Covid crisis spurs 30 per cent jump in M&A activity targeting enterprise software, says Hampleton Partners report

The latest Enterprise Software M&A report from Hampleton Partners, an international technology mergers and acquisitions adviser, reveals that the number of deals targeting enterprise software assets has jumped, with 836 deals recorded in the second half of 2020 compared to 641 deals in the first half of the year.

Total transaction value disclosed across all deals in the space was also sky-high, reaching USD112 billion – the highest amount on record.
Valuation multiples remain healthy but have dipped slightly: the trailing 30-month median EV/S multiple came in at 3.4x, while the EV/EBITDA came in at 14x. This is possibly because the pandemic motivated sellers to decrease pricing to a more appetising level for buyers earlier this year.
Meanwhile, the second half of 2020 saw the highest recorded share of private equity and financial buyer transactions: 38 per cent of all deals were carried out by financial buyers, up from 34 per cent in 2018 and 33 per cent in 2019.
Miro Parizek, founder, Hampleton Partners, says: “The new circumstances and challenges around Covid-19 have created opportunities for software services.
“Businesses that are increasing their digital transformation efforts are looking to software tools to help them navigate the digital sphere. Working from home is becoming widely accepted, so staff need remote access to their files and programmes, meaning a bigger platform for desktop virtualisation and file discovery. Meanwhile, retailers need e-commerce sites and apps.
“As a result, digital implementations and high-functioning enterprise infrastructure are needed now more than ever, allowing software and SaaS providers to fill in the gaps. These, in turn, are attracting the attention of prolific acquirers who are looking to own or operate the next indispensable technology.”

Buyers are looking to enterprise applications that help streamline new processes, particularly supply chain and logistics processes as shipping and digital commerce continue to replace retail. For instance, Coupa Software acquired Llamasoft and its enterprise supply chain management (SCM) software from TPG Capital for USD1.5 billion.
Customer analytics and business intelligence are experiencing a boom in interest, as digital customer acquisition and retention becomes growing concern for digital commerce newcomers and existing players alike. For instance, Twilio acquired customer analytics API provider Segment for USD3.2 billion.
Infrastructure and APIs are key for all businesses looking to improve their digital architecture and ensure their systems are up to speed. For example, Splunk acquired Plumbr’s application performance monitoring (APM) service for an undisclosed amount.
The healthcare software vertical is front-of-mind for financial sponsors. For example, private equity-backed WellSky acquired care coordination software company CarePort for USD1.4 billion.
Parizek says: “Looking forward, 2021 has started with a flurry of activity. Hampleton has entered the year with a strong portfolio of mandates including AR/VR, electric vehicles, IoT, digital marketing, e-commerce, payments, digital banking and transformation.
“We anticipate Tech M&A to remain robust in both volume and value this year as technology vendors continue making strategic acquisitions, and traditional industry players and financial buyers add more technology to their portfolios.”

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