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October 8, 2013 No Comments

SOURCE: Berkery Noyes

NEW YORK — October 2, 2013 — Berkery Noyes, an independent mid-market investment bank, today released its third quarter 2013 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity during the three-month period and compares it with data for the six previous quarters.

According to the Berkery Noyes’ latest research, volume increased four percent over the prior quarter, from 386 to 401 deals. Aggregate transaction value rose 17 percent, from $26.2 billion to $30.6 billion. The industry’s most active financial sponsor year-to-date was Vista Equity Partners with 11 acquisitions, six of which occurred in third quarter 2013. Vista Equity Partners was also responsible for three of the top ten highest value transactions during the quarter.

The Business Software segment had the largest quarter-to-quarter increase in volume, rising 18 percent. As for the Consumer Software segment, deal flow declined 21 percent over the past three months. This came in the aftermath of a 16 percent increase between first and second quarter 2013. Despite the downward movement in Consumer Software volume, the overall industry’s highest value deal year-to-date occurred in the segment during third quarter 2013. This consisted of the announced management buyout of Activision Blizzard, a video game developer, for $8.2 billion.

In terms of “Niche Software,” which is targeted to specific vertical industries, volume increased 15 percent on a quarterly basis. The most active acquirer in the segment thus far in 2013 was Constellation Software with 11 deals, including two during the past quarter. Meanwhile, the segment’s largest strategic and private equity backed transactions year-to-date were each completed in third quarter 2013. The highest value Niche Software deal in the report was Schneider Electric’s acquisition of Invensys, an engineering company that develops industrial automation software and control systems, for $4.6 billion. Regarding financial sponsors, the largest transaction was Thoma Bravo’s acquisition of Intuit Financial Services, a provider of software and services to financial institutions, for $1.0 billion.

Deal value in the Infrastructure Software segment throughout the first three quarters of 2013 was driven in part by the cyber-security subset. Along these lines, three of the top five transactions by value in the segment year-to-date were related to cyber-security. The largest Infrastructure Software deal in third quarter 2013 was Cisco Systems’ acquisition of SourceFire for $2.7 billion. This was also the highest value transaction in the cyber-security subset since 2010, when Intel acquired McAfee for $7.5 billion. The SourceFire acquisition followed Vista Equity Partners’ acquisition of Websense for $942 million in second quarter 2013. One point to note is that the target companies in each of these instances received widely different valuations based on revenue. SourceFire had a revenue multiple of 10.9x, whereas Websense had a revenue multiple of 2.7x.

Other security focused transactions by notable acquirers in third quarter 2013 included IBM’s acquisition of Trusteer, an endpoint security software company that protects financial institutions against fraud and data breaches; and Welsh, Carson, Anderson & Stowe’s announced acquisition of Alert Logic, which delivers SaaS-based security solutions to cloud service providers and other enterprise customers.

“M&A activity in the information security market is showing signs of growth,” said James Berkery, Chief Information Officer at Berkery Noyes. “This is due in part to several factors, such as vulnerability from the adoption of cloud and mobile technologies. Moreover, the proliferation of bring your own device policies is creating another need for heightened levels of network security.” Berkery continued, “With some of the transactions we have seen this year, it is also becoming evident that acquirers are not shying away from high value deals in the sector.”

A copy of the SOFTWARE INDUSTRY M&A REPORT FOR THIRD QUARTER 2013 is available at the Berkery Noyes website.

About Berkery Noyes

Berkery Noyes is an independent investment banking advisory firm servicing the information industry. The firm specializes in mergers and acquisitions advisory, debt and equity financing, and financial consulting services for companies in the $10 million to $500 million range. Since its founding by Joseph W. Berkery in 1983, Berkery Noyes has worked with corporate clients to grow through acquisition, divest non-core assets, and maximize shareholder returns through strategic transactions and restructurings. For private owners, Berkery Noyes helps create liquidity and execute timely exit strategies that achieve their personal and professional objectives. The firm’s research teams publish acquisition activity in the respective sectors they follow on


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