Welcome to the Q3 2017 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 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.
In Q3, over a quarter of enterprise software M&A deal volume took place in Europe (consistent with Q2), despite there being a slight decline in overall activity quarter-on-quarter. The UK has seen a number of notable deals from both private equity and strategic buyers, including Swiss asset manager Partners Group’s blockbuster acquisition of Civica (ERP and managed services), Verint’s take private of AIM listed EG Solutions (workforce optimization software), Addnode’s acquisition of Service Works Group (workplace management software) and Verisk Analytics’ acquisition of Sequel (insurance and reinsurance software). In addition Sage, the UK’s largest enterprise software company, acquired US-based Intacct (accounting and financial management software) for 9.7x revenue. On a global scale, Microsoft are now one of the top 10 enterprise software acquirers in the year (6 acquisitions) in a field that continues to be dominated by private equity (including Vista Equity Partners, Thoma Bravo and Insight Venture Partners etc.) once again demonstrating that investors are more than matching and often beating their strategic counterparts on price.
Pure play SaaS business models are continuing to generate the greatest interest and value, maintaining last quarter’s strong valuation multiple (6.4x Revenue). Next-gen cybersecurity vendors are now trading at similar multiples (6.5x Revenue), demonstrating the market impact of more recent ransomware attacks and data breaches (FedEx, Equifax and WPP to name a few). This has further been reflected in Results International’s global indices with cybersecurity tracking up 5.7% in the last quarter, matching the Nasdaq’s gain of 5.8% over the same period.
The fundraising market remains very healthy and this quarter has seen significant raises for a number of UK-based businesses in particular, spanning across different verticals and horizontals. These include Darktrace’s $75m Series D raise (security), Receipt Bank’s $50m Series B raise (ERP) and Ve Global’s $15m venture round (AdTech/MarTech). There have been no IPOs in the quarter in the sectors that we cover, but those that listed in Q2 (Cloudera, Yext and Okta) all continue to trade very well (6.3x Revenue, 7.9x Revenue and 13.5x Revenue respectively).
With high valuations, strong market conditions and growing strategic and private equity appetite in the enterprise software sector, the remainder 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, get in touch.
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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: