1| 10 SaaS and Cloud M&A Overview 2H 2017
The ongoing evolution of cloud computing and
Software-as-a-Service (SaaS) means the ability for
enterprises to navigate an increasingly complex
environment in the coming years remains one of the
largest
leadership challenges. Underpinning the
transition from legacy systems is the drive towards
better efficiency, cost and speed.
Big data and analytics has been one of the bright
spots in the sector, with enterprises flocking to
internet-based tools in order to avoid spending on
data centres. As the amount of data stored by companies accelerates, many are updating their systems to help
them understand, predict and influence customer behaviour both online and offline.
As a result, in today's competitive business environment, the need to be well equipped for the shift to cloud
computing, a technology which spans across all industries, has significant implications for M&A activity. Legacy
vendors such as IBM, Oracle, Salesforce and SAP are locked in a perpetual rivalry with each other to acquire
assets to speed up their transition, while tech giants such as Google continue to join the buyer universe in efforts
to boost their enterprise credentials. And further validating investment in cloud and SaaS models private
equity investors are giving strategic buyers a run for their money when it comes to paying premiums.
Looking ahead, developments in artificial intelligence and cloud-hosted voice assistants such as Siri, Cortana,
Google Assistant and Alexa are tipped to be one of the biggest drivers of future growth in the sector.
-
100
200
300
400
500
600
1H 2011 2H 2011 1H 2012 2H 2012 1H 2013 2H 2013 1H 2014 2H 2014 1H 2015 2H 2015 1H 2016 2H 2016 1H 2017
Total number of Saas and Cloud M&A deals 2011 - 2017
Transaction Volume
Introduction: New era of computing
2| 10 SaaS and Cloud M&A Overview 2H 2017
2428
Total transaction volume since
1H2015
3.8x
Trailing 30 Month Median
EV/S
14.5x
Trailing 30-Month Median
EV/EBITDA
Deal flow in the Software-as-a-service (SaaS) and Cloud sector picked up
slightly in the opening half of 2017 compared the last half of 2016. The
information management and enterprise applications & networking sub-
sectors contributed much to the uplift, with the former increasing by 36% on
previous half year numbers, contributing to a total value of $7.22 billion
across the entire SaaS and Cloud sector.
For the most part, valuations remained steady. The trailing 30-month
median revenue multiple for the period came in at 3.8x, consistent with the
level we have monitored since 2015.
Vista tops buyer charts
Cloud services and digital media group, J2 Global, once again came out in
the lead as the sector's most active acquirer in the last 30, placing it ahead
of other serial legacy buyers such as Salesforce, Microsoft, Oracle and IBM.
J2 Global has announced a total of 18 SaaS acquisitions for the period,
followed by software, data, and technology-focused private equity firm,
Vista Equity Partners, with 16 deals and software giant Microsoft with 14
deals.
M&A summary
Our SaaS and Cloud report covers the two and a half year period between January 2015 and June 2017. All totals and median values refer to the
entire period unless otherwise stated. Median multiples plotted in the graphs refer to the 30 month period prior to and including the half year.
3.8x
4.0x
3.8x
3.8x
3.8x
14.5x
14.5x
15.1x
14.5x
14.5x
-
100
200
300
400
500
600
1H 2015
2H 2015
1H 2016
2H 2016
1H 2017
Transaction Volume
Trailing 30 Month Median EV/S
Trailing 30 Month Median EV/EBITDA
3| 10 SaaS and Cloud M&A Overview 2H 2017
Acquirers
Acquisitions
in 30 months
Three most recent acquisitions
18
Campaigner Email marketing SaaS
Scrypt Inc. Document management & e-signature SaaS
CudaMail Anti-spam & malware SaaS
16
PayLease LLC Property management payment SaaS
Lithium Technologies Inc. Social media creation SaaS
Xactly Corporation Sales Performance management SaaS
14
Cloudyn Cloud monitoring & management SaaS
Hexadite Automated cybersecurity SaaS
Deis Inc. [Engine yard] Web application deployment PaaS
13
Twin Prime Inc. Mobile app acceleration SaaS
Krux Digital Audience management & targeting SaaS
HeyWire Inc. Enterprise cloud-based messaging software
11
Moat Inc. Advertising analytics SaaS
Wercker US Inc. Continuous integration & delivery SaaS
Apiary Inc. API development software
10
TIMETOACT GROUP Team collaboration SaaS assets
Fluid Inc. (XPS division) Personal shopping recommendation software
EZ Legacy Enterprise application management software & SaaS
10
NYSE Governance Services Inc. Behavioural analytics-enabled
compliance
Tangoe Telecom expense management software
Edgenet Inc. Construction product configuration SaaS
9
Spanning Cloud Apps Inc. Application backup & recovery SaaS
Zyme Solutions Channel data management SaaS
YourMembership.com Membership management & social SaaS
1765
Number of active acquirers
during the past 30 months
Number of acquirers that
made >1 acquisition
361
$41m
Median disclosed transaction
value in past 30 months
Top acquirers
4| 10 SaaS and Cloud M&A Overview 2H 2017
1. Private equities ramp up spending in the sector, paying steeper prices than strategic buyers
2. UK dominates European deal share despite ongoing concern around Brexit
3. Increasing complexity of cyber threats boosting security-related acquisitions Cloud-based data analytics
continue to play a pivotal role in deal-making across the buyer spectrum
4. Collaboration tools face renewed demand in era of digital workplaces
5. Artificial intelligence tipped to be the industry's next major growth driver
Top trends in SaaS and Cloud
Private equity gives strategic buyers run for their
money
Lured by sustainable, recurring revenue streams and
business versatility, the total number of private equity-
backed transactions grew to 59, up 7% from the
previous half year period and up an even steeper 34%
from the first half of 2016, as more private equity
firms rush to ride the increasingly mainstream SaaS
and Cloud bandwagon. Half of the industry's top ten
highest valued deals in the first half of 2017 involved a
private equity bidder.
