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Mergers and acquisitions up for enterprise software sector, report finds

By Catherine Knowles, Tue 12 Oct 2021

The enterprise software sector is riding a post-pandemic wave of activity, with 751 merger and acquisition (M&A) deals signed and a record $124 billion in transaction value achieved in the first six-months of 2021.

This is according to the latest Enterprise Software M&A report from Hampleton Partners, the international technology mergers and acquisitions advisor.

During the height of the COVID-driven boom in Enterprise Software M&A during 2H2020, a record 836 deals and $112 billion in valuations were recorded, as companies set their teams up for dedicated remote-working, the report finds.

As new post-COVID habits have settled, M&A activity in the enterprise software sector has demonstrated strong growth in comparison with pre-pandemic levels.

Hampleton Partners founder and principal partner Miro Parizek, says, “Now, the situation is more complex, with many workers returning to a more flexible, hybrid office setup.

"After initial investment in virtualisation and digitalisation, there is a critical need for companies to ensure their teams have smooth, uninterrupted access to their technology and platforms, no matter where they are working from.

"That could mean investing more in cloud integration, collaboration and virtualisation tools, or better enterprise resource planning technology that can cope with the needs and demands of a hybrid workforce.”

The revenue multiples achieved have grown at a significant rate, reaching 4.7x in 1H2021, up from 3.4x in 2H2020, the researchers find.

This half-year also saw very high multiples paid out, such as the 93.2x EBITDA multiple paid by Optum Health for Change Healthcare, a provider of revenue cycle management, data analytics, imaging solutions, artificial intelligence capabilities and patient engagement solutions for providers and payers.

The report also finds that there has been a clear, increasing trend in the share of private equity-led deals in the enterprise software sector.

In the first half of 2021, private equity buyers made up 44% of all deals, the highest share of deals on record.

In line with the previous period, private equity buyers continue to target technologies that are increasingly relevant after the pandemic. For instance, in the education management and e-learning software verticals every target was bought by a financial buyer.

Parizek continues, “Companies are adjusting their M&A strategy to focus more on targeted business resilience, digital technology alignment, and to gain market share through consolidation.

"M&A activity is becoming a crucial lever for growth as the rate of organic growth decelerates for many tech companies in the future.

"Meanwhile, even non-tech companies are continuing to acquire capabilities in software, IT services and internet commerce verticals to digitise offerings, while private equity players are placing big bets on securing applications as well as risk and compliance.”

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