The Shrinking Vendor Market: How Mergers

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The Shrinking Vendor Market How Mergers
Acquisitions Drive Change

• Panel Discussion Two Nat Burgess, Moderator

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How Mergers and Acquisitions Drive Change
Introducing Panel Two

• Mark Leonard, Pres. Chrmn. Constellation
  Software
• Eric Filipek, Principal, Kennet Partners
• Alan Snell, CEO, KCS Management Systems
• Satyadeep Prasanna, Bus. Dev. Manager, Consona

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About Mark Leonard Constellation Software
Mark Leonard, President and Chairman Mr. Leonard
founded CSI in 1995. Prior to founding CSI, Mr.
Leonard worked in the venture capital business
for eleven years. He was a Senior Vice-President
of Ventures West Capital Ltd., one of Canada's
largest venture capital management companies. He
has also worked in the United States and Canada
as a corporate banker. Mr. Leonard has served as
a director of numerous public and private
software and technology companies.
Constellation Software Constellation Software
is an international provider of market leading
software and services to a select number of
industries, both in the public and private
sectors. Our mission is to acquire, manage and
build market-leading software businesses that
develop specialized, mission-critical software
solutions to address the specific needs of our
particular industries.
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M A Strategy -- Constellation

• Acquiring, Building Managing Exceptional
  Companies
• Three traits that make companies Exceptional to
  us
• An outstanding manager
• Consistent profitability
• Above average growth
• Allow Companies to continue operations that make
  them Exceptional
• Our Acquisition Criteria
• Exceptional Businesses
• A mid- to large-sized vertical market software
  company
• Minimum of 1-million earnings before interest
  and tax
• Consistent annual earnings and growth
  EBITDA/revenue revenue growth of 20
• Experienced and committed management
• An offering price that has been determined
• Good Businesses
• Number 1 or Number 2 market-share holder in a
  niche vertical market
• Revenues of at least 5-million
• Hundreds or thousands (not dozens) of customers
• Unimposing competitors

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About Eric Filipek Kennet Partners
Eric Filipek, Principal Eric is a Principal of
Kennet Partners. He is currently on the board of
Resilience and eProject, and a board observer at
Medefinance and Netpro. He has been a director
of Consul Risk Management (acquired by IBM).
Prior to joining Kennet, he spent six years with
Broadview International. Eric has extensive MA
transaction and advisory experience in the
enterprise software and infrastructure software
markets. Earlier, he worked as a
product-marketing engineer at Intel. Kennet
Partners LLC Kennet Partners is a leading
transatlantic venture capital firm which invests
in growth companies providing information
technology products and business services that
leverage information technology. Kennet provides
expansion capital to firms that want to
accelerate growth and build exceptional
shareholder value in partnership with an
experienced investor. Kennet Partners acts as an
advisor to Kennet II LP, a Guernsey limited
partnership.
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M A Strategy -- Kennet Partners

• Funding Overview Experience
• Growth-oriented private equity firm with
  approximately 300 million under management
• Exclusively focused on technology and technology-
  enabled businesses
• Typically leads investments of 5 million to 15
  million individually, up to 50 million with
  co-investors
• Primary use of capital is for sales expansion,
  acquisition finance, partial liquidity for
  current shareholders
• Support portfolio companies by development of
  management team, business strategy, business
  partnerships and acquisitions
• Funding Criteria
• Company developed with little or no outside
  funding
• Primary development and growth funded through
  internal cash flow
• Equity held primarily by founders and a
  restricted set of employees
• Breakeven or profitable performance by necessity
• Some companies formed from breakeven or cash
  positive corporate divestitures share these
  qualities
• Funding Considerations
• Determine economics of current sales approach
• Model impact of an investment in sales and
  marketing resources over the next 3 to 5 years
• Compare companys return with investor return
  requirements
• If returns are high, assess likely growth
  challenges and increase investment
• If returns are low, evaluate challenges and
  consider changes including pricing, gross margin
  and/or channel of distribution

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About Alan Snell KCS Management Systems
Alan Snell, CEO Alan is the Group CEO of KCS.
He has 19 years experience in the IT industry,
predominantly in senior management positions. He
has led the 1999 MBO (Management Buy Out) team
for KCS and has taken the business through one of
the most challenging markets the IT industry has
ever faced. During an extended period of market
decline, Alan led KCS to achieve consistent
growth both in terms of market share and
revenues. KCS Management Systems KCS is a
principal provider of HR, Payroll and Time and
Attendance software solutions and services to
organisations throughout the UK, serving clients
across most industry sectors. Today, the KCS
RightSource portfolio is totally comprehensive
and encompasses in-house and outsourced solutions
offering each client considerable flexibility and
choice in terms of how each solution can be
configured and deployed.
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M A Strategy -- KCS Global Holdings Ltd

• Acquisition Background Experience
• 2 MBOs in 7 years
• 4 successful acquisitions of Payroll outsource
  service companies
• Acquisition Criteria
• Focus on Systems and Service Integration
• Companies serving 1,000 plus employee market
• Track record of strong organic growth
• Acquisition Vision and Philosophy
• To build an integrated HR Systems and Outsource
  company with revenues in excess of 40m (75
  recurring) and generating an EBITDA margin of 25

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Panel TwoHow Mergers Acquisitions Drive Change
Nat Burgess, Corum Group, Moderator
nburgess_at_corumgroup.com
Mark Leonard, Constellation Software
mleonard_at_csisoftware.com
Eric Filipek, Kennet Partners efilipek_at_kennet.com
Satyadeep Prasanna, Consona satyadeep.prasanna_at_con
sona.com
Alan Snell, KCS Management Systems
Alan.Snell_at_KCSPLC.com
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