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Q2 ’20 saw ~$16Bn in financing deal value and ~$5Bn in M&A deal value

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Sector Report: Software Q2 2020

EXECUTIVE SUMMARY

  • Global software sector trading performance remained stable, but the impact of COVID-19 has tempered M&A activity
  • Q2 ’20 saw ~$16Bn in financing deal value and ~$5Bn in M&A deal value
    • 234 financings, 6.6% higher than Q2 ‘19
    • 315 M&A transactions, 12.3% lower than Q2 ’19
  • Many companies have not yet reported Q2 earnings, the first full quarter of COVID-19, so we expect some realignment to occur in Q3
  • Significant M&A activity in Q2 includes acquisitions in the Infrastructure sector: Verizon’s $400MM acquisition of BlueJeans, KeySight Technologies’ $330MM acquisition of Eggplant, and NetApp’s $325MM acquisition of Spot
  • Financial Software had some of the largest financing deals in Q2 ‘20 led by the $850MM financing of Stripe and $251MM financing of Paidy; the Infrastructure sector also saw high financing volume
  • Software sector performed well in Q2 with the IGV tech-software index outperforming the S&P 500 by 23.6% LTM as of Q2 2020
    • Infrastructure software index grew 84.8% LTM as of Q2 2020, outperforming all other software sub segments
  • Technical Application software companies traded at 10.4x and 30.5x for 2020E Revenue and EBITDA, respectively, among the highest in software
  • Overall outlook in software growth remains healthy despite continued uncertainty, with most sectors seeing notable growth
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