Case Study: IQMS
HW’s TMT Group advised IQMS, a portfolio company of TCV and Banneker Partners, on its sale to Dassault Systemes (EPA: DSY).
IQMS is a leading provider of fully-integrated software solutions that manage, optimize, and automate production operations and back-office workflows for manufacturers across diverse end-markets, globally.
Through its comprehensive manufacturing execution system (MES) and enterprise resource planning (ERP) software platform, IQMS’ solutions provide manufacturers with a comprehensive end-to-end suite that provides real-time visibility and actionable insights throughout the manufacturing lifecycle.
IQMS serves over 1,000 longstanding customers across diverse end-markets, including automotive, medical, packaging, consumer goods, electronics, and aerospace and defense in a growing $35 billion global market.
Dassault Systemes will help IQMS expand its customer base by leveraging the presence in the mid-market space established through Dassault’s SOLIDWORKS applications, which are delivered and supported by the company’s Professional Solutions global partner channel.
- Industrial Software
- Supply Chain & Logistics Software
- ERP Software
Select Software M&A Transactions – 4Q 2018
Vista Equity Partners’ Pending Acquisition of Mindbody
- Mindbody provides business management software and payment solutions for the fitness, beauty, and wellness services industries.
- The Company’s integrated platform enables business owners to operate, market, and grow their businesses, while enabling consumers to easily find, engage, and transact with fitness, wellness, and beauty providers in their local communities.
- Following the acquisition, Vista will provide capital and operating expertise to accelerate development of Mindbody’s platform and product suite.
Autodesk’s Acquisition of PlanGrid
- PlanGrid provides construction productivity and collaboration software to over 12,000 contractors, subcontractors, and owners in commercial, heavy civil, and other industries.
- The Company’s web-based solution enables clients to share blueprints, project plans, and daily reports across project teams, resulting in increased productivity and efficiency and decreased project timelines.
- PlanGrid’s workflows will be integrated with Autodesk Revit and the Autodesk BIM 360 platforms to provide a seamless flow of project information across all project stakeholders.
General Atlantic’s Pending Acquisition of Invoice Cloud
- Invoice Cloud provides cloud-based vertical software, payments, and billing solutions to over 25,000 clients in the government, utilities, health and wellness, non-profit, and financial services sectors.
- The Company’s SaaS solutions help clients minimize administrative costs, improve customer engagement, and streamline the billing and collections processes.
- Following the acquisition, Invoice Cloud will leverage General Atlantic’s extensive vertical software and payments expertise to execute on an organic and inorganic growth strategy.
SAP’s Pending Acquisition of Qualtrics
- Qualtrics provides enterprise data collection and experience management (“XM”) software to over 9,000 enterprises worldwide.
- The Company’s XM platform enables teams, departments, and organizations to collect, manage, and act on experience data, resulting in superior customer, employee, product, and brand experiences.
- Post acquisition, Qulatrics will leverage SAP’s global scale, reach, and resources to accelerate growth and adoption globally.
Bertelsmann’s Acquisition of OnCourse Learning
- OnCourse Learning provides eLearning, workforce management, and compliance solutions to enterprises and professionals in the healthcare, financial services, and real estate sectors to over 750,000 learners and 19,000 B2B clients annually.
- The Company’s software solutions empower organizations to manage the workforce lifecycle, ensure compliance, and advance careers through technology-based personal learning solutions.
- As part of the transaction, OnCourse’s professional education segment will become a new entity within Bertelsmann Education Group while OnCourse’s healthcare segment will merge with Relias, a healthcare-focused e-learning business within the Bertelsmann Education Group portfolio.
Software Acquisition Activity – Strategic Acquirers
Most Active Strategic Acquirers of Software Assets by Volume1
- The 10 most active strategic software acquirers registered 65 acquisitions in 2018. Activity among large strategic software acquirers surpassed 2017 levels.
- Microsoft was the most active strategic acquirer in 2018, completing 17 acquisitions. Collaboration and development tools remain strategic priorities as evidenced by the $7.5 billion acquisition of GitHub, which will provide a strong base for Microsoft to expand its cloud-services offerings and grow its developer network.
Global Strategic Acquirer Software M&A Activity by Volume1
- Globally, strategic software M&A registered 450 acquisitions in 4Q 2018 2018, an 10% increase from 3Q 2018.
- 2018 was highlighted by incumbent enterprise software providers expanding their cloud capabilities through multi-billion dollar acquisitions of open-source software, cloud services, and developer solutions. Notable deals include IBM’s $34 billion acquisition of Red Hat, Broadcom’s $18.5 billion acquisition of CA Technologies, and SAP’s $8 billion acquisition of Qualtrics.
Note: Includes control investments only.
Software Acquisition Activity – Private Equity
Most Active Private Equity Buyers of New Software Platforms by Volume1
- The 10 most active software investors completed 70 new platform investments in 2018.
- Thoma Bravo was the most active software private equity firm in 2018, completing 14 platform acquisitions. Notable acquisitions for the year include Veracode, Imperva, and Barracuda Networks.
Global Private Equity New Software Platforms M&A Activity by Volume1
- Globally, private equity buyers registered 95 new software platform investments in 4Q 2018, the highest quarter ever.
