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Five-year high enterprise software M&A insights revealed at MSH Europe

Companies buying other businesses in enterprise software has hit a five-year high. The latest M&A market report from international technology mergers and acquisitions advisor Hampleton Partners,  shows consistent growth in transaction volume, multiples and valuations, with Enterprise Software M&A disclosed deal value achieving a whopping $182.2bn in 2018 – a five-year high.

Jonathan Simnett (pictured) from Hampleton will be talking about the M&A potential in the sector at the European Managed Services Summit on May 23rd in Amsterdam. He presented at the event last year and was well received for his insights into where the smart money was going in the sector.

More details on the Summit here

In the second half of 2018, M&A volume in the Enterprise Software sector also reached its highest level in five years: a total of 629 deals were recorded, representing an increase of 35% since the low of 465 deals in 2H2013. The figure included deals from large strategic players such as Microsoft, Oracle, Salesforce, Adobe and SAP.

Miro Parizek, founder, Hampleton Partners, said: “We are witnessing a land grab for innovative software and IT companies. On the one hand, verticals such as healthtech and fintech are experiencing rapid growth and are compelled to update and adapt their systems, software and processes simply to keep up the pace and survive in the face of their competition. On the other hand, large strategic and legacy players are pursuing a comeback to the market, acquiring innovative, horizontally applicable software to remain relevant and versatile. As the record-high valuations and volumes show, this competition for tech and talent is driving-up M&A valuations to a peak.”

Blockbuster deals included IBM spending $33.4bn – all cash - on open-source software provider Red Hat. Meanwhile, Broadcom acquired CA Technologies, a leading IT management software vendor, for $18.9bn, a premium of approximately 20% over the closing price of CA Technologies’ stock in July 2018. Hampleton’s IT & Business Services M&A Report reveals a total count of 421 transactions for 2018, including a total of seven billion-dollar deals and many deals in the hundreds of millions.

In this sector, outsourcing deals have remained extremely popular, offering new talent, connectivity and even competitive labour overseas to companies seeking to keep up the pace in a rapidly changing technological environment. Integration services also struck a note, and will no doubt remain sought-after following this half year, particularly among public sector organisations and providers to government agencies looking to improve and integrate systems securely.

In addition, Hampleton notes:

  • Traditional software players such as Microsoft, Adobe and Oracle are returning to the M&A landscape to remain relevant and versatile.
  • Private equity firms continuing to acquire innovative enterprise software firms.
  • Cloud-based business consolidating, as legacy tech companies bolster their cloud capabilities through the acquisition of software companies.
  • High transaction volume for ERP targets, particularly HR and employee management software.
  • A strong appetite for healthcare and financial services software.
  • Digital marketing acquisitions, including firms specialising in email marketing, PR and advertising, playing a key role in shaping the M&A landscape for IT services.
  • Cross-border acquisitions playing a large part, with both North American and European companies targeting companies in Western Europe for expansion.