Harris Williams Overview

Harris Williams (“HW”) Global Advisory Platform

screen_shot_2019-07-24_at_4.50.46_pm.pngKey Facts 

  • Founded in 1991
  • 340+ professionals across eight offices globally
  • 21st record year in 2018
  • 10 industry groups

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HW Technology, Media & Telecom (“TMT”) Group Focus Areas

Vertical Focus Areas

  • 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

Horizontal Focus Areas

  • 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

Select Recent HW TMT Transactions

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Select Recent HW Software Transactions

HW continues its momentum as a leading advisor for governance, risk, and compliance (“GRC”) software assets.

Cority

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  • Leading provider of SaaS-based environmental, health, safety, and quality (“EHSQ”) software solutions

 

Company Overview

  • Cority’s end-to-end technology platform includes EHSQ, operational risk management, sustainability, and predictive analytics, offering a unified SaaS platform for a global customer base
  • The Company’s solutions enable organizations to advance their journey to sustainability and operational excellence by combining deep domain expertise with a comprehensive and secure SaaS platform
  • Cority serves over 800 organizations in 100+ countries globally, supporting more than 2.5 million end-users

Relevant Sub-Sectors

  • Compliance Software
  • SaaS
  • Industrial Software

Veriforce

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  • Leading provider of fully-integrated, SaaS-based operator qualification (“OQ”), drug and alcohol, safety and insurance, and training solutions

 

Company Overview

  • Veriforce’s software platform increases safety for workers and communities while driving efficiencies and reducing costs for hiring clients and contractors
  • The Company’s solutions are uniquely positioned to address complex and evolving OQ requirements, with regulation expansion through OQ notice of proposed rulemaking expected to more than triple TAM in the next five years
  • Veriforce serves more than 185,000 registered professionals across end-markets and geographies

Relevant Sub-Sectors

  • Compliance Software
  • Human Capital Management
  • Industrial Software

Select Software M&A Transactions – 2Q 2019

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E2open’s Take-Private of Amber Road

  • Amber Road provides cloud-based global trade management solutions to clients in over 80 countries, conducting trade in more than 170 countries.
  • The Company’s GTM platform plans, optimizes, and executes all aspects of global trade, allowing clients to efficiently and compliantly import and export goods through international borders.
  • The acquisition of Amber Road bolsters E2open’s global trade management capabilities and extends its reach globally.

 

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Advent International’s Pending Acquisition of Transaction Services Group

  • Transaction Services Group provides business management software and integrated payments solutions to the health and fitness, childcare, education, insurance, and entertainment industries.
  • The Company’s revenue management solutions help clients manage their members and customers, enabling them to drive improved member retention and revenue performance, and reduce administrative burden and cost.
  • Following the acquisition, Transaction Services Group will leverage Advent’s capital and industry expertise to continue driving product innovation and further expand its geographical footprint.

 

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GI Partners’ Pending Acquisition of Insurity

  • Insurity provides policy and claims administration software to more than 200 clients in the property and casualty insurance industry.
  • The Company’s cloud-based policy administration, claims, billing, and data analytics tools enable carriers to improve processing speed and enhance customer experience.
  • Following the acquisition, Insurity will leverage GI Partners’ operational expertise and proven add-on capabilities to continue driving growth and expanding its leadership position in policy administration.

 

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Clearlake Capital’s Acquisition of Dude Solutions

  • Dude Solutions provides end-to-end operations management software to over 12,000 clients in the education, government, healthcare, and manufacturing verticals.
  • The Company’s solutions automate mission critical enterprise asset management workflows including work order, inventory, energy, capital planning, facility scheduling, and community development.
  • Post acquisition, Dude Solutions will leverage Clearlake Capital’s global resources and operational expertise to invest in both organic and inorganic initiatives that accelerate the Company’s long-term growth.

 

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Francisco Partners’ Pending Acquisition of PayScale

  • PayScale provides cloud-based compensation data, analytics, and software to over 8,000 clients, ranging from small businesses to Fortune 500 companies.
  • The Company’s solutions leverage big data and proprietary algorithms to dynamically acquire, analyze, and aggregate compensation information, enabling employers to make salary decisions supported by real-time data that align to business goals.
  • Post acquisition, PayScale will leverage Francisco Partners’ operational network and capital to further drive organic growth in a large and expanding market opportunity.

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 28 acquisitions in 1H 2019. Activity among large strategic software acquirers remains in line with 2018 levels as incumbent players look to M&A to expand technology capabilities and reach new customers.
  • Microsoft was the most active strategic acquirer in 1H 2019, completing seven acquisitions.
  • Notable 2Q 2019 strategic software transactions include Alphabet’s pending acquisition of Looker Data Sciences, salesforce.com’s pending acquisition of Tableau Software, and Dassault Systemes’ pending acquisition of Medidata.

Global Strategic Acquirer Software M&A Activity By Volume1

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  • Global strategic software M&A registered 499 acquisitions in 2Q 2019, which is in line with the prior quarter, but represents a 31% increase over 2Q 2018.
  • Traditional software bellwethers continue to consolidate niche markets as they look to fill product gaps and maintain competitive advantage against nimbler, more disruptive innovators.

