Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business. www.harriswilliams.com TECHNOLOGY, MEDIA, & TELECOM QUARTERLY SOFTWARE SECTOR REVIEW │ 2Q 2015
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Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams & Co. Ltd, which is authorised and regulated by the Financial Conduct Authority. Harris Williams & Co.is a trade name under which Harris Williams LLC and Harris Williams & Co. Ltd conduct business.
Deep expertise with large, disparate data sets, leveraging proprietary data analyticsand customer segmentation modeling.
Broad market reach and expansive relationships within the retail automotive sector,including over 6,500 franchised dealer and aftermarket client locations.
DMEautomotive was founded in 1982 and is based in Daytona Beach, FL.
ABOUT DMEAUTOMOTIVE
Solera's acquisition of DME is one of a series of recent strategic investments to enhanceits Service, Maintenance, and Repair ("SMR") capabilities (e.g., Identifix, AutoPoint, andService Dynamics).
DME supports Solera’s strategy of fortifying its digital transformation and capturingvaluable customer content for its risk and asset management platform.
With DME, Solera’s extensive SMR database will expand to include nearly 100 millionunique owner-vehicle relationships and three billion automotive transactional detailrecords representing 62% of U.S. households.
HW&Co. advised DMEautomotive (“DME”), a leading provider of data-driven customer retentionmarketing solutions for the retail automotive industry, on its sale to Solera Holdings (NYSE: SLH).
CISCO: OVERCROWDED SECURITY MARKET NEEDS MORE M&A | JULY 14, 2015
Cisco reports that the average large enterprise currently uses more than 54 separate IT security vendors, with some enterprises using as many as 100 different vendors. These patterns suggest that corporate buyers of IT security solutions will increasingly demand more holistic, integrated IT security solutions in an effort to condense their number of IT security vendors. This growing preference for more comprehensive security solutions over niche point solutions is expected to drive further industry consolidation. As evidence of this trend, many big tech and non-traditional security companies, such as defense companies like Raytheon, are making significant investments in the sector compared to the pure-play IT security vendors, such as Check Point, Symantec, Palo Alto Networks, and Fortinet, which have largely remained on the sidelines.
Investor’s Business Daily
MORE COMPANIES WILLING TO SPEND BIG BUCKS ON BIG DATA TECHNOLOGY| JULY 6, 2015
Today, it is standard for companies to amass large amounts of data in the hope that they can analyze and use it to make better business decisions. The process of analyzing data doesn’t come cheap, however, and companies of all sizes need to invest in software that does the grunt work of crunching numbers. Thus, the market for big data software is expected to grow 50% by 2019. Data management software currently accounts for over 40% of the total big data technology spend in the United States, with $15.9 billion so far in 2015.
Fortune
WHAT WE’RE READING
3
MARKETING TECH STAYS HOT: $6.8B IN DEALS IN THE PAST 2 MONTHS| JUNE 2, 2015
Investors continue to fuel the marketing tech fire, with 25 acquisitions and 63 investments totaling $6.8 billion in April and May alone. The true totals are likely much higher, as this amount does not include undisclosed acquisitions, angel investors, or friends-and-family fundraising. Driving this investment is a proliferation of data, caused by a massive and long-term shift in both consumer and business buying patterns. Marketers are most impacted by this proliferation, as they are tasked with sifting through the data in order to derive actionable insights.
VentureBeat
TECH, TELECOM M&A SO FAR THIS YEAR AT HIGHEST LEVEL SINCE 2000| MAY 29, 2015
Technology and telecom firms are bulking up at the fastest rate in more than a decade, driven by a continuing explosion of Internet data usage that is hitting everything from handheld gadgets to massive data centers—and the straining networks that connect them. To be sure, data isn’t the only driver of heightened M&A activity in the sector. Cheap cash from low interest rates is driving investment activity in a diverse set of industries as companies seek to increase scale while the market is hot. Technology and Telecom M&A activity, however, continues to outpace broader dealmaking, which by itself is already on pace to eclipse peak 2007-levels.
