Consumer Software Deals Power Tech M&A Market

The industry's largest transaction to date this year is Cisco Systems' acquisition of Jasper Technologies for $1.4 billion, according to Berkery Noyes.

m&a and software

The software industry merger and acquisition (M&A) deals volume increased 7 percent, with a total of 523 transactions, over the past three months; however, overall value decreased 81 percent to $21.6 billion from $111.5 billion, according to independent mid-market investment bank Berkery Noyes' “Q1 2016 Software Industry M&A Report.”

Of note, the industry's largest transaction to date this year is Cisco Systems' acquisition of Jasper Technologies for $1.4 billion.

Aggregate value declined 9 percent on a year-over-year basis, and in the past five quarters, deal volume reached its peak in Q3 2015. Deal value reached its peak in Q4 2015.

"In general there have been fewer megadeals, but middle-market transaction volume should continue at a steady pace as acquirers look for innovative technologies to help expand their product offerings," Mary Jo Zandy, managing director at Berkery Noyes, told eWEEK.

Most notable in Q4 was Dell's announced acquisition of EMC Corp. for $67.5 billion. If these four deals are excluded, deal value would have only decreased by 15 percent.

"Much of the activity in the consumer software sector was driven by mobile application deals," Zandy said. "High-profile, mobile-based transactions in Q1 included Microsoft's announced acquisition of Swiftkey, which provides predictive keyboard technology for Android and iOS devices, with a reported purchase price of approximately $250 million; GoPro's announced acquisition of video editing apps Replay and Splice for $105 million; and Spotify's acquisitions of Soundwave and Cord Project, as the digital music service looks to bolster its social and messaging capabilities."

Other notable acquirers were Snapchat with the announced acquisition of Bitstrips, which allows users to create personalized emojis and carton avatars, for a reported $100 million, and Facebook, with its announced acquisition of Masquerade, a face-swapping application.

The infrastructure software segment's deal volume decreased 21 percent in Q1 2016. One noteworthy deal was Micro Focus' announced acquisition of Serena Software for $540 million.

The consumer software segment's deal volume increased 22 percent in Q1 2016 for its third consecutive quarterly rise, while the business software segment's deal volume increased 18 percent in Q1 2016.

"We expect this momentum to carry on throughout the rest of the year and into 2017, with a focus on companies that can provide new customers, new technologies or access to new markets," Zandy said.