Select Harris Williams Q1 2018 Software Transactions
Real Estate Technology & Payments
Date Closed: 1/18/2018
Relevant Sectors: Saas, Fintech
The TMT Group advised Property Brands, a provider of property management software, insurance, screening, and payments solutions for the residential and commercial real estate markets, on its majority investment from Insight Venture Partners.
- With one of the industry's broadest product suites, the Company empowers over 20,000 property managers to streamline their operations, with solutions from applicant tracking, tenant / resident management and insurance.
- Insight's investment will allow the Company to scale quicker through various organic and inorganic growth initiatives and accelerate its product development efforts.
Government Technology & Payments
Date Closed: 2/21/2018
Relevant Sectors: SaaS, Fintech
The TMT Group advised nCourt, a provider of SaaS civic processing solutions for government entities, on its acquisition by Providence Equity and Greater Sum Ventures.
- The Company's solutions improve the operational efficiencies and revenue generation capacity of government entities by streamlining payments and enhancing public satisfaction.
- Post-acquisition, Providence and GSV will provide operational and financial support to accelerate nCourt's organic and acquisition-driven growth strategy in both courts and non-court markets.
Date Closed: 2/23/2018
Relevant Sectors: Saas, Data & Analytics
The TMT Group advised GetWellNetwork, a provider of interactive patient engagement and education software solutions across the continuum of care, on its acquisition by Pamplona Capital Management.
- The Company's proprietary platform and workflow engine help provider organizations advance service, quality, and efficiency measures.
- Pamplona will leverage its deep experience in healthcare to help GWN capitalize on various market and new product opportunities.
Member Management & Payments
Date Closed: 3/12/2018
Relevant Sectors: SaaS, Fintech
The TMT Group advised Togetherwork, a provider of Saas-based group management software and integrated payment solutions, on its acquisition by GI Partners.
- Market leader in group management solutions across mission-driven, community, and recreation and leisure end markets.
- Over 5,000 unique customers and more than 30 million users.
- The investment will help support Togetherwork's continued integration, expansion, and growth through acquisitions into adjacent vertical markets.
Select Software M&A Transactions - Q1 2018
Inovalon’s acquisition of ABILITY Network
- ABILITY provides a web-based health information network designed to simplify the administrative and clinical complexities of the healthcare system.
- The company’s platform provides core connectivity, administrative, clinical, and quality analysis tools to more than 44,000 acute, post-acute, and ambulatory point-of-care provider facilities.
- The combined company is expected to benefit from an increased addressable market and significant cross-sell opportunities through a highly diversified customer base.
ION’s acquisition of Openlink Financial
- Openlink provides trading and risk management software solutions for the energy, commodities, and financial services industries.
- The Openlink Cloud platform and its advanced analytics capabilities enable clients to make better decisions from data, seize market opportunities, and mitigate risk.
- The acquisition will expand ION’s Triple Point Technology product portfolio for energy and financial services firms by adding trading, treasury, and risk management solutions.
MINDBODY’s pending acquisition of Booker Software
- Booker Software provides SaaS business management apps for salons and spas, in addition to an automated marketing solution for wellness businesses.
- Booker offers health, wellness, and beauty businesses an all-in-one solution for online booking, CRM, marketing automation, staff management, and POS.
- The acquisition will expand MINDBODY’s wellness and beauty platform by adding more than 11,000 high-end salons and spas to the company’s existing marketplace.
GTCR and Sycamore Partners’ pending take private of CommerceHub
- CommerceHub provides a cloud-based, distributed commerce network to retailers for supply chain and inventory management.
- The company’s platform allows retailers to expand product offerings, increase promotions, and ensure rapid, on-time customer delivery.
- Following the acquisition, GTCR and Sycamore’s capital will be used to accelerate the development of the company’s platform and network.
Stone Point Capital’s acquisition of Grace Hill
- Grace Hill provides online courseware and administration tools to more than 1,300 customers within the multifamily property management market.
- The company’s platform offers a suite of online solutions for property managers to train employees to ensure compliance with housing industry rules and regulations (e.g.,Fair Housing, OSHA).
- Post acquisition, Stone Point’s industry expertise and capital will be utilized to enhance and expand Grace Hill’s current product offerings and market presence.
Software Acquisition Activity - Strategic Acquirers
MOST ACTIVE STRATEGIC ACQUIRERS OF SOFTWARE ASSETS BY VOLUME1
- The 10 most active strategic software acquirers registered 17 acquisitions in 1Q 2018. Activity among large strategic acquirers continues to be on pace with 2017 levels.
- Google was the most active strategic acquirer in 1Q 2018, completing three acquisitions. Data analytics and mobile application software remain key focus areas for Google as evidenced by the acquisitions of Xively and Tenor.
GLOBAL STRATEGIC ACQUIRER SOFTWARE M&A ACTIVITY BY VOLUME1
- Global strategic software M&A registered 395 acquisitions in 1Q 2018, remaining in line with the prior two quarters.
- As a result of rising interest rates and new tax reform, large strategic acquirers are flush with cash and continue to pursue high growth software acquisitions to fuel innovation, fill technological gaps, and expand into new end-markets to support future growth
Software Acquisition Activity - Private Equity
MOST ACTIVE PRIVATE EQUITY BUYERS OF NEW SOFTWARE PLATFORMS BY VOLUME1
- The 10 most active software investors completed 11 new platform inv estments in 1Q 2018, a 50% increase ov er 1Q 2017.
