Case Study: Therapy Brands

Harris Williams' TMT Group advised Therapy Brands, a portfolio company of Providence Strategic Growth and Greater Sum Ventures, on its sale to Lightyear Capital and Oak HC/FT.

screen_shot_2018-10-18_at_1.36.45_pm.pngCompany Overview

Therapy Brands is a leading provider of fully-integrated practice management, electronic health record (EHR), payment and revenue cycle management (RCM) solutions for the mental and behavioral health market.

Through its comprehensive SaaS platform purpose built for mental and behavioral health practitioners across diverse specialties, Therapy Brands’ solutions streamline practice management, EHR, RCM, billing, and payments, driving operational efficiencies while improving customer satisfaction and clinical outcomes. 

Therapy Brands serves thousands of practices across diverse end-markets, including psychotherapy, applied behavioral analysis, substance abuse, speech and occupational therapy throughout the US and processes billions in patient payments and insurance claims annually.

Relevant Sub-Sectors

  • HCIT
  • FINTECH
  • SAAS

Select Software M&A Transactions – 3Q 2018

screen_shot_2018-10-18_at_1.41.27_pm.png Fortive Corporation’s Acquisition of Accruent

  • Accruent provides a broad suite of physical resource management software to more than 10,000 global customers across a wide range of industries.
  • The Company’s integrated, cloud-based software helps clients fulfill the mission of their organization by extending the lifecycle of assets, ensuring full compliance and reducing safety risks.
  • Following the acquisition, Accruent will become part of Fortive’s Field Solutions platform (comprising Fluke, Qualitrol, Industrial Scientific, and Gordian) within Fortive’s Professional Instrumentation segment.

screen_shot_2018-10-18_at_1.43.02_pm.pngGlobal Payments’ Acquisition of AdvancedMD

  • AdvancedMD provides SaaS-based, enterprise software solutions to independent ambulatory physician practices in the United States.
  • The Company’s electronic health records, revenue cycle management, relationship management, and BI tools enable physicians and medical professionals to automate and optimize workflow in all areas of the physician practice.
  • The acquisition expands Global Payments’ healthcare sector capabilities and will add significant subscription revenue.

screen_shot_2018-10-18_at_1.45.45_pm.pngSummit Partners’ Acquisition of MercuryGate International

  • MercuryGate provides a SaaS-based transportation management system that manages more than $70 billion of annual freight spend and supports over 300,000 daily logins from over 80 countries.
  • The Company’s solution enables shippers, carriers, brokers, freight forwarders, and third party logistics providers to plan, optimize, and execute global transportation movements with complete end-to-end shipment visibility.
  • Summit Partners will continue to support MercuryGate’s vision and commitment to extending their foundation into a platform for accelerated innovation, global ecosystem enablement, and customer scale.

screen_shot_2018-10-18_at_1.46.52_pm.pngBC Partners’ Acquisition of NAVEX Global

  • NAVEX provides governance, risk management, ethics, and compliance intelligence technology solutions to over 13,000 businesses globally.
  • The Company’s ethics and compliance software platform allows its customers to address issues and respond quickly and effectively in increasingly complex regulatory environments.
  • Following the acquisition, BC Partners will help accelerate NAVEX’s expansion into international markets, as well as broaden its GRC offerings in one of the fastest growing sectors in the software industry.

screen_shot_2018-10-18_at_1.48.13_pm.pngAmadeus IT Holding’s Pending Acquisition of TravelClick

  • TravelClick provides cloud-based solutions, including an independent and mid-size hotel central reservation system and guest management solution, to over 25,000 customers across 176 countries in the hospitality industry.
  • The Company’s software provides hotels with distribution reach across all channels, both digital and traditional, and allows them to improve digital interaction with guests, increase revenues and performance, reduce cost, and create a strong brand.
  • The acquisition expands Amadeus’ presence in the hospitality sector and creates a hospitality data leader, providing a broad range of innovative technology to hotels and chains of all sizes across the globe.

Software Acquisition Activity – Strategic Acquirers

Most Active Strategic Acquirers of Software Assets by Volume1

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  • The 10 most active strategic software acquirers registered 48 acquisitions through YTD 2018. Activity among large strategic acquirers is on pace with 2017 levels.
  • Microsoft has been the most active strategic acquirer through YTD 2018, completing 12 acquisitions. The recent acquisition of Lobe highlights Microsoft’s continued investment in and focus on next-generation artificial intelligence and machine learning tools for developers.

Global Strategic Acquirer Software M&A Activity By Volume1

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  • Globally, strategic software M&A registered 410 acquisitions in 3Q 2018, an 8% increase from 2Q 2018.
  • Cash-rich strategics remain highly acquisitive as management teams continue to view inorganic growth as a key value-creation strategy. Many diversified software and large industry companies are pursuing vertical-specific software acquisitions as they look to expand into new markets and add next generation technology.

Note: Includes control investments only. 

Software Acquisition Activity – Private Equity

Most Active Private Equity Buyers of New Software Platforms by Volume1

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  • The 10 most active software investors completed 51 new platform investments in YTD 2018.
  • Thoma Bravo was the most active software private equity firm through YTD 2018, completing eight platform acquisitions.
  • Notable 3Q private equity platform acquisitions include Summit Partners’ acquisition of MercuryGate, Insight Venture Partners’ pending acquisition of Episerver, and Vista’s acquisition of iCIMS.

