NEW YORK, July 8, 2013 /PRNewswire/ -- Berkery Noyes, an independent mid-market investment bank, today released its half year 2013 mergers and acquisitions trend report for the Software Industry. The report analyzes M&A activity during the first half of 2013 and compares it with the four previous six-month periods from 2011 to 2012.
Berkery Noyes' data showed that transaction volume decreased three percent in first half 2013. Deal value remained flat, totaling $29.56 billion year-to-date. The median revenue multiple moved slightly from 2.1x to 2.0x, while the median EBITDA multiple increased from 10.4x to 12.5x.
The largest transaction in first half 2013 was the announced acquisition of BMC Software by a private investor group, led by Bain Capital and Golden Gate Capital, for $6.81 billion. This deal represented a 3.1x revenue multiple and 11.2x EBITDA multiple. In addition, four of the industry's top ten highest value transactions in first half 2013 were backed by private equity firms.
The number of deals within the Business Software segment remained nearly constant at 146. Notable digital marketing transactions in the segment were Salesforce.com's acquisition of ExactTarget for $2.25 billion and Adobe's acquisition of Neolane for $600 million. Deal flow in the Consumer Software segment increased 24 percent, making it the fastest growing sector when examined on a half-to-half year basis.
As for software used within specific vertical industries or "Niche Software," transaction volume decreased ten percent. Four of the ten largest deals in first half 2013 occurred in the Niche Software segment. Along these lines, the largest strategic acquisition was Fidelity National Financial's acquisition of Lender Processing Services (LPS) for $3.92 billion. LPS provides technology and services to the mortgage and real estate sectors. More than one-third of LPS' revenue in 2012 was derived from the company's SaaS and web based solutions, which is the reason for its inclusion in the report. The majority of LPS' remaining revenue was divided nearly in half between its origination and default transaction services, respectively.
Other noteworthy transactions in the Niche Software segment over the past six months were Trulia's $289 million acquisition of Market Leader, a provider of real estate marketing software and technology; and Cisco's $107 million acquisition of JouleX, a cloud-enabled energy management company.
Deal volume in the Infrastructure Software segment declined six percent during first half 2013. Nonetheless, there were several large transactions in the segment's cyber security subset, such as Vista Equity Partners' acquisition of Websense for $942 million and McAfee's acquisition of Stonesoft for $352 million. Vista Equity's acquisition of Websense was the largest cyber security software deal backed by a financial sponsor since 2011, when Thoma Bravo acquired Blue Coat Systems for $1.15 billion.
Regarding other active industry sectors, acquirers have been showing interest in Application Programming Interface (API) management tools. This can be attributed in part to the widespread expansion of SaaS offerings and the changing nature of information technology. Transactions by notable acquirers in the API market during first half 2013 included CA Technologies' acquisition of Layer 7 Technologies and Intel's acquisition of Mashery.
"There are a few key takeaways from the data in this report," said James Berkery, Chief Information Officer at Berkery Noyes. "First, companies that are going to market are receiving strong valuations, even though volume in the Software Industry stayed constant compared to the latter part of 2012. Second, financial sponsors are completing high value software transactions, a trend that indicates growing confidence in the marketplace as well as the macro M&A environment. And third, acquirers are especially interested in data management, security, and cloud-based solutions at the moment."
A copy of the SOFTWARE INDUSTRY M&A REPORT FOR HALF YEAR 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 MandAsoft.com.
Securities services are offered through Berkery Noyes Securities, LLC. For more information, visit www.berkerynoyes.com.
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