HW Infrastructure Software Introduction

Harris Williams (“HW”) as a Firm

  • Founded in 1991
  • 330+ professionals across eight offices globally
  • 150+ closed transactions in the last 24 months
  • 21st record year in 2018
  • 10 industry groups

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Technology, Media & Telecom (“TmT”) Group

  • 35 professionals across Boston, San Francisco, and London
  • 41 closed transactions in the last 24 months

Horizontal Focus Sectors:

  • Compliance Software
  • CRM and Member Management Software
  • Data and Analytics
  • Enterprise Software
  • Human Capital Management
  • Infrastructure and Security Software
  • IT and Tech Enabled Services
  • Managed Services, Hosting, Data Center Solutions
  • Online Marketing, Data, and Research

Vertical Focus Sectors:

  • Architecture, Engineering, and Construction
  • eCommerce and Retail Software
  • Education Technology
  • Energy Technology
  • Facilities and Real Estate Technology
  • Financial Technology
  • Government Technology
  • Healthcare IT
  • Industrial and Supply Chain Software

Observations on Key Infrastructure Software Trends

  • Continued strength in Infrastructure Software with significant interest from strategic acquirers and financial investors alike – IBM’s acquisition of Red Hat became the largest ever enterprise software deal, while KKR’s acquisition of BMC was the largest PE-backed software deal since the recession. The public markets continue to be favorable with over 12 IPOs in the LTM period.
  • A key trend has been the democratization of software development, allowing developers and business users alike to access APIs, tools, and technologies, and to create highly rich and relevant apps. 
    • On the developer side, this has led to widespread adoption of open source technologies and recognition by industry giants, such as IBM and Microsoft, that to access these developers, you need to embrace these technologies.
    • On the business users side, this has led to the increasing adoption of low code software development models, business process management, project / collaboration software, and other configurable workflow tools. 
    • Companies that have played on this theme, especially team-based, developer-centric, high velocity sales models, have traded at significant premiums to their peers.
    • Across verticals, this has led developers and users to create innovative cloud and mobile apps that are shifting those vertical ecosystems to online and mobile.
  • Open source, hybrid cloud, and security continue to be key themes. While there has been increasing adoption of public cloud, security, compliance, and control concerns have led to growth in on-premise and private cloud environments.
  • Legacy infrastructure software companies with strong cash flow characteristics have drawn interest from both large private equity funds as well as industrial strategic acquirers looking for software opportunities.

Infrastructure Software Taxonomy

Software Development / DevOps

Solutions that enable the software development lifecycle, including planning, creating, testing, and deploying software applications and systems

  • Application Lifecycle Management
  • Continuous Integration / Continuous Delivery
  • Version Management
  • Test Management

Select Market Participants

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IT Operations Management

Solutions that help to manage the provisioning, capacity, performance, and availability of an organization's IT infrastructure

  • Infrastructure / App / Database Performance Monitoring
  • IT GRC and Asset Management
  • Service and Support Management
  • Operations Analytics

Select Market Participants

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Security

Solutions that protect software and systems against malicious attacks, unauthorized access and resource use, and other external and internal risks

  • Identity and Access Management
  • Network / App / Data Security
  • Advanced Threat Protection
  • SIEM / Security Analysis

Select Market Participants

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Data Management

Solutions that integrate, cleanse, migrate, and manage data across platforms to produce accurate and consistent information

  • Data Integration
  • Data Quality and Governance
  • Database Management
  • Data Analytics

Select Market Participants

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Cloud Managed Services

Solutions that manage cloud security, computing, storage, network operations, and application stacks to automate and enhance business operations

  • PaaS / aPaaS / iPaaS
  • Managed Hosting and Applications
  • Managed Security
  • Backup and Disaster Recovery

Select Market Participants

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Collaboration / Communication

Solutions that enable groups and teams to communicate, share, coordinate, cooperate, and solve problems for the purpose of completing a task

  • Project Portfolio Management
  • Business Process Management
  • Communications PaaS
  • Agile Project Management

Select Market Participants

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Case Study: Mailgun

HW’s TMT Group advised Thoma Bravo on its acquisition of Mailgun.

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Company Overview

Mailgun is a leading email API software platform that enables developers to embed email capabilities, such as send, receive, and track, into their applications.

Mailgun’s robust technology infrastructure, combined with best-in-class developer tools and customer support, ensures market-leading email deliverability across several types of emails, including transactional and promotional use cases.  Mailgun’s solutions integrate directly with a company’s internal applications and business intelligence tools, enabling developers to analyze email deliverability issues, or marketing professionals to monitor email campaign performance and customer engagement.

