NEW YORK — July 1, 2019 — Berkery Noyes, an independent mid-market investment bank, today released its half year 2019 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity during the first half of 2019 and compares it with the four previous six-month periods from 2017 to 2018.
Deal volume increased nine percent on a half year basis. Aggregate transaction value declined 35 percent, from $144.86 billion to $94.69 billion. The median revenue multiple decreased from 3.6x in second half 2018 to 3.3x in first half 2019, while the median EBITDA multiple remained nearly constant at 17.8x. 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 3.2x revenue for those in the $20-$160 million range and 5.1x revenue for those in the $160 million range and above.
M&A activity in the Business segment, which consists of software designed for general business practices and not specific industry markets, saw an 18 percent rise relative to second half 2018. Of note, two of the top three and three of the top five highest value deals thus far in 2019 occurred in the Business segment. Notable segment transactions year-to-date included Salesforce’s announced acquisition of Tableau Software, a data visualization and analysis platform, for $15.7 billion in an all-stock transaction; the acquisition of Ultimate Software Group, a provider of cloud-based human capital management (HCM) solutions, by an investor group led by Hellman & Friedman, for $10.82 billion; and Google’s announced acquisition of Looker, a unified platform for business intelligence, data applications, and embedded analytics, for $2.6 billion.
In terms of software used within specific vertical industries or “Niche Software,” transaction volume gained six percent. Five of the industry’s top ten highest value deals year-to-date took place in the Niche segment, three of which were located in the Finance vertical. Meanwhile, high profile segment transactions outside of the Finance vertical in first half 2019 included Dassault Systèmes’ announced acquisition of Medidata, a provider of SaaS-based clinical development software, for $5.82 billion; Bridgestone Europe’s announced acquisition of TomTom Telematics, the company’s fleet management business, for $1.04 billion; and Genstar Capital’s acquisition of Prometheus Group, a provider of plant maintenance operations and optimization software, for $1 billion.
After improving 20 percent in second half 2018, deal volume in the Consumer segment stayed about the same over the past three months. Notable Consumer transactions in first half 2019 included Chinese live streaming and social media platform YY’s acquisition of Bigo Technology, a social video streaming app based in Singapore, for $1.5 billion; and Trax’s acquisition of Shopkick, a shopping rewards app, for $200 million.
Transaction volume in the Infrastructure segment increased 12 percent in first half 2019. High profile Infrastructure deals over the past six months 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’ 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; and Palo Alto Networks’ announced acquisitions of Demisto, a security orchestration, automation and response (SOAR) company, for $560 million; and Twistlock, a container security company, for $410 million.
A copy of the SOFTWARE INDUSTRY M&A REPORT FOR HALF YEAR 2019 is available at the Berkery Noyes website.