January 7, 2015 SOFTWARE TRANSACTION VOLUME AND VALUE MAKES SIGNIFICANT GAINS IN 2014

Berkery Noyes has issued its Software report for full year 2014. Deal volume experienced a 14 percent increase, with a total of 1,840 transactions in 2014. There was also a 19 percent rise in the number of software deals backed by financial sponsors, from 257 to 305. Aggregate value rose 36 percent, from $88.32 billion to $120.18 billion.

Four of the top ten highest value deals in 2014 occurred in the Business Software segment, which consists of software designed for general business practices and not specific industry markets, making it the best represented segment in the top ten list.  

The Consumer Software segment was responsible for three of the industry’s top ten largest deals during the past year. Two of these three deals were completed by Facebook: WhatsApp, a consumer mobile messaging application, for $19.65 billion and Oculus VR, a virtual reality technology company, for $2 billion. Facebook’s acquisitions of WhatsApp and Oculus represented approximately one-fifth of the industry’s aggregate deal value in 2014.

As for the Infrastructure Software segment, deal volume remained nearly constant between 2013 and 2014. There was however a 43 percent volume increase in the segment’s information and cyber-security subsector, from 65 to 93 transactions.

In terms of specific buyers, the Infrastructure segment’s most active acquirer in 2014, either directly or through an affiliated business, was EMC Corporation with six transactions. EMC has been acquisitive over the past several years, especially as it continues to invest in hybrid cloud solutions. This was demonstrated through each of EMC’s Infrastructure deals in 2014: Continuent, Cloudscaling, Maginatics, Spanning Cloud Apps, CloudVolumes, and TwinStrata.

“Major technology players such as IBM, EMC and Oracle are in acquisition mode, snapping up companies in a bid to add mass, plug technical and channel gaps, and diversify,” said James Berkery, Chief Information Officer at Berkery Noyes. “The rapid pace of product development by both early-stage and middle-market software developers is creating high value acquisition opportunities for market leaders, provided they remain nimble and prepared to move swiftly when such opportunities arise. They are bidding aggressively for complementary businesses, recognizing the market advantages of buying versus building new product offerings.” Berkery continued, “We anticipate healthy transaction volume among strategic buyers looking for tuck-in and bolt-on acquisitions that deepen their market penetration and strengthen their customer offerings.”