Select Recent HW TMT Transactions
Case Study: PayIt
HW’s TMT Group advised PayIt on its strategic investment from Insight Partners.
Company Overview
PayIt is a leading provider of next generation, integrated digital government software and payment solutions, designed to improve government operations, revenue collection, and citizen engagement.
Through its highly configurable and extensible rules-based SaaS platform, PayIt improves the way citizens interact with government by simplifying the maze of government agencies to provide users with an intuitive, contextual experience.
The Company’s solution seamlessly integrates across existing technology infrastructure to connect disparate systems and data, making government smarter, modern, and more convenient for all constituents.
Relevant Sub-Sectors
- Financial Technology
- Government Technology
- SaaS
- Mobile
Select Software M&A Transactions – 1Q 2019
Boeing’s Acquisition of ForeFlight
- ForeFlight provides digital flight planning and navigation software for general aviation, business aviation, military, and commercial airline pilots worldwide.
- The Company’s digital flight planning application simplifies complex flight planning by gathering destination information, mapping flight routes, managing inflight electronic charts, and logging flight characteristics.
- Following the acquisition, Boeing will leverage ForeFlight’s experience in business and general aviation to provide integrated digital lifecycle solutions to Boeing’s commercial and government aviation customers.
Tyler Technologies’ Acquisition of MicroPact
- MicroPact provides cloud-based, vertically-oriented case management and business process management applications to more than 350 U.S. Government agencies and Fortune 500 corporations.
- The Company’s web-based, low-code application development platform enables clients to generate efficiencies in enterprise workflows and quickly solve complex challenges by providing organizations with the tools to develop applications quickly.
- The acquisition of MicroPact significantly expands Tyler Technologies’ addressable market by adding a presence in federal government services, while expanding their product portfolio into new verticals, specifically health and human services.
DiscoverOrg’s Acquisition of ZoomInfo
- ZoomInfo provides cloud-based sales and go-to-market intelligence and data for use by sales and marketing professionals.
- The Company’s comprehensive business database combines user behaviors, organizational data, and artificial intelligence, to enable clients to streamline their sales workflows and optimize sales and marketing effectiveness.
- The combined company will provide customers with a fully comprehensive B2B sales and marketing intelligence platform.
HgCapital’s acquisition of Transporeon Group
- Transporeon provides a SaaS-based intelligent transport logistics platform, serving a global network of more than 1,000 shippers and 90,000 carriers across 100 countries.
- The Company’s logistics platform enables clients to simplify the transportation process and reduce transportation costs through sourcing, communicating, collaborating, and transacting more efficiently across the supply chain.
- Post acquisition, Transporeon will leverage Hg’s extensive SaaS expertise and capital to further organic growth in a large, highly inefficient, and fragmented global logistics market.
Vista Equity Partners’ Pending Acquisition of QuickBase
- QuickBase provides a low-code business application development platform to more than 5,400 customers across verticals.
- The Company’s SaaS platform enables users to develop customized solutions that streamline processes, track and analyze real-time data, and create efficiencies to improve operations.
- Following the acquisition, Vista will provide capital and operating expertise to grow QuickBase’s product offerings, enhance workflow automation, and invest in artificial intelligence and machine learning tools.
Software Acquisition Activity – Strategic Acquirers
Most Active Strategic Acquirers of Software Assets by Volume1
- The 10 most active strategic software acquirers registered 14 acquisitions in 1Q 2019. Activity among large strategic software acquirers continues to be on pace with 2018 levels.
- Dassault Systemes was among the most active strategic acquirers in 1Q 2019, completing three acquisitions. The company continues to bolster its manufacturing and engineering software solutions through its acquisitions of IQMS, Argosim, and Elecworks.
Global Strategic Acquirer Software M&A Activity By Volume1
- Globally, strategic software M&A registered 490 acquisitions in 1Q 2019, a 9% increase from 4Q 2018.
- Large strategic acquirers remain flush with cash and continue to pursue high growth software acquisitions to fuel innovation, fill technological gaps, and expand into new end-markets.
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 19 new platform investments in 1Q 2019. Portfolio company M&A activity remained high as well, as evidenced by 38 add-on acquisitions in 1Q 2019 among this group.
- Thoma Bravo was the most active software private equity firm in 1Q 2019, completing six platform acquisitions and ten add-on acquisitions. Notable platform acquisitions in 1Q include Ellie Mae, Connectwise, Apttus, and Mailgun.
Global Private Equity New Software Platforms M&A Activity by Volume1
- Globally, private equity buyers registered 105 new software platform investments in 1Q 2019, the highest quarter ever.
- Private equity investment across the software sector continues to exhibit strong momentum as dry powder remains at all-time highs and fundraising activity continues its strong momentum, especially for technology focused funds.
