Enterprise Software Report 2H2020
In the last reporting period (2H2019), M&A in the Enterprise Software sector was beginning to cool down. Our latest research shows that this cooldown is being slightly exacerbated by the coronavirus crisis in terms of deal volumes and some valuation multiples.
However, it is difficult to gauge exactly how much the pandemic has affected Enterprise Software M&A thus far. Covid-19 is re-shaping the Enterprise Software M&A market. Both private equity and strategic buyers are focusing their sights on companies helping to improve communications, streamline processes or facilitate remote working capabilities; businesses that help fuel the e-commerce boom, like supply chain logistics software critical for improving last-mile fulfilment; and, of course, healthcare software.
The report focuses on Enterprise Software subsectors such as Business Intelligence & Customer Analytics; EnterprisE Applications; Information Management; Design, Testing & Simulation; Infrastructure Management; and Vertical Applications. It includes:
- Trends and analysis of deal activity
- Deal geography
- Top acquirers
- Valuation metrics
Transaction volume dropped by five per cent, with 602 deals recorded in 1H2020 compared to 631 deals in 2H2019. Valuation multiples peaked in 2019 and are now beginning to decline: the trailing 30-month median EBITDA multiple reached 17.3x but is now at 16.7x – still higher than the 14.3x observed between 2015 and 2017. The revenue multiple peaked at 4x last year and has now decreased to 3.8x. Although these are not huge changes as they are trailing medians over a 30-month period, we can infer that valuations have been impacted by the pandemic.
Our Enterprise Software report covers the two-and-a-half-year period between January 2018 and July 2020. All totals and median values refer to the entire period unless otherwise stated. Median multiples plotted in the graphs refer to the 30-month period prior to and including the halfyear.