NEW YORK — October 3, 2016 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2016 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 the Berkery Noyes’ latest research, volume decreased nine percent over the prior quarter. The number of transactions year-to-date improved two percent compared to the corresponding timeframe in 2015. Aggregate value rose 43 percent relative to the previous quarter, from $44.8 billion to $64.2 billion. Moreover, three of the industry’s top five highest value deals thus far in 2016 occurred during the third quarter.

The industry’s largest transaction in third quarter 2016 and year-to-date was Oracle Corporation’s announced acquisition of NetSuite in the enterprise resource planning (ERP) sector for $9.3 billion. NetSuite’s cloud-based platform provides an integrated solution for ERP, CRM, and e-commerce. Of note, Oracle CEO Larry Ellison is also NetSuite’s most significant shareholder, in which he controls about a 40 percent stake. This was the second highest value deal ever completed by Oracle, slightly behind the company’s acquisition of PeopleSoft for $10.3 billion in 2004. PeopleSoft offers a suite of software solutions for human capital management, financial management, supply chain management, and other purposes.

Beyond the NetSuite acquisition, Oracle remained an active acquirer of cloud related companies thus far in 2016. Also in the third quarter Oracle acquired LogFire, a cloud-based warehouse management systems provider; and Palerra, a cloud security vendor. This continued a trend from earlier in the year with Oracle’s announced acquisitions of Textura, which offers contracts and payment management services to the construction sector, for $663 million; Opower, a customer engagement platform used by energy utilities, for $532 million; Ravello, a provider of cloud-based virtualization software solutions, for a reported $400-$450 million; and AddThis, a web tracking and data analytics company, for $175 million.

Meanwhile, Hewlett Packard Enterprise (HPE) has been involved in several notable divestitures this year. In the third quarter, HPE announced the spinoff of its software business and the merger of those assets with Micro Focus International for $8.8 billion. At the time this was the industry’s highest value acquisition in the U.K. since Britain’s vote in June to leave the European Union. HPE also announced in the second quarter that it plans to merge its technology-services division with Computer Sciences Corporation (CSC), a deal valued at $8.5 billion. Note that the latter deal falls outside of the report’s purview because it’s not software centric.

In terms of “Niche Software,” which is targeted to specific vertical industries, volume fell 11 percent on a quarterly basis but increased four percent compared to a year ago. The segment’s highest value transaction in third quarter 2016 was Kohlberg Kravis Roberts & Co.’s (KKR) announced acquisition of Epicor Software Corporation, which provides enterprise software solutions to customers in the manufacturing, distribution, and retail sectors, for $3.3 billion. This was also the segment’s largest private equity backed deal during the quarter and year-to-date.

As for other high value deals in the Niche segment over the past quarter, Verizon announced its acquisition of Fleetmatics, which offers fleet and mobile workforce management solutions, for $2.2 billion; Harvest Partners and OMERS Private Equity acquired Epiq Systems, a provider of integrated technology solutions for the legal profession, including electronic discovery, bankruptcy, and class action and mass tort administration, for $1 billion; and Thoma Bravo acquired Imprivata, a healthcare IT security company, for $544 million.

Deal flow in the Consumer Software segment improved five percent during the last three months. The Business Software segment, which consists of software designed for general business practices and not specific vertical industries, saw volume decrease 12 percent from second to third quarter 2016. However, the segment year-to-date experienced a two percent uptick relative to the same time period in 2015. In addition to the previously discussed NetSuite acquisition, notable third quarter segment deals included Open Text Corporation’s announced acquisition of Dell EMC’s enterprise content division for $1.6 billion; and Genesys’ announced acquisition of Interactive Intelligence Group, which provides software and cloud services for customer engagement, unified communications and collaboration, for $1.4 billion.

Transaction volume in the Infrastructure segment stayed nearly constant for the third consecutive quarter. Upon examination of the segment’s cybersecurity sector, the largest related deal during the quarter was Intel’s announced sale of a majority stake in its cybersecurity business to TPG Capital for $1.1 billion. This business unit originated from Intel’s acquisition of McAfee back in 2010 for $7.7 billion. As a result of the transaction, McAfee will become a jointly-owned independent company with Intel retaining a 49 percent ownership stake.

“Acquisition activity across the software marketplace is rooted in sound strategy as major technology companies seek greater mass and diversity, formerly emerging technologies have matured, and financial buyers look to invest in quality assets,” said James Berkery, Managing Partner at Berkery Noyes. According to Berkery, “Demand exists for businesses that can demonstrate growth, profitability and a solid product or service. Large strategic companies continue to seek growth through acquisition, private equity investors have capital to deploy, and private owners are looking for timely exit strategies.”

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