The Wall Street Journal
ENTERPRISE SOFTWARE’S TRILLION-DOLLAR OPPORTUNITY | JUNE 21, 2015
As the world economy continues to become more digital in nature, large corporations are being forced to disperse with legacy cultures, business processes and technology that leave them vulnerable to technological disruption. For this reason, corporations are spending $330 billion annually on enterprise software which is expected to grow to over a trillion dollars as all sectors continue to go digital. With a greater number of products becoming information-based, there are significant opportunities for billion dollar technology companies to grow into the space. Ultimately, the competitive use of technology will determine the winners and losers in every legacy sector.
Phytel is a leading provider of integrated SaaS-based population health management software.
IBM will integrate Phytel and another recent acquisition, Explorys, to build a new business unit, Watson Health, focused on IBM’s Watson supercomputer.
Through the acquisitions of Phytel and Explorys, IBM has aggressively formalized its strategy within the healthcare market and extended the scope of IBM Watson’s capabilities.
Closed 5/4/15
Ent. Value: NA
Revenue: NA
EV / Revenue: NA
EV / EBITDA: NA
GI Partners’ acquisition of MRI Software
MRI Software is a leading global provider of real estate property and investment management software solutions.
GI will assist MRI in executing its strategic growth plan by driving innovation of MRI’s flagship property management and accounting solution, aiding expansion into new markets, and building relationships with a fast growing partner network.
GI was drawn to MRI's unique market position in the real estate industry, an end market that GI has significant experience in with past investments in Waypoint Homes and Ladder Capital.
Ent. Value: NA
Revenue: NA
EV / Revenue: NA
EV / EBITDA: NA
Closed 6/24/15
Cox Automotive’s pending acquisition of Dealertrack Technologies
Dealertrack Technologies provides SaaS-based solutions for the automotive retail industry in the U.S. and Canada.
The acquisition of Dealertrack will expand Cox Automotive’s collection of businesses, which is currently focused on the used-car market, into the new-car market.
The combination will also provide dealers, consumers, and manufacturers with a more comprehensive platform that will make buying and selling cars easier.
Ent. Value: $4.5B
Revenue: $948.4M
EV / Revenue: 4.7x
EV / EBITDA: 36.1x
Announced 6/15/15
MasterCard’s acquisition of Applied Predictive Technologies
The acquisition will enhance MasterCard's merchant offerings, and will complement the recent purchase of London-based 5One, another retail analytics technology firm.
Applied Predictive Technologies’ team, technology, and flagship Test & Learn platform, are highly compatible with MasterCard’s analytics solutions, providing customers with enhanced and more actionable decision-making capabilities.
Ent. Value: $600M
Revenue: NA
EV / Revenue: NA
EV / EBITDA: NA
Closed 5/31/15
CA Technologies’ acquisition of Rally Software Development
Rally Software provides cloud-based Agile development software and services.
Rally’s highly complementary solutions will expand CA’s strengths in the areas of DevOps and Management Cloud.
The acquisition is consistent with CA’s strategy of enabling its customers to thrive in the application economy, where software applications are pervasive and Agile software and services is increasingly important for custom development.
Closed 7/8/15
Ent. Value: $432.4
Revenue: $92.5M
EV / Revenue: 4.7x
EV / EBITDA: NM
Francisco Partners’ take-private acquisition of ClickSoftware
ClickSoftware is the leading provider of SaaS-based mobile workforce management solutions for the field service industry.
Francisco Partners will assist ClickSoftware in further enhancing its cloud solutions, growing its customer pipeline, and advancing its strategic goals.
The Francisco Partner's transaction represents yet another take-private acquisition by a private equity firm in the software sector.
MOST ACTIVE STRATEGIC ACQUIRERS OF SOFTWARE ASSETS BY VOLUME 1, 2
GLOBAL STRATEGIC ACQUIRER SOFTWARE M&A ACTIVITY BY VOLUME 2
The 10 most active strategic software consolidators combined for 28 acquisitions in 1H 2015.
