THE SPARTAN GROUP LLC
INVESTMENT BANKERS
Los Angeles  San Francisco  Silicon Valley
QUARTERLY TECHNOLOGY NEWSLETTER
Q3 2013 Sector Update
Global Quarterly M&A Activity
Contents
Page
879
807
897
882
842
818
1,000
743
$35,000
$30,000
$27,886
$25,000
$20,000
$8,377
$5,000
$5,063
$10,000
200
$18,830
$31,476
$26,098
$24,331
$14,251
$26,641
$25,703
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
$0
1
2
3
4
5
6
For more information regarding
the Technology sector or to inquire
about The Spartan Group’s
services, please contact:
Michael A. Mitgang, CFA
Managing Director
Head of Technology
Silicon Valley
(650) 539-4947 | Direct
mmitgang@spartanTSG.com
Follow Michael on Twitter:
@MichaelMitgang
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39 E. Union Street
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0
Deal Value < $5B
Deal Value > $5B
Deal Volume
North American Quarterly Private Placement Activity
$8,000
Deal Value ($ in millions)
Executive Summary
M&A Activity
Private Placement Activity
Notable Transactions
IPO Activity
Tech. Bellwether Summary
600
400
$15,000
$5,000
800
Deal Volume
$40,000
1,164
1,152
1,200
$7,000
1,100
1,058
$5,000
$4,000
1,150
1,096
$6,000
1,016
1,014
992
$3,000
1,050
1,000
$2,000
$1,000
Deal Volume
October 2013
Deal Value ($ in millions)
$45,000
950
$4,911
$7,393
$4,576
$5,668
$4,365
$6,632
$5,766
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
$0
900
Market Observations

Global Technology Sector M&A activity in Q3 2013 increased 17.6% in dollar terms
compared to Q3 2012 while deal volume declined 17.2% over the same period. However,
Q3 2013 marked the third consecutive declining quarter for the sector. M&A deal volume
and aggregate deal value continued to decline, with deal volume down 9.2% to 743 deals
and deal value down 12.3% to $30.7 billion. Three announced multi-billion dollar deals
(Fairfax Financial / BlackBerry for $4.7 billion, Microsoft / Nokia Devices & Services
division for $5.0 billion, and Cisco / Sourcefire for $2.7 billion) represented 40.4% of the
quarterly deal volume. U.S. and Canada continued to dominate technology M&A during Q3
2013, accounting for 53.3% and 60.5% of global deal volume and deal value, respectively.

North American Technology Sector private placement activity in Q3 2013 increased 26.0%
in dollar terms compared to Q2 2012 while deal volume declined 2.2% over the same
period. However, as compared to Q2 2013 deal value declined 13.1% to $5.8 billion and the
number of deals declined 14.8% to 992. Of the 880 deals with disclosed values, 23.4% were
between $5 to $25 million and 3.4% were above $25 million. Internet & Digital Media
continued its momentum in Q3 2013, accounting for 63.1% of deal volume and 56.8% of deal
value.

North American Technology Sector IPO’s in Q3 2013 increased 45% in dollar terms and 50%
in number compared to Q3 2012 and represented the 2nd best quarter for IPOs since
Facebook’s $16.0 billion IPO in Q2 2012. However, IPO’s declined 49.3% in dollar terms
and 30.8% in number compared to Q2 2013.

Trading performance of The Spartan Group’s index of Technology bellwether stocks
increased 19.9% in the last twelve months ended Q3 2013 as compared to 21.0% (NASDAQ)
and 16.7% (S&P 500) buoyed in larger part by Facebook’s 131.9% increase.
Note: Please see page 6 for sources and disclaimer.
1
Q3 2013 Technology Newsletter
Investment Bankers
Los Angeles • San Francisco • Silicon Valley
Global Annual M&A Activity
3,780
$180,000
4,000
3,515
$160,000
YTD Q3 2013, there were three deals over
$5 billion in transaction value, amounting
for 38.3% of total disclosed transaction
value (Microsoft’s $5 billion acquisition of
Nokia’s Devices and Services division,
BMC Software’s $8.4 billion sale to an
investor group including Bain Capital and
Golden Gate Capital, and Silver Lake’s
$24.9 billion acquisition of Dell).
Comparatively, YTD Q3 2012 saw one
deal over $5 billion (Scientific Atlanta’s
$5.1 billion acquisition of NDS).

