Software Equity Group's 2010 M&A Survey
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ABOUT OUR FIRM Software Equity Group is an investment bank and M&A advisory serving the software and technology sectors. Founded in 1992, our firm has guided and advised companies on five continents, including privately-held software and technology companies in the United States, Canada, Europe, Asia Pacific, Africa and Israel. We have represented public companies listed on the NASDAQ, NYSE, American, Toronto, London and Euronext exchanges. Software Equity Group also advises several of the world's leading private equity firms. We are ranked among the top ten investment banks worldwide for application software mergers and acquisitions. Our value proposition is unique and compelling. We are skilled and accomplished investment bankers with extraordinary software, internet and technology domain expertise. Our industry knowledge and experience span virtually every software product category, technology, market and delivery model, including Software-as-a Service (SaaS), software on-demand and perpetual license. We have profound understanding of software company finances, operations and valuation. We monitor and analyze every publicly disclosed software M&A transaction, as well as the market, economy and technology trends that impact these deals. We're formidable negotiators and savvy dealmakers who facilitate strategic combinations that enhance shareholder value. Perhaps most important are the relationships we've built and the industry reputation we enjoy. Software Equity Group is known and respected by publicly traded and privately owned software and technology companies worldwide, and we speak with them often. Our Quarterly and Annual Software Industry Equity Reports are read and relied upon by more than eighteen thousand industry executives, entrepreneurs and equity investors in sixty-one countries, and we have been quoted widely in such leading publications as The Wall Street Journal, Barrons, Information Week, The Daily Deal, The Street.com, U.S. News & World Report, Reuters, Mergers & Acquisitions, USA Today, Arizona Republic, Detroit Free Press, Entrepreneur Magazine, Softletter, Software Success, Software CEO Online and Software Business Magazine. Software Equity Group’s senior bankers have keynoted and spoken at more than one hundred software industry conferences and seminars, including Software Business, SoftExpo, Culpepper, VAR Conference, ACETECH, and the Arizona, Colorado, Chicago, Southern California, Denver, San Diego, Washington State and Boulder Software Associations. Software Equity Group, LLC 12220 El Camino Real, Suite 320 San Diego, CA 92130 www.softwareequity.com p: (858) 509-2800 f: (858) 509-2818 Software Equity Group, L.L.C. 2009 Annual Software Industry Equity Report Contents U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS........................................................................ 1 IT SPENDING............................................................................................................................................................ 2 PUBLIC SOFTWARE COMPANY STOCK PERFORMANCE ................................................................................. 2 PUBLIC SOFTWARE COMPANY MARKET VALUATIONS ................................................................................... 3 PUBLIC SOFTWARE COMPANY FINANCIAL PERFORMANCE .......................................................................... 5 PUBLIC SOFTWARE COMPANY PERFORMANCE BY PRODUCT CATEGORY ................................................ 6 PUBLIC SOFTWARE AS A SERVICE (SAAS) COMPANY MARKET VALUATIONS AND FINANCIAL PERFORMANCE....................................................................................................................................................... 8 PUBLIC INTERNET COMPANY MARKET VALUATIONS AND FINANCIAL PERFORMANCE ........................... 9 INITIAL PUBLIC OFFERINGS................................................................................................................................ 11 VENTURE CAPITAL INVESTMENT....................................................................................................................... 12 THE BUYERS SPEAK: SOFTWARE EQUITY GROUP’S 2010 M&A SURVEY................................................... 14 MERGERS AND ACQUISITIONS: THE NUMBERS.............................................................................................. 17 M&A DEAL VOLUME AND SPENDING: ALL INDUSTRY SECTORS ............................................................................... 17 SOFTWARE M&A DEAL VOLUME AND SPENDING..................................................................................................... 