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      MERGERS AND ACQUISITIONS UPDATES FROM BERKERY NOYES

    Monday
    Jul252016

    SOFTWARE DEAL VOLUME, LED BY PRIVATE EQUITY ACQUIRERS, REMAINS STRONG

    Berkery Noyes’ Software report for first half 2016 showed transaction volume increased four percent on a half year basis. The number of acquisitions completed by strategic acquirers remained constant. However, private equity backed deal flow improved 26 percent.

    Following a relative lack of megadeals earlier in the year, the four largest transactions thus far in 2016 were each announced in June. Despite this, overall value fell 57 percent in first half 2016, totaling $67.21 billion year-to-date. Of note, eight of the industry’s top ten largest acquisitions in 2015 occurred during the second half of last year.

    Deal volume in the Consumer Software segment improved 20 percent, making it the sector with the largest increase in first half 2016. In terms of software used within specific vertical industries or “Niche Software,” transaction volume experienced a two percent uptick. Four of the industry’s top ten highest value deals year-to-date occurred in the Niche segment, making it the best represented sector in the top ten list.

    The largest Niche segment deal in first half 2016 was Salesforce’s announced acquisition of Demandware, a provider of digital commerce solutions used by retailers, for $2.66 billion. Demandware was the highest value transaction ever completed by Salesforce, surpassing the $2.27 billion acquisition of email marketing platform ExactTarget in the Business Software segment, which was completed in 2013.

    Sponsored deals accounted for 35 percent of the industry’s aggregate value in first half 2016, compared to 23 percent in second half 2015. Vista Equity Partners was responsible for two of the industry’s top ten largest transactions year-to-date. Along these lines Vista Equity Partners announced its acquisition of Marketo, an automated marketing software company, for $1.62 billion; and Cvent, a cloud-based enterprise event management business, for $1.34 billion.

    “Technology enabled services are becoming a driver of M&A,” said James Berkery, Chief Information Officer at Berkery Noyes. “As an overarching term that is distinct from concepts such as cloud or Software as a Service (SaaS), technology enabled services combine business process outsourcing (BPO) concepts with proprietary technologies that go hand in hand with a company’s offerings.”

    Berkery continued, “Although the service in SaaS implies that hosting the software is the service, there is typically no personal service in the traditional sense. Technology enabled services use and implement the software for the client, an approach that encourages the provider to implement the product beyond introduction and training. These companies are taking on the responsibility of making sure all of the data points are entered, reported and acted upon as they were designed to be, which ensures the user obtains the maximum benefit of the product.”

    Tuesday
    Apr122016

    MANAGING DIRECTOR TOM O'CONNOR SPEAKS AT DUKE’S MEDICAL ENTREPRENEURSHIP CONFERENCE

    Managing Director Tom O’Connor was recently invited to speak at Duke University. Duke hosted its first annual Medical Entrepreneurship Conference, with guest speakers from across the Research Triangle providing insight on Biotechnology, Healthcare Venture Capital, Pharmacology, Medical Devices, and other topics.

    An overview of his presentation is available here.

    Tuesday
    Mar012016

    HIGHER-ED MEDIA AND TECH DEAL ACTIVITY DRIVES INCREASE IN EDUCATION VOLUME

    Berkery Noyes’ Education report for full year 2015 revealed that transaction volume improved 26 percent on a year-to-year basis. Aggregate value rose 52 percent, from $11.68 billion to $17.75 billion. The industry’s most active strategic acquirer in 2015, either directly or through an affiliated business, was Bertelsmann with four transactions.

    Bertelsmann acquired Redilearning, an online learning company that serves the senior care sector; Academy Medical, a provider of continuing education content for various healthcare providers; YoBoHo, a digital media company that specializes in creating original content for children; and Alliant International University, a network of five California-based professional schools.

    The Higher-Ed Media and Tech segment experienced a 68 percent increase in volume, making it the sector with the largest yearly gain. Notable acquirers in the segment included Cengage Learning with the acquisition of Pathbrite, a web-based portfolio tool that allows students to store their completed coursework; The Gordian Group with the acquisition of Sightlines, a provider of facilities benchmarking data and expertise; and Leeds Equity Partners with the acquisition of Campus Labs; a software platform for colleges and universities to make data driven decisions ranging from accreditation to student retention to effective operations.

    “Private equity firms are increasingly being drawn to the education and training sector, given the sheer scale of the market, the favorable lending environment, and the increasing number of companies that are growing with subscription based revenue models in the space,” said Peter Yoon, Managing Director at Berkery Noyes. “The largest area of activity in 2015 was in the corporate and professional education space as the need for continuing education and workforce development continues to expand while technology has improved the delivery and efficacy of instruction.”

    “The increased deal value derived importantly from the significant participation of strategic acquirers in 2015 deal activity,” said Mary Jo Zandy, Managing Director at Berkery Noyes. “A combination of content with technology yielded the highest transaction value premiums. Despite the recent turbulence in the capital markets, we expect the growing usage of technology in education and training to secure high transaction values in 2016.”

