asasa M&A Overview Enterprise Applications 17 Woodstock Street, London, W1C 2AJ Suite 200, 1 Sutter St, San Francisco, CA 94104, US
Our Enterprise Applications report covers the two and a half year period between January 2012 and June 2014. All totals and median values refer to the entire period unless otherwise stated. Median multiples plotted in the graphs are for the 30 month period prior to and including the half year. The first half of 2014 saw the Enterprise Applications sector reach $23.5 billion in disclosed transactions. The trailing thirty month median EV/S ratio was 2.9x, while the trailing median EBITDA multiple over the same period was 14.6x. M&A activity increased by 17% on 2H 2013, and 35% on 1H 2013. This year has also already seen several mega deals, completed by prolific acquirers in this space: Germany-based SAP AG acquired Fieldglass, Inc., a workforce management SAAS provider, for $1 billion with a revenue multiple of 11.8x. The purchase is intended to reaffirm SAP s position as the market leader of integrated human resources and procurement in the cloud. Top Tech acquirer, Hellman & Friedman, invested $1.1 billion in Renaissance Learning Inc., an education software provider. With this deal, H&F has now taken on three deals worth more than $1 billion within the past year. The company s proclaimed rationale behind the purchase is to expand Renaissance Learning s network and help accelerate student learning on a global scale. The trailing thirty month multiples show that the Enterprise Application targets have experienced consistently strong +2x valuations, a trend that looks likely to continue based on the strength of activity in 2014 this far. $23.5 B Total disclosed transaction value in 1H 2014 2.9x $22.7 M Median disclosed transaction value in 1H 2014 14.6x Median EV/EBITDA ratio 2.6 2.9 2.8 2.8 2.9 Total Transaction Count Market Outlook: Self-Service BI Self-service BI will continue to drive M&A activity in 2014, led by the need to meet the growing demand for data discovery and visualization tools for novice users and personnel in LOB roles who need more than just the desktop tools. Machine learning could play a key role in shaping market consolidation, as these technologies can automate and play well with business requirements when modeling and other types of analytic skills aren't present. The rise of self-service BI will also lead to a growing momentum to deliver self-service integration, given that about 80% of analytic projects involve data preparation, which is now expanding beyond the purview of IT as business users request capabilities of this type in support of doing analysis themselves. (451 Research) 1
Headquarters of Targets Headquarters of Acquirers purchasing European Targets 7% 71% 22% 52% 45% 3% Europe North America ROW Europe North America ROW The majority of Enterprise Applications targets from 1H 2012 to 1H 2014 were North American, while 22% were European and 7% were from the rest of the world. In Europe, regional transactions counted for over 50% of the deals throughout the period, a trend that we see across the IT sector. There were a number of notable deals that took place in Europe. IMS Health acquired France-based Cegedim Group, a CRM and database software provider, for $520 million and with a revenue multiple of 0.9x. IMS Health believe that Cegedim s technological expertise and infrastructure will help create integrated solutions and is necessary to avoid falling behind in the rapidly growing healthcare technology segment. Earlier in 2014, Equifax purchased UK-based TDX Group, a global debtcollection SaaS provider. The deal amounted to $327 million and yielded the sellers a revenue multiple of 3.6x. Equifax chose to acquire TDX group in order to capitalize on the relatively fast development of technological applications in the debt-collecting industry, using TDX s global network and debt-collecting expertise to drive revenue growth. The top acquirer in terms of completed Enterprise Applications-related deals, Autodesk, made 8 of their 13 acquisitions since the beginning of 2012 in Europe, all of which were companies involved with graphic design/cad. 22% Percentage of targets located in Europe. 52% Percentage of European targets acquired by European buyers 2.3x of European targets The median revenue multiple for all European targets in the Enterprise Applications sector throughout the period was 2.3x. 2
