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| Home - Software M&A Review - Apr 06 Issue |
Software M&A – Acquisition Spree Continues
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Pitney Bowes (NYSE: PBI) Acquires Emtex
Category: Document Management Software
Purchase Price: $41,000,000
Seller Revenue: $15,000,000
Revenue Multiple: 2.7x
Payment Terms: Cash
SEG’s Perspective:
Pitney Bowes, provider of mail automation and document management technology, acquired Emtex, developer of document management technologies to large volume mail handlers. Pitney Bowes will use Emtex to extend further beyond mail meters to encompass electronic communication, online commerce, document management, mail-tracking software, and related sorting services. Content and document management software has garnered significant M&A attention (20 deals1, 3.0x2) since 2005, most notably Autonomy/Verity ($483 million), EMC/Captiva ($289 million), PTC/Arbortext ($190 million) and Macrovision/eMeta ($35 million). This would have been Pitney Bowes third software acquisition since December 2004 had it not dropped its $55 million bid for Firstlogic, a provider of data management software recently acquired by Business Objects.
1: Data Source: Software Equity Group
2: Content & document management software median M&A multiple
Progress Software (NASDAQ: PRGS) Acquires Actional
Category: Web Services Management Software
Purchase Price: $32,000,000 EV
Seller Revenue: $7,100,000 (estimate)
Revenue Multiple: 4.5x EV (estimate)
Payment Terms: Cash, Stock
SEG’s Perspective:
Progress Software, supplier of application infrastructure software, acquired Actional, provider of web services management software for distributed IT systems in a service-oriented architecture (SOA) environment. Progress, and the software industry at large are hoping that SOA and Web 2.0 will accelerate industry growth and improve public software company valuations. With high growth rates hard to come by in the software sector, well-positioned companies such as Actional command very high premiums. Mercury Interactive (Systinet; 4.6x TTM revenue) and BEA (Fuego; 7.0x) paid well above the software industry's median valuation to gain SOA expertise. While the 4.5x revenue multiple is a premium to the software industry, Actional's investors might not be pleased. Actional had raised an estimated $78 million since its inception in 2000.
EV: Enterprise Value = equity purchase price, plus seller's interest bearing debt, minus seller's cash & cash equivalents.
Software Equity Group, L.L.C. (SEG), a mergers and acquisitions advisory firm serving the software, life science and technology sectors, prepared this report. SEG is solely responsible for its content. This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to its accuracy and does not purport to be complete. This information is not to be used as the primary basis of investment decisions. For more, please visit www.softwareequity.com, or phone (858) 509-2800.
 
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