|
|
| Home - Software M&A Review - Nov 02 Issue |
Software M&A - September Deals and Insight |
By Ken Bender, Managing Director, and Allen Cinzori, Associate - Software Equity Group, LLC
Two or three years ago, technology drove most software acquisitions. Fearing they'd miss the boat and lose ground to the competition, public software companies had a voracious appetite for unproven technologies in search of a market. Today, most software acquisitions are driven by a quest for increased market share and increased revenue from cross-selling the buyer's products into the acquired company's installed base and vice versa. Common today are acquisitions which provide an entrée into the the mid-market or a vertical sector. Below are our thoughts on eight such transactions.
NetIQ Corporation (NTIQ) / PentaSafe Security Technologies
Category: Integrated security management solutions
LTM Revenue Multiple: 7.08x*
Terms: Cash and stock
SEG s Perspective:
The multiple reflects the strategic importance to NetIQ, a leader in systems management and Web analytics, of acquiring a comprehensive, best of breed security management solution in order to capitalize on the convergence of the two technologies. NetIQ also picks up 1,250 customers, including the Big 4 auditing firms. The transaction, which is dilutive but expected to be accretive within 12 months of closing, will provide revenue to offset NetIQ s decline in license fees from Microsoft.
EMC Corporation (EMC) / Prisa Networks
Category: Storage area network
LTM Revenue Multiple: 3.33x*
Terms: Cash
SEG s Perspective:
Information and storage leader EMC, hammered by IT budget cuts and resistance to a proprietary offering, continues its foray into open systems. By acquiring Prisa Networks, a leading supplier of open systems storage area network software, EMC is now positioned to move into the low-end and midrange of the storage systems market. We anticipate additional software acquisitions by EMC, as it seeks to increase its software revenue contribution to 30%, acquire additional open systems market leverage, and use its substantial cash reserve.
Systems & Computer Technology Corporation (SCTC) / Campus Pipeline
Category: Software for higher education
LTM Revenue Multiple: 2.80x*
Terms: Cash
SEG s Perspective:
SCT, a provider of administrative software to the higher education market, had announced a strategy of providing an e-Education infrastructure platform. Campus Pipeline, serving the same university market, had the products and technology to enable SCT to deliver on the promise. Additionally, Campus Pipeline provides SCT with access to more than 200 colleges and universities. The two companies have had a strategic partnership for more than 4 years. Backing out Campus Pipeline's $15M in cash from the purchase price, the multiple declines to 1.8x.
John H. Harland (JH) / SPARAK Financial Systems
Category: Hardware and software systems for community banks
LTM Revenue Multiple: 1.88x
Terms: Cash
SEG s Perspective:
Harland, a leading provider of print and software products to financial institutions, continues to grow its software side. Typical of today s buyer, Harland stays close to home and moves downstream acquiring SPARAK, an established leader in integrated hardware and software solutions for community banks. Expect Harland to cross-sell into SPARAK s installed base and to boost SPARAK s revenues by leveraging Harland s brand and distribution channels. This is an accretive transaction and includes a $2M earnout, which would take the valuation to 2.0x.
|
|
|
