TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 3Q 2016
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.
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 3Q 2016
HARRIS WILLIAMS & CO. OVERVIEW
CONTENTS
HARRIS WILLIAMS & CO. (HW&CO.) GLOBAL ADVISORY PLATFORM
. M&A TRANSACTIONS – 2Q 2016 . SOFTWARE M&A ACTIVITY . SOFTWARE SECTOR OVERVIEWS
KEY FACTS
. 25 year history with over 120 closed transactions in the last 24 months
. SOFTWARE PRIVATE PLACEMENTS OVERVIEW
. SOFTWARE PUBLIC COMPARABLES OVERVIEW
. Approximately 250 professionals across seven
offices in the U.S. and
Europe
. TECHNOLOGY IPO OVERVIEW . DEBT MARKET OVERVIEW . APPENDIX: PUBLIC COMPARABLES DETAIL
. Strategic relationships in
TMT CONTACTS
HW&Co. Office
Network Office
India and China
UNITED STATES
. 10 industry groups
Jeff Bistrong
Managing Director
HW&CO. TECHNOLOGY, MEDIA & TELECOM (TMT) GROUP FOCUS AREAS
Sam Hendler
Managing Director
- SOFTWARE / SAAS
- INTERNET & DIGITAL MEDIA
. Digital Media and Content . eCommerce . Mobile
. IT and Tech-enabled
. Enterprise Software
. Data and Analytics . Infrastructure and Security Software
. AdTech and Marketing
Solutions
Mike Wilkins
Managing Director
Services
. Data Center and Managed Services
. Consumer Internet
EUROPE
Thierry Monjauze
TMT VERTICAL FOCUS AREAS
Managing Director
- . Education
- . Fintech
- . Manufacturing
- . Public Sector and Non-Profit
- . Energy, Power, and
- . Healthcare IT
- . Professional Services
- . Supply Chain, Transportation,
TO SUBSCRIBE PLEASE EMAIL:
- Infrastructure
- and Logistics
SELECT RECENT HW&CO. TMT TRANSACTIONS
Baarsma B2C trades as:
has received a majority investment from has been recapitalized by has been recapitalized by
- has been acquired by
- has acquired
- has been acquired by
- has been acquired by
- has been acquired by
- has been acquired by
- has been acquired by
- has been acquired by
- has been acquired by
PAGE | 1
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 3Q 2016
CASE STUDY: DAXKO
HW&Co.’s TMT Group advised Pamlico Capital and its portfolio company, Daxko, on a majority recapitalization transaction led by GI Partners.
Date Closed:
. Leading provider of SaaS-based software and services to member-based health and wellness centers, offering end-
9/22/2016
to-end solutions for club and member management,
including engagement and payments solutions.
Relevant Sectors:
a portfolio company of
SaaS / Application
. Charlotte-based private equity firm targeting investments
Software across the business & technology services, communications,
and healthcare industries, and currently investing out of its $650 million Pamlico Capital III fund.
Fintech / Payments Non-Profit Software Health & Wellness
has been recapitalized by
. San Francisco-based private equity firm targeting investments in the software, tech-enabled services, IT
infrastructure, and healthcare sectors, and actively
investing out of its $2 billion GI Partners Fund IV fund.
THE DEAL
. Positions Daxko well to meet the increasingly complex needs of multi-site and multi-purpose health and wellness facility operations and gives GI Partners the ability to leverage Daxko’s market leadership, scale, and history of successful strategic acquisitions as a platform for further industry consolidation.
HW&CO. DEAL CONTACTS
Jeff Bistrong
Managing Director
Tyler Dewing
Director
Priyanka Naithani
Vice President
Office: (617) 654-2102
Office: (617) 654-2133
Office: (617) 654-2115
PAGE | 2
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 3Q 2016
SELECT SOFTWARE M&A TRANSACTIONS – 3Q 2016
EQT’s pending take-private of Press Ganey
Announced
. Press Ganey provides patient-experience measurement, performance analytics, and strategic advisory software and services
for healthcare organizations across the continuum of care.
. Partnering with more than 26,000 healthcare organizations, Press Ganey leads the industry in using data and analytics to help transform and advance patient-centered care in the US and internationally.
