Technology, Media & Telecom INFRASTRUCTURE SOFTWARE SECTOR REVIEW | Q3 2018 Investment banking services are provided by Harris Williams LLC and Solebury Capital LLC, registered broker-dealers and members of FINRA and SIPC, and Harris Williams Ltd, which is private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams is a trade name under which Harris Williams LLC and Harris Williams Ltd conduct business.
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Technology, Media & TelecomINFRASTRUCTURE SOFTWARE SECTOR REVIEW | Q3 2018
Investment banking services are provided by Harris Williams LLC and Solebury Capital LLC, registered broker-dealers and members of FINRA and SIPC, and Harris Williams Ltd, which is private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams is a trade name under which Harris Williams LLC and Harris Williams Ltd conduct business.
T E C H N O L O G Y , M E D I A & T E L E C O M PAGE | 1
INFRASTRUCTURE SOFTWARE SECTOR REVIEW | Q3 2018
HW Infrastructure Software Introduction
O B S E R V A T I O N S O N K E Y I N F R A S T R U C T U R E S O F T W A R E T R E N D S 1 , 2 , 3 , 4
• Led by big moves from strategic buyers, including Microsoft, IBM, and Salesforce, year to date 2018 has been an active period for infrastructure software with over 200 transactions in Q3 2018 alone
• The public markets have also continued to be favorable, with nearly 25 initial public offerings in the last 24 months
• Software targeted at teams – developers, marketers, and professional services – that are lightweight, easy to use, and can be purchased and deployed over the web are witnessing increased demand and bypassing the traditional IT and enterprise buying processes
• Security remains top of mind for both large and small organizations as large scale cloud adoption leaves them with connected devices and increased exposure to threats
• While industrial tech and infrastructure tech companies continue to make separate investments in their IoT platforms, this area will come increasingly into focus with resulting partnerships and M&A, especially as billions of intelligent devices are connected to the cloud, and organizations look for platforms that can turn these massive amounts of data into real-time business value
H A R R I S W I L L I A M S ( “ H W ” ) A S A F I R MT E C H N O L O G Y , M E D I A & T E L E C O M ( “ T M T ” ) G R O U P
• Founded in 1991
• 300+ professionals across eight offices globally
• 140+ closed transactions in the last 24 months
• 20th record year in 2017
• 10 industry groups
• 35 professionals across Boston, San Francisco, and London
• 47 closed transactions in the last 24 months
TMT Vertical Focus Areas
• Education Technology• Fintech• Healthcare IT• Human Capital Management• Internet and Digital Media• Manufacturing Technology
• Membership Management• Public Sector Software• Supply Chain, Transportation
• Centrify provides identity and access management (“IAM”) software solutions to over 5,000 organization worldwide, including more than 50% of the Fortune 50.
• The Company’s solutions include privileged access management (“PAM”) where the client base is majority larger enterprises andIdentity as a Service (“IDaaS”) solutions where client base is largely small to midsize enterprises. 50% of sales are direct.
• Thoma Bravo has been a long time investor in cybersecurity companies, including Sailpoint and Bomgar in the IAM segment. Since the acquisition the Company has been split into two separate businesses – Centrify focused on privileged access management, and Idaptive focused on Identity as a Service.
Microsoft’s acquisition of GitHub
• GitHub is a source code management platform based on the open source Git distributed version control system. The company enables the hosting of open-source projects while providing paid support for private code repositories.
• The Company’s solutions provide code review, project management, documentation, and code hosting along with many other developer collaboration features. Over 30 million developers utilize the platform including a large portion of the open source community.
• Microsoft paid a significant premium to for access to a large and loyal developer ecosystem which over time will provide a strong base for cross sell (especially Azure). Similar to LinkedIn, Microsoft plans to run GitHub independently.
Closed October 26, 2018
Enterprise Value: $7,500M
Rev: NA EV / EBITDA: NA
EV / Rev: NA
Siemens’ acquisition of mendix
• mendix is a low-code application development environment that empowers business users to build web and mobile applications using visual modeling tools and high level code constructs. It allows business users to tap into existing disparate applications, databases, and reusable components/templates to quickly and easily create rich and more relevant applications.
• The acquisition is highly complementary to Siemens’ Mindsphere IoT platform which is enabling business users to create rich apps that tap into the physical infrastructure of their products, plants, systems, and machines.
• The acquisition will allow Siemens to combine mendix’s leadership in low code development, providing rich user experience and digital connectivity, with Mindsphere’s wealth of IoT data and physical infrastructure connectivity.
