More Than Half of 2009 Top Tech Deals Are Software or Services

November 13, 2009
Software and Services account for more than 50% of largest tech deals and EV

The Wall Street Journal published a chart of the largest technology deals of 2009 yesterday and what was most notable was that more than half of the transactions were in software or services. While Oracle’s pending acquisition of Sun Microsystems still takes the top spot at $7.3 billion, software and services account for just over 54% of total enterprise value for all tech deals over $1 billion. The WSJ notes that this string of recent tech deals (11 deals have been announced in the second half of the year) is breathing life into “the once morbid M&A market,” as larger companies chase after growth through acquisitions.

Top Tech Deals of 2009



Updata Advisors Publishes Q3 2009 IT M&A Review

November 3, 2009
M&A Market Continues To Recover In Q3 with More Deals, But At Lower Valuations

In our Q2 2009 IT M&A Review, Updata Advisors predicted that growth in the IT M&A market (software, services, internet), glimmers of which appeared at the end of Q1, would continue through 2009. Indeed, the third quarter has shown the real makings of a market comeback, as five multi-billion dollar deals helped contribute to another increase in total enterprise value and the total number of transactions reached a peak we have not seen since 2007.

This review includes coverage of deal activity over Q3 2009 and future expectations for the Infrastructure Software, Enterprise Application Software, IT Security, IT Services, Internet and Financial Technology sectors. Read more>>

Areas With Potential for IT M&A Transaction Activity: We believe that the mobile technology, social networking and government services markets will be fertile for IT M&A activity for the remainder of the year into next… read more>>

SECTOR ANALYSES

Infrastructure Software: The Infrastructure software sector began to show meaningful signs of improvement from an M&A perspective during Q3, including hitting a peak of 23 transactions, more than any of the previous four quarters. … read more>>

Enterprise Application Software: The Enterprise Application software sector appears to have bucked the trend many of our sectors witnessed of higher deal volumes and lower valuations in Q3 with increases transactions as well as total enterprise value and average deal size. … read more>>

IT Security: Aided by the rebound in equity markets and evidence of firming enterprise demand, IT Security saw the number of announced M&A transactions tracked by Updata double in Q3 and rise 20% over the prior year quarter.… read more>>

IT Services: IT Services deal activity increased for the second straight quarter in Q3 and, contrary to most sectors, total enterprise value and average deal value also climbed significantly higher… read more>>

Internet: In Q3, the Internet sector experienced its first palpable recovery from the steep declines of the prior three quarters… read more>>

Financial Technology: The third quarter brought a marked increase in the number of announced Financial Technology M&A transactions, although total announced deal value and average deal size were both down significantly… read more>>>


Big Deals, Big Multiples Hit The Spotlight In September

September 18, 2009
Deals such as Omniture and Mint.com are larger transactions with higher revenue multiples.

There has been a slew of big M&A deal announcements in the tech sector the past week (Mint.com, NetOsQ, Omniture) and it certainly makes us feel even more comfortable for deals in Q4 as we near the end of September. This quarter as a whole has brought 15 big deals (over $100 million) and some of the highest multiples since the beginning of 2009 spread across our entire spectrum of IT sectors.

M&A multiples have more than doubled since the beginning of the year. In September alone, the biggest deals are boasting LTM EV/Rev multiples of between 3.6x and 17x. As of September 17, the median revenue multiple for deals over $100 million came to 3.1x — a big increase over the 2.5x median multiple for Q2 and 1.5x median multiple for Q1.

Software Transactions Over $100 Million

The most recent deal announcement — Adobe’s acquisition of Omniture, a provider of online business optimization software — has really caused some buzz in the market. The transaction rings in at a deal value of $1.7 billion (a 24% premium) with an enterprise value/revenue multiple of 5x. John Lovett, an analyst for Forrester, believes the deal brings in a new challenger for Web content management providers, while others say the Omniture deal (along with other deal announcements) is a good sign for tech start-ups since acquirers appear to be extending into and finding new markets as well as increasing web presence.

The biggest payout in terms of multiples goes to Intuit and its $170 million acquisition of Mint.com at an EV/Rev multiple of 17x. A day before the Omniture deal broke, CA announced its $200 million acquisition of network performance management provider NetQoS Inc at an EV/Rev multiple of 3.6x. Skype’s $2.7 billion acquisition by Silver Lake Partners (which could now be heading for some lawsuit trouble) is the largest of the deals for Q3, and also boasts a hearty revenue multiple as well at 4.5x.

The market appears to be well off the lows of Q1 and we expect there could be even more activity before Q3 rounds out at the end of the month. While deal volumes for all M&A are still lower (global deal volume as of September 11 was $1.34 trillion, down 37% from the same time last year), the big jump in deal sizes and multiples since the second quarter is a good sign. We believe there will be plenty of room for continued growth through the remainder of 2009 and expect a move to more normalized levels for M&A, particularly in the software sector, in 2010.

Q3 2009 Software Transactions Valued Over $100 Million



Updata Advisors Q2 2009 IT M&A Review

August 5, 2009
Tech Continues Slow Climb From The Bottom In Q2

Updata Advisors has published its Q2 2009 Information Technology M&A Review. In our Q1 Review, Updata predicted that Q2 would show the beginnings of a return to normalcy in tech M&A. Indeed, several events took place in the early days of Q2 that suggested this would be the case. The announcement of several large deals suggests that buyers are slowly regaining their courage to spend.

This review includes coverage of deal activity over Q2 2009 and future expectations for the Infrastructure Software, Enterprise Application Software, IT Security, IT Services and Internet sectors. Read more>>

Areas With Potential for IT M&A Transaction Activity: We believe that mobile technology, SaaS and cloud computing and financial technology will be fertile for IT M&A activity for the remainder of the year into next… read more>>

Overall Market Observations: Updata has observed more competitive deals and the tech IPO market improving in the overall technology M&A landscape… read more>>

SECTOR ANALYSES
Infrastructure Software: The market for M&A transactions in infrastructure software has shown continued signs of improvement during Q2 2009… read more>>

Enterprise Application Software: From an M&A perspective, the enterprise application software sector appears to still be struggling, but there are a number of reasons causing the declines that we expect may well turn around when the overall economy bounces back… read more>>

IT Security: M&A transaction volume in the IT security sector remained modest in the second quarter of 2009, but, encouragingly, first-half 2009 announced deal volumes were down only slightly from 2008… read more>>

IT Services: IT Services M&A saw reasonable activity in Q2, including a significant number of cross-border deals… read more>>

Internet: Internet sector M&A activity remains modest but picked up in Q2 2009, with an increase in pure-play deals tracked by Updata, compared to Q1… read more>>

For the full report click here.


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