The majority of M&A activities within the Enterprise Applications area took place in the 'Enterprise Resource Planning' and 'Vertical Applications' sub-sectors with 44% and 31% of the deals, respectively, and shared $57 billion in disclosed transactions. 'Business Intelligence & Customer Analytics' and 'Design, PLM, Project and Portfolio Management' were both smaller sub-sectors with 17% and 8% of the remaining transactions. Sub-Sector Overview Enterprise Resource Planning Vertical Applications Business Intelligence & Customer Analytics Design, PLM, Project and Portfolio Management Enterprise Resource Planning: CRM, Desktop Productivity Applications, Desktop Publishing, Partner Relationship Management, Vertical Applications: Software across verticals including: Banking, Insurance, Health, Shipping Trade and Commerce Business Intelligence & Customer Analytics: Corporate Performance Management, Market Intelligence, Reporting, Web Analytics Design, PLM, Project and Portfolio Management: Graphics and Design, Product Lifecycle, Project & Portfolio Management Enterprise Resource Planning 2.6 20x 3.2 Median EV/EBITDA ratio 2.8 3.2 Transaction Count 2.8x 2.8 So far this year the ERP sub-segment has seen heightened M&A activity since 2013, with the total number of deals growing by 17 percent on 2H 2013 and 40% on 1H 2013. The median revenue multiple for the two and a half year period was 2.8x, while the median EBITDA multiple over the same period was 20x. The largest transactions in the ERP segment involved the global market leader for ERP systems and prolific acquirer, SAP AG. SAP is constantly expanding its technology portfolio into as many niches as possible, and is trying to grow its user base through organic means as well as inorganic. Due to the steadily rising demand for ERP solutions in the cloud, particularly among SMEs, SAP seeks to substantialize their market position in cloud services like most other ERP solution providers. Apart from the previously discussed acquisition of Ariba, SAP also purchased Fieldglass, Inc., a workforce management SaaS provider, for $1 billion in March 2014. SAP s rationale behind that purchase is to expand the company s leadership for public B2B solutions on the cloud. Other prolific enterprise application acquirers such as Oracle and Riverside have also been active in ERPrelated M&A since 2012. 3
Vertical Applications 2.8 2.8 2.6 2.4 2.3 11.5x Median EV/EBITDA ratio Transaction Count 2.3x Business Intelligence & Customer Analytics 2.5x 2.5x 2.6x 2.6x 4.0x The Vertical Applications subsector saw a significant rise of more than 20 percent in the total number of transactions compared to the second half of 2013. The median revenue multiple for the last two and a half years was 2.3x, while the median EBITDA ratio was 11.5x. In addition to IBM, which has purchased several highvalue targets, a few prolific acquirers have also been active in this segment. Swedish measurement technology group, Hexagon AG, acquired Mintec Inc., an operating room management software provider, in April 2014 to strengthen the core of its product portfolio. Mintec is a typical deal for Hexagon, which has grown its business across several industrial markets through a combination of technology and geographic tuck-ins over the past decade. The top acquirer in this segment was Solera holdings. Over the course of the last 30 months, the company acquired 6 vertical application targets, all of which were in the range of $100 million in value. Targets in the Business Intelligence & Customer Analytics segment achieved the highest valuations in the whole Enterprise Applications sector, with a median revenue multiple across the period of 4.0x. The number of acquisitions rose to 112 1H 2014, while the median transaction value was $70 million. No EBITDA data was available for targets in this space. With two completed deals throughout the past 30 months, Accenture has been the most active purchaser in the BI segment. Accenture s most recent target in April 2014 was i4c Analytics, a developer of industry-tailored analytics software. Though undisclosed, the value of this transaction is estimated to be significant and is intended to strengthen one of Accenture s core activities within its analytics division. $70 M Transaction Count 4.0x The BI segment has seen several other noteworthy activities, the most significant of which being IBM s purchase of the customer analytics software provider Tealeaf for $500 million and at EV/S ratio of 10x. Median transaction value in 1H 2014 4
Design, PLM, Project and Portfolio Management Valuations have significantly increased in this subsector since 1H2012. The median revenue multiple for the previous thirty months was 3.1x, while the median EBITDA multiple over the same period was 13.3x. 1.9 2.4 2.4 2.9 3.1 The fragmentation of purchasers in this sub-sector is lower than in any other segment within Enterprise Applications. Autodesk alone purchased 12 targets in the past 30 months, French PLM & CAD software giant, Dassault, purchased 9. These two companies were responsible for nearly one-fifth of all deals in this subsector. 