January 24, 2014 M&A ACTIVITY IN THE SOFTWARE INDUSTRY HOLDS STEADY

Berkery Noyes has released its Software report for full year 2013. Deal volume experienced a two percent uptick, with a total of 1,598 transactions in 2013. Aggregate value rose 31 percent, from $67.23 billion to $88.22 billion. The median revenue multiple increased from 2.1x to 2.4x, while the median EBITDA multiple moved slightly from 11.3x to 11.5x. 

Five of the industry’s top ten highest value deals occurred in the Niche Software segment, which is targeted to specific vertical markets. In addition, four of these five acquisitions were located in the finance vertical. One notable transaction was NCR’s acquisition of Digital Insight, a provider of banking software, which was acquired from Thoma Bravo for $1.65 billion. Approximately four months prior to this, Thoma Bravo acquired Digital Insight from Intuit for $1.03 billion. 

Regarding other areas covered in the report, the Business Software segment underwent a three percent increase in volume on a year-to-year basis. The largest financially sponsored deal in the segment was Advent International’s announced acquisition of Unit4 in the enterprise resource planning (ERP) subsector. This transaction, with a purchase price of $1.71 billion, represented a 2.7x revenue multiple and 18.5x EBITDA multiple. 

“After getting off to a somewhat slow start, software M&A activity began to gain momentum during the latter part of 2013,” said James Berkery, Chief Information Officer at Berkery Noyes. “Moreover, the annual rise in aggregate value was mainly driven by deals that took place throughout the second half of the year. This is when seven of the industry’s top ten largest transactions occurred.” Berkery continued, “In terms of deal activity, some companies are deciding to divest non-core assets as they re-evaluate their market position. Many of these assets are strong businesses in their own right, which is drawing the attention of acquirers.”