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    « VALUATIONS IN THE SOFTWARE INDUSTRY SHOW ONGOING SIGNS OF STRENGTH | Main | MANAGING DIRECTOR TOM O'CONNOR SPEAKS AT DUKE’S MEDICAL ENTREPRENEURSHIP CONFERENCE »
    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.”

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