Microsoft was the most active software acquirer in 1H 2015 with 8 acquisitions, including LiveLoop, Datazen, and 6 Wunderkinder, that complement Microsoft’s mobile-and cloud- based application ecosystem.
Google, Cisco, and IBM were also active in 1H 2015, completing a combined 15 acquisitions. Notable deals include Google’s acquisition of Pulse.io, IBM’s acquisitions of Phytel & Explorys, and Cisco’s acquisition of OpenDNS.
Global strategic software M&A registered 453 transactions in 2Q, a 14% increase over the prior quarter and the highest volume quarter in the last four years.
With stock prices at or near all-time highs and cash reserves largely untapped and expanding, Big Tech is increasingly turning to M&A as a primary growth vehicle, fueling the historic pace of strategic dealmaking seen in Q2.
MOST ACTIVE PRIVATE EQUITY BUYERS OF NEW SOFTWARE PLATFORMS BY VOLUME 1, 2
GLOBAL NEW PLATFORM PRIVATE EQUITY SOFTWARE M&A ACTIVITY BY VOLUME 2
Francisco Partners, Vista Equity, and Marlin Equity were the most active private equity acquirers of new software platforms in 1H 2015, with a combined 13 acquisitions.
Collectively, the top 10 most active private equity software acquirers have completed 22 acquisitions in 1H 2015, including 5 take-private transactions. Notable take-private transactions include: E2open / Insight Venture Partners, ClickSoftware Technologies / Francisco Partners, and Riverbed Technologies / Thoma Bravo.
After a flat 1Q 2015, global private equity software investment activity increased 18% in 2Q, reaching its highest quarterly level in over three years.
Private equity investment in the software sector has broadly been driven by attractive debt market conditions, large amounts of dry powder, and increased liquidity in private markets as a result of improving investor confidence.
01/16/15 GI Partners, LLC Logibec Inc. Clinical and administrative information systems for the healthcare industry. $342 5.5x
$322 3.3x
CONFIDENTIAL
CONFIDENTIAL
CONFIDENTIAL
DATE
CLOSED ACQUIRER TARGET DESCRIPTION
ENTERPRISE
VALUE (MM)
REVENUE
MULTIPLE
APPLICATION SOFTWARE – M&A MARKET SUMMARY
APPLICATION SOFTWARE M&A VOLUME (GLOBAL)
NOTABLE APPLICATION SOFTWARE M&A TRANSACTIONS
In 2Q 2105, Application Software M&A activity increased 18% over the prior quarter, representing the most active quarter in four years.
Median reported Application Software M&A revenue multiples rebounded in 2Q as large strategics demonstrated a willingness to stretch on valuation for sector leaders.
Business Management software vendors continue to be among the most sought after assets as companies are facing increasing pressure to improve operational agility and performance.
Some of the more notable Business Management transactions include SS&C’s acquisition of Advent, Lexmark’s acquisition of Kofax, and Vista’s acquisition of ACS.
