NEW YORK — July 5, 2016 — Berkery Noyes, an independent mid-market investment bank, today released its half year 2016 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity during the first half of 2016 and compares it with the four previous six-month periods from 2014 to 2015.

Berkery Noyes’ data showed transaction volume increased four percent on a half year basis. The number of acquisitions completed by strategic acquirers remained constant. However, private equity backed deal flow improved 26 percent.

Following a relative lack of megadeals earlier in the year, the four largest transactions thus far in 2016 were each announced in June. Despite this, overall value fell 57 percent in first half 2016, totaling $67.21 billion year-to-date. Of note, eight of the industry’s top ten largest acquisitions in 2015 occurred during the second half of last year. This included Dell’s announced acquisition of EMC Corporation for $67.48 billion, which was the highest value deal ever recorded in the industry. Aggregate value in first half 2016 rose 17 percent when examined on a year-over-year basis.

The median revenue multiple rose from 2.1x in second half 2015 to 3.2x in first half 2016, while the median EBITDA multiple stayed nearly the same at 13.1x. Deals in first half 2016 with enterprise values above $160 million received a median revenue multiple of 4.2x, whereas those in the $10-$20 million range had a median revenue multiple of 2.5x.

Transaction volume in the Infrastructure Software segment, after remaining flat in second half 2015, declined seven percent in first half 2016. The segment’s largest deal year-to-date was Symantec Corporation’s announced acquisition of Blue Coat Systems for $4.72 billion in the cyber-security sector. In addition, an investor group led by Thoma Bravo previously took Blue Coat private in 2011 for $1.1 billion and Bain Capital acquired Blue Coat Systems in 2015 for $2.4 billion.

As for other security related deals in first half 2016, notable acquirers included Experian with the announced acquisition of CSID, an identity theft and fraud detection solutions company, for $360 million; and Cisco’s announced acquisition of CloudLock, which specializes in cloud access security broker technology, for $293 million.

In terms of software used within specific vertical industries or “Niche Software,” transaction volume experienced a two percent uptick. Four of the industry’s top ten highest value deals year-to-date occurred in the Niche segment, making it the best represented sector in the top ten list. The largest Niche segment deal in first half 2016 was Salesforce’s announced acquisition of Demandware, a provider of digital commerce solutions used by retailers, for $2.66 billion. Demandware was the highest value transaction ever completed by Salesforce, surpassing the $2.27 billion acquisition of email marketing platform ExactTarget in the Business Software segment, which was completed in 2013.

M&A activity in the Business Software segment, which consists of software designed for general business practices and not specific industry markets, saw a six percent rise relative to second half 2015. This was the segment’s fourth consecutive half year increase. The largest Business Software deal in first half 2016 was Thoma Bravo’s announced acquisition of Qlik Technologies, a provider of business intelligence software and data visualization tools, for $2.58 billion. Thoma Bravo completed another notable transaction in the segment during this period with the acquisition of Infogix, which offers data analysis of business operations to enterprises in a variety of verticals such as financial services and healthcare.

Deal volume in the Consumer Software segment improved 20 percent, making it the sector with the largest increase in first half 2016. One high profile Consumer deal over the past six months was Rovi Corporation’s announced acquisition of TiVo, a provider of cloud-based video technology solutions that allow users to access live, recorded, and on-demand content across multiple devices, for $1.1 billion. Moreover, TiVo and Rovi both completed acquisitions of their own back in 2014 as well. TiVo acquired Digitalsmiths for $135 million and Rovi acquired Veveo for $82 million in the video search and recommendation subsector.

Sponsored deals accounted for 35 percent of the industry’s aggregate value in first half 2016, compared to 23 percent in second half 2015. Vista Equity Partners was responsible for two of the industry’s top ten largest transactions year-to-date. Along these lines Vista Equity Partners announced its acquisition of Marketo, an automated marketing software company, for $1.62 billion; and Cvent, a cloud-based enterprise event management business, for $1.34 billion.

“Technology enabled services are becoming a driver of M&A activity,” said James Berkery, Chief Information Officer at Berkery Noyes. “As an overarching term that is distinct from concepts such as cloud or Software as a Service (SaaS), technology enabled services combine business process outsourcing (BPO) concepts with proprietary technologies that go hand in hand with a company’s offerings.”

Berkery continued, “Although the service in SaaS implies that hosting the software is the service, there is typically no personal service in the traditional sense. Technology enabled services use and implement the software for the client, an approach that encourages the provider to implement the product beyond introduction and training. These companies are taking on the responsibility of making sure all of the data points are entered, reported and acted upon as they were designed to be, which ensures the user obtains the maximum benefit of the product.”

A copy of the SOFTWARE INDUSTRY M&A REPORT FOR HALF YEAR 2016 is available at the Berkery Noyes website.