Closed October 1, 2018
Enterprise Value: $730M
Rev: NA EV / EBITDA: NA
EV / Rev: NA
EQT’s pending acquisition of SUSE
• SUSE provides enterprise-grade open source solutions including Linux enterprise server, Open Stack cloud technology, and software defined storage, for managing on-premise and cloud workloads.
• The Company’s main product is SUSE Linux Enterprise server - an enterprise-grade supported version of open source Linux, that competes directly with and occupies the #2 position behind Red Hat Enterprise Linux in the paid Linux market.
• For EQT, SUSE provides a compelling thesis around open source and cloud, as Linux increasingly becomes the OS of choice across public and private clouds as a result of better performance, lower TCO and ability to use commodity hardware, and reduced vendor lock-in across paid and unpaid versions, as well as an increased uptake of OpenStack-based infrastructure.
Broadcom’s acquisition of CA
• CA provides a diversified portfolio of IT management and application development solutions across mainframe, cloud, mobile and distributed environments.
• The Company’s Mainframe solutions comprise more than 50% of revenue and it is a leader in the space (only behind IBM) with nearly 90% of the Fortune 500 as customers.
• The acquisition will provide Broadcom with significant customer and product diversification, and cross sell through access to larger enterprise data centers where CA’s mainframe solutions are deeply embedded and mission critical. Broadcom has since sold Veracode, the application security company acquired by CA in March 2017, whose customer base is largely midsize enterprises.
Closed November 5, 2018
Enterprise Value: $19,000M
Rev: $4,148M EV / EBITDA: 14.3X
EV / Rev: 4.6X
Announced July 2, 2018
Enterprise Value: $2,540M
Rev: $366M EV / EBITDA: 22.7X
EV / Rev: 6.9X
Note: Announced or Closed in Q3 2018.
EV / EBITDA: NA
EV / Rev: NA
Closed August 15, 2018
Enterprise Value: NA
Rev: NA
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INFRASTRUCTURE SOFTWARE SECTOR REVIEW | Q3 2018
IDENTITY AND ACCESS MANAGEMENT (“IAM”)
Select Market Participants
Market Observations
Recent Transactions
• IAM is a $5 – 10 billion market across Identity as a Service (“IDaaS”), Privileged Access Management (“PAM”) and Identity Governance and Administration (“IGA)”)
• Majority of the IDaaS activity is being driven by the need to manage user access across multiple cloud and mobile applications and shift to the cloud
• A number of public security breaches have increased the focus on PAM and the need for better monitoring and auditing of privileged user accounts, including administrators, vendors, etc.
• IGA solutions are more complex to implement since they require modelling policies, workflows, and reporting, and are taking longer to move to a service model
October 4, 2018
August 15, 2018
Select Sector Spotlight3,4
TEST AUTOMATION AND MANAGEMENT VERSION MANAGEMENT
Market Observations Market Observations
• Testing remains one of the few areas within the Software Development Lifecycle (“SDLC”) that is largely manual, with opportunity for technology disruption
• As cloud, mobile, IoT, web services/API, and low code/business user development models proliferate, the need for testing solutions that capture these “omni-channels” continues to evolve
• The testing market is over $30 billion (including manual) and the current test automation market is about $2 billion
• Version management software acts as the code repository on software development projects, and enables collaboration across developers
• It is one of the few tools that provides an opportunity for a platform play besides Application Lifecycle Management (“ALM”) and Project Portfolio Management (“PPM”) tools
• Cloud-based, developer centric, team-based software tools are experiencing significant demand as they allow developers to bypass the traditional enterprise buying processes
Select Market Participants
Recent Transactions
Select Market Participants
Recent Transactions
Pending
October 1, 2018
October 31, 2018
October 25, 2018
January 1, 2017
T E C H N O L O G Y , M E D I A & T E L E C O M PAGE | 5
Pending SUSE EQT Provider of enterprise-grade, open source software infrastructure and application delivery solutions. $2,540 6.9x 22.7x
11/05/2018 CA Technologies Broadcom Provider of enterprise IT software to eliminate the barriers between ideas and business outcomes. $19,000 4.6x 14.3x
10/26/2018 GitHub Microsoft Provider of a source code management platform. $7,500 * *
10/04/2018 BeyondTrust Bomgar; Francisco Partners Developer of cybersecurity software designed to protect against data breaches. * * *
10/04/2018 CloudHealth VMWare Provider of a cloud-service-management software. $500 * *