MEDIAN M&A REVENUE MULTIPLES (REPORTED)
2.0x
1.9x 1.9x
1.2x
2.1x
2.4x
1.3x
1.4x 1.5x
1.6x
2.5x
2.8x
2.1x
2.4x
2.3x
1.4x
2.5x
271
285
269
255
288
266
298
244 246 252 251
227
281 270
286 274
323
2Q '1
1
3Q '1
1
4Q '1
1
1Q '1
2
2Q '1
2
3Q '1
2
4Q '1
2
1Q '1
3
2Q '1
3
3Q '1
3
4Q '1
3
1Q '1
4
2Q '1
4
3Q '1
4
4Q '1
4
1Q '1
5
2Q '1
5
2Q '1
1
3Q '1
1
4Q '1
1
1Q '1
2
2Q '1
2
3Q '1
2
4Q '1
2
1Q '1
3
2Q '1
3
3Q '1
3
4Q '1
3
1Q '1
4
2Q '1
4
3Q '1
4
4Q '1
4
1Q '1
5
2Q '1
5
MEDIAN
7
PAGE | 8
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 2Q 2015
Pending Vista Equity Partners Pearson SIS (d.b.a. PowerSchool) Web-based student information systems for the education market. $350 NA
Pending Insight Venture Partners Fourth Ltd. Cloud-based software management solutions to the hospitality industry. $315 8.5x
07/13/15 Francisco Partners Management ClickSoftware Technologies Ltd. SaaS-based energy management solutions. $376 3.0x
06/09/15 NetSuite Inc. Bronto Software, Inc. Cloud-based marketing platform for commerce-driven organizations. $200 NA
05/11/15 Extend Health, Inc. Acclaris, Inc. SaaS technology and serv ices supporting account-based healthcare plans. $140 NA
05/08/15 Visma AS e-conomic international a/s Cloud-based accounting software for small and medium-sized businesses. $226 NA
05/04/15 IBM Corporation Phytel, Inc. Population health management and improvement solutions for healthcare organizations. NA NA
04/13/15 IBM Corporation Explorys, Inc. Cloud-computing platform for health system performance management. NA NA
03/30/15 Vector Capital Saba Software, Inc. SaaS intelligent talent management solution for organizations. $270 NA
03/25/15 Insight Venture Partners E2open, Inc. Cloud-based supply chain management and optimization solutions. $250 3.2x
03/11/15 Kennet Partners Limited Impartner SaaS CRM solutions for marketers and partner program managers. NA NA
03/02/15 Deltek, Inc. HRsmart, Inc. SaaS human resources and talent management software solutions. NA NA
02/16/15 Infosys Ltd. Panaya Ltd. SaaS quality management solutions for enterprise applications. $200 NA
02/10/15 Coupa Software Incorporated ZenPurchase, Inc. On-demand collaborative B2B purchasing platform for large organizations. NA NA
01/27/15 Bridgepoint Advisers Limited eFront S.A. Web-based software solutions for the financial industry. $341 4.1x
01/09/15 Dealertrack Technologies, Inc. Incadea Plc Enterprise software solutions to the automotive retail and wholesale markets. $202 3.7x
01/05/15 AVEVA Group plc 8over8 Limited SaaS lifecycle contract management software solutions. $41 NA
01/02/15 EnerNOC, Inc. World Energy Solutions, Inc. SaaS-based energy management solutions. $77 2.0x
$226 3.5x
6.0x
2.4x
4.5x
3.3x
8.8x
2.8x
6.0x
5.0x 5.0x
3.4x
7.4x
6.1x
3.4x
3.8x
3.3x
4.7x 4.7x35
38 39
43
38
42
55
38
49 47
45 46
60
54 52
63
70
SAAS – M&A MARKET SUMMARY
SAAS M&A VOLUME (GLOBAL)
NOTABLE SAAS M&A TRANSACTIONS
SaaS M&A activity continued its upward trajectory in 2Q 2015, with an 11% increase over the prior quarter’s record results.
In 2Q 2015, median reported M&A revenue multiples remained near 5.0x as SaaS assets continue to garner attractive valuations.
2Q 2015 was marked by high levels of vertical SaaS transactions, notably in the automotive, healthcare, hospitality, and education verticals.
In one of the largest vertical transactions, Cox Automotive announced its $4.5 billion acquisition of Dealertrack Technologies, demonstrating the increased desire for new-age, SaaS-based capabilities in a traditionally “low-tech” vertical.
