Home | About | Recent Issue | Archives | Events | Jobs | Subscribe | Contact Bookmark The Sterling Report


Will consoles like XBOX or PS2 ever replace the personal computer in the home?



Software M&A: Acquisition Season in Full Bloom

By Ken Bender, Managing Director, and David Legacki, Associate – Software Equity Group, LLC

M&A Deal activity within the software sector continues its torrid pace. Deals highlighted this month include Birdstep Technology’s acquisitions of ServiceFactory AB and Secgo Software in the mobile workforce management space; Experian’s acquisition of Hitwise in the burgeoning online advertising market; Mediasurface’s acquisition of Immediacy within web content management; Microsoft’s acquisition of digital marketing and services company aQuantive and Quest’s acquisition of ScriptLogic, a provider of systems lifecycle management solutions to the growing SME market.

Sign up for Software Equity Group’s complementary (http://www.softwareequity.com) 2Q07 M&A Report, which provides a comprehensive analysis of deals, valuations and trends in 2Q07.

Birdstep Technology (Oslo: BIRD) Acquires ServiceFactory AB
Category: Enterprise Mobility Management Software
Purchase Price: $16,777,500
Seller Revenue: $3,758,160
EBITDA: $601,305
Revenue Multiple: 4.5x
EBITDA Multiple: 27.9x
Payment Terms: Stock

Birdstep Technology (Oslo: BIRD) Acquires Secgo Software
Category: Enterprise Mobility Management Software
Purchase Price: $12,512,000
Seller Revenue: $4,216,000
EBITDA: $210,800
Revenue Multiple: 3.0x
EBITDA Multiple: 59.4x
Payment Terms: Stock and Earnout

SEG’s Perspective:
Birdstep, a developer of mobile workforce management solutions, acquires both ServiceFactory (the developer of Orbyte – a service and access management system for broadband network operators and service providers) and Secgo Software (a developer of enterprise mobility management solutions). Secgo’s information security and mobility management solutions complement Birdstep’s connectivity offering to mobile operators while Orbyte, by ServiceFactory, gives Birdstep the opportunity to leverage its customer base by enabling mobile operators to offer wireless data services on top of their voice offerings. The company beefed up its global presence with the acquisition of US-based laptop connectivity software provider Aramova in December 2006. According to IDC, Enterprise Mobility Management is a $214 million market, growing 35% annually.

Experian (London: EXPN) Acquires Hitwise
Category: Internet Marketing Intelligence
Purchase Price: $240,000,000
Seller Revenue (TTM): $40,000,000 (estimate)
Revenue Multiple (TTM): 6.0x
Payment Terms: Cash

SEG’s Perspective:
Experian, a leading provider of credit, marketing, automotive and consumer related solutions and services, continues to grow its Marketing Solutions business with the acquisition of Hitwise, a provider of on-demand web intelligence solutions for Internet marketers. The acquisition of Hitwise provides Experian best-of-breed digital intelligence solutions to further leverage its data, tools and expertise in consumer research services and email distribution. Specifically, Hitwise leverages the sales and distribution network of email delivery and analytics company CheetahMail, one of three additional acquisitions (Informarketing – Brazilian direct marketing services provider and Tallyman – collections management software) announced in Q207. The acquisition also provides Experian better footing in the US online advertising market, which is projected to grow to $32 billion by 2010, a five year 20% CAGR1.
1. Interactive Advertising Bureau

Mediasurface plc (AIM: MSR) Acquires Immediacy
Category: Web Content Management Solutions (WCM)
Purchase Price: $11,100,000
Seller Revenue (TTM): $6,739,000
Revenue Multiple (TTM): 1.7x
Payment Terms: Cash and Stock

SEG’s Perspective:
European web content management provider Mediasurface acquires Immediacy, a developer of web content management software for mid-sized businesses. The acquisition provides Mediasurface further down-market penetration and complements its Morello and Pepperio web content management products for large enterprises and small businesses, respectively. The deal consideration included two million shares of Mediasurface stock, with 90% of that going to Immediacy’s four major shareholders who are locked up until year-end 2007. Mediasurface acquired Class-Act Bv ($515,000) for its Silverbullet content management software in April 2005 and renamed the product Pepperio in early 2006.

Microsoft (NASDAQ: MSFT) Acquires aQuantive (NASDAQ:AQNT)
Category: Digital Marketing and Services
Purchase Price: $5,783,290,000
Seller Revenue: $492,650,000
EBITDA: $130,380,000
Revenue Multiple (TTM): 11.7x
EBITDA Multiple (TTM): 44.4x
Payment Terms: Cash

SEG’s Perspective:
In its largest acquisition to date, Microsoft acquires digital marketing and services company aQuantive. aQuantive’s acquisition is highly strategic for Microsoft, enabling it to compete with Google and Yahoo in the online media space. Avenue A/Razorfish is a leading interactive ad agency that will give Microsoft a major platform to serve advertisers, agencies, media owners, publishers and the digital marketing ecosystem, as well as promote Silverlight, Microsoft’s new rich-media and video plug-in, over Adobe’s Flash. Atlas, a provider of advanced tools to advertisers and publishers, competes directly with DoubleClick, a company Microsoft reportedly lost to Google in a bidding war earlier this year. The $66.50 per share bid represents an 85% premium over aQuantive’s pre-announcement last day trading price. The deal follows acquisitions of DoubleClick by Google ($3.1 billion), RightMedia by Yahoo ($650 million1) and 24/7 Real Media by WPP Group ($649 million) in a major consolidation of the lucrative Internet advertising market, one that, dominated for decades by traditional broadcast television, is now projected to grow to US $32 billion by 2010, a five-year 20% CAGR2.

1. Purchase price equals 80% of the shares outstanding
2. Interactive Advertising Bureau

Quest Software (NASDAQ: QSFT) Acquires ScriptLogic
Category: Windows-based Systems Lifecycle Management Software
Purchase Price: $90,000,000
Revenue: $20,000,000
Revenue Multiple: 4.5x
Payment Terms: Cash

SEG’s Perspective:
Database and app management developer Quest Software acquires ScriptLogic, a provider of systems lifecycle management solutions for Windows-based networks. ScriptLogic gives Quest greater access to the SME market and a two-tier VAR distribution model to supplement Quest’s direct sales force. The acquisition follows closely on the heels of ScriptLogic’s launch of Security Explorer for SharePoint, a product for managing Microsoft SharePoint Server 2007. Quest is no stranger to purchasing Windows management providers, having acquired Aelita Software ($115 million, 3.8x1) and Vintela Software ($56.5 million, 4.7x2) in 2004 and 2005, respectively. Quest acquired Magnum Technologies in May 2007 and gained entry into the business services management (BSM) space, a market that Forrester predicts will nearly triple by the end of 2008.

1. Purchase Price/Revenue
2. Purchase Price/Revenue

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 for 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

Click to email this article to a friend     Back


  Home | About | Recent Issue | Archives | Events | Jobs | Subscribe | Contact | Terms of Agreement
© 2006 The Sterling Report. All rights reserved.