NEW YORK — January 5, 2015 — Berkery Noyes, an independent mid-market investment bank, today released its full year 2014 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity in the Software Industry during 2014 and compares it with data covering 2012 and 2013.

Deal volume experienced a 14 percent increase, with a total of 1,840 transactions in 2014. There was also a 19 percent rise in the number of software deals backed by financial sponsors, from 257 to 305. Aggregate value rose 36 percent, from $88.32 billion to $120.18 billion. The median revenue multiple increased from 2.3x to 2.6x, while the median EBITDA multiple moved slightly from 11.7x to 12.0x.

Four of the top ten highest value deals in 2014 occurred in the Business Software segment, which consists of software designed for general business practices and not specific industry markets, making it the best represented segment in the top ten list. This included SAP’s acquisition of travel and expense management company Concur Technologies for $7.6 billion; Vista Equity Partners’ acquisition of business integration and process management company TIBCO Software for $4.11 billion; Thoma Bravo’s acquisition of enterprise software and IT services company Compuware Corporation for $2.05 billion; and VMWare’s acquisition of mobile device management company AirWatch for $1.56 billion. Business Software also had the largest rise in deal volume on a year-over-year basis with a 20 percent improvement, from 343 to 410 transactions.

The Consumer Software segment was responsible for three of the industry’s top ten largest deals during the past year. Two of these three deals were completed by Facebook: WhatsApp, a consumer mobile messaging application, for $19.65 billion and Oculus VR, a virtual reality technology company, for $2 billion. Facebook’s acquisitions of WhatsApp and Oculus represented approximately one-fifth of the industry’s aggregate deal value in 2014.

Transaction activity in the “Niche Software” segment, which is targeted to specific vertical markets, saw a 15 percent gain. The segment’s highest value deal in 2014 was Oracle’s acquisition of MICROS Systems. The provider of point-of sale (POS) software and other integrated solutions for the hospitality and retail sectors was acquired for $5.3 billion (or $4.6 billion net of the company’s cash items). Meanwhile, two of the top five highest value deals in the Niche Software segment were secondary buyouts that occurred in the capital markets subsector. This consisted of Centerbridge Capital Partners’ acquisition of IPC Information Systems from Silver Lake Partners for $1.2 billion and Blackstone and Goldman Sachs Merchant Banking Division’s acquisition of Ipreo Holdings from Kohlberg Kravis Roberts & Co. (KKR) for $975 million.

As for the Infrastructure Software segment, deal volume remained nearly constant between 2013 and 2014. There was however a 43 percent volume increase in the segment’s information and cyber-security subsector, from 65 to 93 transactions. One notable private equity deal in the space was Veritas Capital Partners’ acquisition of BeyondTrust, a vulnerability management software solutions company, for a reported $310 million.

In terms of specific buyers, the Infrastructure segment’s most active acquirer in 2014, either directly or through an affiliated business, was EMC Corporation with six transactions. EMC has been acquisitive over the past several years, especially as it continues to invest in hybrid cloud solutions. This was demonstrated through each of EMC’s Infrastructure deals in 2014: Continuent, Cloudscaling, Maginatics, Spanning Cloud Apps, CloudVolumes, and TwinStrata.

Google was another notable acquirer in the Infrastructure segment in 2014 with two mobile development related transactions: Firebase, a cloud hosted back-end service that helps developers build apps; and Appurify, a mobile app testing platform. In addition to Firebase, Google completed another cloud focused deal in the segment with the acquisition of StackDriver, a cloud monitoring service for Amazon Web Services, Rackspace, and other cloud environments.

“Major technology players such as IBM, EMC and Oracle are in acquisition mode, snapping up companies in a bid to add mass, plug technical and channel gaps, and diversify,” said James Berkery, Chief Information Officer at Berkery Noyes. “The rapid pace of product development by both early-stage and middle-market software developers is creating high value acquisition opportunities for market leaders, provided they remain nimble and prepared to move swiftly when such opportunities arise. They are bidding aggressively for complementary businesses, recognizing the market advantages of buying versus building new product offerings.” Berkery continued, “We anticipate healthy transaction volume among strategic buyers looking for tuck-in and bolt-on acquisitions that deepen their market penetration and strengthen their customer offerings.”

A copy of the SOFTWARE INDUSTRY M&A REPORT FOR FULL YEAR 2014 is available at the Berkery Noyes website.