Mailgun serves over 150,000 organizations, with a network of blue chip clients that include Slack, Stripe, Lyft, and GitHub, among many others.

Relevant Sub-Sectors

  • Developer centric
  • Marketing
  • Infrastructure software
  • SAAS

 

Select Infrastructure Software M&A Transactions1,2

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Vista Equity Partners’ Acquisition of QuickBases

  • QuickBase provides a low-code business application development platform to more than 5,400 customers across verticals, allowing non-technical users to build cloud applications mapped to unique business use cases.
  • The Company’s software empowers business users to leverage visual modeling tools and existing templates to quickly create a purpose-built workflow solution, and easily connect to existing databases and application APIs to track and analyze data in real time.
  • This democratization of software development results in richer and more relevant applications, strong alignment with business use cases, and independence from central IT. Following the acquisition, Vista will provide capital and operating expertise to grow QuickBase’s product offerings, enhance workflow automation, and invest in AI and machine learning tools.

 

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Atlassian’s Acquisition of AgileCraft

  • AgileCraft provides an enterprise-level agile project management platform, helping business leaders and application teams gain visibility into all projects across the organization, whether planned or in progress, and manage prioritization, resource allocation, bottlenecks, and ROI.
  • As businesses continue to focus on digital transformation projects across functional areas and embark on new Agile & DevOps methodologies, there is a growing need to manage these increasing number of projects to better align them with strategic goals and plans.
  • The acquisition is highly complementary to Atlassian’s Jira and other project management tools. While Jira is better suited for single team use cases, Agilecraft’s solutions are targeted towards business leaders and C-suites and will help Atlassian sell at a more strategic level and elevate its presence within large enterprises. 

 

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Palo Alto Networks’ Acquisition of Demisto

  • Demisto is a leader in the Security Orchestration, Automation, and Response (“SOAR”) market, providing security analytics and automation technologies that help Security Operations Center (“SOC”) / SecOps teams reduce alerts that require human intervention.
  • The Company’s solution collects security threat data and alerts from different sources and applications through open APIs, and then analyzes that data with AI / machine learning to drive automated incident response / response playbooks for threat prevention, improving productivity of security analysts, reducing manual workflows, and increasing response times.
  • The acquisition will accelerate Palo Alto Networks’ Application Framework strategy to operationalize data collected across its 60,000 customers from its own sensors and third party apps, and diversify revenue beyond next-gen firewalls.

 

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Thoma Bravo’s Acquisition of ConnectWise

  • ConnectWise provides a comprehensive business management platform that automates a variety of workflows across the technology service delivery lifecycle for managed services providers (“MSPs”) and IT teams.
  • The company’s professional services automation (“PSA”) and business management solutions include remote monitoring and management (“RMM”), service management, CRM and proposal / contract management, and back office functions like finance and time / billing. The Company has over 25,000 partners in more than 65 countries.
  • Thoma Bravo has made a number of investments in the MSP and RMM categories, including Solarwinds, Continuum, and Bomgar, and post-acquisition will continue to drive organic and inorganic growth, as the managed services market experiences significant momentum.

 

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AWS’ Acquisition of CloudEndure

  • CloudEndure provides a cloud-based continuous backup and disaster recovery solution for hybrid environments (on-premise and multi-cloud)  by enabling the backup to be recovered across multiple environments. The Company also supports migration from on-premise to cloud and from one cloud environment to another cloud across AWS, Azure, and Google Cloud.
  • The Company’s solutions prevent data loss and downtime due to human errors, network failures, external threats, or any other disruptions, enabling companies to recover and mobilize entire applications with their data across clouds with near-zero downtime and no data loss.
  • The acquisition will help AWS provide affordable cloud migration and disaster recovery and backup solutions for customers, and continue to be a significant partner in customers’ hybrid cloud and multi-cloud strategies.

Key Performance Metrics for Recent Infrastructure Software IPOs1

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Infrastructure Software – Trading Comparables Metrics

Valuation1

As of March 29, 2019 ($ in millions)

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Infrastructure Software – Trading Comparables Metrics by Sector

Valuation1

As of March 29, 2019 ($ in millions)

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Security Software – Trading Comparables Metrics by Sector

Valuation

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Infrastructure Software – Transaction Activity

Select Recent M&A Transactions1,2

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Select HW TMT Transactions

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1. FactSet

2. PitchBook

 

The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.

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