The largest private equity deal and second largest
deal across the sector in the last half year period was
Clearlake Capital's acquisition of LANDESK, a provider
of
IT asset management and endpoint security
software, from buyout firm Thoma Bravo for an
estimated $1.15 billion. Clearlake then merged
LANDESK with its portfolio company Heat Software, a
provider
of
cloud-based
service management
software, and changed its name to Ivanti.
Trends in SaaS and Cloud
5| 10 SaaS and Cloud M&A Overview 2H 2017
Cross-Atlantic deals
One of the largest deals to come out of Europe in 1H
2017 was Vector Capital's acquisition of Irish-based
Experian Information Solutions Inc. for approximately
$300 million. Although the bulk of large deals were North
American-based, this deal highlights the significant
strength of Europe in SaaS and Cloud M&A.
40%
Geographical breakdown
Investors shrug off Brexit blues
Economic slowdown and political uncertainty in Britain
had little impact on deal flow, particularly in the small
to mid-market segment. In fact, the number of UK deals
grew by 37% from the same period last year ahead of
the Brexit vote. In addition, the UK accounted for 40%
of all deals in Europe. Germany and France were the
next most targeted countries.
acquires
Europe
53%
North
America
43%
RoW
4%
Headquarters of acquirers of European targets
Europe
21%
North
America
71%
RoW
8%
Headquarters of SaaS and Cloud targets
6| 10 SaaS and Cloud M&A Overview 2H 2017
Information
Management
13%
Enterprise
Applications &
Networking
66%
Infrastructure
Management
21%
The largest disclosed deals of1H2017
Sub-sector breakdown
Enterprise Applications & Networking
Business intelligence, CRM, ERP, online marketing & e-commerce, SCM, network
performance and management, enterprise VoIP, premises networks
Information Management
Collaboration, content management, data management, info retrieval, data protection,
storage performance management
Infrastructure management
App lifecycle management, business process management, hosted services, integration,
systems management, security
$3.70 billion
Cisco Systems Inc. buys AppDynamics
Inc.
$1.15 billion
Clearlake Capital Group L.P. buys
LANDESK Software
$1.13 billion
HGGC buys IDERA Inc.
$800 million
Thoma Bravo LLC buys Planview Inc.
$800 million
TA Associates buys MRI Software LLC
$750 million
First Data Corporation buys
CardConnect Corp.
$650 million Hewlett Packard Enterprise buys
SimpliVity
$614 million
CA Technologies buys Veracode
$610 million
Cisco Systems buys Viptela Inc.
acquires
acquires
7| 10 SaaS and Cloud M&A Overview 2H 2017
Buyout funds propel deal count
Increased levels of
interest
from buyout funds
propelled total deal volume up for the first time since
1H 2015 by 1.5% and booking a total value of $7.22
billion. The sub-sector accounted for three out of the
sector's ten largest deals, which involved private
equity buyers TA Associates, Thoma Bravo and Vista
Equity Partners.
The sub-sector's largest two deals were TA Associates'
$800 million estimated investment in MRI Software, a
global provider of real estate software solutions, and
Thoma Bravo's acquisition of PlanView, a portfolio
management SaaS specialist, also for an estimated
$800 million.
Cloud-based data and analytics in high demand
Legacy buyer Oracle's acquisition of New York-based
Moat for an estimated $600 million is a testament to
the growing
interest in cloud-based data and analytics providers.
The start-up, which had raised approximately $67.5
million prior to the acquisition, will operate as an
independent platform within Oracle Data Cloud.
Oracle has been moving aggressively into the digital
advertising and marketing space over the past few
years, acquiring businesses such as Vitrue, a social
media marketer,
in 2012 and data management
platform BlueKai in 2014.
Interest in cloud-based data and analytics providers
was
also
strong among
financial
buyers,
as
demonstrated by Vista Equity Partners' $564 million
acquisition of Xactly, the third largest private equity
deal in the sub-sector and among the ten largest
transactions throughout the wider sector in the
opening half of 2017. Headquartered in San Jose,
California, Xactly supplies data software that tracks
employee and sales performance and helps manage
incentive compensation.
