- Transaction volume dropped five percent in the first half of 2020 vs. second half of 2019
- Valuation multiples beginning to decline – 16.7x trailing 30-month median EBITDA multiple vs. 17.3x in the second half of 2019
- More regional deal-making in Enterprise Software M&A market as travel restrictions and local lockdown measures impact intercontinental M&A
The first post-COVID-19 Enterprise Software M&A market report from Hampleton Partners, the international technology mergers and acquisitions advisor, reveals that transaction volumes dropped by five percent, with 602 deals recorded in the first half of 2020 compared to 631 deals in the second half of 2019.
Hampleton’s report did register $34 billion worth in disclosed transaction value, however, with a handful of blockbuster billion- and nine-digit deals, including Visa’s $5.3 billion acquisition of Plaid and Salesforce’s $1.3 billion acquisition of Vlocity.
Contrary to previous quarters, in Q2 2020, 61 percent of European targets were bought by acquirers that were also European, pointing to more regional deal-making this year. This is likely to be due to travel restrictions and local lockdown measures strongly impacting the prospects for intercontinental M&A.
Miro Parizek, founder, Hampleton Partners, said:
“Covid-19 is re-shaping the Enterprise Software M&A market. Both private equity and strategic buyers are focusing their sights on companies helping to improve communications, streamline processes or facilitate remote working capabilities; businesses that help fuel the e-commerce boom, like supply chain logistics software critical for improving last-mile fulfillment; and, of course, healthcare software.
“Looking forward, we anticipate robust M&A activity as buyers jockey for position in the new, post-pandemic, business environment.”
Video-conferencing begins to attract new acquirers
In April, telecommunications company Verizon acquired BlueJeans, an American provider of video conferencing, webinar, and online event management SaaS, for $400 billion at 4x revenue. The software can integrate with existing systems and is accessible through multiple web browser platforms and on mobile devices.
In March 2020, private equity firm Marlin acquired Lifesize, a provider of 4K video conferencing SaaS which allows users to host free video and audio calls instantly via a share link to their teams, for an undisclosed sum.
Healthcare remains the biggest software vertical
Healthtech dominated the vertical software segment in 1H2020.
In February, CompuGroup Medical, a German healthcare information management SaaS, acquired the German and Spanish assets of Cerner Corp. Cerner provides healthcare practice management software and SaaS which has features for billing, EHR (electronic health records) management, and electronic data interchange (EDI). The acquisition closed at $249 million, at 3x Cerner’s revenue, and 17.1x its EBITDA.
The digitalization of healthcare is continuing to accelerate the growth of data volumes. With more data, healthcare players need new and improved tools in artificial intelligence (AI), machine learning (ML), and predictive and prescriptive analytics to comb through this massive pool of data.
“We’ve seen the number of AI targets rise exponentially as the early movers and pioneers of this space are becoming ripe for sale,” says Parizek.
In 1H2020, American genetic testing services provider Invitae made two acquisitions in this space. In the first, it acquired Diploid, a Belgian AI-based genetic disorder sequencing SaaS, for $95 million.
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In a second acquisition, Invitae acquired YouScript for $79.3 million. The target, a four-year-old American startup, provides prescription medication management and analytics SaaS to healthcare providers. Its software includes features for analyzing patients’ genetic data with clinical knowledge on drug metabolism to help predict which prescription medications will work best.
Supply chain logistics continue to garner M&A interest
In January, WiseTech Global, the ASX-listed company specializing in logistic management SaaS acquired SISA Studio, a near 50-year-old Swiss provider of customs clearance and freight forwarding SaaS which includes document and warehouse management features.
Meanwhile, Valsoft, a Montreal-based vertical investor, acquired the Belgian assets of Navitrans which provides logistics and warehousing management SaaS, enabling management of land, sea, and air freight forwarding, associated documentation and integrated logistics.