Ent. Value: $2,284.5M Revenue: $344.3M
EV / Rev: 6.6x EV / EBITDA: 21.4x
. Post acquisition, EQT will leverage its deep platform and healthcare expertise to support Press Ganey’s expansion both organically and through strategic acquisitions on a global basis.
Verizon’s pending acquisition of Fleetmatics
Announced
. Fleetmatics provides SaaS-based mobile workforce and fleet management software that allows service-based businesses of all sizes to improve the productivity of their mobile workforces.
. Serving approximately 38,000 customers and 757,000 subscribed vehicles worldwide, the company’s solutions provide fleet operators visibility into vehicle location, fuel usage, and other insights that allow clients to increase revenue and reduce costs.
Ent. Value: $2,183.4M Revenue: $310.7M
EV / Revenue: 7.0x EV / EBITDA: 25.9x
. Verizon Telematics plans to combine Fleetmatics with recently acquired Telogis to become a global leader in fleet and mobile
workforce management.
Thoma Bravo’s take-private of Imprivata
September 16, 2016
. Imprivata provides cloud-based, single sign-on and access-management security software for the healthcare sector that provides improved workflows, increased data security, and compliance with government regulations.
. The company’s mission-critical solutions allow hospitals to identify patients at registration and allow providers to conveniently access patient health information (“PHI”), communicate PHI across devices, and transact PHI for important clinical workflows.
Ent. Value: $442.5M Revenue: $131.1M
EV / Revenue: 3.4x EV / EBITDA: NA
. Leveraging its deep experience in both security and healthcare IT, Thoma Bravo bolsters Imprivata’s ability to expand its market
presence organically by providing additional high-value products and inorganically through strategic acquisitions.
Vista Equity Partners’ acquisition of Regulatory DataCorp
August 31, 2016
. Regulatory DataCorp provides counterparty risk and financial regulatory compliance data and software solutions to financial institutions and technology companies worldwide.
. The company’s solutions are used by Fortune 100 companies across a range of industries and combine comprehensive data, a scalable platform, and tailored analytics to provide precise risk alerts and ongoing monitoring.
Ent. Value: NA Revenue: NA
EV / Revenue: NA EV / EBITDA: NA
. Vista Equity Partners’ deep focus on software, data, and tech-enabled businesses will allow Regulatory DataCorp to increase
capital investment in risk and compliance software at a time of significant growth in the industry.
GE Transportation’s acquisition of ShipXpress
August 30, 2016
. ShipXpress provides cloud-based software solutions that enable transportation, industrial, and commodity trading businesses to operate efficiently and collaborate with their supply chain partners.
. The company works with major North American railroads and Fortune 500 companies to deliver customized transportation management solutions that help businesses manage data, simplify manual processes, and improve analysis.
Ent. Value: NA Revenue: NA
EV / Revenue: NA EV / EBITDA: NA
. Post acquisition, GE Transportation will deliver one of the industry’s most advanced and scalable cloud-based solutions by
combing ShipXpress’ software products with GE’s existing sensing technology platform, Predix.
PAGE | 3
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 3Q 2016
SOFTWARE ACQUISITION ACTIVITY – STRATEGIC ACQUIRERS
MOST ACTIVE STRATEGIC ACQUIRERS OF SOFTWARE ASSETS BY VOLUME
(# of Transactions)
.
The 10 most active strategic software acquirers registered 66 acquisitions in YTD 2016, with Google and IBM being the most active with 25 between them.
13 12
2016 YTD 2015
12 13
2014
.
Google has been actively pursuing assets that enhance its enterprise cloud business, while IBM focuses on its stated strategic imperatives – big data and analytics, cloud platform expansion, mobile, social, and security.
9
2013
83
6
2012
18
- 28
- 10
6
9
86
- 9
- 1
4
3
4
2
3
38
31
3
4
9
10
5
75
8
1
57
- 5
- 9
5
55
93
92
12
10
8
7
GLOBAL STRATEGIC ACQUIRER SOFTWARE M&A ACTIVITY BY VOLUME
(# of Transactions)
.
Global strategic software M&A
registered 359 transactions in 3Q 2016, a slight uptick from a slow 2Q, and demonstrating promising momentum going into 4Q 2016.
.
