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Software M&A Insights: Deals Active Despite Macro-Economic Turmoil

By Ken Bender, Managing Director and Kris Beible, Analyst – Software Equity Group, LLC

Amid deepening macro-economic turmoil, M&A software buyers continue to remain active in 1Q09. Deals highlighted this month include Autonomy’s acquisition of Interwoven, a leading provider of content management solutions, Dealertrack’s acquisition of automotive in-store inventory management system, American Auto Exchange and Meetic’s acquisition of Match.com’s European online dating service assets.

Autonomy (LSE: AU) Acquires Interwoven (NASDAQ: IWOV)
Category: Document Management
Total Transaction Size: $767,570,000
Purchase Price: $582,340,000EV
Seller Revenue (TTM): $260,290,000
EBITDA (TTM): $44,720,000
Revenue Multiple (TTM): 2.2xEV
EBITDA Multiple (TTM): 13.0xEV
Payment Terms: Cash

SEG’s Perspective:
Autonomy, a leading enterprise search and retrieval software provider, acquires Interwoven, a leader in enterprise content management software. Interwoven’s subsidiary, Discovery Mining, will bring to Autonomy some 4,500 new customers, most of them law firms that may be good prospects for Autonomy’s Meridio data and record management offering. UK-based Autonomy has aggressively pursued market share with such acquisitions as Verity (enterprise search) and eTalk (customer interaction analysis software) in 2005 and Zantaz (email archiving) in 2007. The $775 million, all-cash offer will be financed by an underwritten placement of £220 million ($310.74 million) in ordinary shares of Autonomy, a new revolver credit facility of ~$200 million from Barclays and cash from both companies’ reserves. Autonomy agreed to pay a $25 million break-up fee if the agreement is terminated; Interwoven agreed to pay a $7 million break-up if it fails to secure shareholder approval.

DealerTrack (NASDAQ: TRAK) Acquires American Auto Exchange
Category: Automotive Industry Software
Purchase Price: $32,500,000EV
Payment Terms: Cash

SEG’s Perspective:
DealerTrack, a leading provider of on-demand automotive industry software solutions, acquires American Auto Exchange (AAX), a provider of real-time inventory management systems to North American automotive dealerships. AAX brings DealerTrack a state-of-the-art automotive industry in-store inventory management system used by the top six US dealer groups and technology complementary to DealerTrack’s current inventory price optimization and marketing products – InventoryPro and PriceDriver. In addition, the acquisition further extends DealerTrack’s reach in one of the fastest growing segments of the dealership technology space. AAX continues DealerTrack’s aggressive inorganic growth strategy, which stalled in 2008, but aggregated ten acquisitions from 2005 through 2007.

Meetic (ENXTPA: MEET) acquires Match.Com
Category: Internet Software
Total Transaction Size: $111,868,000
Purchase Price: $111,868,000EV
Seller Revenue (TTM): $76,692,000
Revenue Multiple (TTM): 1.5xEV
Payment Terms: Stock and Cash

SEG’s Perspective:
Online dating company Meetic acquires rival Match.Com’s European operations from IAC. Match.com and Meetic are two of the largest online dating services in Europe and the combination creates a clear pan-European leader serving a growing population of online daters in Europe. Match.Com’s well established European brand compliments Meetic’s 13.9 million registered profiles in 13 European countries. Match.Com’s European operation includes 15 countries and contributes 13% of Match’s consolidated operating income before amortization. Meetic established its European footprint in the past years by acquiring eFriendsNet, Lexa, ParPerfeito, DatingDirect, Cleargay and Neu. Meetic will issue 6.1 million shares and promissory note of €5.3 million, giving Match.Com 26.8% of Match’s share capital.

Software Equity Group is an investment bank and M&A advisory, serving the software and technology sectors. Founded in 1992, the firm has represented and guided private companies throughout the United States and Canada, as well as Europe, Asia Pacific, Africa and Israel. They have advised public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also represents several of the world’s leading private equity firms. They were recently ranked among the top ten investment banks worldwide for application software mergers and acquisitions. For more, please visit www.softwareequity.com

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