2017 proved to be a winning year for Real Estate Software M&A as deal volume continued to grow for the fourth consecutive year. Since 2014, deal volumes have grown by 17% on a CAGR basis, and given the current strength in the U.S. housing market, it is expected that the number of transactions in 2018 will likely approach the mark set last year.
Based on research by SEG, software companies in the residential and commercial categories accounted for 49% and 35% of all transactions, respectively.
In terms of residential real estate software, the most highly sought-after categories included residential home sales, property search, mortgage origination and financing, and home construction. Meanwhile, activity in commercial software centered on software tools for corporate and commercial facilities management, site selection, construction, building design, and lease management.
While industry players such as Oracle, CBRE, and Moody’s were among the active investors in 2017, private equity funds accounted for roughly 40% of all transactions – of which one-third were PE-backed strategic buyers.
Notable deals included Oracle’s acquisition of Aconex for $1.2 billion and RealPage’s acquisition of The Rainmaker Group’s Lease Rent Options (LRO) for $300 million – which was 8.4x revenue.
Of the major transactions closed in 2017, the median EV/Revenue was 5.4x. While this was slightly below the median EV/Revenue of comparable public companies, the trend indicated that valuations of private companies where increasing in line with the broader market.
SEG expects that 2018 will be another brisk year for Real Estate Software M&A.
Download our 2018 Real Estate Software M&A Snapshot to read more.