Geographically, 49.5% of M&A deal
volume and 46.0% of M&A deal value
were completed with U.S. companies in
Q3 2013, as compared to 47.7% and 70.9%,
respectively, in Q2 2013.
3,500
$30,997
$120,000
3,000
2,582
$14,386
2,402
2,500
$5,063
$100,000
2,000
$41,263
$5,063
$80,000
1,500
$60,000
Deal Volume
$140,000
Deal Value ($ in millions)

3,465
1,000
$40,000
500
$20,000
$107,159
$124,110
$100,735
$76,404
$66,595
2010
2011
2012
YTD 2012
YTD 2013
$0
0
Deal Value < $5B
Deal Value > $5B
Deal Volume
Q3 2013 M&A Deal Value by Segment(1)
Q3 2013 vs. Q2 2013 M&A Transaction Volume by Deal Size(1)
160
143
140
130
120
Deal Volume
100
80
60
40
40
30
28
28
20
5
11
8
6
0
<$25M
$25M - $100M
$100M - $500M
Q2 2013
$500M - $1B
$1B+

M&A transactions under $25 million in value continued to dominate the
technology sector in Q3 2013, up 10.0% over Q2 2013 and represented 66.2% of
total deals with disclosed transaction value, compared to 61.0% in Q2 2013.

The number of deals in the $25-$100 million, $100-$500 million, and over $1
billion ranges declined a combined 20.5% during Q3 2013, offset by a 120%
growth in deals in the $500-$1 billion range.
Q3 2013 Median Enterprise Value Multiples by Deal Size(1)
Valuation
Range
Q3 2013
EV/Revenue

Software and Internet and Digital Media represented 73.0%
of deal volume and 45.2% of deal value in Q3 2013, as
compared to 70.0% and 70.7% respectively, in Q2 2013.

In Q3 2013 Communications Equipment represented only
4.0% of deal volume but a massive 35.9% of deal value as
compared to 5.0% and 3.0%, respectively in Q2 2013. The
spike in deal value was driven primarily by the announced
Nokia Devices & Services business and BlackBerry deals.
Q3 2013
14.0x
Q2 2013
EV/EBITDA
EV/Revenue
Historical Median Enterprise Value Multiples(1)
EV/EBITDA
12.1x
12.0x
5.0x
11.4x
11.9x
4.5x
10.0x
<$25M
1.4x
7.4x
1.0x
8.9x
9.4x
1.8x
12.7x
6.0x
$100M - $500M
0.8x
9.3x
2.5x
9.0x
4.0x
$500M - $1B
1.4x
NM
3.2x
11.7x
2.0x
12.1x
0.0x
NM
3.1x
3.0x
1.2x
2.5x
1.6x
1.5x
1.2x
1.4x
2.0x
1.5x
0.9x
1.0x
0.5x
0.0x
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Median EV/EBITDA
2
4.0x
3.5x
8.4x
2.0x
2.0x
3.4x
9.9x
8.0x
$25M - $100M
$1B+
10.3x
10.0x
Q1 2013
Q2 2013
Q3 2013
Median EV/Revenue
Q3 2013 Technology Newsletter
Investment Bankers
Los Angeles • San Francisco • Silicon Valley
U.S. and Canada Annual Private Placement Activity
$30,000
4,500
3,337
YTD Q3 2013 private placement activity
remained flat over YTD Q3 2012 in both
dollar and number terms.

Several large financings in Q3 2013
included:
Uber
($361.2
million),
Davis+Henderson ($244 million), Palantir
Technologies ($196.5 million), and Pure
Storage ($175 million).
4,000
3,214
3,182

3,500
$25,000
3,000
$20,000
2,500
$15,000
2,000
Deal Volume
Deal Value ($ in millions)
4,278
4,154
$35,000
1,500
$10,000
1,000
$5,000
$20,687
$29,949
$22,547
$16,880
$16,763
2010
2011
2012
YTD 2012
YTD 2013
500
$0
0
U.S. and Canada Q3 2013 Private Placement Activity by Deal Size(1)
800
734
700
628

In Q3 2013, private placement deals below
$5 million continued to be the sweet spot,
representing 71.4% of total deals with
disclosed transaction values.

