Facebook, Citrix Deals Boost Mergers and Acquisitions Market

Transactions in the infrastructure software segment completed by notable acquirers in the first quarter of 2014 included Citrix's acquisition of Framehawk.

Transaction volume for mergers and acquisitions (M&A) in the software industry declined 4 percent on a quarter-to-quarter basis, though this represented a 14-percent increase compared to the first quarter of 2013, according to midmarket investment bank Berkery Noyes.

Facebook also completed the industry's second largest deal in the first quarter of 2014 with the acquisition of Oculus, a virtual reality technology company, for $1.9 billion.

Although Oculus provides headset hardware for gaming, Facebook has indicated that this transaction was based on software, services and the desire to leverage Oculus' technology beyond gaming, which is the reason for its inclusion in the report.

The "niche software" segment, which consists of software that is targeted to specific vertical markets, underwent a 10 percent volume increase in the first quarter of 2014.

In terms of growth areas within the segment, deal volume pertaining to the health care IT market increased 31 percent.

Transactions in the infrastructure software segment completed by notable acquirers in the first quarter of 2014 included Citrix's acquisition of Framehawk, a software development company that focuses on virtualized desktop solutions and mobilizing enterprise applications, IBM's acquisition of Cloudant, a database-as-a-service (DBaaS) provider, and Oracle's acquisition of Corente, which offers software-defined networking (SDN) technology.

Deal volume in the segment decreased 32 percent in the first quarter of 2014, following a 13 percent increase between the third quarter of 2013 and the fourth quarter of 2013.

Continuing a trend from 2013, cyber-security transactions continued to have an impact on the segment's value. Along these lines, the segment's highest value deal in the first quarter of 2014 was FireEye's acquisition of malware detection company Mandiant for $826 million.

The report noted M&A activity in the cyber-security subsector is being driven in part by several factors such as the need to prevent breaches at major retailers, ensure digital identity as a means of protecting sensitive information and identify threats both before they occur as well as in real-time.

"Many acquirers are looking for the ability to manage enterprise platforms across public, private and hybrid cloud environments," James Berkery, chief information officer at Berkery Noyes, said in a statement. "Cloud brokers that serve as an intermediary between cloud providers and enterprises are also starting to play a more important role in the marketplace. There could be an opportunity for eventual consolidation, as new entrants focused on customization and configuration draw attention from some of the large cloud computing and information technology companies."

As for other sectors covered in the report, consumer software volume remained about constant. Business software, after rising 17 percent in the fourth quarter of 2013, saw a 13 percent decline in transaction volume throughout the past three months.

One of the largest deals in the business software segment in the first quarter of 2014 was Verint Systems' acquisition of cloud-based customer service company KANA Software for $514 million. A similar transaction during the quarter was Microsoft's acquisition of Parature, one of Kana Software's competitors, for $100 million.