NEW YORK — January 6, 2014 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2013 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity in the Software Industry during 2013 and compares it with data covering 2011 and 2012.

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.

Transaction activity in the “Niche Software” segment, which is targeted to specific vertical markets, remained about constant. Five of the industry’s top ten highest value deals occurred in the Niche Software segment. 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.

Digital Insight was one of several finance related acquisitions completed by NCR during the year. NCR also acquired Alaric Systems, a provider of fraud protection software that serves financial institutions, for $78 million. With the acquisitions of Digital Insight and Alaric Systems, NCR is positioning itself as a leader in the retail banking market.

As for the Infrastructure Software segment, deal volume rose four percent between 2012 and 2013. The segment’s most active acquirers in 2013, either directly or through an affiliated business, were EMC Corporation and Intel Corporation with six transactions each. EMC acquired Desktone, PassBan, ScaleIO, Aveksa, Adaptivity, and Virsto Software. The largest of EMC’s transactions was the acquisition of Virsto Software, which EMC acquired through its subsidiary VMware, for $184 million. Meanwhile, Intel acquired Omek Interactive, Stonesoft, Aepona Group, Mashery, and the HTML5 development tools division from AppMobi. The largest of Intel’s transactions was the acquisition of Stonesoft, which Intel acquired through its subsidiary McAfee, for $369 million. When examined over the three years covered in the report, EMC was the segment’s most active acquirer with 25 transactions.

Also of note, there were six deals in the segment’s cyber and information security subset during 2013 that were above $100 million in value. Activity in the subset was driven in part by an interest in cloud-based solutions that protect against Distributed Denial of Service (DDoS) attacks, a notion highlighted by transactions such as Akamai Technologies’ acquisition of Prolexic Technologies for $370 million.

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. At the same time, transaction volume in the Consumer Software segment improved ten percent. Consumer Software was also the industry’s fastest growing segment over the past twelve months.

“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.”

A copy of the SOFTWARE INDUSTRY M&A REPORT FOR FULL YEAR 2013 is available at the Berkery Noyes website.