Wave Issue 0508 2/25/05 Article 12-01

***Software Industry Mergers and Acquisitions up Sharply in
2004; On Pace for an Even Better 2005

SAN DIEGO
Feb. 22, 2005

Software Equity Group, L.L.C. (SEG), a software industry
mergers and acquisition (M&A) advisory and investment bank,
issued its much anticipated 2004 Software Industry Equity
Report, a 60 page analysis of software industry mergers and
acquisitions, initial public offerings and venture capital
investments of the past year. The Annual Report also includes
an insightful forecast of software industry M&A activity and
valuations in 2005.

Key Findings:

The software industry accounted for 16% of total North
American M&A activity in 2004, leading all other industry
sectors. 1,630 software companies sold, up 23% from 2003. The
aggregate $52.1 billion spent on software companies was 18%
greater than 2003's total as a result of increased valuations,
a higher number of transactions, and a surge of "mega" deals.

The median software company M&A valuation in 2004 was 2.4x
trailing-twelve-month (TTM) revenue, a steep ascent from
2003's median valuation of 1.6x TTM revenue. The median M&A
valuation in Q4 was 2.8x TTM revenue. Software M&A valuations
continued to vary widely by product category, ranging from a
median 6.9x TTM revenue (Storage Management) to 1.1x TTM
revenue (Supply Chain). The Report includes a detailed
analysis of more than 60 transactions.

Despite forecasts of relatively flat IT spending in 2005, an
array of other factors are expected to spur software deals
this year, including cash-swollen balance sheets of public
software companies, a record number of private equity firms
willing to pay strategic multiples and new buyers entering the
M&A market with cash after successful IPOs. SEG projects North
American deal volumes will increase 18% in 2005 to 1,925, and
median valuations will grow from 2.4x TTM to 2.8x TTM revenue.

www.softwareequity.com