2019-04-08 Berkery Noyes Releases Software Industry M&A Report for First Quarter 2019

NEW YORK — April 8, 2019 — Berkery Noyes, an independent mid-market investment bank, today released its Q1 2019 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity in the Software Industry during Q1 2019 and compares it with the past four quarters.

Transaction volume saw a two percent uptick over the past three months, from 588 to 599. After rising 56 percent in Q4 2018, aggregate value fell 48 percent, from $88 billion to $45.5 billion. Deal activity improved 18 percent and value gained 33 percent when examined on a year-over-year basis.

M&A volume in the Infrastructure segment underwent a 22 percent increase from Q4 2018 to Q1 2019, making it the sector with the largest rise in M&A activity. Notable Infrastructure transactions year-to-date included:

  • Vista Equity Partners’ announced acquisition of a majority stake in Quick Base, a cloud-based application building platform, for a reported purchase price of approximately $1 billion;
  • F5 Networks’ announced acquisition of NGINX, which runs an open-source web server with the same name, for $670 million;
  • Carbonite’s acquisition of Webroot, which secures endpoints and provides network protection, security awareness training, and threat intelligence services, for $619 million;
  • Palo Alto Networks’ announced acquisition of Demisto, a security orchestration, automation and response (SOAR) company, for $560 million;
  • Qlik Technologies’ announced acquisition of Attunity, a provider of data integration and big data management software solutions, for $506 million; and
  • Juniper Networks’ acquisition of Mist Systems, which delivers cloud-managed wireless networks powered by artificial intelligence (AI), for $405 million.

“Looking at the cybersecurity sector, it is commonly understood that the legacy antivirus and firewalls relied upon by even the smallest companies are obsolete,” said Martin Magida, Managing Director at Berkery Noyes. “Tomorrow’s security devices will need to see and interoperate with each other to recognize changes in the networked environment, anticipate new risks, and automatically update and enforce policies.” Magida continued, “Innovation is occurring in artificial intelligence (AI) in the areas of anti-fraud and identity management, mobile security, predictive intelligence behavioral analytics and anomaly detection, automated security solutions, cyber-risk management, app security, IoT security, and deception security.”

Deal volume in the “Niche Software” segment, which is targeted to specific vertical markets, experienced a three percent quarterly gain and rose 11 percent over Q1 2018. Notable transactions in the segment’s finance vertical year-to-date included Thoma Bravo’s announced acquisition of Ellie Mae, a cloud-based platform provider for the residential mortgage sector, for $3.3 billion; BlackRock’s announced acquisition of eFront, an alternative investment management software and solutions provider, for $1.3 billion; and Envestnet’s announced acquisition of PIEtech, the creator of financial planning software MoneyGuide, for $500 million.

Regarding other select markets covered in the report, M&A activity in the Business segment, which consists of software designed for general business practices and not specific industry markets, remained about constant over the last quarter. However, volume improved 15 percent compared to Q3 2018 and 45 percent relative to Q1 2018. The industry’s largest transaction year-to-date was the announced acquisition of Ultimate Software Group, a provider of cloud-based human capital management (HCM) solutions, by an investor group led by Hellman & Friedman, for $10.8 billion. Other notable first quarter deals in the segment’s HCM space included Morgan Stanley’s announced acquisition of Solium Capital, a provider of SaaS-based stock plan administration technology and services, for $744 million; and K1 Investment Management’s acquisition of a majority stake in Jobvite, a recruitment software company, for $200 million.

A copy of the SOFTWARE INDUSTRY M&A REPORT FOR FIRST QUARTER 2019 is available at the Berkery Noyes website.