Deal
volume experienced a nine percent year-to-year increase, with a total of 2,028
transactions in 2015. Overall value gained 72 percent, from $123.74 billion to
$213.20 billion. This rise was attributable in major part to Dell’s announced
acquisition of EMC Corporation for $67.48 billion, which was the highest value
deal ever recorded in the industry.
The
EMC acquisition accounted for almost one-third of the industry’s aggregate
value in 2015. If excluded, total value gained 18 percent on a yearly basis.
With this transaction, Dell is looking to combine its server businesses with
EMC’s storage and virtualization assets, enabling it to better compete beyond
the PC market with a wider range of products. Also of note, Michael Dell and
Silver Lake Partners took Dell private in 2013 for $24 billion.
In
terms of valuations, the median revenue multiple declined from 2.7x to 2.4x,
while the median EBITDA multiple improved from 12.0x to 13.8x. Deals in the
$10-$20 million range over the past three years received a median enterprise
value multiple of 2.3x revenue, whereas those above $160 million had a median
enterprise value multiple of 3.6x revenue.
Financial
sponsors were responsible for five of the industry’s top ten largest deals in
2015. Three of these five transactions occurred in the Infrastructure segment.
This consisted of The Carlyle Group’s announced acquisition of Veritas
Technologies Corporation, a storage and server management software solutions
business, for $8 billion; Permira and CPP Investment Board’s acquisition of
Informatica, a provider of enterprise data integration software and services,
for $4.77 billion; and Thoma Bravo and Silver Lake Partners’ announced
acquisition of SolarWinds, an IT management software and monitoring company,
for $4.38 billion.
As
for volume in the Infrastructure Software segment, deal activity improved 19
percent over the past year. Upon examination of the information security
subsector, Blue Coat Systems was a notable acquirer in 2015 with Elastica, a
cloud security startup, for $280 million; and Perspecsys, a cloud data protection
platform. This followed Bain Capital’s acquisition of Blue Coat earlier in the
year for $2.4 billion. With these acquisitions, Blue Coat is positioning itself
as a leader in the cloud access security broker (CASB) space. Regarding high
profile strategic Infrastructure deals, EMC acquired Virtustream, which offers
cloud computing management software, for $1.2 billion prior to the Dell
acquisition.
The
Consumer Software segment underwent a 27 percent decrease in volume. This
followed a 14 percent rise between 2013 and 2014. The largest Consumer deal
during 2015 was the announced acquisition of Qihoo 360 Technology, an internet
security company based in China, which was taken private by an investor
consortium for $8.28 billion.
Transaction
activity in the “Niche Software” segment, which is targeted to specific
vertical markets, saw a 17 percent gain. Three of the industry’s top ten deals
occurred in the Niche segment, including two related to the automobile market.
Accordingly Vista Equity Partners acquired Solera Holdings, which provides risk
management software to the automotive and property marketplace, for $6.25
billion; and Cox Automotive acquired Dealertrack Technologies, a web-based
software solutions and services company for automotive retailers, for $4.36
billion.
Meanwhile,
the number of deals in the Business Software segment, which consists of
software designed for general business practices and not specific industry
markets, increased 12 percent. The most active acquirer in the Business segment
in 2015 was Microsoft with seven transactions.
“With
the increased adoption of cloud and SaaS environments even software companies
are recognizing the innate ability to integrate rather than develop
everything," said James Berkery, Chief Information Officer at Berkery
Noyes. "It stands to reason as more software solutions appear on the web
that the proliferation of the API has begun to create an integration market
unto itself. A sort of API marketplace with brokered solutions, tech enabled
services and niche applications is poised to capitalize."
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