2018-10-04 Berkery Noyes Releases Software Industry M&A Report For Third Quarter 2018

NEW YORK — October 4, 2018 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2018 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity during the three-month period and compares it with data for the six previous quarters.

According to Berkery Noyes’ latest research, volume decreased five percent on a quarter-to-quarter basis. Aggregate value rose nine percent, from $51.6 billion to $56.4 billion. This was the industry’s fifth consecutive quarterly increase in value. Upon further examination of value, four of the top ten largest deals thus far in 2018 occurred in third quarter 2018. These four deals, with a combined value of $28.1 billion, accounted for one-fifth of the industry’s aggregate value year-to-date. Each of the four deals were completed by strategic acquirers.

In terms of “Niche Software,” which is targeted to specific vertical industries, volume fell nine percent over the prior quarter, returning to its second quarter level. Notable deals in the segment’s Finance vertical during the third quarter included State Street Corporation’s announced acquisition of Charles River Systems, a provider of investment management front office tools and solutions, for $2.6 billion; and SS&C Technologies’ announced acquisitions of Intralinks Holdings, which offers secure data sharing and enterprise collaboration solutions that are used by the banking and capital markets sectors, for $1.5 billion; and Eze Software, an investment management software solutions company, for $1.5 billion.

As for other notable Niche segment deals during the past quarter, Amadeus IT Group announced its acquisition of Travelclick, which serves mid-chain and independent hotels with business intelligence, reservations, bookings, guest management, and other solutions, for $1.5 billion; Fortive announced its acquisition of Gordian, a construction cost data, software, and services company, for $775 million; Global Payments acquired AdvancedMD, which offers medical office software to ambulatory medical practices, for $700 million; and Intertek Group acquired Alchemy Systems, a workplace training company used by the food and retail sectors, for $480 million.

The Business segment, which consists of software designed for general business practices and not specific vertical industries, saw volume decrease four percent in the third quarter. This followed a 31 percent rise in the second quarter. Notable third quarter Business segment deals included Adobe Systems’ announced acquisition of Marketo, a cloud platform for B2B marketing engagement, for $4.8 billion; Fortive’s announced acquisition of Accruent, a cloud-based software company that helps businesses manage their real estate, facilities, and other physical resources, for $2 billion; Insight Venture Partners’ announced acquisition of Episerver, a web content management, digital commerce, and digital marketing solutions company, for $1.2 billion; and ARM’s announced acquisition of Treasure Data, a customer-data analytics firm that is used by businesses in the automotive, retail, Internet-of-Things, and entertainment sectors, for a reported estimate of $600 million.

Transaction volume in the Infrastructure segment declined six percent in third quarter 2018. Notable segment deals during the quarter included Broadcom’s announced acquisition of CA Technologies, a provider of information technology (IT) management software and solutions, for $18.4 billion; Cisco Systems’ acquisition of Duo Security, which offers unified access security and multi-factor authentication delivered through the cloud, for $2.4 billion; Siemens’ announced acquisition of Mendix, a low-code application development software company, for $700 million; and Atlassian’s announced acquisition of OpsGenie, an incident management platform used by DevOps and IT-operations teams to manage critical IT alerts and incidents, for $295 million.

“Among several areas, we’re seeing a strong level of investor interest in the cybersecurity sector, partly driven by the need for vendors to continually enhance and improve their solutions to mount a defense against ever changing threats,” said Martin Magida, Managing Director at Berkery Noyes. “One way that vendors are meeting the challenge is by amassing a war chest of security assets. Other vendors are enjoying organic growth simply by exploiting the greenfield ahead of them, getting their clients current with the latest technologies.”

Magida continued, “Mobile devices, cloud infrastructure, and lax user behavior are among the many concerns cited by security professionals. Given an increasingly mobile workforce, mobile security remains an issue when devising bring your own device (BYOD) policies. One way to mitigate BYOD risk is to shore up authorization/authentication capabilities while making it easy for users to operate in a secure environment.”

A copy of the SOFTWARE INDUSTRY M&A REPORT FOR THIRD QUARTER 2018 is available at the Berkery Noyes website.