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Enterprise Software – Q2 2017 Market Review

By Jay Nathwani 04 Jul 2017

Welcome to the Q2 2017 edition of our Enterprise Software Perspective – 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 pure play SaaS business model. In addition to this summary, we produce separate quarterly reports that focus specifically on Security (The Cyberscope), AdTech/Martech (The Barometer) and HealthTech (The Heartbeat). You can find all these reports here.

Enterprise software M&A deal volume has continued its strong upward trend since the end of last year with a total of 415 deals announced this quarter. There have been some notable strategic transactions amongst these with both Oracle (Wercker and Moat) and Microsoft (Deis, Hexadite and Cloudyn) back on the acquisition trail. However, Salesforce, Adobe and SAP, who form part of our enterprise software aggregators, have been unusually quiet in the first half of 2017, all to suggest we can expect to see some interesting strategic transactions from them in the second half of the year.

In contrast, PE firms have continued their dominance in the space representing 7 of the top 10 enterprise software acquirers. Vista Equity Partners made an impressive 16 acquisitions alone this quarter, including cloud-based sales management provider Xactly for $564m (5.9x revenue). With an ever-evolving SaaS industry, we are seeing wider vertical SaaS adoption and consolidation in industries such as healthcare, energy and utilities. Examples of such consolidation include Accel KKR (through its portfolio company ESG), advised by Results International, acquiring UK-based SaaS provider to the energy and utilities industries, Utiligroup and Athenahealth acquiring US-based EHR and decision-support software provider, Praxify for $63m.

The fundraising market has remained strong in both Europe and North America especially in Cybersecurity and Martech, with examples including Crowdstrike and Cybereason each raising $100m, Market Logic raising $50m and Unlockd raising $23m. The IPO market has re-opened with Cloudera (Hardoop data management software) and Yext (location-based search engine for SMEs) both listed on the NYSE, whilst Okta (identity management software) listed on the Nasdaq. This has coincided with the Nasdaq and tech stocks continuing to set new record highs. In fact, all of our sector indices registered positive growth in the last quarter, with significantly strong performances by our selected HealthTech (+17%) and MarTech (+16%) indices.

Valuations in the enterprise software space have remained healthy with pure play SaaS companies continuing to attract the highest valuation multiples (6.4x Revenue). Interestingly, next-gen cybersecurity stocks aided by recent worldwide attacks (Wannacry and Petya the most widely publicised) are catching up and are currently trading at multiples close to 6.0x revenue. With improving valuations, growing deal activity and continued strategic and PE appetite in enterprise software business, alongside a thriving IPO market, the second half of 2017 shows great promise. We hope that you enjoy the document and look forward to discussing the data and underlying themes with you. If you are contemplating fundraising, exit or growth through acquisitions, please do get in touch.

Click on the image below to view the report.

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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

The Tech Report (all 5 sectors)

Jay Nathwani

Analyst

Contact Jay

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