Global Private Equity New Software Platforms M&A Activity by Volume1

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  • Globally, private equity buyers registered 100 new software platform investments in 3Q 2018, which was in line with the prior quarter.
  • Private equity investment across the software sector continues to exhibit strong momentum as dry powder is at all-time highs and fundraising activity for technology funds remains robust.

Note: Includes control new platform investments only. Excludes add-on acquisitions.

Application Software – M&A Market Summary

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  • Application Software M&A registered 380 transactions in 3Q 2018, representing a 13% year-over-year increase and a slight increase from the prior quarter.
  • Median reported Application Software M&A transaction multiples increased to 3.0x, the highest quarter in the last four years.

Notable Application Software M&A Transactions1,5

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  • In 3Q 2018, strategic buyers were highly active in pursuing application software targets, as vertical-specific software companies remain highly sought after. 
  • Notable 3Q 2018 Application Software transactions include Fortive’s pending acquisition of Accruent, BC Partners’ acquisition of NAVEX Global, and Dassault’s acquisition of Centric.

SaaS – M&A Market Summary

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  • SaaS M&A registered 53 transactions in 3Q 2018, a slight increase from the previous quarter.
  • 3Q 2018 median reported SaaS transaction multiples decreased to 4.8x revenue, still remaining slightly above trailing four-year averages. 

Notable SaaS M&A Transactions1,5

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  • Demand for cloud-based delivery models remains strong, resulting in continued robust M&A activity by both strategic and private equity buyers.
  • Vista Equity Partners was highly active in SaaS M&A in 3Q 2018, acquiring three new platforms: iCIMS, ComplySci, and Alegeus. 

Data and Analytics – M&A Market Summary

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  • Data and Analytics M&A registered 110 transactions in 3Q 2018, in line with the last four quarters.
  • Median reported Data and Analytics transaction multiples decreased slightly to 2.6x revenue, though remain in line with recent averages.

Notable Data and Analytics M&A Transactions1

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  • Data and Analytics remains a key focus area for enterprises in 3Q 2018 as companies increasingly seek data-driven insights and visibility to support critical decision-making.
  • Recent examples include Salesforce’s acquisition of Datorama, ARM’s acquisition of Treasure Data, and Thoma Bravo’s acquisition of Apttus.

Infrastructure Software – M&A Market Summary

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  • Infrastructure Software M&A registered 89 transactions in 3Q 2018, the highest quarter ever as demand for high quality infrastructure assets continues.
  • In 3Q 2018, median reported Infrastructure Software transaction multiples increased slightly to 2.9x revenue, remaining in line with the prior four quarters.

Notable Infrastructure Software M&A Transactions1

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  • Established vendors including Mimecast and VMware, and private equity-backed groups remain highly active acquirers of Infrastructure Software companies.
  • Cybersecurity and IT-service management software companies were in high demand in 3Q 2018, evidenced by VMware’s pending acquisition of CloudHealth Technologies, Thoma Bravo’s acquisition of Centrify, and Gigamon’s acquisition of Icebrg.

Private Placement Activity By Software Sector

Private Placements by Software Sub-Sector and New Capital Raised1,4

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  • There were 976 private placement financings in 3Q 2018, representing a 15% increase over 3Q 2017.
  • Total reported capital investment in the software sector appears to have stabilized in 3Q 2018, after strong growth in the prior two quarters.

Private Placement Capital Raised by Round1,4 (as percentage of total reported private placement capital)

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  • In 3Q 2018, later stage rounds (C – later) continued to represent the majority of private placement rounds, comprising 57% of total capital invested.
  • Notable late stage rounds included TraceLink’s $93 million Series D investment led by Georgian Partners, GitLab’s $100 million Series D investment led by ICONIQ Capital, and Sisense’s $80 million Series E investment led by Insight Venture Partners.

Select Recent Software Private Placements1,4

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Public Software Valuation Multiples by Sector1

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Key Metrics by Sector – Comparable Public Software Companies1

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Summary of Technology IPOs

Recent U.S. Technology IPO Activity (by offering size)1

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  • Following an active 2Q 2018, technology IPO activity slowed in 3Q as companies evaluate timing and private markets continue to offer compelling valuations.
  • Public market investors continue to value growth over profitability as evidenced by SurveyMonkey’s 42% surge on its opening day of trading.
  • Notable technology IPOs in 3Q 2018 include SurveyMonkey, Eventbrite, Domo, and Tenable.

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Key Performance Metrics for Recent Software IPOs1

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Debt Market Overview

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  • Median middle market LBO loan multiples through 3Q 2018 were 5.5x, remaining in line with the prior four quarters.
  • Middle market LBO loan volume decreased slightly to $1.5 billion in 3Q 2018.
  • In September, the Federal Reserve raised interest rates for the third time in 2018 and hinted at another before year endscreen_shot_2018-10-22_at_12.16.27_pm.png
  • Technology companies were the largest recipients of middle market LBO loans in 3Q 2018, representing 24.3% of new issuance.
  • Median LBO debt percentages slightly increased to 55% of total purchase price through 3Q 2018.

Select Harris Williams TMT Transactions

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Appendix: Software Sector Public Company Universe1

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Appendix: Software Sector Public Company Metrics1

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1.    FactSet

2.    PNC Capital Markets

3.    S&P LCD Stats

4.    PitchBook

5.    HW Proprietary Transaction Information

 

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