The global Software and Services industry witnessed exciting movement in Q3 as nearly 1,000 deals were closed this quarter. Despite concerns of an economic slowdown, deal multiples remained elevated and capital continued to be deployed at healthy rates. Strategic acquirers made headlines with a few large acquisitions, including Broadcom’s announced $10.7 billion acquisition of Symantec’s enterprise software assets (4.5x EV/Sales) and VMware’s $2.7 billion acquisition of Pivotal (4.6x EV/Sales).
Interestingly, financial sponsors represented more than half of deal volume in Q3, and have continued to demonstrate a willingness to pay premium multiples in the market in order to compete with strategic buyers for attractive assets. As fundraising continues and private equity accumulates greater levels of dry powder, CEOs evaluating a sale of their business would be wise to consider including both financial and strategic buyers in their sale processes.
We’ve continued to cover the Compliance Software vertical in Q3 and view it as an attractive growth area for investors and acquirers. New, rapidly-evolving regulations are forcing organizations across all sectors to rethink their risk and compliance strategies and driving significant adoption of new technologies. Further, as many companies continue to grow in both scale and complexity, many have found it increasingly difficult to protect workers, reduce environmental impact and ensure high-quality operations. Investors have taken notice with companies in the sector, raising record amounts of growth capital and several high-profile transactions taking place. Most notably, VMware recently announced its acquisition of Carbon Black, an industry-leading enterprise security and compliance software company, and Nordic Capital closed its $700 million acquisition of ArisGlobal, the leading compliance software provider for the drug development industry. As strategic and private equity interest in compliance technology continues to grow, we are excited to see how M&A activity will impact the vertical.
We hope that this report serves as a useful tool for you. As you evaluate opportunities, please feel free to call us at 310.478.9000 for additional insight.