- The software sector is rapidly evolving as all industries are experiencing disruptive digital technology transformations. To capitalize on this trend, dealmakers, including both traditional technology investors and non-traditional investors, are deploying an unprecedented amount of capital in the software sector.
Note: Includes control new platform investments only. Excludes add-on acquisitions.
Application Software – M&A Market Summary
- Application Software M&A registered 394 transactions in 4Q 2018, the highest quarter ever, as demand for high quality Application Software assets proliferates across different sectors of the economy.
- Median reported Application Software M&A transaction multiples continued an upward trend, increasing to 3.5x revenue in 4Q 2018.
Notable Application Software M&A Transactions1,5
- In 4Q 2018, strategic buyers were highly active pursuing application software targets, as vertical-specific software companies remain highly sought-after.
- Notable vertical-specific software transactions include Bertelsmann’s acquisition of OnCourse Learning (education), PTC’s acquisition of Frustum (manufacturing), and Cubic’s acquisition of Trafficware (transportation).
SaaS – M&A Market Summary
- SaaS M&A registered 56 transactions in 4Q 2018, in line with the last four quarters as both strategic and private equity buyers continue to invest across the sector.
4Q 2018 median reported SaaS transaction multiples increased to 5.0x.
Notable SaaS M&A Transactions1,5
- While strategic buyers continue to demonstrate a strong appetite for SaaS companies, private equity firms have been particularly active in new platform and add-on acquisitions.
- With two SaaS acquisitions totaling over $1 billion in 4Q 2018, Autodesk is continuing to build out its suite of SaaS solutions for the construction sector.
Data and Analytics – M&A Market Summary
- Data and Analytics M&A registered 112 transactions in 4Q 2018, a slight increase from the previous quarter.
- Median reported Data and Analytics transaction multiples remained in line with 2018 multiples, at 2.8x.
Notable Data and Analytics M&A Transactions1
- Data and Analytics remains a key focus area for enterprises in 4Q 2018 as operational decision-making is increasingly driven by complex and real-time data.
- Recent examples include SAP’s pending acquisition of Qualtrics, Cloudera’s pending acquisition of Hortonworks, Drop Technologies’ acquisition of Canopy Labs Software, and Linkedin’s acquisition of Glint.
Infrastructure Software – M&A Market Summary
- Infrastructure Software M&A registered 84 transactions in 4Q 2018, representing a slight decrease from the prior quarter.
- In 4Q 2018, median reported Infrastructure Software transaction multiples decreased slightly to 2.5x revenue, but remain in line with historical averages.
Notable Infrastructure Software M&A Transactions1
- Established software vendors including IBM, Broadcom, Microsoft, and VMWare, as well as private equity investors, remain keen on high quality infrastructure software assets.
- Network and infrastructure security companies continue to be in high demand as evidenced by Thoma Bravo’s pending acquisitions of Imperva and Veracode, Palo Alto Networks’ acquisition of RedLock, and Bomgar’s acquisition of BeyondTrust (via its financial sponsor Francisco Partners).
Private Placement Activity By Software Sector
Private Placements by Software Sub-Sector and New Capital Raised1,4
- There were 976 private placement financings in 4Q 2018, which represents a 15% increase over 4Q 2017.
- Total reported capital investment in the software sector continues to grow substantially with $18.2 billion invested in 4Q 2018, up from $13.0 billion in 3Q 2018.
Private Placement Capital Raised by Round1,4(as percentage of total reported private placement capital)
- In 4Q 2018, the majority of private capital invested was in late stage (C – later) rounds, comprising 56% of total capital invested.
- Notable late stage rounds included Amplitude’s $80 million Series D investment led by Sequoia Capital, Aras’ $70 million Series D investment led by Goldman Sachs, and HashiCorp’s $100 million Series D investment led by IVP.
Select Recent Software Private Placements1,4
Note: Financial information presented above represents reported capital raised only.
Public Software Valuation Multiples by Sector1
Key Metrics by Sector – Comparable Public Software Companies1
Summary of Technology IPOs
Recent U.S. Technology IPO Activity (by Offering Size)1
- Technology IPO activity in 4Q 2018 remained in line with the previous quarter, with just three new companies listed.
- Following a more active 1H 2018, technology IPO activity slowed in 2H 2018 as companies evaluate timing and private markets continue to offer compelling valuations.
- There are a number of large technology companies including Uber, Lyft, and Palantir who have all signaled they are preparing to go public in 2019.
Key Performance Metrics for Recent Software IPOs1
Debt Market Overview
- Median middle market LBO loan multiples in 2018 increased slightly to 5.6x leverage.
- Middle market LBO loan volume decreased to $0.9 billion in 4Q 2018, bringing total volume in 2018 to $5.8 billion.
- Technology companies were the largest recipients of middle market LBO loans in 2018, representing 22.0% of new issuance.
- Median LBO debt percentages increased slightly to 55% of total purchase price 2018.
Select HW TMT Transactions
Appendix: Software Sector Public Company Universe1
Appendix: Software Sector Public Company Metrics1
2. PNC Capital Markets
3. S&P LCD stats
5. HW proprietary transaction information
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