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 26 new platform investments in 1H 2019.
  • Thoma Bravo remained the most active software private equity firm in 1H 2019, completing eight platform acquisitions.
  • Notable 2Q 2019 private equity platform acquisitions include Advent’s pending acquisition of Transaction Services Group, Vista Equity’s acquisition of Plansource, Insight Partners’ acquisition of Recorded Future, and Thoma Bravo’s acquisition of Autodata Solutions.

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

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  • Globally, private equity buyers registered 107 new software platform investments in 2Q 2019, remaining in line with the prior four quarters.
  • Private equity firms continue to exhibit strong interest in the software sector as they seek to deploy record levels of uninvested capital and capitalize on a favorable lending environment, especially for high quality, middle market software companies.

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 390 transactions in 2Q 2019, representing a 5% decrease from the prior quarter, but remain in line with 2018 activity levels.
  • Median reported Application Software M&A transaction multiples increased slightly to 3.6x revenue in 2Q 2019.

Notable Application Software M&A Transactions1,5

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  • Vertical-specific Application Software companies were in high demand in 2Q 2019, as both strategic and financial buyers seek to build and fortify their market positions.
  • Notable vertical-specific Application Software transactions include Advent’s pending acquisition of Transaction Services Group (Membership Management), GI Partners’ pending acquisition of Insurity (Insurance), and Providence Equity Partners’ acquisition of GlobalTranz (Transportation and Logistics).

SaaS – M&A Market Summary

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  • SaaS M&A registered 53 transactions in 2Q 2019, slightly below recent averages.
  • Median reported SaaS transaction revenue multiples again decreased slightly to 4.6x revenue in 2Q 2019.

Notable SaaS M&A Transactions1,5

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  • Cloud adoption continues to drive sector consolidation with both public and PE-backed strategics seeking to bolster their cloud capabilities and fortify their positions in key vertical markets.
  • Notable 2Q 2019 SaaS transactions include E2open’s take-private of Amber Road, Thoma Bravo’s majority investment in Cority Software, and Advance Publications’ acquisition of Turnitin.

Data and Analytics – M&A Market Summary

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  • Data and Analytics M&A remained robust in 2Q 2019, registering 136 transactions, an 18% increase year over year.
  • Median reported Data and Analytics transaction multiples decreased slightly to 2.6x in 2Q 2019.

Notable Data and Analytics M&A Transactions1

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  • As the volume of complex data available to enterprises increases, strategic buyers are actively pursuing real-time information and business intelligence solutions to enhance their software solutions.
  • Notable recent examples include salesforce.com’s pending acquisition of Tableau Software, Alphabet’s pending acquisition of Looker Data Sciences, and Atlassian’s acquisition of AgileCraft.

Infrastructure Software – M&A Market Summary

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  • Infrastructure Software M&A registered 101 transactions in 2Q 2019, marking the most active quarter in the last three years.
  • In 2Q 2019, median reported Infrastructure Software transaction multiples decreased slightly to 2.7x revenue.

Notable Infrastructure Software M&A Transactions1

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  • Infrastructure Software M&A activity remained robust in 2Q 2019, as both private equity investors and established software vendors continue to view M&A as an attractive strategy to accelerate growth and market share.
  • Noteworthy Infrastructure Software M&A transactions in 2Q 2019 include Palo Alto Networks’ acquisition of Twistlock, Insight Partners’ acquisition of Recorded Future, and Francisco Partners’ acquisition of Perforce.

Private Placement Activity By Software Sector

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

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  • There were 1,078 private placement financings in 2Q 2019, which represents a 10% increase over 2Q 2018.
  • Total reported capital investment in the software sector rebounded in 2Q 2019, and remains above historical averages.

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

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  • In 2Q 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 SalesLoft’s $70 million Series D investment led by Insight Partners, Toast’s $250 million Series E investment led by TCV, and Sumo Logic’s $110 million Series G investment led by Battery Ventures.

Select Recent Software Private Placements1,4

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Note: Financial information presented above represents reported capital raised only.

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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  • After a quiet 1Q 2019, a result of the government shutdown, IPO activity picked up with eight technology IPOs in 2Q 2019 as many highly anticipated companies officially listed their shares.
  • Notable 2Q 2019 IPOs include Uber, Pinterest, Zoom, CrowdStrike, and the direct listing of Slack.
  • Despite lackluster performance by Uber and Lyft’s IPOs, Slack’s direct listing indicates strong demand still exists in the public markets for high quality technology companies.

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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 in 1H 2019 increased slightly to 5.7x leverage.
  • Middle market LBO loan volume increased to $1.4 billion in 2Q 2019, rebounding after a downward trend the past three quarters.

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  • Technology companies were the largest recipients of middle market LBO loans in 1H 2019, representing 23.7% of new issuance.
  • Median LBO debt percentages decreased slightly to 49% of total purchase price in 1H 2019.

Select HW 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

 

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.

Harris Williams LLC is a registered broker-dealer and member of FINRA and SIPC. Harris Williams & Co. Ltd is a private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. Corporate Finance Advisors GmbH is registered in the commercial register of the local court of Frankfurt am Main, Germany, under HRB 107540. The registered address is Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany (email address: hwgermany@harriswilliams.com). Geschäftsführer/Directors: Jeffery H. Perkins, Paul Poggi. (VAT No. awaited). Harris Williams is a trade name under which Harris Williams LLC, Harris Williams & Co. Ltd and Harris Williams & Co. Corporate Finance Advisors GmbH conduct business.