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Will the current economic slowdown threaten innovation in the Software industry?



Software M&A Insights: An Active 4Q08

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

Amid heightened economic uncertainty, M&A software buyers continued to remain active in 4Q08, but focused on smaller transactions. Deals highlighted this month include Autodesk’s acquisition of ALGOR, a leading provider of analysis and simulation software for mechanical engineers; ECI Partners leveraged buy-out of Ascribe Plc, a UK-based provider of healthcare management applications, and Experian’s acquisition of healthcare payment prediction data and analytics software provider SearchAmerica.

Autodesk (NASDAQ: ADSK) Acquires ALGOR
Category: Computer Aided Engineering Software
Purchase Price: $34,000,000
Payment Terms: Cash

SEG’s Perspective:
Computer-aided design and engineering software leader, Autodesk, acquires ALGOR, a leading provider of analysis and simulation software for mechanical engineers. ALGOR provides new advanced simulation functionality to Autodesk’s finite element analysis offering, mechanical event simulation, computational fluid dynamics, coupled fluid flow, thermal, piping and electrostatic analysis, as well as builds on Autodesk’s recent purchases of simulation and analysis vendors Moldflow ($190 millionEV, 3.1xEV TTM revenue) and PlassoTech. ALGOR follows acquisitions of BIM World, Logimetrix and Softimage ($35 million) in 4Q08 and is Autodesk’s 13th acquisition in 2008.

ECI Partners Acquires Ascribe Plc (AIM: ASP)
Category: Healthcare Software
Purchase Price: $48,880,000EV
Seller Revenue (TTM): $26,810,000
Seller EBITDA (TTM): $7,320,000
Revenue Multiple (TTM): 1.8x EV
EBITDA Multiple (TTM): 6.7x EV
Payment Terms: Cash

SEG’s Perspective:
Middle-market private equity firm ECI Partners, acquires Ascribe Plc, a UK-based provider of healthcare management applications. Ascribe provides ECI partners a platform acquisition within the healthcare vertical (Ascribe counts 50% of UK hospitals as customers) and a strong management track record of inorganic growth success from which to expand upon. Ascribe management successfully acquired and integrated 8 strategic acquisitions since going public in late 2004, while concurrently increasing top and bottom line figures each consecutive year. The 28 pence per share offer represents a 12 percent premium to Ascribe’s pre-announcement last day closing stock price.

Experian (LSE: EXPN) Acquires SearchAmerica
Category: Healthcare Payment Prediction Software
Purchase Price: $90,000,000
Revenue (TTM): $17,000,000 (estimate)
Revenue Multiple (TTM): 5.3x (estimate)
Payment Terms: Cash

SEG’s Perspective:
Credit reporting bureau Experian, acquires SearchAmerica, a leading provider of payment prediction data and analytics software to the U.S. healthcare industry. The acquisition provides Experian entry into the healthcare industry, alongside major credit reporting bureau’s Equifax and TransUnion and will enable Experian to use data and analytics capabilities to help healthcare providers manage billings and cash flow. SearchAmerica brings approximately 200 clients and 500 hospital facilities, a three-year CAGR greater than 20% and high recurring revenue. SearchAmerica follows 2008 acquisitions of credit and risk management software providers KreditInform and DP Information Group.

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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