Technology is no longer the exclusive poster child of the Venture Capital community. In the last year, traditional private equity firms and corporate buyers have hopped on the bandwagon, investing heavily in the space.
The M&A value for software in Q1, 2019 was $73.75 billion and the number of deals closed were 552. Software accounted for 47% of the total M&A transactions in Q1 2019 compared to 36% of all transactions last year during the same period. 

The median deal size in the Software industry was $87 million in Q1, 2019. The broader software industry M&A's upward trend continued in Q1 2019. In particular, the SaaS M&A market boomed, reaching an all-time quarterly record of 277 deals.

SaaS valuations for Q1 2019 remained high at a multiple of 4.5x EV/Revenue About a third of transactions in Q1 2019 had a revenue multiple greater than 6.0xEV/Revenue. Highest median revenue multiple of 5.3x EV/Revenue was posted by targets with revenue of $50-$100M, while targets with revenue of $100M or greater posted the second highest revenue multiple of 5.0x EV/Revenue.

Private Equity buyers remain an active acquirer of SaaS companies. The most active software buyers were Vista Equity Partners, Insight Venture Partners, TA Associates, Providence Equity Partners, Thoma Bravo, Genstar Capital, Accel-KKR, and HG.
106 Ed-tech deals closed in Q1 2019, compared with 45 in Q1 of last year – a 235% YoY increase. The increase has primarily come from strategic buyers focusing more on acquiring technology companies to stay competitive, and PE firms diversifying their capital offerings by engaging in minority equity deals in light of the increasing competition in M&A.

When you compare Q2 2018 figures with figures from Q1 2019 – the largest and second largest months in terms of dollar volume over the last 6 quarters respectively – Q1 2019 achieved 87% of Q2 ‘18’s dollar volume, but did so in 230% more transactions.

The Takeaways

·   Buyers are increasingly doing smaller deals, at a more frequent pace than previous years.

·   Buyers are targeting vertical-specific technology companies to provide offerings to specific segments and new customer bases.

We saw a host of closed transactions this past May that
spoke to this trend:

·    BV Investment Partners Announced a growth-Oriented, minority Investment in CivicPlus, a leading integrated technology platform for local government.

·    Great Point Partners completed a growth equity investment in Axiom Real-Time Metrics, a premier provider of unified eClinical solutions and services that are used to enhance the efficiency of clinical trials and observational studies.

·    Tendril, the leading provider of AI-powered utility customer experience and DSM solutions Acquires EnergySavvy, the leader in personalized utility customer engagement.

·   TABS Analytics, a technology-enabled analytics firm, acquired Decision Insight, a Kansas City, Mo. based global marketing research and analytics firm with expertise in both brick-and-mortar and online shopping environments.
ABOUT US
Whether you want to sell or buy a business, Chapman Associates provides a personalized service, based upon our sixty-two years of successful M&A closings and our relationships with more than 9,300 registered buyers. Chapman is one of the most respected middle-market M&A firms in the country. What makes Chapman different from the competition?

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