298
3.5x
Transaction volume 1H2017
Median EV/S
3.5x
3.5x
3.5x
3.5x
3.5x
-
50
100
150
200
250
300
350
1H 2015
2H 2015
1H 2016
2H 2016
1H 2017
Transaction Volume
Trailing 30 Month Median EV/S
Enterprise applications & networking
8| 10 SaaS and Cloud M&A Overview 2H 2017
Collaboration investment sees marked increase
Driven by ongoing developments
in the digital
workplace, the opening half year saw a marked
increase in investment in the collaboration software
space by both strategic and financial buyers. With
collaboration tools once again ranking high on the
agenda, the $462 million sale of collaboration giant,
Jive Software, to buyout firm, ESW Capital, shows that
legacy software hasn't lost its touch in the face of a
slew of younger competitors like Slack.
The enterprise collaboration space has become
increasingly competitive in recent years with the
emergence of new generation of tools such as
Workplace by Facebook and Microsoft Teams. Keen to
keep up with a new wave of nimble players capturing
market share, software giants such as Adobe Systems,
Salesforce, Cisco and IBM also offer their own
collaboration tools.
Strong start to 2017
Deals in the information management sub-sector
were off to a stronger start compared to the previous
half year, with deal volume up by 36% to 60 and total
disclosed value coming in at $1.81 billion. The trailing
30-month median revenue multiple for the period
came in at 3.8x, following a strong decline from the
4.4x in 2015 through 1H 2016..
The
sub-sector's
largest
transaction was HP
Enterprise's
acquisition
of Massachusetts-based
storage start-up SimpliVity for $650 million in cash.
Meanwhile, SimpliVity rival Nutanix, went public in
September 2016. Both companies were racing to
stake out a leading position in the fast-growing hyper-
converged infrastructure market. Adoption of the red-
hot market has surged in recent times as the industry
makes the monumental leap from legacy-converged
infrastructure.
60
3.8x
Transaction volume 1H2017
Median EV/S
4.4x
4.4x
4.4x
3.8x
3.8x
-
10
20
30
40
50
60
70
80
1H 2015
2H 2015
1H 2016
2H 2016
1H 2017
Transaction Volume
Trailing 30 Month Median EV/S
Information management
9| 10 SaaS and Cloud M&A Overview 2H 2017
Headline deals boost total deal value
A flurry of landmark transactions pushed the total
deal value for the opening half year up by 113% in
infrastructure management compared with
the
previous six months. The trailing 30-month median
enterprise value to sales multiple for the period came
in at 5.0x, having remained stable since mid-2015.
Cisco pushes for scale
Cisco was the only company to announce two
transactions among the top ten highest valued deals,
bringing its total deal count across this sector in the
last 30 months to eight. As part of a sustained effort
to stay ahead of smaller cloud-based rivals like New
Relic, the firm is under immense pressure to expand
into higher growth and next-gen tech markets and has
undertaken a big push in transformation deals from
both a scale and technology standpoint.
In January, the software-hungry legacy enterprise
business which is transitioning from its core hardware
networking business, announced a $3.7 billion
acquisition of
cloud application and business
monitoring provider AppDynamics. A few months
later, it bought Viptela, a privately held software-
defined wide area network (SD-WAN) company based
in San Jose, for $610 million.
Complex cyber threats boost security M&A
Enterprise software vendor CA Technologies' $614
million acquisition of Veracode, which runs security
tests on corporate software, highlights investors'
increased focus on security amid the advent of
increasingly complex cyber threats. The acquisition is
the latest in a long line of security deals by the
software giant, including last year's acquisition of
Israeli testing outfit BlazeMeter.
106
5.0x
Transaction volume 1H2017
Median EV/S
4.4x
5.0x
4.9x
5.0x
5.0x
-
20
40
60
80
100
120
140
1H 2015
2H 2015
1H 2016
2H 2016
1H 2017
Transaction Volume
Trailing 30 Month Median EV/S
Infrastructure management
10| 10 SaaS and Cloud M&A Overview 2H 2017
Conclusions & contacts
Frank Berger
Partner
frank@hampletonpartners.com
Miro Parizek
Principal Partner
miro@hampletonpartners.com
The SaaS and Cloud sector saw an increase in transaction volume in 1H 2017 over
the previous period, indicative of buyers' continued interest in adapting to
modern business solutions. Two of the three sub-sectors saw increases in deals,
with the more significant jump coming in Information Management at 36%,
thanks in part to the strength of the enterprise collaboration space.
Looking to the future, we expected cloud-hosted applications to continue to fetch
higher multiples than their on-premises counterparts. The drive for cloud-based
solutions is supported on both the demand side and the supply side. Increasing
numbers of businesses are turning to the cloud as fears of data insecurity are
allayed. At the same time, SaaS businesses are starting to find winning
profitability formulas after years of development of their business models.
Axel Brill
Director
Axel@hampletonpartners.com
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Hampleton provides independent M&A and corporate finance advice to owners of Internet, IT Services, Software and High-Tech Industrial 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.
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