NEW YORK — July 30, 2018 — Berkery Noyes, an independent mid-market investment bank, today released its half year 2018 mergers and acquisitions trend report for Private Equity in the Information Industry.
The report analyzes M&A in the private equity market for the first half of 2018 and compares it with activity in the four previous six-month periods from 2016 to 2017. It features transactions completed by financially sponsored acquirers within the Information Industry, including purchases through subsidiaries or platforms of private equity firms. The Information Industry is defined here as being comprised of companies in either the Media & Marketing, Software, or Online & Mobile sectors.
Sponsored deal volume improved five percent on a half year basis. Total value increased from $28.93 billion to $46.37 billion, a 60 percent rise. The peak for both private equity volume and value during the past two-and-a-half years occurred in first half 2018.
The median revenue multiple declined from 2.7x in second half 2017 to 2.3x in first half 2018, returning to its first half 2017 level. Deals in the $10-$20 million range over the last two-and-a-half years received a median enterprise value multiple of 1.6x revenue, compared to 2.1x revenue for those in the $20-$80 million range and 2.9x revenue for those in the $80 million and above range.
Regarding the horizontal Software market, private equity volume remained nearly constant in first half 2018. Notable Infrastructure Software deals completed by financial sponsors year-to-date included KKR’s announced acquisition of BMC Software, which offers cloud and IT management solutions to enterprises, for $8.5 billion; Microsoft’s announced acquisition of GitHub, which provides code hosting services that allow developers to build software for open source projects, for $7.5 billion; and Searchlight Capital Partners’ announced acquisition of Mitel Networks Corporation, an enterprise communications and IT telephony company that has repositioned itself over the years with cloud-based and Software-as-a-Service (SaaS) offerings, for $2 billion.
The Online & Mobile horizontal saw sponsored volume increase nine percent during the half year period. Notable deals included SilverLake’s announced acquisition of ZPG, the owner of property website Zoopla, for $3.34 billion; and GTCR and Sycamore Partners’ acquisition of CommerceHub, a technology company that helps retailers manage e-commerce inventory, for $989 million.
In terms of specific verticals, private equity volume in the Healthcare market decreased six percent in first half 2018. This followed a 14 percent rise in second half 2017. The largest Healthcare IT deal thus far in 2018 was Veritas Capital Partners’ acquisition the Value-Based Care Division from GE Healthcare for $1.05 billion.
Sponsored deal activity in the industry’s Finance vertical increased 27 percent on a half year basis. High profile transactions in the Finance segment year-to-date included Blackstone Group led consortium’s announced acquisition of a 55 percent stake in Thomson Reuters Financial & Risk division for $11 billion; SilverLake and P2 Capital Partners’ acquisition of Blackhawk Network; and Warburg Pincus’ announced acquisition of a majority stake in Fiserv’s lending solutions business for $419 million.
As for the industry’s Education vertical, private equity deal flow improved 18 percent. Notable Education deals in first half 2018 included Francisco Partners Management’s announced acquisitions of a majority stake in Discovery Education, a provider of digital content and professional development for K-12 classrooms, for $120 million; and Renaissance Learning, a PreK-12 learning analytics company.
“Having succeeded with early-round investments, many private equity players are increasing their acquisition activity and going head to head with strategic buyers,” said James Berkery, Managing Partner at Berkery Noyes. “Awash in cash and under pressure to use it, these funds are bidding aggressively for high-quality assets, courting sellers with full valuations.”
A copy of the PRIVATE EQUITY IN THE INFORMATION INDUSTRY M&A REPORT FOR HALF YEAR 2018 is available at the Berkery Noyes website.