VC-backed transaction this quarter. 2. The median return on invested capital was a healthy 5.7x(a) 3. Seven transactions that provide >8.0x invested capital multiple returns to investors are provided below: Buyer / Seller Trx Value/ Inv. Cap 45.6x 19.0x 18.2x 16.0x 10.9x 9.6x 9.6x Seller Description Social game developer Real time display ad Cloud-based open source platform Mobile payment Mobile local shopping application Multichannel customer support platform Mobile broadband services

FOLLOWING ANALYSIS
SUMMARY OF VC-BACKED M&A EXITS: VC-BACKED M&A TRANSACTIONS:
SUMMARY OF QUARTERLY ACTIVITY IN NUMBERS AND TONE

LISTING OF TRANSACTIONS.

VC-BACKED

EA/PopCap ValueClick/Dotomi Citrix/Cloud.com eBay/Zong NICE/The FIzzback Group Salesforce/Assistly Tele2/Network Norway

4. Non-U.S. sellers comprised 33% of transactions. Seven out of eight of these companies were backed by local region VCs.

(a) Note: Data pertains to 17 transactions in the quarter (out of a total of 24), where both acquisition price and total invested capital were disclosed. 24 transaction also includes EAs $1b+ acquisition of PopCap.

VC-BACKED M&A SNAPSHOT - SUMMARY

COVERAGE
Architect Partners tracks venture capital-backed M&A activity within the converging Internet | mobile | digital media sectors. The following assessment is focused on venture capital-backed M&A transactions with announced values of between $25mm and $1b as these typically represent successful business-building endeavors. We also include transactions with unannounced values which we believe are within $25mm-$1b range.

MARKET TONE
Quality businesses with momentum attract close assessment although buyers generally remain prudent and move at a moderate pace.

Q1

2010 Q2 Q3
26 20

Q4
20

Q1

2011 Q2
27

Q3

3 17

4 27

4 18 16
23 23

Venture-Backed M&A Exits (#)1.........................................................

12

$4.2

$3.4 $2.3 $1.4

$3.2

$3.4

$3.6

Total Consideration Paid ($b)2,4.........................................................

$135 $124
$103 $104 $80

$70

$70

Median Transaction Size ($mm)2,4.....................................................

85% 67% 74% 75% 63% 64% 67%

U.S.-based Target (%)3...........................................................................

Note: 1) Dark blue includes VC-backed M&A transactions with announced values of between $25mm and $1b. Light blue includes VC-backed M&A transactions where consideration paid was not announced, however we believe to have values of between $25mm and $1b. 2) Total consideration paid and median transaction size are calculated based on transactions with announced values of between $25mm and $1b. 3) Percentage is based on U.S. target, calculated based on cumulative transactions. 4) Transaction values with a range are presented as a mid-point value

VC-BACKED M&A SNAPSHOT - TRANSACTIONS

Below, we highlight Venture Capital-backed transactions this quarter. This list contains transactions with $25mm and $1b values and one notable transaction (EAs purchase of PopCap Games) that is larger than $1b.
ACQUISITION PRICE ($mm)
$1,025 $756 $580 $295 $240 $231 $200+

TARGET

ACQUIRER

INVESTED CAPITAL ($mm)

$23 NA NA $16 $15 NA $11 NA $15 $18 $55 $17 $30 $7 $16 $20 $12 NA $5 $99 (a)

MULTIPLE OF INV. CAPITAL VENTURE CAPITAL FIRMS

45.6x NA NA 19.0x 16.0x NA 18.2x NA 9.6x 6.9x 2.3x 5.7x 2.7x 10.9x 4.6x 3.7x 5.6x NA 9.6x 0.5x

TARGET LOCATION

M&A ALERT

Unknown

$155 $140 $125 $125 $97 $80 $80 $76 $74 $64 $55 $50 $47

Note: a) Represents public company at time of acquisition. Funding is not disclosed.

VC-BACKED M&A SNAPSHOT - TRANSACTIONS (continued)

TARGET ACQUIRER ACQUISITION PRICE ($mm)
$40 $34 $30 $28

CAPITAL ($mm)
$14 NA NA $62 Average Median (b)

INVESTED

MULTIPLE OF INV. CAPITAL VENTURE CAPITAL FIRMS

2.9x NA NA 0.5x 9.7x 5.7x

TARGET LOCATION

M&A ALERT