    Wednesday
    Feb242016

    HEALTHCARE IT COMPANIES REMAIN IN HIGH DEMAND FROM BOTH STRATEGIC AND FINANCIAL ACQUIRERS

    Berkery Noyes Healthcare report for full year 2015 indicated that total transaction volume increased 15 percent on a year-to-year basis. Aggregate value gained four percent, from $16.44 billion to $17.08 billion. Regarding valuations, the median revenue multiple improved from 2.4x to 2.7x, while the median EBITDA multiple remained nearly constant at 13.8x.

    Deal volume in the Healthcare IT segment improved 21 percent in 2015. The Healthcare IT segment accounted for almost half of the industry’s aggregate volume, and strategic acquirers comprised 82 percent of the Healthcare IT volume.

    Notable Healthcare IT transactions in the top ten list included IBM Watson Health’s acquisition of Merge Healthcare Incorporated, a provider of medical image handling and processing, interoperability and clinical systems, for $1.03 billion; and Cardinal Health’s acquisition of Navihealth, a post-acute care software company that helps physicians manage bundled payments, for $290 million.

    Other high profile Healthcare IT deals outside the top ten were Computer Programs and Systems’ acquisition of Healthland, a provider of integrated technology solutions to rural community and critical access hospitals, for $250 million; Quality Systems’ acquisition of HealthFusion, a developer of web-based, cloud computing software for physicians, hospitals and medical billing services, for $165 million; and Roper Industries’ acquisition of Strata Decision Technology, a cloud-based financial analytics and performance platform that is used by healthcare providers, for $140 million.

    Upon examination of other markets covered in the report, the segment with the largest yearly rise in volume was Medical Education, which more than doubled from 18 to 39 transactions. The Healthcare Business Services segment experienced a 19 percent increase, from 81 to 96 deals. M&A activity in the combined Pharma segments declined 17 percent, from 52 to 43 acquisitions.

    “For all the recent talk of increased deal flow, there still remains a lack of high-quality opportunities of scale in the market today,” said Tom O’Connor, Managing Director at Berkery Noyes. “However, once an attractive opportunity of scale comes out there is no lack of buyers at robust prices. The credit environment is still favorable for attractive deals of scale, particularly those where a high percentage of revenue is recurring.” O’Connor added, “Companies of scale with rapid revenue growth are perfect bolt-ons for strategic buyers, and many of the large private equity groups have come down market looking for new platforms to buy and build.”

    According to Jonathan Krieger, Managing Director at Berkery Noyes, "Strategics continue to acquire businesses to build out their product portfolio and broaden their customer footprint. Healthcare constituents continue to seek niche software vendors that promote interoperability, structure clinical data, improve outcomes and reduce costs."

    Monday
    Feb222016

    FINANCIAL TECHNOLOGY VOLUME AND VALUE SHOWS MAJOR UPWARD TREND

    Berkery Noyes’ Financial Technology report for full year 2015 showed that transaction volume rose 14 percent on a year-to-year basis. Aggregate value more than doubled, from $27.81 billion to $63.78 billion. FIS’ acquisition of financial software company SunGard Data Systems for $9.1 billion was the industry’s largest deal since 2012, when Intercontinental Exchange acquired NYSE Euronext for $10.18 billion.

    The Payments segment, after rising 46 percent in 2014, saw volume decrease 21 percent in 2015. In terms of value, five of the industry’s top ten largest deals during the year occurred in the segment. The highest value Payments transaction in 2015 was Global Payments’ announced acquisition of Heartland Payment Systems, which offers payment processing services to merchants, as well as those in several vertical markets such as the education sector, for $4.31 billion.

    The number of deals in the Capital Markets segment increased 42 percent over the past year, making it the sector with the largest yearly gain. Intercontinental Exchange was responsible for two of the segment’s top ten highest value deals during the year with the acquisition of Interactive Data Corporation, a provider of financial market data and analytics, for $7.45 billion; and Trayport, which offers energy trading solutions to traders, brokers and exchanges, for $646 million.

    “Significantly, the median revenue and EBITDA multiples in the Capital Markets sector during 2015 have trended well above those of the entire financial technology industry,” said Peter Ognibene, Managing Director at Berkery Noyes. “While it took this sector the longest to recover from the financial crisis, buyers are piling in now and really driving up prices. We’re also seeing an increased number of software providers who have a recurring revenue business model.”

    As for other markets covered in the report, acquisition activity in the Banking segment increased 35 percent, from 62 to 85 deals. The largest Banking transaction in 2015 was Diebold’s announced acquisition of Wincor Nixdorf, a provider of IT solutions and services to banks and the retail sector, for $1.8 billion. Regarding the Insurance segment, volume increased 22 percent, from 51 to 62 transactions. The largest Insurance related deal in 2015 was Vista Equity Partners’ acquisition of Solera Holdings in the property and casualty (P&C) sector for $6.25 billion.

    “New database technologies are improving the ability of debt servicers to assemble disparate pieces of information about consumers, making it easier and more cost-efficient to locate and contact them,” said John Guzzo, Managing Director at Berkery Noyes. “Mortgage servicers are also experiencing greater demand for more targeted and frequent borrower communication, including email, text messaging and more complex print and mail offerings.” Guzzo continued, “Innovations have aided lenders and debt servicers in the ability to obtain, store and transfer data about consumers and their debts. When licensing technology or subscribing to third-party technology is not an option, outsourcing business processes has become a viable solution and growing trend as well.”