10/01/2018 Duo Security Cisco Systems Provider of cloud-based Internet security services designed to protect against data breaches. $2,350 * *
10/01/2018 mendix Siemens Provider of a low-code application development platform. $730 * *
10/01/2018 OpsGenie Atlassian Developer of an altering and on-call management technology to manage schedules and escalations. $295 * *
10/01/2018 Zephyr Smart Bear Provider of on-demand test management software. $138 * *
09/28/2018 Built.io Software AG Provider of an application development platform designed to build mobile applications. * * *
09/26/2018 RightScale Flexera Software; TA Associates; OTPP Provider of an enterprise cloud management platform. * * *
09/11/2018 Ytica Twilio Provider of contact center reporting, speech analytics, and workforce optimization software. * * *
09/10/2018 Base Zendesk Provider of customer relationship management and sales software. * * *
09/05/2018 RapidFire Tools Kaseya; Insight Venture Partners Provider of business building technology tools for Managed Service providers and resellers. * * *
08/24/2018 Frame Nutanix Provider of a software browsing platform to allow any Windows software to be run in the cloud. $116 * *
08/22/2018 AlienVault AT&T Provider of a digital security management and crowdsourced threat intelligence platform. $600 * *
08/15/2018 Centrify Thoma Bravo Provider of an identity and access management platform to protect against cyber threats. * * *
08/14/2018 Basefarm Orange SA Provider of cloud-based infrastructure / services and management of critical applications. $408 * *
08/13/2018 Prevoty Imperva Provider of an autonomous application protection technology. $151 * *
07/31/2018 Dattus Plex Systems; Francisco Partners Provider of an asset monitoring platform designed to extract the critical machine data. * * *
07/26/2018 HipChat Slack Provider of internal communication and messaging services. * * *
07/18/2018 Actian HCL Technologies; Sumeru Equity Provider of enterprise-class database software to connect operational and analytical business data. $330 * *
07/12/2018 Kogentix Accenture Provider of a big data analytics platform designed to make better business decisions. * * *
07/10/2018 Trusted Metrics SolarWinds Provider of real-time threat monitoring and management software. * * *
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INFRASTRUCTURE SOFTWARE SECTOR REVIEW | Q3 2018
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T E C H N O L O G Y , M E D I A & T E L E C O M PAGE | 13
INFRASTRUCTURE SOFTWARE SECTOR REVIEW | Q3 2018
HARRIS WILLIAMS OFFICE LOCATIONS
Our Firm
Healthcare & Life Sciences Industrials
Energy, Power & Infrastructure
Industrials
Harris Williams has a broad range of industry expertise, which create powerful opportunities. Our clients benefit form our deep-sector experience, integrated industry intelligence and collaboration across the firm, and our commitment to learning what makes them unique. For more information, visit our website at www.harriswilliams.com/industries.
U N I T E D S T A T E S E U R O P E
N E T W O R K O F F I C E S
Beijing
Hong Kong
Mumbai
New Delhi
Shanghai
Aerospace, Defense &
Government Services
Building Products & Materials
Business Services
Consumer Specialty Distribution
Technology, Media & Telecom
Transportation & Logistics
BostonOne International PlaceSuite 2620Boston, Massachusetts 02110Phone: +1 (617) 482-7501
Cleveland1900 East 9th Street20th FloorCleveland, Ohio 44114Phone: +1 (216) 689-2400
Minneapolis222 South 9th StreetSuite 3350Minneapolis, Minnesota 55402Phone: +1 (612) 359-2700
Richmond (Headquarters)1001 Haxall Point9th FloorRichmond, Virginia 23219Phone: +1 (804) 648-0072
San Francisco575 Market Street31st FloorSan Francisco, California 94105Phone: +1 (415) 288-4260
T E C H N O L O G Y , M E D I A & T E L E C O M PAGE | 14
INFRASTRUCTURE SOFTWARE SECTOR REVIEW | Q3 2018
Harris Williams (www.harriswilliams.com) is a preeminent middle market investment bank focused on the advisory needs of clients worldwide. The firm has deep industry knowledge, global transaction expertise, and an unwavering commitment to excellence. Harris Williams provides sell-side and acquisition advisory, restructuring advisory, board advisory, private placements, and capital markets advisory services.
Investment banking services are provided by Harris Williams LLC, a registered broker-dealer and member of FINRA and SIPC, and Harris Williams Ltd, which is private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams is a trade name under which Harris Williams LLC and Harris Williams Ltd conduct business.
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