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The economic slowdown in the US will increase outsourcing to countries like India and China.



Software M&A Insights: Deals Going Strong in 4Q08  

By Ken Bender, Managing Director and Kris Beible, Analyst – Software Equity Group, LLC

Amid significant macroeconomic turmoil, M&A deal activity within the software sector continues to show strength in 4Q08. Deals highlighted this month include eBay’s acquisition of Bill Me Later, a leading provider of digital payments solutions; Hewlett Packard’s purchase of mid-market storage management software vendor LeftHand Networks, and Oracle’s acquisition of Primavera, the largest pure-play provider of project portfolio management software.

eBay (NASDAQ: EBAY) acquires Bill Me Later
Category: Ecommerce Software
Purchase Price: $945,000,000
Seller Revenue (TTM): $150,000,000 (estimate)
Revenue Multiple (TTM): 6.3x
Payment Terms: Cash and Options

SEG’s Perspective:
Online auction provider, eBay, acquires Bill Me Later, a leading provider of deferred payments and promotional financing solutions to online retailers. Through its acquisition of Bill Me Later, eBay adds a complementary merchant base of over 1000 online merchants (including Walmart, Apple and Amazon), further leverages its low-cost business advantage offered to retail merchants and will own the two most popularly used online payment brands worldwide. Additionally, the combination of PayPal and Bill Me Later will give online consumers the option of paying for items immediately or overtime. Bill Me Later’s credit risk modeling and analysis solutions, which enable online retailers to offer transactional credit to consumers at the point of sale, has consistently performed better than the consumer credit industry average.

Hewlett Packard (NYSE: HPQ) acquires LeftHand Networks
Category: Storage Management Software
Purchase Price: $360,000,000EV
Payment Terms: Cash

SEG’s Perspective:
Hewlett Packard acquires LeftHand Networks, a leading provider of low-cost storage virtualization and iSCSI storage area network solutions. Through its acquisition of LeftHand Networks, HP further penetrates the growing iSCSI/IP SAN market, which IDC projects will grow to $4.4 billion by 2012 and extends its virtualization portfolio to the mid-market, as well as remote and branch offices of large corporations. Dell extended its reach into the iSCSI mid-market earlier this year by acquiring EqualLogic, another low-cost iSCSI SAN solution vendor. LeftHand follows acquisitions of Colubris Networks, EDS ($14.2 billion, 0.6xEV TTM revenue), Tower Software Engineering ($109 million, 2.4xEV TTM revenue) and Exstream Software ($720 million, 7.2x TTM revenue estimate), as HP’s fifth acquisition in 2008.

Oracle (NASDAQ: ORCL) acquires Primavera
Category: Project Portfolio Management Software
Seller Revenue: $175,000,000 (estimate)

SEG’s Perspective:
Enterprise software behemoth, Oracle, acquires Primavera, the largest pure-play provider of project portfolio management (PPM) software. Oracle Projects, which has robust cost management, project resource allocation, contract management and planning features, has historically relied on integrations to Microsoft Projects and Primavera for full project scheduling – Primavera’s flagship P6 scheduling product fills this hole and further extends Oracle’s reach into project intensive industries (including engineering, construction, aerospace and defense, utilities, oil and gas, manufacturing and professional services. Additionally, there may be an opportunity to extend Primavera’s manufacturing-focused PPM solutions to complement PLM products acquired through Oracle’s 2007 acquisition of Agile Software ($332.5EV, 2.6xEV TTM revenue). Primavera follows 2008 acquisitions of SaaS PPM vendors Projity and OpenAir ($26.9 million), by Serena Software and Netsuite, respectively.

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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