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Gridley & Company LLC

Gridley & Company LLC 8th Annual Information, Marketing, Internet, Financial Technology & Outsourcing Services Conference. January 13, 2009 Jumeirah Essex House New York City. Agenda About Gridley A Look Back at 2008 A Look Ahead to 2009. About Gridley.

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Gridley & Company LLC

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  1. Gridley & Company LLC 8th Annual Information, Marketing, Internet, Financial Technology & Outsourcing Services Conference January 13, 2009 Jumeirah Essex House New York City

  2. Agenda • About Gridley • A Look Back at 2008 • A Look Ahead to 2009

  3. About Gridley

  4. Gridley’s Investment Banking Effort is Focused on a Few Related Sectors of Information Services Financial Technology and Outsourcing Services Advertising & Marketing Services INFORMATION & TECHNOLOGY & SERVICES Database / Information Services Internet Services

  5. Gridley’s Value Proposition • Highly strategic approach • Buyside work for industry leaders • Sellside and fundraising work for private companies • Well-developed industry “network” • Excellent client references • Known for market insights in 2,050+ quarterly newsletter distribution • Host of Bellwether Events • Experts in changing market cycles

  6. Select Recent Gridley Transactions

  7. A Look Back at 2008

  8. Stocks in Our Sectors for 2008 • Carnage everywhere across all sectors • Internet Services = worst performing sector • 50% of stocks down more than 50% • 27% now have market caps less than $100 million Median Stock Price Performance of Targeted Industry Sectors

  9. IPO Activity in Our Sectors for 2008 • Minimal activity – just 3 completed IPOs • VISA: +19.3% • China Mass Media International Advertising: (78.8%) • Rackspace Hosting: (55.3%)

  10. M&A Themes for Our Sectors in 2008 • Overall M&A market held up until October • Internet Services is where the action was • A few large strategic deals in other sectors • Private equity activity hurt by credit crisis

  11. Largest Strategic M&A Deals in Our Sector for 2007 vs. 2008 2008 Largest Strategic Deals - $1 billion +

  12. Largest Strategic M&A Deals in Our Sector for 2007 vs. 2008 2007 Largest Strategic Deals - $1 billion +

  13. A Look Back – What We Said in Dec. 2007 Internet Services How We Did • Globalization – Foreign buyers increase U.S. presence • ValueClick gets sold? • The 4 Titans continue to dominate • Strong sector activity continues • Broadening buyer universe • Plethora of acquisition opportunities • Media companies become more aggressive buyers

  14. A Look Back – What We Said in Dec. 2007 Marketing Services How We Did • Direct mail takes a hit • Client frustration with traditional providers becomes more evident • Clients show their insatiable appetite for data analytics • Ad spending without the internet, olympics & elections looks bleak • Valassis, Harte-Hanks, or Vertis get acquired • Increase in M&A activity by ad holding companies?

  15. A Look Back – What We Said in Dec. 2007 Financial Technology How We Did • Decline in M&A multiples - first time in 5 years • Banks become sellers not buyers • Niche private companies continue to flourish • New startups from First Data alums • Underperforming stocks • Need for new industry consolidation drivers • Financial security gets hit by tougher bank environment [Discuss]

  16. A Look Ahead to 2009

  17. A Look Ahead – Overall Comments • M&A Activity remains slow through 1st Half 2009 • Internet services is only sector with action • Private company pricing expectations need to adjust down to public company multiples • Illiquidity in credit market continues through 1st Half 2009 • Plenty of PE growth capital as long as pricing is right • PE firms selecting “bail” on mediocre and troubled portfolio companies

  18. A Look Ahead – Internet Services • Sector where all the action will be • Hot growth areas: • Video • Web Analytics • Mobile • More consolidation of interactive agencies • Private companies will continue to flourish • Yahoo! splits up or gets sold • Interesting deals from media companies and “out of the box” buyers

  19. A Look Ahead – Marketing Services • Mixed bag for 2009 • Traditional advertising and direct mail have a very tough year • Key Growth areas: • Database marketing • Data analytics • Database Marketers realized need for multi channel marketing capabilities and make acquisitions on digital marketing • Harte Hanks and Valassis don’t recover • Consolidation of smaller, struggling providers

  20. A Look Ahead – Financial Technology • Lower levels of M&A activity and lower multiples will continue • Banks need to get healthier for deal activity to pick up • Watch for Visa and Mastercard to increase M&A appetite • Watch for Online Resources to get sold • Deals for stored value lenders fell apart in 2008. Targets will become buyers • Need for new consolidation drivers

  21. What are Your Predictions for 2009?

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