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Are IPOs slowly making a comeback?



Software M&A Insights: Infrastructure and Applications Software Still Find Buyers

By Kris Beible, Analyst – Software Equity Group, LLC

Buyers in the infrastructure and applications software markets continue to remain. Deals highlighted this month include Infor’s acquisition of SoftBrands, a leading provider of mid-market ERP software; Intel’s acquisition of WindRiver, a developer of operating systems and middleware software and the leveraged buy-out of MSC Software, a provider of engineering simulation software to product manufacturers.

To sign up for Software Equity Group’s complementary Quarterly and Monthly Software Industry Research Reports, which provide a comprehensive analysis of recent deals, valuations and trends in the M&A and public markets, please visit their website ( http://www.softwareequity.com). Software Equity Group’s 2008 Annual Software Industry Equity Report, which is a comprehensive analysis of 2008 software industry public stock market performance, initial public offerings, mergers and acquisitions, and venture capital and private equity financings, is available for purchase at their website.

Infor acquires SoftBrands (AMEX: ABN)
Category: Manufacturing and Hospitality ERP Software
Purchase Price: $80,520,000EV
Seller Revenue (TTM): $99,700,000
Seller EBITDA (TTM): $13,370,000
Revenue Multiple: 0.8xEV
EBITDA Multiple: 6.0xEV
Payment Terms: Cash

SEG’s Perspective:
Golden Gate Capital backed Infor Global Solutions acquires Softbrands, a provider of mid-market ERP software. The acquisition provides Infor further penetration down market and extends the company’s expertise in the manufacturing and hospitality markets. Additionally, it breathes new life into the company’s traditional inorganic growth strategy. Since making acquisitions of 6 companies in 2004, 9 companies in 2005, 7 companies in 2006, and 3 companies in 2007, Infor failed to announce any new transactions – leading to rumors the software titan did not have the cash to continue purchasing smaller entities. Infor’s $0.92 per share tender offer represents a 100% premium over Softbrands’ pre-announcement last day closing stock price.

Intel acquires WindRiver Systems (NASDAQ: WIND)
Category: Operating Systems Software
Purchase Price: $793,400,000EV
Seller Revenue (TTM): $354,270,000
Seller EBITDA (TTM): $38,070,000
Revenue Multiple (TTM): 2.2x EV
EBITDA Multiple (TTM): 20.8x EV
Payment Terms: Cash

SEG’s Perspective:
Hardware computing behemoth, Intel, moves into software through its acquisition of WindRiver Systems, a provider of operating systems, middleware and development tools for the device market. The acquisition provides market-leading and complementary software assets to help further grow Intel’s presence within the embedded systems and mobile device markets. It also reinforces Intel’s stated intentions to move beyond its traditional stronghold in the PC market, and diversify its revenue model to offer more than semiconductors. The acquisition also falls short of creating conflict between Intel and its largest ally, Microsoft, because WindRiver’s operating system solutions are not targeted at the PC market. However, it could hurt Microsoft’s hopes for products like Windows Mobile and Windows Embedded. Intel’s $11.50 per share tender offer represents a 44% premium over WindRiver’s pre-announcement last day closing stock price.

Symphony Technology and Elliot Management acquire MSC Software (NASDAQ: MSCS)
Category: Engineering Software
Purchase Price: $198,760,000EV
Seller Revenue (TTM): $246,790,000
Seller EBITDA (TTM): $22,540,000
Revenue Multiple (TTM): 0.8x EV
EBITDA Multiple (TTM): 8.8x EV
Payment Terms: Cash

SEG’s Perspective:
Private equity firms, Symphony Technology Group and Elliot Management, acquire MSC Software, a provider of simulation software and services to product manufacturing industries. The low multiple represents traditional private equity financial engineering. Over the past several years, MSC Software has seen its EBITDA and recurring maintenance (+50% of revenue) revenues steadily increase, while letting its license software and services revenue streams steadily decline. The $7.63 per share tender offer represents a 13% premium over MSC Software’s pre-announcement last day closing stock price.

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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