Series B and later deals in Q3 2013
represented in aggregate approximately
18% of the deals with disclosed
information and valuations were generally
at levels consistent with, to slightly up
relative to, valuations in 2012.
500
400
300
200
119
106
111
100
34
100
29
20
17
0
<$5M
$5M - $10M
$10M - $25M
Q2 2013
$25M - $50M
Q3 2013 Venture Capital Deal Volume by Stage
Unspecified
Round
28%
Average Value of Venture Capital Deals, 2008 – Q3 2013
Add-on and Other
12%
Growth
Capital/Pipe
3%
$40
37
36
$35
Angel/Seed
24%
Series D and Later
3%
$50M+
Q3 2013
Deal Volume ($ in millions)
Deal Volume
600
Series C
5%
30
28
$30
25
$25
13
$15
12
10
8
6 6
7
13
12 12
19
23
22 22
21
19
$20
$10
25
18
21
17
16
16
13
12
10
12
12
11
8 8
9
10
9
10
8
6 6
$5
Series B
10%
$0
Series A
Series A
15%
2008
Q3 2013 Private Placements Deal Volume by Segment
Series B
2009
Series C
2010
Series D and
Later
2011
Growth
Capital
2012
Unspecified
Venture
Debt
YTD 2013
Q3 2013 Private Placements Deal Value by Segment
3
Q3 2013 Technology Newsletter
Investment Bankers
Los Angeles • San Francisco • Silicon Valley
Q3 2013 Notable Transactions
 On September 3, 2013, SciQuest, a leading provider of cloud-based business automation solutions for spend management,
announced that it acquired CombineNet, a provider of advanced sourcing software to large companies with complex procurement
needs, for approximately $43 million.
•
The purchase was comprised of approximately $26 million in cash and 820,000 shares of common stock, and was valued at a
enterprise value multiple of 3.6x LTM revenue.
•
CombineNet had revenue of roughly $12 million in 2012 and approximately 100 customers internationally across retail,
consumer, restaurant, and food and beverage manufacturing industries.
•
The acquisition expands SciQuest’s strategic footprint in the commercial sector with an advanced, cloud-based multitenant
SaaS architecture solution that improves procurement decisions beyond traditional e-sourcing software and enables SciQuest’s
customers to more easily aggregate and leverage spending across goods and services.
•
CombineNet had previously received venture funding from Alta Communications in June 2010 ($2.1 million) and a
consortium of investors led by Apex Venture Partners in February 2004 ($12 million).
 On September 4, 2013, RiverMeadow Software, a leading developer of automated server migration solutions, announced that it
closed a $12 million Series B round of financing.
•
RiverMeadow’s Cloud Migration SaaS automates the migration of live physical, virtual and cloud-based servers "as-is" into
public, private and hybrid cloud environments and automates the cloud migration process from beginning-to-end.
•
RiverMeadow intends to utilize the additional investment to expand its engineering team and continue supporting its OEMs in
meeting growing market demands for cloud migration tools and services.
•
Earlier in April, RiverMeadow announced that Cisco would use their tool for cloud on-boarding to help customers easily move
entire server workloads to public, private and hybrid cloud environments.
•
Interestingly, this round was predominantly comprised of strategic investors (including Cisco and Violin Memory) and
suggests the trend that large technology corporations may be increasing venture capital investments in an effort to capitalize
on strategic advantages. In 2013, Cisco has actively invested in technology companies, participating in nine transactions.
 While completed subsequent to close of Q3 2013, on October 1, 2013, Telogis announced that it raised a $93 million round of
financing from a consortium of investors led by Kleiner Perkins and positions the company for a potential IPO in 2014.
•
Telogis is a leading provider of a SaaS based platform for companies that require dynamic routing, real-time work order
management, commercial navigation, telematics and mobile integration services for their workforces in the field.
•
The company is profitable and expects to generate about $85 million in sales for 2013 and since 2011 has been the exclusive
commercial telematics technology provider for Ford and recently partnered with Volvo to co-develop new telematics and
navigation services.
•
Telogis intends to utilize the investment to expand its global footprint and capitalize on the rapidly growing multi-billion
dollar market for location-based products and services designed for mobile-orientated enterprises and organizations
•
Interestingly, since its founding in 2001, Telogis had been financed by private capital funded by its founders, management and
other individuals; Kleiner’s investment represents the company’s first round of outside institutional capital.
 On September 9, 2013, Western Digital, a global provider of enterprise optimization software and hard disk and solid state disk
drives, announced that it acquired Virident Systems, a leader in PCIe storage and flash memory solutions, for $685 million in cash.
•
Virident doubled its employee base during the first nine months of 2013 and revenue was up 200% on a year-over-year basis.
•
This transaction further extends Western Digital’s presence in enterprise SSDs and enables Virident to accelerate it go-tomarket efforts by leveraging Western Digital’s channel relationships and global customer reach.
•
Previously, in February 2013, Seagate Technology had acquired a $40 million stake in Virident and signed an OEM deal to
push Virident’s products through Seagate’s channels; interestingly, Seagate was not the ultimate acquiror of the company.
•
Virident had previously received nearly $120 million in invested capital investors including Accel Management, Ariva
Partners, Artiman Ventures, Cisco, Globespan Capital Partners, Hercules Technology Growth Capital, Intel, Mitsui & Co.,
Musea Ventures, Seagate Technology and Sequoia Capital.
•
The acquisition of Virident further adds to consolidation and funding activity within the flash storage space following Cisco’s
$415 million acquisition of WhipTail Technologies as well as Violin Memory’s $162 million IPO and Pure Storage’s $175
million financing round, all of which were completed during Q3 2013.
4
Q3 2013 Technology Newsletter
Investment Bankers
Los Angeles • San Francisco • Silicon Valley
U.S. and Canada Quarterly Normalized IPO Activity(2)
$2,500
14
13

