Enterprise Software Acquisition Surges

Data is a popular commodity

Earlier this week, private equity firm Vista Equity Partners announced that it was buying Apptio for $1.94 billion and SAP announced that it was purchasing Qualtrics for $8 billion. These acquisitions are just the latest in a recent series of blockbuster deals involving software firms. Much of the M&A activity has been driven by legacy tech firms and cloud companies.

The Deals

What It Means

The glut of big tech deals and consolidation is, in some ways, reflective of what’s going on in the broader economy. According to Dealogic, global M&A deals are on pace to reach $4.8 trillion this year, which would set a record.

The dynamics that led to these software deals are multifaceted. They include integration into new areas of business, making sure their competitors couldn’t buy valuable assets, restructuring business models and creating a good story they could promote in the market, according to Darren Herman, operating partner at Bain Capital.

Large acquisitions of software companies shows how popular a commodity data is. In a December 2017 survey of 650 IT decision-makers worldwide by MuleSoft (one of the companies recently acquired for billions of dollars), nearly six in 10 respondents said their companies are investing in big data and analytics. More recently, in an April 2018 survey of 123 US marketers from SmarterHQ, Cheetah Digital, Liveclicker and MailCharts, 82.8% of respondents said they are investing in data and analytics.

Several of the firms that recently shelled out to purchase tech assets have been very active on the M&A front over the past few years. It is possible that the combination of acquisitions could become more valuable than when they operated separately. But that will come down to how everything is integrated.

“How will they integrate?” Herman asked. “This always is better on paper than reality.”