MEDIAN M&A REVENUE MULTIPLES (REPORTED)
2Q '1
1
3Q '1
1
4Q '1
1
1Q '1
2
2Q '1
2
3Q '1
2
4Q '1
2
1Q '1
3
2Q '1
3
3Q '1
3
4Q '1
3
1Q '1
4
2Q '1
4
3Q '1
4
4Q '1
4
1Q '1
5
2Q '1
5
2Q '1
1
3Q '1
1
4Q '1
1
1Q '1
2
2Q '1
2
3Q '1
2
4Q '1
2
1Q '1
3
2Q '1
3
3Q '1
3
4Q '1
3
1Q '1
4
2Q '1
4
3Q '1
4
4Q '1
4
1Q '1
5
2Q '1
5
DATE
CLOSED ACQUIRER TARGET DESCRIPTION
ENTERPRISE
VALUE (MM)
REVENUE
MULTIPLE
MEDIAN
8
PAGE | 9
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 2Q 2015
70 72
76
63
82
73 74
64
71 74
64 67
72 76
96
88
101
DATA AND ANALYTICS – M&A MARKET SUMMARY
DATA AND ANALYTICS M&A VOLUME (GLOBAL)
NOTABLE DATA AND ANALYTICS M&A TRANSACTIONS
In 2Q 2015, the Data and Analytics software M&A market registered its strongest quarter in the past four years, with 101 reported transactions.
Median reported revenue multiples for Data and Analytics transactions increased to near a four-year high, as companies continue to prioritize and pay a premium for Big Data assets that enhance their solution suites.
As enterprises seek to leverage the ever-increasing data available in their ecosystems, consolidation remains vigorous, particularly among strategic buyers which are driving the majority of M&A activity.
Notable Data and Analytics transactions include MasterCard’s $600 million acquisition of Applied Predictive Technologies and Permira’s pending $4.8 billion take-private acquisition of Informatica.
MEDIAN M&A REVENUE MULTIPLES (REPORTED)
1.6x
1.3x
1.4x
3.3x
1.6x
0.9x
1.8x
1.1x
0.9x
1.4x
1.3x
1.9x 1.9x
2.3x
2.7x2.6x
3.2x
Pending Aval Data Corporation Fixstars Corporation Application development tools for big data analysis. $177 7.0x
Pending Cavendish Square Holding B.V. comScore, Inc. Digital media analytics software and serv ices. $1,561 4.6x
Pending Microsoft Corporation Revolution Analytics, Inc. Software and support for the open source statistical computing language. NA NA
Pending Permira Advisers Ltd. Informatica Corporation Enterprise data integration software and serv ices. $4,844 4.6x
06/04/15 Hitachi Data Systems Corporation Pentaho Corporation Data integration and business analytics platforms. NA NA
06/04/15 Francisco Partners Management Procera Networks, Inc. Subscriber experience assurance solutions based on deep packet inspection (DPI). $130 1.6x
06/04/15 Solera Holdings Inc. DMEautomotive, LLC Automotive direct marketing and analytics solutions. $143 2.3x
05/31/15 MasterCard Incorporated Applied Predictive Technologies, Inc. Cloud-based predictive analytics software solutions. $600 NA
05/19/15 Verisk Analytics, Inc. Wood Mackenzie Ltd Research and consulting commercial intelligence platform. $2,790 8.1x
05/06/15 ABRY Partners, LLC Sentry Data Systems, Inc. Data intelligence solutions for healthcare providers. NA NA
04/17/15 IHS Inc. RootMetrics Inc. Mobile analytics solutions providing insight into the consumer mobile experience. NA NA
04/08/15 Harman International Industries Symphony Teleca Corp. Enterprise software, mobile, big data and analytic, and integrated solutions. $780 2.1x
04/01/15 MAXIMUS Federal Serv ices, Inc. Acentia, LLC DaaS management solutions to healthcare, financial, and regulatory markets. $301 1.6x
03/18/15 AppNexus Inc. Yieldex, Inc. Advertisement forecasting, analytics, and trading tools. $100 NA
02/26/15 Engility Holdings, Inc. TASC, Inc. Big-data cybersecurity and counterintelligence solutions. $1,100 NA
01/28/15 Capita plc Constructionline Online database that enables buyers to source pre-qualified construction resources. $53 3.8x
