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| Home - Industry Article -
September 08 Issue |
Software M&A Insights: 3Q08 Continues to Impress
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By Ken Bender, Managing Director, and Kris Beible, Analyst – Software Equity Group, LLC
M&A deal activity within the software sector has
continued to impress thus far in 3Q08. Deals highlighted this
month include Hellman & Friedman’s leveraged buy-out of SSP
Holdings, a leading provider of insurance solutions to the
European and Australasia markets; IBM’s tuck-in acquisition of
ILOG in the business process management infrastructure arena,
JDA Software’s purchase of struggling supply chain management
competitor i2 Technologies and OpenText’s acquisition of
Captaris, a provider of document capture and imaging
technologies.
Hellman & Friedman acquires SSP Holdings (AIM: SSPH)
Category: Insurance Industry Software
Purchase Price: $393,560,000EV
Seller Revenue (TTM): $128,750,000
EBITDA (TTM): $32,900,000
Revenue Multiple (TTM): 3.1xEV
EBITDA Multiple (TTM): 12.0xEV
Payment Terms: Cash
SEG’s Perspective:
Hellman & Friedman adds to its portfolio of enterprise software
businesses through its acquisition of SSP Holdings, a UK-based
provider of software and services to the insurance industry. SSP
Holdings serves as Hellman and Friedman’s second European
platform software acquisition – following the June 2007
announced merger of Iris Group and Computer Software, funded by
Hellman and Friedman for approximately $1 Billion. SSP
significantly expanded its geographical presence in May 2007 by
acquiring Sirius Financial Solutions, which had operations in
the United States, Africa, India and Australasia. The 1.90 pence
per share tender offer represents an approximate 50% premium
over SSP’s closing stock price prior to announcement of a
possible takeover.
IBM (NYSE: IBM) acquires ILOG (ENXTPA: ILO)
Category: Business Process Management Software
Purchase Price: $231,190,000EV
Seller Revenue (TTM): $214,710,000
EBITDA (TTM): $5,750,000
Revenue Multiple (TTM): 1.1xEV
EBITDA Multiple (TTM): 40.2xEV
Payment Terms: Cash
SEG’s Perspective:
Infrastructure software behemoth IBM, acquires ILOG, a provider
of business rules management software. The acquisition of ILOG
fills a hole in the IBM WebSphere business process management
suite, and extends IBM’s optimization and visualization
opportunities, two areas of increasing relevance to business
process management and complex event processing environments.
The business rules market has seen significant consolidation
over the past 3 years, with acquisitions of RulesPower by Fair
Isaac in 2005, Mindbox by MacDonald Detwiller & Assoc. in 2006
and 2007 acquisitions of Gensym ($15.5 millionEV, 0.9x TTM
revenue) by Versata, Yasu Technologies by SAP and Haley Systems
by RulesBurst. The $15.69 per share tender offer represents an
approximate 56% premium to ILOG’s pre-announcement average 30
days’ closing stock price.
JDA Software (NASDAQ: JDAS) acquires i2 Technologies (NASDAQ:
ITWO)
Category: Supply Chain Management
Purchase Price: $346,000,000EV
Seller Revenue (TTM): $257,040,000
EBITDA (TTM): $ 34,050,000
Revenue Multiple (TTM): 1.6xEV
EBITDA Multiple (TTM): 11.7xEV
Payment Terms: Cash
SEG’s Perspective:
JDA Software group, an industry-leading supplier of supply chain
management solutions, has acquired struggling competitor i2
Technologies. The acquisition significantly strengthens JDA’s
position within the manufacturing sector, while also doubling
the company’s size and increasing recurring revenue to nearly
50% of total sales. The $14.86 per share tender offer represents
a 9.7% premium over i2’s pre-announcement average 30 days
closing stock price – a substantial offer given i2’s high margin
license and maintenance & support streams have decreased
year-over-year for the past several years, while its low margin
services business has shown growth, albeit sluggish.
With the acquisition of i2, JDA surpasses Manhattan Associates
as the largest pure-play provider of supply chain management
solutions.
Open Text (NASDAQ: OTEX) acquires Captaris (NASDAQ: CAPA)
Category: Document Management/Imaging
Purchase Price: $105,460,000EV
Seller Revenue (TTM): $111,370,000
EBITDA (TTM): ($3,840,000)
Revenue Multiple (TTM): 0.9xEV
Payment Terms: Cash
SEG’s Perspective:
Open Text, a leading provider of enterprise content management
software, acquires Captaris, a provider of document and data
capture solutions. The acquisition strengthens Open Text’s
partnership offerings by better integrating its invoice
management solutions with SAP and Oracle enterprise offerings.
OpenText’s $4.80 bid modestly trumps private equity firm Vector
Capital’s March 2008 $4.75 per share tender offer. The 0.9xEV
revenue multiple offered reflects Captaris’ sluggish revenue
growth and poor profitability. The addition of Captaris serves
as Open Text’s third acquisition of the year, following
acquisitions of eMotion ($5M – Equity Value), a provider of
digital media asset management solutions, and Spicer Corporation
($12M – Equity Value), a developer of content and document
management solutions.
Software Equity Group is an investment bank and M&A advisory
serving the software and technology sectors. Founded in 1992, the firm has
represented and guided private companies throughout the United States and
Canada, as well as Europe, Asia Pacific, Africa and Israel. They have advised
public companies listed on the NASDAQ, NYSE, American, Toronto, London and
Euronext exchanges. Software Equity Group also represents several of the world's
leading private equity firms. They were recently ranked among the top ten
investment banks worldwide for application software mergers and acquisitions.
For more, please visit
www.softwareequity.com.
 
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