13.3x Median EV/EBITDA ratio Transaction Count 3.1x Trends in Enterprise Applications Mobility Environment A mobile approach has begun to be widely embraced in the enterprise applications space. Third-party application leaders in the mobility space such as Amazon, Apple and Google are already challenging the dominance of traditional enterprise infrastructure providers such as IBM, Microsoft and Oracle. Increasing shifts towards using mobile devices in the professional landscape imply that software does not only need to be reliable and user friendly anymore, but it also needs to provide collaboration and sharing as well as simplicity of mobile deployment and support. Mobile centric solutions need completely new architectures and have altered the way in which software is developed, and will continue to do so as the shift towards mobile devices is only accelerating. One of the most noteworthy transactions of the past 30 months is Dassault s acquisition of Accelrys, a scientific PLM software provider, in January 2014. The purchase was made for $750 million and yielded the sellers a respectable revenue multiple of 3.9x. Through purchasing Accelrys, Dassault enriches its molecular chemistry capabilities. Cloud Computing Cloud computing is expected to continue growing at a rapid pace, quadrupling in annual revenues between now and 2020 to reach a level of approximately $200 billion. Most experts believe that cloud solutions will make up 60-70% of the global enterprise applications market by 2020. Ongoing investments in reliable cloud solutions by software providers is already and will continue to erode the fear of security breaches that is associated with enterprise-cloud computing. By 2020, while a considerable portion of MNCs will still keep internal systems and extensive IT landscapes, particularly those operating with extensive amounts of sensitive information like major investment banks, the vast majority of SMEs and a substantial fraction of large corporations are expected to incorporate cloud solutions into their businesses. 5
Acquirer Acquisitions closed from 1H 2012-1H 2014 Total amount** Circuits.io - Circuit design & simulation SaaS Delcam plc - CAD, CAM & project management software Virtual Shape Research - Automotive modelling software * 3 most recent acquisitions of 13 since 1H 2012 +$500 million Accelrys Inc. - Scientific PLM software provider Realtime Technology AG - 3D visualization software Safe Technology Limited - Engineering testing software * 3 most recent acquisitions of 13 since 1H 2012 BigMachines, Inc. - CPQ sales automation SaaS Eloqua - Marketing automation SaaS provider Instantis, Inc. - Project management software * 3 most recent acquisitions of 9 since 1H 2012 STATS LLC - Sports statistics software DealerSocket, Inc. - Automotive CRM software PeopleAdmin, Inc. - Employee management SaaS * 3 most recent acquisitions of 9 since 1H 2012 +$1.5 billion +$3.3 billion +$3.4 billion ilab Sistemas - Brazilian Farming management software Mintec, Inc. - Mining & production software Pixis - Chilean engineering design software * 3 most recent acquisitions of 9 since 1H 2012 MERCAREON GmbH - Shipping scheduling SaaS McLeod & Associates - Utilities repair management SaaS Alchemy Systems, LP - Employee training SaaS * 3 most recent acquisitions of 8 since 1H 2012 Undisclosed Undisclosed SeeWhy - Point-of-sale marketing SaaS Fieldglass, Inc. - Workforce management SaaS KXEN, Inc. - Customer lifecycle predictive analytics SaaS * 3 most recent acquisitions of 8 since 1H 2012 +$5.5 billion AutoSoft Srl. - Automotive claims management software Servicios Informaticos Serinfo - Dealership management systems HyperQuest Inc. - Insurance industry software * 3 most recent acquisitions of 8 since 1H 2012 CSC (UK) Ltd - 3D structural engineering software Asset Forestry Limited - Forestry logistics software Vico Software, Inc. - Building modelling software * 3 most recent acquisitions of 8 since 1H 2012 SmartLinc, Inc. - Shipping & logistics software Outback Software Pty Ltd. - Dba Metrix Software GamSys - Print industry ERP software * 3 most recent acquisitions of 7 since 1H 2012 +$100 million +$350 million +$30 million **cumulative value of disclosed transactions 6
Hampleton provides independent M&A and corporate finance advice to owners of Internet, IT Services and Software companies. Our research reports aim to provide our clients with current analysis of the transactions, trends and valuations within our focus areas. Data Source: We have based our findings on data provided by industry recognised sources. Data and information for this publication was collated from the 451 Research database (www.451research.com), a division of The 451 Group. For more information on this or anything else related to our research, please email the address provided below. Disclaimer: This publication contains general information only and Hampleton Ltd, is not, by means of this publication, rendering professional advice or services. Before making any decision or taking any action that may affect your finances or your business, you should consult a qualified professional adviser. Hampleton Ltd shall not be responsible for any loss whatsoever sustained by any person who relies on this publication. 2014. For more information please contact Hampleton Ltd. London San Francisco 4th Floor Suite 200 17 Woodstock Street 1 Sutter St W1C 2AJ CA 94104 United Kingdom United States Email: jo.goodson@hampletonpartners.com 7