April 14, 2014 SOFTWARE M&A VALUE REBOUNDS STRONGLY IN Q1 2014

Berkery Noyes has issued its Software report for Q1 2014. Transaction volume declined four percent on a quarter-to-quarter basis. However, this represented a 14 percent increase compared to Q1 2013. Overall deal value in Q1 2014 gained 72 percent in Q1 2014 over Q4 2013, from $22.6 billion to $38.8 billion. This increase in aggregate value was attributable in large part to Facebook’s acquisition Whatsapp for $16 billion, a cross-platform mobile messaging application.

One notable occurrence was the rise in overall value compared to the same time period last year. There were eight software transactions above the $500 million threshold in Q1 2014, compared to one such deal in Q1 2013. The top ten largest transactions accounted for 61 percent of the industry’s aggregate value in Q1 2014, as opposed to 55 percent in Q4 2013 and 38 percent in Q1 2013.

The “Niche Software” segment, which consists of software that is targeted to specific vertical markets, underwent a ten percent volume increase in Q1 2014. In terms of growth areas within the segment, deal volume pertaining to the Healthcare IT market increased 31 percent.

Deal volume in the Infrastructure Software segment decreased 32 percent in Q1 2014. This followed a 13 percent increase between Q3 2013 and Q4 2013. Continuing a trend from 2013, cyber-security transactions continued to have an impact on the Infrastructure Software segment’s value. Along these lines, the segment’s highest value deal in Q1 2014 was FireEye’s acquisition of malware detection company Mandiant Corporation for $826 million.

M&A activity in the cyber-security subsector is being driven in part by several factors such as the need to prevent breaches at major retailers, ensure digital identity as a means of protecting sensitive information, and identify threats both before they occur as well as in real-time.

Other transactions in the Infrastructure Software segment completed by notable acquirers in Q1 2014 included Citrix’s acquisition of Framehawk, a software development company that focuses on virtualized desktop solutions and mobilizing enterprise applications; IBM’s acquisition of Cloudant, a database-as-a-service (DBaaS) provider; and Oracle’s acquisition of Corente, which offers software-defined networking (SDN) technology.