The proliferation of M&A within the technology space has been the backdrop for deal activity in North America for much of 2019. In 2Q alone, the Information Technology industry accounted for 25.7% of deal value thanks to a boost from software and SaaS companies.

Like other asset classes, private equity is navigating the consequences of heightened competition in its traditional industries, while grappling with fewer viable investment opportunities. These trends have contributed to PE’s increased appetite for investments into SaaS—a notably high-growth subsector comprised of companies that boast even higher valuations.

In fact, PE represented about 43% of all software M&A deals in 2Q. But, one key difference in software investments today is the innovation around debt structure, according to PitchBook’s 2Q 2019 North American M&A report.

Traditionally PE firms have used hard assets as collateral for debt, effectively eliminating software firms as buyout targets. In recent years though, it has become apparent that the recurring revenues of many software companies are stable enough to leverage, thus opening a new avenue for investment within the high-growth industry.

Firms are also gaining a better understanding of the unique opportunities SaaS companies offer, such as flexibility and adaptability—which can complement add-on strategies. Similarly, corporates have also been steadfast in their acquisitions of software companies, often pursuing these deals to expand product scope rather than scale. Undergoing a digital transformation is critical in today’s hyperconnected world and acquiring software companies has become key to achieving that goal.
 

A snapshot of notable M&A software deals closed in 1H 2019
 

Qualtrics

$8B M&A
January 23, 2019
Provo, Utah

Qualtrics was acquired by SAP for $8 billion earlier this year. Founded in 2002, the company’s survey software is a single system of record for all response data, enabling organizations to efficiently receive feedback and manage experiences.

See our Qualtrics profile preview
 

Hortonworks

$5.2B M&A
January 23, 2019
Santa Clara, California

Hortonworks was acquired by Cloudera for $5.2 billion earlier this year. Founded in 2011, the company specializes in creating, distributing and supporting enterprise-ready open data platforms and applications. 

See our Hortonworks profile preview
 

SendGrid

$3B M&A
February 1, 2019
Bellevue, Washington

SendGrid was acquired by Twilio for $3 billion in early February. Founded in 2009, the company’s digital communication platform enables businesses to confidently engage with their customers.  

See our SendGrid profile preview
 

IBM (software products)

$1.8B M&A
June 30, 2019
Armonk, New York

The software business unit of IBM was acquired by HCL Technologies for $1.8 billion in late June. The unit’s portfolio includes applications for secure application development, secure device management, marketing automation, omnichannel e-commerce and more. 

See our IBM (software products) profile preview
 

Cylance

$1.5B M&A
February 21, 2019
Irvine, California

Cylance was acquired by BlackBerry for $1.5 billion. Founded in 2012, Cylance’s cybersecurity platform is programed to detect and prevent advanced cyberthreats like viruses and malware. 

See our Cylance profile preview
 

 

Want to learn more about the latest M&A trends? Download our 2Q 2019 North American M&A report 

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