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| Home - Software M&A Review - Jul 02 Issue |
Software M&A: The Skinny on Key Deals in Q2 |
By Ken Bender, Managing Director, and Allen Cinzori, Associate - Software Equity Group
The Deals:
| Seller |
Acquirer |
Price |
Revenue |
Multiple |
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Navision (NVIOF)
Financial / accounting software |
Microsoft Corp. (MSFT) |
$1,169,100,000 (EV)
Form of payment:
Stock plus cash |
$202,600,000 |
5.77x |
Simplex Solutions (SPLX)*
Integrated circuit design software |
Cadence Design Systems (CDN) |
$275,800,000 (EV)
Form of payment:
Stock |
$48,400,000 |
5.70x |
HNC Software (HNCS)*
Analytic and decision management software |
Fair, Issac and Company (FIC) |
$633,000,000 (EV)
Form of payment:
Stock |
$228,000,000 |
2.78x |
Flagship Group*
Accounting and business management software |
Intuit (INTU) |
$26,000,000
Form of payment:
Stock plus cash |
$10,000,000** |
2.60x |
Mechanical Dynamics (MDII)
Engineering design software |
MSC.Software Corp. (MNS) |
$100,000,000 (EV)
Form of payment:
Cash |
$57,500,000 |
1.74x |
Hyprotech
Process manufacturing software |
Aspen Technology (AZPN) |
$99,000,000
Form of payment:
Cash |
$69,000,000 |
1.43x |
NetSchools Corp.
e-Learning software platform |
PLATO Learning (TUTR) |
$20,000,000**
Form of payment:
Stock plus cash |
$16,000,000 |
1.25x |
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(EV) Enterprise Value = Purchase price plus debt minus cash & equivalents
* This deal has not closed. Terms may change.
** SEG Estimate
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The Scoop:
Navision / Microsoft Corp. - Big deal, high multiple. Currently, 80% of Microsoft Great Plains revenue comes from the US. Navision gives Microsoft access to 2,400 international partners, and the ability to rapidly expand its enterprise software in Europe. Spells trouble for SAP and PeopleSoft.
Simplex Solutions / Cadence Design Systems - This is a “technology buy”, and multiples tend to be high when the technology is proprietary and leading edge. Simplex has 0.13 micron and below chip design software and Cadence wants it. This is an all stock deal, with Cadence paying $18 in stock for each share of Simplex stock, a 46% premium over Simplex’s trading price.
HNC Software / Fair, Isaac and Company - With a strong balance sheet, superb technology, and over $228 million in revenue, we’re at a loss to explain why HNC agreed to this merger. The market’s response indicates we’re not alone. After subtracting HNC’s cash and equivalents and adding back debt, the multiple is 2.78, hardly sufficient for this market leader in high-end analytic applications.
Flagship Group (American Fundware) / Intuit - Intuit is committed to competing against Microsoft Great Plains in the middle market and plans to use vertical industry focus to do so. The acquisition of American Fundware, the number one provider of accounting and management software in the non-profit vertical, is Intuit’s third vertically focused acquisition since late 2001. Based on employee base and next fiscal year projections, we estimate American Fundware’s revenues to be $10 million.
Mechanical Dynamics / MSC.Software Corp. - MSC.Software acquired all of Mechnical Dynamics’ stock for $18.85 per share in cash, a 55% premium. One month later, MSC.Software’s market value fell 42%. Had Mechanical Dynamics’ shareholders opted for stock, they would have lost 58% of their return. In today’s volatile markets, cash is king.
Hyprotech / Aspen Technology - Aspen Tech focuses on software solutions for process industries where vertical specialization is a competitive advantage. In the petroleum process industry, a key sector for AspenTech, Hyprotech was the primary competitor and had the better product. Through this strategic acquisition, AspenTech removes a formidable competitor and acquires superior technology - good move.
NetSchools Corp. / PLATO Learning - NetSchools’ platform fills a strategic gap in PLATO’s product line by providing the platform infrastructure it needs to help K-12 school districts satisfy student accountability demands. SEG estimates PLATO paid a 0.5 multiple for NetSchool’s hardware business (75% of its revenue) and a 3.5 multiple for its software. This deal clearly enhances PLATO’s product and its market reach.
M&A Update is prepared by Software Equity Group, L.L.C. (SEG) which is solely responsible for its content. SEG (www.softwareequity.com) is one of the nation’s leading software industry M&A Advisories for privately held software companies. Established in 1992, SEG has served more than 300 companies in thirty states and six countries. This material is based on data obtained from sources we deem to be reliable; it is not guaranteed as to accuracy and does not purport to be complete. This information is not intended to be used as a basis for investment decisions.
 
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