Despite M&A volumes being down relative to 2015, both large tech and non-traditional software buyers continue to view M&A as a core
growth initiative. However, recent
M&A activity suggests that
454
437
434
412
- 406
- 402
371
- 359
- 352
- 352
- 340
- 341
- 333
- 327
324
309
strategics are focusing on bolt-ons rather than large, transformational deals.
- 4Q '12
- 1Q '13
- 2Q '13
- 3Q '13
- 4Q '13
- 1Q '14
- 2Q '14
- 3Q '14
- 4Q '14
- 1Q '15
- 2Q '15
- 3Q '15
- 4Q '15
- 1Q '16
- 2Q '16
- 3Q '16
Note: Includes control investments only.
PAGE | 4
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 3Q 2016
SOFTWARE ACQUISITION ACTIVITY – PRIVATE EQUITY
MOST ACTIVE PRIVATE EQUITY BUYERS OF NEW SOFTWARE PLATFORMS BY VOLUME
(# of Platform Transactions)
..
The 10 most active software investors completed 42 platform investments YTD 2016, with Vista Equity and Thoma Bravo outpacing their peers with 12 and 7 new platform investments, respectively.
2016 YTD 2015
12
2014
69
Private equity remains attracted to the software sector as they look to consolidate niche vertical software markets and capitalize on the ongoing shift to the cloud.
2013 2012
7
5
37
37
4
5
1
4
34
24
2
79
4
2
332
53
7
3
33
3
3
43
33
3
- 6
- 4
14
422
51
- 6
- 2
2
GLOBAL NEW PLATFORM PRIVATE EQUITY SOFTWARE M&A ACTIVITY BY VOLUME
(# of Platform Transactions)
.
Globally, private equity software
M&A registered 74 new platform acquisitions in 3Q 2016, representing a 34% increase over 3Q 2015 and a 21% increase over the prior
quarter’s strong results.
.
With private equity dry powder at record high levels and the lending market continuing to exhibit strong
interest in high quality software
credits, both incumbent software investors and newcomers to the sector are rapidly deploying capital across a broad range of software sectors.
74
61
56
54
50
48
- 47
- 47
- 47
- 46
45
- 44
- 43
41
38
32
- 4Q '12
- 1Q '13
- 2Q '13
- 3Q '13
- 4Q '13
- 1Q '14
- 2Q '14
- 3Q '14
- 4Q '14
- 1Q '15
- 2Q '15
- 3Q '15
- 4Q '15
- 1Q '16
- 2Q '16
- 3Q '16
Note: Includes control investments only.
PAGE | 5
TECHNOLOGY, MEDIA, & TELECOM
QUARTERLY SOFTWARE SECTOR REVIEW │ 3Q 2016
APPLICATION SOFTWARE – M&A MARKET SUMMARY
- APPLICATION SOFTWARE M&A VOLUME (GLOBAL)
- MEDIAN M&A REVENUE MULTIPLES (REPORTED)
..
Application Software M&A registered 298 transactions in 3Q 2016, representing a 6% increase over the previous quarter, falling in line with historical averages.
- 320
- 319
316
314
- 298
- 298
2.5x
2.5x
- 2.5x
- 2.5x
289
2.5x
2.4x
282
281
2.4x
2.3x
- 272
- 271
2.3x
- 2.3x
- 2.3x
266
252
251
246
244
2.1x
227
1.6x
3Q 2016 median reported Application Software M&A revenue multiples were slightly below 2015 and 1H 2016 multiples, though remain in line with historical four year
averages.
1.5x
1.4x
1.4x
1.3x
- 2
- 2
- 3
- 3
- 3
- 3
- 4
- 4
- 4
- 4
- 5
- 5
- 5
- 5
- 6
- 6
- 6
- 2
- 2
- 3
- 3
- 3
- 3
- 4
- 4
- 4
- 4
- 5
- 5
- 5
- 5
- 6
- 6
- 6
- 1
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- 1
- '
- '
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- Q
- 3
- 3
- 4
- 1
- 2
- 3
- 4
- 1
- 2
- 3
- 4
- 1
- 2
- 3
- 4
- 1
- 2
- 3
- 3
- 4
- 1
- 2
- 3
- 4
- 1
- 2
- 3
- 4
- 1
- 2
- 3
- 4
- 1
- 2