18 SOFTWARE M&A DEAL CURRENCY ........................................................................................................................ 19 PRIVATE VS. PUBLIC BUYERS ................................................................................................................................. 20 SOFTWARE M&A VALUATIONS ............................................................................................................................... 21 M&A EXIT VALUATIONS BY SOFTWARE CATEGORY................................................................................................. 23 SAAS .................................................................................................................................................................... 24 APPENDIX A: 2009 PUBLIC MARKET VALUATIONS AND STATISTICS BY PRODUCT CATEGORY ........... 26 APPENDIX B: 2009 MERGERS AND ACQUISITIONS, SELECT PUBLIC SELLER VALUATIONS................... 29 APPENDIX C: 2009 MERGERS AND ACQUISITIONS, MOST ACTIVE BUYERS .............................................. 30 APPENDIX D: 2009 MERGERS AND ACQUISITIONS, SOFTWARE INDUSTRY MEGA-DEALS...................... 33 APPENDIX E: 2009 MERGERS AND ACQUISITIONS, SELECT SOFTWARE-AS-A-SERVICE SELLERS ...... 34 APPENDIX F: 2009 MERGERS AND ACQUISITIONS – DEAL INSIGHT............................................................ 35 APPENDIX G: SELECT 2009 SOFTWARE INDUSTRY MERGERS AND ACQUISITIONS ................................ 42 APPENDIX H: SELECT 2009 CORPORATE ANNOUNCEMENTS – SEEKING SOFTWARE ACQUISITIONS . 55 This Report may not be reproduced in whole or in part without the expressed prior written authorization of Software Equity Group, L.L.C. Software Equity Group registers each Report with the U.S. Copyright Office and vigorously enforces its intellectual property rights. Copyright © 2010 Software Equity Group, L.L.C., All Rights Reserved Software Equity Group, L.L.C. Investment Banking / Mergers & Acquisitions Figure 1: U.S. Gross Domestic Product and Unemployment Rate 10% 8% 7.5% 5.7% 6% 4.8% 3.6% 3.9% 4% 3.5% 3.5% 3.6% 3.0% 3.0% 3.2% 2.7% 2.7% 2.5% 2.6% 2.1% 2.1% 2.2% 2% 1.5% 1.2% 1.3% 1.1% 1.2% 0.2% 0% 4Q 4 4Q04 4Q05 4Q06 4Q 4 4Q09 Q Q 0 03 07 -0.7% 08 2 -0.7% -2% -2.7% -4% -5.4% -6% -6.4% -8% GDP % Growth Unemployment Rate U.S. ECONOMY: SOFTWARE INDUSTRY MACROECONOMICS We begin our review of 2009, as always, with a growth. The Index is now slightly higher than its brief synopsis of U.S. Gross Domestic Product July 2007 peak. (GDP) behavior over the course of the year. GDP is best defined as the total market value of all Looking a bit closer at the Conference Board’s final goods and services produced in a country LEI, eight of ten indicators increased in in a given year, equal to total consumer, November. The positive contributors, beginning investment and government spending, plus the with the largest positive contributor, were interest value of exports, minus the value of imports. rate spread, building permits, average weekly initial claims for unemployment insurance When we published our 2008 Annual Report a (inverted), stock prices, index of consumer year ago, in January 2009, 4Q08 GDP was expectations, index of supplier deliveries (vendor forecast to contract 3.3%. The actual 5.4% performance), money supply and manufacturers’ decline, equating to $183 billion, was far worse new orders for nondefense capital goods. The than predicted. The GDP nosedive continued in average workweek of production workers and 1Q09, declining on an annualized basis by 6.4% manufacturers’ new orders for consumer goods (Figure 1). In February 2009, President Obama and materials held steady in December. signed the $787 billion stimulus package into law. Although the impact of this legislation is the Despite the GDP turnaround and modest subject of ongoing debate, the GDP’s rate of progress on other fronts, it wasn’t all good news. decline slowed in 2Q09 to 0.7% and GDP actually In January 2009, the U.S. unemployment rate grew by an encouraging 2.2% in 3Q09. stood at 7.7% amid signs it would worsen before getting better. As predicted, unemployment The Bureau of Economic Analysis (BEA) is increased throughout 2009, but the job loss rate predicting GDP will rise 5.7% in 4Q09 (Figure 1). began to level off at the end of the year. The U.S. This latest, and quite optimistic forecast seems Labor Department estimates the unemployment credible in light of recently released economic rate increased to 9.3% in 3Q09 and 10.0% during data. The U.S. Conference Board’s Leading 4Q09, markedly worse than the 6.9% Economic Index (LEI) increased 0.3% in October, unemployment rate of a year earlier (Figure 1). 1.0% in November and 1.1% in December marking the ninth consecutive month of LEI 1| 2009 ANNUAL SOFTWARE INDUSTRY EQUITY REPORT www.softwareequity.com Copyright © 2010 Software Equity Group, L.L.C., All Rights Reserved