July 11, 2013 PRIVATE EQUITY DEAL VALUE IS RISING IN THE SOFTWARE INDUSTRY

Berkery Noyes has released its Software Industry M&A report for half year 2013. Transaction volume decreased three percent over the past six months. Deal value remained flat, totaling $29.56 billion year-to-date. The median revenue multiple moved slightly from 2.1x to 2.0x, while the median EBITDA multiple increased from 10.4x to 12.5x.

Financial sponsors in the first half of 2013 accounted for 17 percent of volume but 43 percent of value. Contrast this with the first half of 2012, when PE firms represented 15 percent of volume and only 22 percent of value.

The largest transaction in first half 2013 was the announced acquisition of BMC Software by a private investor group, led by Bain Capital and Golden Gate Capital, for $6.81 billion. This deal represented a 3.1x revenue multiple and 11.2x EBITDA multiple. In addition, four of the industry’s top ten highest value transactions in first half 2013 were backed by private equity firms.

Deal volume in the Infrastructure Software segment declined six percent during first half 2013. Nonetheless, there were several large transactions in the segment’s cyber security subset, such as Vista Equity Partners’ acquisition of Websense for $942 million and McAfee’s acquisition of Stonesoft for $352 million.

“There are a few key takeaways from the data in this report,” said James Berkery, Chief Information Officer at Berkery Noyes. “First, companies that are going to market are receiving strong valuations, even though volume in the Software Industry stayed constant compared to the latter part of 2012. Second, financial sponsors are completing high value software transactions, a trend that indicates growing confidence in the marketplace as well as the macro M&A environment. And third, acquirers are especially interested in data management, security, and cloud-based solutions at the moment.”