Welcome to the 2017 full year edition of our Enterprise Software Report – Results International’s quarterly market update for the enterprise software segment. The enterprise software sectors we track in this market overview include (i) Infrastructure, (ii) Security, (iii) ERP (comprising diversified, financial accounting and SCM software vendors), (iv) Analytics, (v) Human Capital Management, (vi) AdTech/Martech, (vii) HealthTech and (viii) Other Vertical. We also look at those players that have a SaaS-first business model. In addition to this summary, we produce separate quarterly reports that focus specifically on Security (The Cyberscope), Marketing technology (The Barometer) and HealthTech (The Heartbeat).
M&A activity levels in the global enterprise software market remained strong throughout 2017 with European deal activity, in particular, growing strongly to 439 deals in the year. This is the highest level since we started tracking the sector in 2013 and highlights the growing strategic appetite and investor confidence in the European software sector.
Private equity has dominated M&A activity in the sector in 2017 and comprise nine of the top ten enterprise software acquirers, an increase from 6/10 in 2016. In the near future, we expect private equity to continue to be very active in the sector. However, in the year ahead we expect some of the larger strategic players that have been relatively quiet this year (e.g. Adobe and Salesforce) to pick up activity as they continue to buy innovation and fill strategic gaps in their offerings.
We expect to see artificial intelligence (AI), machine learning and robotic process automation (RPA), drive strategic and PE interest in 2018 as these solutions become increasingly mainstream. Spotify’s acquisition of Sonalytic (on which Results International advised) is a case in point and we are increasingly working with both AI-specialists and vendors with AI embedded into their solutions.
Public markets in the enterprise software sector have been buoyant in 2017 with strong performances in almost all of our tracked indices. Valuations have been driven higher, particularly in the SaaS segment which is currently trading at a median multiple of 7x Revenue on the public markets – the highest level since at least 2015. After a moribund 2016, there has also been a resurgence in enterprise software IPOs. Cybersecurity has led the way with three successful IPOs this year: Okta, Sailpoint and ForeScout. This will no doubt give confidence to companies looking to raise funds through a similar vehicle next year, with many potential scaled candidates considering their options.
With stock markets at all-time highs, strong levels of M&A activity, the IPO market showing further signs of recovery and continuously growing appetite in the enterprise software sector, 2018 holds great promise. We hope that you enjoy this document and look forward to discussing the data and underlying themes with you.
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We hope that you enjoy the document and look forward to discussing the data and underlying themes with you. We have also produced our view on the previous quarter’s proceedings in a series of other market reviews on: Digital Services, HealthTech, Cybersecurity, AdTech & MarTech – click here to view these reports.Read Less