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      MERGERS AND ACQUISITIONS UPDATES FROM BERKERY NOYES

    Entries in Software (24)

    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.”

    Wednesday
    Oct072015

    SOFTWARE M&A VALUE INCREASES FOR THE THIRD CONSECUTIVE QUARTER

    According to Berkery Noyes' Software report for third quarter 2015, volume underwent a slight uptick over the prior quarter, from 502 to 507 deals. The number of transactions year-to-date increased six percent compared to the corresponding timeframe in 2014. Aggregate value rose 24 percent relative to the previous quarter, from $33.8 billion to $41.7 billion. Of note, four of the highest value software transactions year-to-date occurred in the third quarter, three of which were backed by financial sponsors.

    The industry’s largest strategic transaction in third quarter 2015 was the announced acquisition of HERE, a digital mapping and location intelligence business, by car manufacturers BMW Group, Audi Group and Mercedes-Benz for $3.1 billion. HERE was created by Nokia’s $8.1 billion acquisition of Navteq back in 2008. In addition to HERE, there have been several other recent transactions focused on mapping technology such as Apple’s acquisition of Mapsense, a visualization startup, in the third quarter; and Uber’s acquisition of Microsoft’s Bing mapping unit in the second quarter.

    In terms of “Niche Software,” which is targeted to specific vertical industries, volume improved 13 percent on a quarterly basis. Deal flow in the Consumer Software segment decreased nearly one-third over the past three months. The Business Software segment, which consists of software designed for general business practices and not specific vertical industries, saw volume rise five percent.

    Deal volume in the Infrastructure segment experienced a 21 percent quarterly decline. This followed a 29 percent increase between first and second quarter 2015. Regarding high profile acquirers in the third quarter, Microsoft completed a deal in the cyber-security subsector with the acquisition of Adallom, a startup that monitors the use of cloud-based services, for $320 million. This followed Microsoft’s acquisition of security software developer Aorato in 2014 for a reported $200 million. 

    Another notable cyber-security deal during the quarter was Splunk’s acquisition of Caspida, a threat detection company, for $190 million. There were also several deals in the quarter completed by notable acquirers relating to the Internet of Things (IoT), such as IBM’s acquisition of StrongLoop and Autodesk’s acquisition of SeeControl.

    “Threats, intrusions, spam, phishing and other malicious elements show no sign of diminishing,” said James Berkery, Chief Information Officer at Berkery Noyes. “This is leading some vendors to amass a war chest of security assets through M&A.” Berkery continued, “Many organizations are also looking to mitigate information risk by shoring up authorization and authentication capabilities. This includes portal implementations through a unified single sign-on; consolidating information through more effective content management; and applying better analytics to various business processes. Moreover, those in certain vertical markets such as life sciences and financial services must address regulatory concerns as well as ongoing threats of litigation, legal discovery costs and privacy issues. Each of these factors may help spur acquisition activity going forward.”

    Tuesday
    Jul072015

    SOFTWARE VOLUME MOVES UPWARD, VALUATIONS SHOW IMPRESSIVE GROWTH

    Berkery Noyes’ Software report for first half 2015 showed that transaction volume increased three percent compared to second half 2014. This was the industry’s fourth consecutive half year rise over the last 30 months. Deal value fell nine percent on a half year basis, totaling $55.65 billion year-to-date.

    The median revenue multiple declined from 3.0x to 2.8x over the past six months. However, this represented a 17 percent rise compared to first half 2014, when the multiple was 2.4x. Of note, deals in first half 2015 with enterprise values above $160 million received a median revenue multiple of 3.8x and median EBITDA multiple of 25.1x, whereas those in the $10-$20 million range had a median revenue multiple of 2.4x and median EBITDA multiple of 13.4x.

    Transaction volume in the Infrastructure Software segment stayed nearly the same during the half year period. This followed a 32 percent increase in second half 2014. Three of the industry’s top five largest deals in first half 2015 were completed in the Infrastructure segment. This included Bain Capital’s acquisition of Blue Coat Systems for $2.4 billion and Raytheon Company’s acquisition of Websense for $1.9 billion, both of which were in the cyber-security subsector.

    Of note, Websense was previously acquired by Vista Equity Partners for $955 million in 2013 and an investor group led by Thoma Bravo previously took Blue Coat private in 2011 for $1.1 billion. Another cyber-security deal that made the top ten list in first half 2015 was telecommunications operator SingTel’s acquisition of Trustwave for $810 million. Cisco’s acquisition of OpenDNS, a network security company, for $635 million just missed inclusion in the top ten.

    Other high profile Infrastructure transactions year-to-date in different areas of the segment included EMC’s acquisition of Virtustream, a cloud computing management software company, for $1.2 billion; and CA Technologies’ acquisition of Rally Software, a provider of Agile development software and services, for $480 million.

    “Acquirers are demanding a broad array of security capabilities that span the gamut of internal and external network and application users,” said James Berkery, Chief Information Officer of Berkery Noyes. “This includes vulnerability and intrusion detection and prevention, identity management, rogue device identification and other areas.” Berkery continued, “There is a need in the marketplace for solutions that support configuration, provisioning, firmware updates, diagnostics and security, particularly as the range of device types expands.”