NEW YORK — January 18, 2019 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2018 mergers and acquisitions trend report for Private Equity in the Information Industry.
The report analyzes M&A activity in the private equity market during 2018 and compares it with data covering 2016 and 2017. It features transactions made by financially sponsored acquirers within the Information Industry, including purchases made by subsidiaries or platforms of private equity firms.
According to Berkery Noyes’ latest research, private equity volume in the Information Industry increased ten percent on a yearly basis. Total sponsored value rose 40 percent, from $65.31 billion to $91.53 billion.
Regarding valuations, the median revenue multiple year-over-year shifted slightly from 2.6x to 2.7x, while the median EBITDA multiple improved from 12.7x to 14.2x. Over the past three years, deals in the $10-$20 million range received a median enterprise value multiple of 1.6x revenue, compared to 3.4x revenue for those in the $160 million and above range.
The horizontal Software market saw a nine percent yearly increase in private equity deal flow. Notable transactions in the Infrastructure segment included KKR’s announced acquisition of BMC Software, which provides cloud and IT management solutions, for $8.5 billion; Bain Capital’s announced acquisition of Rocket Software, which delivers enterprise modernization and optimization solutions, for $2 billion; and Thoma Bravo’s announced acquisitions of Imperva, a cybersecurity company that offers activity monitoring and risk management solutions for critical business data and applications, for $1.81 billion; and Veracode, a provider of cloud-based application intelligence and security, $950 million.
Sponsored M&A activity in the Media & Marketing horizontal remained nearly constant in 2018. This followed a 15 percent rise from 2016 to 2017. The horizontal’s two largest deals in 2018 were completed by private equity firms. Both of these transactions occurred in the B2B Publishing and Information segment.
The Finance vertical underwent a 21 percent increase in private equity volume during the past year. The largest sponsored deal in the Finance vertical during 2018 was a Blackstone Group led consortium’s announced acquisition of a 55 percent stake in Thomson Reuters Financial & Risk division for $11 billion.
The Healthcare vertical experienced a nine percent year-to-year increase in private equity volume. The vertical’s largest sponsored deal in 2018 was Veritas Capital and Evergreen Coast Capital’s announced acquisition of athenahealth, a provider of network-enabled services for hospital and ambulatory customers, for $5.6 billion. Of note, private equity firms represented slightly more than one-quarter of Healthcare volume but nearly half of value in 2018. In addition, four of the vertical’s top ten largest deals in 2018 were backed by financial sponsors. These four transactions, with a combined total disclosed value of $13.23 billion, accounted for 35 percent of total Healthcare value during the year.
The Education vertical witnessed private equity volume gain 25 percent on an annual basis. The overall vertical’s most active acquirer in 2018, either directly or through an affiliated business, was Leeds Equity Partners with seven transactions. Two of these deals involved companies that serve the financial sector: Pass Perfect, a provider of Financial Industry Regulatory Authority (“FINRA”) license exam training; and Keir Educational Resources, which offers training solutions for financial services professionals.
“Private equity acquirers are continuing to place premium valuations on quality information companies,” said James Berkery, Managing Partner at Berkery Noyes. “This renewed interest is supporting higher multiples for the most attractive properties. Drawn by stronger valuations, once reticent sellers are showing increasing receptivity to good offers, which points to more opportunity ahead.”
A copy of the PRIVATE EQUITY IN THE INFORMATION INDUSTRY M&A REPORT FOR FULL YEAR 2018 is available at the Berkery Noyes website.