Tech M&A Shows Promise in Uncertain Market

The global pandemic has hit the M&A market like it has the rest of the world, bringing much activity to a screeching halt. Overall, M&A activity across all sectors is down 35% in the first quarter compared to Q4 2019 (and we suspect closer to 90% in March). Corporations and consumers alike have displayed the characteristic aversion to nonessential purchasing that is a hallmark of economic contraction. Parsimonious behavior is likely to continue until businesses return to normal (or the “new normal”). However, despite many tech acquisitions having been put on ice, several significant deals were completed in the harsh current environment, by both strategic and financial acquirers.

In early March, business process automation titan DocuSign announced its intent to acquire Seal Software for $188 million in cash. Seal Software’s AI-powered contract management capabilities will further augment DocuSign’s existing market-leading document management offering. The future of DocuSign does not hinge on these expanded capabilities, showing that “nice-to-have” deals are still being executed despite market uncertainty.

On April 7, consumer financial services platform SoFi announced its plan to acquire Galileo, a payments and bank account infrastructure company for $1.2 billion in cash. SoFi is a relatively new leader in the Fintech and consumer finance space that has experienced rapid growth in its short history. The acquisition will bring the Galileo’s payments and banking services APIs to SoFi’s already robust platform, helping with the quick creation and integration of accounts and money transfers. The transaction is reminiscent of Visa’s recent acquisition of API developer Plaid and makes SoFi a formidable player in the space.

Also in March, Veritas Capital announced its acquisition of DXC Technology’s health and human services business valued at a whopping $5.0 billion. The health and human services business is an end-to-end provider of technology enabled, mission critical solutions for hospitals and healthcare providers throughout the US. The rich valuation and timing indicate Veritas’ belief in the continued strength of services businesses; even those tied to non-tech sectors facing a potentially rocky road ahead.

On April 16, Media and Telecom giant Verizon announced its intent to acquire enterprise-focused video conferencing SaaS provider BlueJeans Network for a rumored $400 million. Though video conferencing was already becoming more commonplace in the business world, the pandemic certainly added fuel to the fire by inducing a mass migration to remote working. Verizon’s acquisition of the Zoom rival shows that enterprise video conferencing is here to stay.

Deals are not just being announced during the turbulence of COVID-19, but also completed. On March 23, Thoma Bravo closed on its acquisition of digital learning management platform Instructure for $1.8 billion. While the deal was announced before the outbreak became global, Instructure’s Canvas (K-12/Higher Education) and Bridge (Professional Learning/Training) platforms are an attractive investment in light of the current circumstances where remote learning will no doubt be an integral part of the future of education.

Other notable recent deals include Accenture’s acquisition of cybersecurity consultancy Revolutionary Security announced in April; the acquisition of Marketing SaaS provider Digital Media Solutions by Leo Holdings ($302 million) also announced in April; and Data Center and Co-location provider Digital Realty Trust’s acquisition of European competitor InterXion ($7.2 billion) closed in March. The continued transaction activity in Software & Services indicates maintained investor confidence in the space and is hopefully a bellwether of increased deal flow in the coming months.

By wpteam