The strongest appetite for software acquisitions comes from private equity firms, with 78% of those surveyed planning on three to four acquisitions over the next two years. Meanwhile, 25% of corporations indicate they will be conducting three to four software acquisitions in the same period.
While price isn’t a driving factor, technology, operations, and, in particular, cybersecurity weigh heavily on the minds of both PE and strategic investors. When evaluating a software target, those surveyed say they want their acquisitions to be operationally ready for launch with strong development procedures and tight speed-to-market capabilities.
This emphasis on time has led to worries about post-deal issues relating to cybersecurity. More than half of executives surveyed say they have uncovered an issue after a deal closed – an even higher number than in West Monroe’s “Testing the Defenses: Cybersecurity Due Diligence in M&A” survey last year (40%) – making cybersecurity the second most common reason buyers regretted a deal.
Regardless of cybersecurity fears, data shows that deal volume for software-related M&A rose in the first quarter of 2017 when compared to the same quarter in 2016, and judging by responses from the dealmakers themselves, this is only the beginning.
Key findings of this report include:
- When combined, the majority (57%) of corporates and PE respondents expect to execute three to four acquisitions over the next two years.
- More respondents say the success of a software acquisition primarily depends on technical and operational factors, rather than price.
- A majority of respondents say they’ve walked away from a software deal in the past, with most corporates (23%) citing cybersecurity concerns as the biggest deal-breaker and almost a quarter of PE firms (22%) citing compliance issues.
Mergermarket is a business development and market intelligence tool designed specifically for the M&A sector and provides proprietary intelligence and analysis on corporate strategy across the world. With around 200 M&A journalists talking directly to senior executives, dealmakers and other key players in over 60 locations globally, Mergermarket reports on the whole deal life cycle, from mapping out companies’ early stage strategic intentions to tracking deals before they develop and providing real-time news on live events, thereby creating a large window of opportunity. Subscribers can also mine for trends, patterns and deal ideas using Mergermarket’s comprehensive deals database and regular data-driven editorial analysis and commentary. Visit www.mergermarket.com/info to learn more.
West Monroe Partners
West Monroe is a progressive business and technology consulting firm that partners with dynamic organizations to reimagine, build, and operate their businesses at peak performance. Our team of more than 800 professionals is comprised of an uncommon blend of business consultants and deep technologists. This unique combination of expertise enables us to design, develop, implement, and run strategic business and technology solutions that yield a dramatic commercial impact on our clients’ profitability and performance. For more information, please visit www.westmonroepartners.com.
Global PR Director
The Mergermarket Group
West Monroe Partners