IPO activity of Internet and Digital Media
companies
dominated
the
market,
accounting for 4 out of 9 offerings and
40.9% of total offering dollar value during
the quarter.

Q3 2013 showcased five IPOs over the
$100 million mark: FireEye ($303.5
million), Violin Memory ($162.0 million),
and Benefitfocus ($130.8 million), Cvent
($117.6 million) and Rocket Fuel ($116.0
million).

On average, 1st day price performance for
IPOs priced in Q3 2013 was up 35.6% with
the
best
performing
up
102.1%
(Benefitfocus) and the worst performing
down 22.0% (Violin Memory).
12
11
9
$1,500
10
8
6
6
6
5
$1,000
Deal Volume
Deal Value ($ in millions)
$2,000
4
4
$500
2
$1,493
$774
$693
$876
$412
$1,981
$1,005
Q1 2012
Q2 2012
Q3 2012
Q4 2012
Q1 2013
Q2 2013
Q3 2013
$0
0
Q3 2013 IPO Deal Volume by Segment
Q3 2013 IPO Deal Value by Segment
Q3 2013 IPO Summary
Date
Closed
09/26/2013
Company
Violin Memory
IPO Value
Offer
1st-Day
($M)(3)
Price ($)
Price ▲
Ticker
$9.00
(22.0%)
VMEM
$162.0
Description
Flash memory arrays that integrate enterprise-class hardware and software technologies
09/26/2013
Covisint
64.0
10.00
26.3%
COVS
Cloud engagement platform for enterprise collaboration with customers, partners, and suppliers
09/25/2013
Applied Optoelectronics
36.0
10.00
(0.4%)
AAOI
Optical communications products for CATV, fiber-to-the-home, and internet data centers
09/19/2013
Rocket Fuel
116.0
29.00
93.4%
FUEL
Artificial-intelligence digital advertising solutions
09/19/2013
FireEye
303.5
20.00
80.0%
FEYE
Malware protection system (MPS) products
09/17/2013
Benefitfocus
130.8
26.50
102.1%
BNFT
Cloud-based SaaS benefits solutions for consumers, employers, insurance carriers, and brokers
08/08/2013
Cvent
117.6
21.00
56.8%
CVT
08/06/2013
YuMe
46.1
9.00
0.0%
YUME
07/25/2013
Liquid Holdings Group
28.6
9.00
(15.1%)
LIQD
Cloud-based event management software
Digital video brand advertising solutions
Software for trading, risk management, accounting, reporting, and administration for financial services
5
Q3 2013 Technology Newsletter
Investment Bankers
Los Angeles • San Francisco • Silicon Valley
Technology Bellwethers Public Market Summary(4)
Last 12 Months Indexed Sector Performance
Market Capitalization and Y-O-Y Percent Growth
35%
$500
200%
30%
163.6%
$450
20%
15%
10%
5%
0%
(5%)
(10%)
$400
$350
$300
11/28/12
1/28/13
19.9% Technology Bellwethers
3/28/13
5/28/13
21.0% NASDAQ
7/28/13
16.7% S&P 500
100%
$250
$200
41.5%
24.2%
28.2% Russell 2000
$143
$24
$433
$126
AMZN AAPL
CSCO
$122
$292
$40
$114
$203
$277
$151
$88
FB
GOOG
HPQ
INTC
IBM
MSFT
ORCL
SAP
(50%)
DELL
