July 7, 2015 SOFTWARE VOLUME MOVES UPWARD, VALUATIONS SHOW IMPRESSIVE GROWTH

Berkery Noyes’ Software report for first half 2015 showed that transaction volume increased three percent compared to second half 2014. This was the industry’s fourth consecutive half year rise over the last 30 months. Deal value fell nine percent on a half year basis, totaling $55.65 billion year-to-date.

The median revenue multiple declined from 3.0x to 2.8x over the past six months. However, this represented a 17 percent rise compared to first half 2014, when the multiple was 2.4x. Of note, deals in first half 2015 with enterprise values above $160 million received a median revenue multiple of 3.8x and median EBITDA multiple of 25.1x, whereas those in the $10-$20 million range had a median revenue multiple of 2.4x and median EBITDA multiple of 13.4x.

Transaction volume in the Infrastructure Software segment stayed nearly the same during the half year period. This followed a 32 percent increase in second half 2014. Three of the industry’s top five largest deals in first half 2015 were completed in the Infrastructure segment. This included Bain Capital’s acquisition of Blue Coat Systems for $2.4 billion and Raytheon Company’s acquisition of Websense for $1.9 billion, both of which were in the cyber-security subsector.

Of note, Websense was previously acquired by Vista Equity Partners for $955 million in 2013 and an investor group led by Thoma Bravo previously took Blue Coat private in 2011 for $1.1 billion. Another cyber-security deal that made the top ten list in first half 2015 was telecommunications operator SingTel’s acquisition of Trustwave for $810 million. Cisco’s acquisition of OpenDNS, a network security company, for $635 million just missed inclusion in the top ten.

Other high profile Infrastructure transactions year-to-date in different areas of the segment included EMC’s acquisition of Virtustream, a cloud computing management software company, for $1.2 billion; and CA Technologies’ acquisition of Rally Software, a provider of Agile development software and services, for $480 million.

“Acquirers are demanding a broad array of security capabilities that span the gamut of internal and external network and application users,” said James Berkery, Chief Information Officer of Berkery Noyes. “This includes vulnerability and intrusion detection and prevention, identity management, rogue device identification and other areas.” Berkery continued, “There is a need in the marketplace for solutions that support configuration, provisioning, firmware updates, diagnostics and security, particularly as the range of device types expands.”