Business software M&A hits five-year high

Business software merger and acquisition value hit a five-year high in 2018 driven by the rapid growth of technology firms.

New research shows that enterprise software M&A was $182.2bn last year, and that a total of 629 deals were completed in the second half, up 35 per cent from a low of 465 deals in the second half of 2013.

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Megadeals such as IBM’s $33.4bn acquisition of Red Hat and Broadcom’s $18.9bn purchase of CA Technologies drove up the overall total for the year.

In the second half of the year more established firms including Microsoft, Oracle, Salesforce, Adobe and SAP, made several acquisitions, contributing to the five-year high for transaction value.

“Clearly, the rise of innovative, horizontally applicable software from new players in the field is keeping strategic and legacy players on their toes, forcing them to aim for relevance and versatility, and thereby contributing to a healthy and stable M&A landscape,” the report said.

Hampleton Partners founder Miro Parizek said: “We are witnessing a land grab for innovative software and IT companies. On the one hand, verticals such as healthtech and fintech are experiencing rapid growth and are compelled to update and adapt their systems, software and processes simply to keep up the pace and survive in the face of their competition.

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“On the other hand, large strategic and legacy players are pursuing a comeback to the market acquiring innovative, horizontally applicable software to remain relevant and versatile.

“As the record -high valuations and volumes show, this competition for tech and talent is driving-up M&A valuations to a peak.”