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      MERGERS AND ACQUISITIONS UPDATES FROM BERKERY NOYES

    Entries in Software (26)

    Thursday
    Jul202017

    INFRASTRUCTURE SOFTWARE DEAL VOLUME ON THE RISE

    Berkery Noyes' Software report for first half 2017 showed that M&A volume increased 12 percent on a half year basis. The number of acquisitions completed by strategic acquirers improved eight percent whereas private equity backed deal flow rose 25 percent. Aggregate transaction value declined 18 percent, from $93.02 billion to $76.63 billion. This followed a 41 percent gain in second half 2016.

    The median revenue multiple moved slightly from 2.5x in second half 2016 to 2.3x in first half 2017, while the median EBITDA multiple stayed the same at 13.3x. Over the last two-and-a-half years, deals in the $10-$20 million range received a median enterprise value multiple of 2.2x revenue, compared to 2.6x revenue for those in the $20-$80 million range and 3.9x revenue for those in the $80-$160 million range and above.

    Transaction volume in the Infrastructure Software segment increased 21 percent in first half 2017, making it the segment with the largest half year rise in volume. M&A activity in the segment remained almost constant throughout the four preceding half year periods. The largest Infrastructure deal year-to-date was Cisco Systems’ acquisition of AppDynamics, an application performance management and IT analytics company, for $3.9 billion.

    Cisco completed several other high profile Infrastructure transactions during first half 2017 with the announced acquisition of Viptela, a software-defined wide area network (SD-WAN) company, for $610 million; and MindMeld, an artificial intelligence (AI) startup that helps business build conversational interfaces, for $125 million.

    Additional notable Infrastructure deals thus far in 2017 included HGGC’s announced acquisition of IDERA, a provider of database lifecycle management solutions and application development tools, for $1.13 billion; HP Enterprise’s announced acquisition of SimpliVity, a data management platform focused on hyper-converged infrastructure technology, for $650 million; and CA Technologies’ acquisition of Veracode, a provider of cloud-based application intelligence and security verification services, for $614 million.

    In terms of software used within specific vertical industries or “Niche Software,” transaction volume experienced a 15 percent improvement. After remaining nearly constant in second half 2016, deal volume in the Consumer Software segment declined 14 percent. M&A activity in the Business Software segment, which consists of software designed for general business practices and not specific industry markets, saw a 13 percent rise relative to second half 2016.

    “There are many motivated acquirers competing for good properties in the software space,” added James Berkery, Managing Partner at Berkery Noyes. “Buyers are usually attracted to companies that can demonstrate a high growth rate, strong margins, good free cash flow, and a diversified customer base, among other factors. Although careful not to overpay, they are sometimes willing to stretch to a premium price when they have a valid, compelling and strategic reason to do so.”

    Monday
    May012017

    SOFTWARE DEAL VOLUME AND VALUE BOTH ON THE RISE

    Berkery Noyes’ Software report for Q1 2017 showed that transaction volume experienced a 16 percent gain over the past three months, with a total of 528 acquisitions in Q1 2017. Overall value rose 75 percent, from $29.4 billion to $51.4 billion. The number of deals throughout the past five quarters reached its peak in Q2 2016, whereas value reached its zenith in Q3 2016.

    Deal volume in the “Niche Software” segment, which is targeted to specific vertical markets, increased 14 percent in Q1 2017. The Niche segment accounted for four of the overall industry’s top ten highest value deals year-to-date. The largest of these transactions was Intel’s announced acquisition of Mobileye, which develops self-driving technologies, for $14.7 billion. The Mobileye acquisition follows several related transactions in 2016 by high profile acquirers such as Uber, General Motors, and Ford.