01/23/15 Roper Technologies, Inc. Strata Decision Technology, L.L.C. Cloud solutions for financial analytics, business intelligence, and decision support needs. NA NA
05/26/15 Bain Capital, LLC Blue Coat Systems Inc. Cyber protection and vulnerability assessment. $2,400 NA
04/30/15 NCC Group plc Accumuli plc Web security and WAN optimization solutions. $73 2.5x
04/29/15 Mitel U.S. Holdings, Inc. Mavenir Systems, Inc. IT infrastructure solutions and serv ices. $492 3.8x
02/23/15 Zayo Group, LLC Latisys Holdings, LLC VMware-based hybrid cloud and hosting serv ices. $678 NA
01/07/15 Gemalto NV SafeNet, Inc. Solutions to v isualize, analyze, alert, and store metrics that impact businesses. $890 NA
01/02/15 Belden Inc. Tripwire, Inc. Data protection and software monetization solutions. $710 6.0x
12/15/14 Thoma Bravo, LLC Compuware Corporation Configuration audit and control management software. $2,091 2.9x
12/02/14 Progress Software Corporation Telerik AD Software solutions and application practices for information technology organizations. $263 4.4x
11/20/14 Micro Focus International plc The Attachmate Group, Inc. Unified data management and data protection solutions. $2,302 2.5x
$694 3.2x
80
69 69
49
58 55
67
38
61
56 55 53
48
56
48 45
50
2.3x
3.1x
4.8x 4.8x
1.8x
2.3x
2.8x
0.6x
1.8x
1.3x
4.0x
2.1x
2.5x2.7x
3.2x
4.5x
3.1x
INFRASTRUCTURE SOFTWARE – M&A MARKET SUMMARY
INFRASTRUCTURE SOFTWARE M&A VOLUME (GLOBAL)
NOTABLE INFRASTRUCTURE SOFTWARE M&A TRANSACTIONS
In 2Q 2015, Infrastructure Software M&A volume rebounded to 50 transactions after decreasing in the prior two quarters.
Median reported Infrastructure Software M&A revenue multiples were 3.1x in 2Q 2015, in line with longer term averages.
Security software vendors are attracting significant interest due to recent well-publicized global security breaches and the ongoing shift towards cloud-based computing, which is perceived as less secure than on-premise systems.
Notable security transactions include Proofpoint’s pending acquisition of Emerging Threats, Cisco’s acquisition of OpenDNS, and Singapore Telecom’s acquisition of TrustWave.
Seed Series A Series B Series C Series D / or later
While total private placement volume declined slightly in 2Q 2015, total reported capital raised by software companies increased by $2.2 billion over the prior quarter and continues to exhibit strong upward momentum.
PRIVATE PLACEMENT ACTIVITY BY SOFTWARE SECTOR
In 2Q 2015, 59% of private capital raised was deployed in early stage rounds (Series B / or earlier), up from 53% in the prior quarter.
The continued growth in early stage investing may suggest further investment activity ahead.
Technology IPO activity increased in 2Q 2015, with 15 IPO’s throughout the quarter.
50% of technology IPOs over the past year received valuations in excess of $1 billion at offering, demonstrating the markets’ preference for more sizable assets.
Hypergrowth software companies continue to seek liquidity through public markets, with 50% of tech companies over the past 12 months generating 75%+ annual revenue growth leading up to their IPOs.
MARKET CAP AT IPO (LTM) REVENUE GROWTH (1YR PRIOR TO IPO)OFFERING SIZE AT IPO (LTM)
RECENT U.S. IPO ACTIVITY (BY OFFERING SIZE)
24%
27%
49%
< 25% 25 - 75% > 75%
5%
29%
16%
50%
$0-50M $50-500M $500M-$1B $1B+
18%
24%
34%
24%
$0 - 50M $50 - 100M $100 - 250M $250M +
All tech IPOs over the last 12 months All tech IPOs over the last 12 months All tech IPOs over the last 12 months
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