Note: Includes control new platform investments only. Excludes add-on acquisitions.
Application Software – M&A Market Summary
- Application Software M&A registered 412 transactions in 1Q 2019, representing a 13% year-over-year increase and the most active quarter in the last four years.
- Median reported Application Software M&A transaction multiples decreased slightly to 3.4x revenue in 1Q 2019.
Notable Application Software M&A Transactions1,2
- In 1Q 2019, vertical-specific software companies continue to be highly sought after by private equity and strategic buyers alike.
- Notable vertical-specific software transactions include Insight Partners’ acquisition of PDI (Retail), Dassault’s acquisition of IQMS (Manufacturing), and Deltek’s acquisition of Avitru (Construction).
SaaS – M&A Market Summary
- SaaS M&A continued its upward momentum, registering 59 transactions in 1Q 2019.
- Median reported SaaS transaction revenue multiples decreased slightly to 4.9x in 1Q 2019, but remain in line with last year.
Notable SaaS M&A Transactions1
- As cloud continues to become the delivery model of choice, sector activity remains robust, with strong interest from both private equity investors and strategic buyers.
- In particular, supply chain technology companies are increasingly being sought after as evidenced by Corcentric’s pending acquisition of Determine, HgCapital’s acquisition of Transporeon, GTY’s acquisitions of Bonfire and CityBase, Avetta’s acquisition of Browz, and Spectrum Equity’s acquisition of Agilis.
Data and Analytics – M&A Market Summary
- Data and Analytics M&A registered 121 transactions in 1Q 2019, activity levels consistent with the prior four quarters.
- Median reported Data and Analytics transaction multiples decreased slightly to 2.7x in 1Q 2019.
Notable Data And Analytics M&A Transactions1,2
- Data and Analytics continues to represent a key focus area for strategic acquirers, as optimal decision making continues to be driven by complex and real-time data.
- Recent examples include Atlassian’s pending acquisition of AgileCraft, Microsoft’s acquisition of DataSense, SAP’s acquisition of Qualtrics, and Cloudera’s acquisition of Hortonworks.
Infrastructure Software – M&A Market Summary
- Infrastructure Software M&A registered 82 transactions in 1Q 2019, representing a slight decrease from the prior quarter.
- In 1Q 2019, median reported Infrastructure Software transaction multiples increased slightly to 2.8x revenue.
Notable Infrastructure Software M&A Transactions1
- Private equity investors remain highly active buyers of infrastructure and DevOps assets as they look to compete with established strategic acquirers in a large, but fragmented market.
- Noteworthy private equity transactions in 1Q 2019 include Vista Equity Partners’ pending acquisition of QuickBase, CVC’s acquisition of ConvergeOne, and Thoma Bravo’s acquisition of Veracode.
Private Placement Activity By Software Sector
Private Placements by Software Sub-Sector and New Capital Raised1,3
- There were 981 private placement financings in 1Q 2019, which represents a 7% increase over 1Q 2018.
- Total reported capital investment in the software sector decreased slightly following a strong 4Q 2018, but remains slightly above historical averages.
Private Placement Capital Raised by Round1,3 (as percentage of total reported private placement capital)
- In 1Q 2019, the majority of private capital invested was in late stage (C – later) rounds, comprising 57% of total capital invested.
- Notable late stage rounds included Contrast Security’s $65 million Series D investment led by Warburg Pincus, TalentSoft’s $50 million late stage investment led by Francisco Partners, and Onit’s $200 million late stage investment led by K1 Investment Management
Select Recent Software Private Placements1,3
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
- IPO activity slowed meaningfully in 1Q 2019 with Lyft being the sole technology company listing their shares.
- The government shutdown effectively halted listing activity for the first two months of the quarter, with activity resuming in March as the SEC cleared the backlog of filings.
- Unicorn technology companies including Uber, Palantir and Slack are still signaling that they plan to list in 2019.
Key Performance Metrics for Recent Software IPOs1
Debt Market Overview
- Median middle market LBO loan multiples in 1Q 2019 increased slightly to 5.7x leverage.
- Middle market LBO loan volume decreased to $0.6 billion in 1Q 2019, continuing a downward trend over the past two quarters.
- Technology companies were the largest recipients of middle market LBO loans in 1Q 2019, representing 24.9% of new issuance.
- Median LBO debt percentages decreased slightly to 50% of total purchase price in 1Q 2019.
Select HW TMT Transactions
Appendix: Software Sector Public Company Universe1
Appendix: Software Sector Public Company Metrics1
1. FactSet
2. HW proprietary transaction information
3. PitchBook
4. PNC Capital Markets
5. S&P LCD stats
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