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      MERGERS AND ACQUISITIONS UPDATES FROM BERKERY NOYES

    Friday
    Jan062017

    VALUATIONS IN THE SOFTWARE INDUSTRY SHOW ONGOING SIGNS OF STRENGTH

    According to Berkery Noyes Software report for full year 2016, deal volume remained about constant on a yearly basis, with a total of 2,064 transactions in 2016. Overall value declined 28 percent, from $214.01 billion to $153.28 billion. However, if the $67.48 billion Dell-EMC acquisition in 2015 is excluded, value decreased five percent. Aggregate value in 2016 gained 23 percent relative to 2014.

    In terms of valuations, the median revenue multiple year-over-year increased from 2.4x to 2.8x, while the median EBITDA multiple moved downward from 13.3x to 12.5x. Over the past three years, deals in the $10-$20 million range received a median enterprise value multiple of 2.2x revenue, compared to 2.5x revenue for those in the $20-$80 million range and 3.8x revenue for those in the $80-$160 million range and above.

    Private equity backed volume in the Software Industry increased ten percent in 2016, from 335 to 369 acquisitions. Financial sponsors were responsible for just two of the industry’s top ten largest deals in 2016, as opposed to five of the top ten deals in 2015.

    M&A activity in the Infrastructure Software segment, after rising 20 percent in 2015, decreased eight percent in 2016. Symantec Corporation was a high profile acquirer in the segment during the past year with the acquisitions of Blue Coat, which offers advanced web security solutions for global enterprises and governments, for $4.72 billion; and the announced acquisition of LifeLock, a provider of identity theft protection products and services for consumers, for $2.36 billion.

    Other notable Infrastructure transactions throughout the past twelve months included Avast Software’s acquisition of AVG Technologies, a developer of business, mobile and PC device security software applications, for $1.3 billion; Intel’s sale of a majority stake in its cyber-security business to TPG Capital for $1.1 billion; and Google’s acquisition of Apigee, an API management platform, for $625 million.

    “After getting off to a somewhat slow start, software M&A value began to gain momentum during the latter part of 2016,” said James Berkery, Managing Partner at Berkery Noyes. “Along these lines, seven of the industry’s top ten largest transactions occurred during the second half of the year. Major players are stepping up their acquisition activity of software and technology companies, motivated by the need to find new growth avenues and mindful of those nimble, entrepreneurial upstarts nibbling at the edges of their markets.” Berkery continued, “Emboldened by a stable economic climate, some previously sidelined acquirers are taking a good look at potential targets. And drawn by strong valuations, targets are showing increased receptivity to good offers, pointing to more opportunity for everyone in the year ahead.”

    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."