    Other notable Niche segment deals year-to-date included Vista Equity Partners’ announced acquisition of DH Corporation, a provider of technology solutions to financial institutions, for $3.6 billion, which Vista plans to combine with its portfolio company Misys; McKesson Corporation’s announced acquisition of CoverMyMeds, which offers electronic prior authorization solutions to pharmacies, providers, payers and pharmaceutical manufacturers, for $900 million; and Hexagon’s announced acquisition of MSC Software, a provider of computer-aided engineering (CAE) solutions such as simulation software for manufacturing process development, for $834 million.

    The Business Software segment, which consists of software designed for general business practices and not specific industry markets, saw a 29 percent quarterly increase in volume. The Business segment’s highest value deal in Q1 2017 was Blackstone Group’s announced acquisition of Aon’s technology-enabled and human resources platform for $4.3 billion.

    Other notable Business segment deals year-to-date included Atlassian’s acquisition of Trello, a web-based collaboration software and project management service, for $425 million; and Wolters Kluwer Tax & Accounting’s announced acquisition of Tagetik, which provides corporate performance management solutions and services to mid and large sized corporations, for $317 million.

    “No matter the business the human capital element exists, thus acquirers across a wide spectrum are showing strong interest in workforce management, recruiting, training, performance reporting, compensation and other functions,” said Sameer Pal, Managing Director at Berkery Noyes. “Employers increasingly recognize there are enormous direct and indirect costs to turnover and addressing that spans the entire employee lifecycle. Technology enablement around the critical needs of finding, hiring, and retaining qualified personnel allows companies to deal with these areas holistically.” Pal continued, “Additionally, given the ongoing proclivity for organizations to distribute their work forces, continued outsourcing of functions and business processes, and the progress being made in supporting technology areas, knowledge management and collaboration platforms are becoming even more prolific.”

    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
    Jan192016

    SOFTWARE VALUE MAKES SIGNIFICANT STRIDES AS VALUATIONS REMAIN STRONG

    Berkery Noyes’ Software report for full year 2015 showed that deal volume experienced a nine percent year-to-year increase, with a total of 2,028 transactions in 2015. Overall value gained 72 percent, from $123.74 billion to $213.20 billion. This rise was attributable in major part to Dell’s announced acquisition of EMC Corporation for $67.48 billion, which was the highest value deal ever recorded in the industry.

    The EMC acquisition accounted for almost one-third of the industry’s aggregate value in 2015. If excluded, total value gained 18 percent on a yearly basis. With this transaction, Dell is looking to combine its server businesses with EMC’s storage and virtualization assets, enabling it to better compete beyond the PC market with a wider range of products. Also of note, Michael Dell and Silver Lake Partners took Dell private in 2013 for $24 billion.

    In terms of valuations, the median revenue multiple declined from 2.7x to 2.4x, while the median EBITDA multiple improved from 12.0x to 13.8x. Deals in the $10-$20 million range over the past three years received a median enterprise value multiple of 2.3x revenue, whereas those above $160 million had a median enterprise value multiple of 3.6x revenue.

    Financial sponsors were responsible for five of the industry’s top ten largest deals in 2015. Three of these five transactions occurred in the Infrastructure segment. This consisted of The Carlyle Group’s announced acquisition of Veritas Technologies Corporation, a storage and server management software solutions business, for $8 billion; Permira and CPP Investment Board’s acquisition of Informatica, a provider of enterprise data integration software and services, for $4.77 billion; and Thoma Bravo and Silver Lake Partners’ announced acquisition of SolarWinds, an IT management software and monitoring company, for $4.38 billion.

    Meanwhile, the number of deals in the Business Software segment, which consists of software designed for general business practices and not specific industry markets, increased 12 percent. The most active acquirer in the Business segment in 2015 was Microsoft with seven transactions.

    “With the increased adoption of cloud and SaaS environments even software companies are recognizing the innate ability to integrate rather than develop everything,” said James Berkery, Chief Information Officer at Berkery Noyes. “It stands to reason as more software solutions appear on the web that the proliferation of the API has begun to create an integration market unto itself. A sort of API marketplace with brokered solutions, tech enabled services and niche applications is poised to capitalize.”