Working through the M&A backlog

by Brenon Daly

After surging to start 2019, tech acquirers appear to have worked through most of the backlog of deals that built up during the volatility-plagued end of last year. According to 451 Research’s M&A KnowledgeBase, January saw spending on tech and telecom transactions around the globe jump to a three-month high.

In contrast, spending in February dropped by about 25% compared with the opening month of the year. The M&A KnowledgeBase tallied $32bn worth of deals in February, essentially matching the same month last year. If it hadn’t been for financial buyers, this month’s decline would have been much sharper.

Private equity (PE) acquirers accounted for three of this month’s four largest deals, and a whopping $23bn, or more than 70% of total M&A spending in February. That’s roughly twice their typical share of spending in the tech M&A market. Corporate buyers, which had been averaging six transactions valued at more than $1bn each month last year, put up just three billion-dollar prints in February.

Half of the PE spending came in a single landmark software deal: the $11bn take-private of Ultimate Software. In the largest-ever SaaS acquisition, Hellman & Friedman led a group that valued the human resources software vendor at 10 times trailing sales. Similarly, in this month’s fourth-largest transaction, buyout shop Thoma Bravo paid $3.7bn, or 7x trailing sales, for mortgage lending SaaS provider Ellie Mae.

As to what’s coming for the rest of the year, check out 451 Research’s 2019 Tech M&A Outlook. The 125-page report highlights the trends that we expect to shape deal flow in six key enterprise IT sectors, including application software, information security, IoT and cloud. Additionally, our comprehensive report names over 250 potential target candidates and dozens of specific acquirer-target pairings, based on the research of more than 40 of our analysts.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.