January 4, 2013 SOFTWARE INDUSTRY SEEING MORE INTEREST FROM PRIVATE EQUITY ACQUIRERS

Berkery Noyes has issued its Software Industry M&A Report for Full Year 2012. 

According to the report, deal volume increased one percent from 1,513 transactions in 2011 to 1,529 transactions in 2012. At the same time, transaction value fell from $80.78 billion to $66.60 billion, a decline largely attributed to the lack of deals above $5 billion in 2012. 

Regarding financially sponsored transactions within the Software Industry, there was a 19 percent rise in deal flow compared to 2011 and a 38 percent improvement relative to 2010. This included a 50 percent increase for private equity acquisitions in the Healthcare vertical for 2012.

The Niche Software segment, which is characterized as software that is designed to be used in specific vertical industries, experienced a nine percent increase in transaction volume in 2012. This was in contrast to the segment’s 18 percent rise from 2010 to 2011. Meanwhile, there was a 35 percent M&A uptick in the last twelve months involving companies that serve the retailer portion of the Software Industry. One of the largest corresponding transactions was NCR Corporation’s announced acquisition of Retalix for $650 million.

The Infrastructure segment, after undergoing an 18 percent rise in transaction volume from 2010 to 2011, decreased 12 percent in 2012. Nonetheless, related acquisitions in the software-defined networking (SDN) subsector were made by some of the industry’s most notable companies, such as Cisco and VMware.

“Software-defined data centers, by facilitating a converged infrastructure, allow services in the cloud to be delivered more efficiently,” said James Berkery, Chief Information Officer at Berkery Noyes. “As virtualization and the cloud continue to evolve, product innovation in the Infrastructure segment is likely to have a significant impact upon acquisition activity in the Software Industry.”