45.2%
43.5%
12.6%
20%
1.2%
15%
0.0%
(7.7%)
25.6%
25%
5.6%
5.5%
30.5%
28.2%
30%
13.8%
34.3%
33.0%
35%
23.0%
38.7%
38.6%
40%
30.5%
12.0%
10%
(4.0%) (3.5%)
5%
5.7%
4.4%
0%
-20.0%
AMZN AAPL CSCO DELL
FB
GOOG HPQ
INTC
IBM
MSFT ORCL
AMZN AAPL CSCO DELL
SAP
EV/LTM Revenue Multiple
20.0x
50.0x
18.7x
45.0x
16.0x
40.0x
14.0x
35.0x
12.0x
30.0x
10.0x
25.0x
8.0x
20.0x
6.0x
4.4x
2.1x
2.4x
2.1x
1.9x
2.2x
GOOG HPQ
INTC
IBM
MSFT ORCL
SAP
2.8x
3.7x
47.3x
41.3x
14.4x
15.0x
4.2x
10.0x
7.3x
6.7x
0.0x
12.2x
8.6x
5.9x
3.9x
5.0x
0.5x
0.3x
FB
EV/LTM EBITDA Multiple
18.0x
2.0x
0%
45%
(6.1%)
4.1%
LTM EBITDA Margin
40.0%
-10.0%
(0.3%)
(30.7%)
50%
10.0%
11.1%
(14.4%)
$0
41.4%
20.0%
20.3%
$100
9/28/13
50.0%
4.0x
18.2%
0.7%
LTM Revenue Growth
30.0%
50%
24.1%
$150
$50
(15%)
9/28/12
150%
Percent Growth
Market Capitalization ($ in billions)
25%
5.5x
7.2x
8.4x
0.0x
AMZN AAPL CSCO DELL
FB
GOOG HPQ
INTC
IBM
MSFT ORCL
SAP
AMZN AAPL CSCO DELL
Sources: S&P Capital IQ, Preqin, PitchBook, Company Filings, Press Releases and TSG Research.
(1) Excludes deals with undisclosed transaction values. (2) Excludes $16.0 billion Facebook IPO in Q2 2012.
FB
GOOG HPQ
INTC
IBM
MSFT ORCL
SAP
(3) Does not include over-allotment options. (4) Public market data as of September 30, 2013.
Disclaimer: The information and views contained in this newsletter have been prepared by The Spartan Group LLC for informational purposes only and does not represent a solicitation, or an offer, to buy or sell
any security. This newsletter is not intended to be, and should not be construed as, investment advice or an analysis, ranking, rating or recommendation with respect to the securities, companies or industries
described. No investment decision should be based on this newsletter. The information contained in this newsletter is based on publicly available sources, including reports and filings with the Securities and
Exchange Commission as well as market information based on other third party sources. Such information is considered to be reliable, but we have not independently verified such information and do not guarantee
its accuracy or completeness. The information contained herein is subject to change with the market and we are under no obligation to update the information contained in this newsletter. The Spartan Group LLC
and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein at any
time. This newsletter may not be copied or reproduced in any form, or redistributed without the prior written consent of The Spartan Group LLC. Additional information is available upon request.
6