- Thoma Bravo was the most active software inv estor in 1Q 2018, completing three platform investments and six add-on acquisitions. Notable 2018 private equity platform acquisitions include Barracuda Networks (take private), Nintex Global, and ABC Financial Services.
GLOBAL NEW PLATFORM PRIVATE EQUITY SOFTWARE M&A ACTIVITY BY VOLUME1
- Globally, private equity registered 90 new software platform investments in 1Q 2018, a 23% increase from 1Q 2017.
- Private equity inv estment 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.
Application Software - M&A Market Summary
- Application Software M&A registered 366 transactions in 1Q 2018, representing a 25% increase over 1Q 2017 and the most active quarter in the last four years.
- Median reported Application Software transaction multiples decreased slightly to 2.4x revenue, though remain in line with the recent averages.
NOTABLE APPLICATION SOFTWARE M&A TRANSACTIONS1,5
- In 1Q 2018, vertical-specific software companies continue to be highly sought after by private equity and strategic buyers alike
- Notable vertical-specific software transactions include GTCR’s acquisition of CommerceHub (Retail), NEC’s pending acquisition of Northgate (Public Sector), Stone Point’s acquisition of Grace Hill (Real Estate), and Pamplona’s acquisition of GetWellNetwork (HCIT).
SaaS – M&A Market Summary
- SaaS M&A registered 55 transactions in 1Q 2018, in line with the past two quarters.
- 1Q 2018 median reported SaaS transaction multiples decreased slightly to 4.3x revenue, but remain in line with historical averages.
Notable SaaS M&A Transactions1,5
- SaaS M&A activity remained high in 1Q 2018 as demand for cloud-based delivery models continues across sectors.
- While strategic buyers continue to demonstrate a strong appetite for SaaS companies, private equity firms have been particularly active.
- Notable private equity SaaS acquisitions include Providence’s acquisitions of nCourt and Value Payment Systems, GI Partners’ acquisitions of Togetherwork and Doxim, and Insight's acquisition of Property Brands.
Data and Analytics – M&A Market Summary
- Data and Analytics M&A continued its upward momentum, registering 122 transactions in 1Q 2018, representing a 15% increase over 1Q 2017.
- In 1Q 2018, median reported sector transaction multiples decreased to 2.8x revenue, though remain in line with two-year historical averages.
Notable Data And Analytics M&A Transactions1
- Data and Analytics remained a key focus area for strategic acquirers, particularly companies seeking to gain insights into consumer and economic trends.
Strategic data and analytics acquirers sought to strengthen their positions within existing markets, as evidenced by R1’s pending acquisition of Intermedix, ION’s pending acquisition of Dealogic, and S&P Global’s acquisition of Kensho Technologies.
Infrastructure Software – M&A Market Summary
- Infrastructure Software M&A registered 67 transactions in 1Q 2018, a slight decrease from the prior quarter though among the most active quarters in the last four years.
- Median reported Infrastructure Software transaction multiples increased to 3.2x revenue, the highest level since 3Q 2015.
Notable Infrastructure Software M&A Transactions1
- Private equity continues to compete successfully with established software vendors to acquire high quality infrastructure software assets.
Network and infrastructure security companies continue to be in high demand as evidenced by Thale’s pending acquisition of Gemalto, Pamplona and BlackRock’s acquisition of PhishMe, and RELX’s acquisition of ThreatMetrix.
Private Placement Activity By Software Sector
Private Placements by Software sub-Sector and New Capital Raised1,4
- There were 920 private placement financings in 1Q 2018, representing a 15% increase over 1Q 2017.
- Total reported capital continues to grow with $12.8 billion invested in 1Q 2018 up from $10.1 billion in 4Q 2017.
Private Placement Capital Raised by Round1,4 (as percentage of total Reported private placement capital)
- In 1Q 2018, the majority of private capital invested was in late stage (C – later) rounds, with 44% of capital raised in Series D or later rounds.
- Notable late stage rounds included Collective Health’s $110 million Series D investment led by GV, Wag’s $260 million Series D investment led by SoftBank, and Duetto’s $80 million Series D investment led by Warburg Pincus.
Select Recent Software Private Placements
Select Recent Software Private Placements1,4
Public Software Valuation
Multiples by Sector1
Key Metrics by Sector – Comparable Public Software Companies
Comparable Public Software Companies1
Summary of Technology IPOs
- Despite a robust 4Q 2017, IPO activity in the sector slowed in 1Q 2018 as companies remain wary of the public markets and late-stage capital continues to be readily available.
- High profile technology IPOs candidates have made news recently as Airbnb and SoFi announced their intention to push their IPOs to 2019, while others such as Adyen and WeWork have announced their intention to remain private.
- Recently announced IPOs of Dropbox, Glassdoor, and a direct listing of Spotify will give a clear picture of the market’s appetite for new technology stocks over the next few months.
Key Performance Metrics for Recent Software IPOs
Debt Market Overview
- Median middle market LBO loan multiples in 1Q 2018 remained in line with prior years at 5.4x leverage.
- Middle market LBO loan volume increased to $1.5 billion in 1Q 2018.
- Lender activity within the technology industry is at an all-time high as companies bring back cash to repay debt and investors continue to enter the market.
- Technology companies in the middle market were the second largest recipients of LBO loans in 2017, representing 15.5% of new issuance.
- Median LBO debt percentages increased slightly to 54% of total purchase price in 1Q 2018.
Deep TMT Experience Across Software Verticals
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Appendix: Software Sector
Public Company Universe1
Appendix: Software Sector Public Company Metrics
2PNC Capital Markets
3S&P LCD stats
5HW&Co. proprietary transaction information