M&A value in enterprise software stays high, despite activity cooling down

According to Hampleton‘s M&A market report 1H 2020 for Enterprise Software, trailing 30 month median revenue multiples reached a record 4x for enterprise software M&A, while EBITDA multiples remained at 17.3x.

The amount of deals done in the second half of 2019, however, decreased slightly, with 620 deals completed compared to 669 in the first half.

The percentage of enterprise software M&A that was completed by a private equity buyer, meanwhile, went up to 32% in 2019, up 7% from 2018.

“Despite the slight cooldown in deal volume, the overall picture indicates that we’re entering 2020 with continued strong demand for enterprise software assets,” said Miro Parizek, founder of Hampleton Partners.

“Private equity investors continue to harness readily available debt financing for acquisitions and have outbid strategic buyers in leveraged buyouts throughout 2019.”

Popular technologies that seemed to frequently be in mind when making M&A deals included AI-powered customer service tech such as chatbots, 3D software that leverages virtual reality (VR), and training and education software, the latter of which being especially demanded by private equity.

Additionally, Software-as-a-Service (SaaS) remained a standard delivery choice for tech for companies of all sizes, and data management software has been shown to help businesses comply with regulations such as the EU General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

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“The never-ending need for businesses to invest in IT, applications and specialist software has also encouraged rival tech giants like Google and Microsoft to increase their M&A activity in the sector, bumping them back up on the list of top enterprise software acquirers over the past 30 months,” Parizek continued.

WiseTech Global was found to be the most prolific acquirer, according to the report, with 23 made within the past 30 months.

Vista Equity Partners and MRI Software tied for second place with 17 deals each.

Microsoft made 12 acquisitions during that time, including SaaS platforms Mover Inc. and JClarity Ltd., while Google and Siemens each made 10.

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Aaron Hurst

Aaron Hurst is Information Age's senior reporter, providing news and features around the hottest trends across the tech industry.

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