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Sector Report: Software Q1 2020

EXECUTIVE SUMMARY

  • The global software sector remains one of the most active investment sectors, with ~$14Bn in financing deal value and ~$28Bn in M&A deal value during Q1 2020
    • 211 financings, 5% higher than Q1 ‘19
    • 389 M&A transactions, 8% higher than Q1 ‘19
  • Significant M&A activity in Q1 includes major acquisitions in the cybersecurity sector: Symphony Technology Group’s $2.1Bn acquisition of RSA, Advent International’s $1.9Bn acquisition of Forescout Technologies, and Hellman & Friedman’s $1.2Bn acquisition of Checkmarx
  • Financial Software had some of the largest financing deals in Q1 ‘20 led by the $700MM financing of Chime and $500MM financing of Revolut; the Business Intelligence & Analytics sector also saw high financing volume
  • Software sector trading performance has experienced turmoil due to the effect of COVID-19 but performed better than the S&P 500, with the IGV tech software index outperforming the S&P 500 by 8.3% LTM as of Q1 2020
    • Infrastructure software index grew 42.9% LTM as of Q1 2020, outperforming all other software sub segments
  • Technical Application software companies traded at 7.7x and 23.9x for 2020E Revenue and EBITDA, respectively, among the highest in software
  • Overall outlook in software growth remains healthy despite continued uncertainty, with some sectors seeing decline
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