Software/SaaS M&A Deal Volume and Spending

The following article is from Software Equity Group’s 2011 Q3 Software Equity Industry Report.  A complimentary copy of the quarterly report can be downloaded here:

To date, there were 405 reported software M&A transactions in 3Q11, virtually the same as in the second quarter (409) and third 3Q10 (407) (Figure 24).  Since M&A data for the quarter is often revised and released well into the following quarter, we anticipate the final deal tally for 3Q11 will exceed 420, the highest quarterly tally this year.  M&A deal volume has been above or very near its historically healthy level of 400 for six of the past seven quarters, following five consecutive quarters of sub-400 M&A transactions (4Q08 to 4Q09).  In the first three quarters of 2011, there have been 1,242 software M&A transactions, up 1.7% YoY for the same nine month period, and 30% higher than the 957 software deals reported for the first nine months of 2009.

A total of $23.8 billion was spent on 3Q11 transactions with announced price tags, 13% higher than 2Q11’s $21.0 billion, and the highest software M&A spend since 2Q07.  Software mega deals are in large part responsible, as nearly half of the total spend in each of 3Q11 and 2Q11 came from transactions greater than $500 million: In 3Q11, HP acquired Autonomy for an enterprise value of $10.3 billion; in 2Q11 Microsoft acquired Skype for an enterprise value of $9.1 billion.

Considering the irregular fluctuations in total M&A spend each quarter, YoY comparisons of TTM data are a more reliable measure to discern M&A spending trends. And the trend over the past year is encouraging.  On a TTM basis, total software transaction dollars aggregated $70.6 billion at the close of 3Q11, 49% greater than the $47.4 billion spent on software M&A deals at the close of 3Q10. Similarly, on a TTM basis, the average deal size increased for the sixth consecutive quarter to $42 million (Figure 25).

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