The enterprise software market review: Q2 2022
Welcome to the Q2 2022 edition of the Enterprise Stack report – Results’ quarterly market update for the enterprise software sector.
Contact: Julie Langley Contributors: Richard Latner, William Garbutt, Vinay Saraiwala, Ryan Wheeler McKinley
The private M&A market in Q2 2022 has remained strong, recording over 500 deals this quarter – a number significantly higher than that achieved in the same quarter of 2021 (399), and above pre-pandemic levels. The public markets have again experienced a volatile quarter, as geopolitical uncertainty continues
Q2 2022 saw one of the largest acquisitions in tech history take place. VMware’s acquisition by Broadcom for approximately $69Bn represents a significant shift from the traditional hardware-focus of Broadcom, further increasing its move more squarely into the Enterprise Software space, deepening its portfolio of infrastructure solutions
As organisations increasingly focus on embedding ESG values into their culture, demand for digital solutions in compliance, environment, social and governance has increased substantially, fuelling investor appetite in GRC & ESG software vendors. HG Capital took private UK-based GRC and quality management software, Ideagen for $1.35Bn, while Apax Partners took private Norway-based environment, health, and safety software, EcoOnline for $400m earlier in the quarter. CVC Capital is also currently exploring a multi-billion dollar sale of US-based VelocityEHS, to capitalise on the growing rise in demand for GRC & ESG solutions globally
Against the backdrop of a highly competitive job market and with teams becoming increasingly dispersed, innovative new HCM tools are emerging to assist HR heads in prioritising workforce wellbeing, engagement, and productivity. Velocity Global raised $400m in a Series B round which was followed by Cornerstone’s acquisition of SumTotal for $200m in Q2 2022 to grow workforce solutions that help organisations retain employees and scale globally
Increasingly sophisticated phishing campaigns have seen a marked rise in the wake of expanding hybrid work environments. Cultivating a cyber-aware culture across the organisation is becoming an increasing priority for CIOs, in order to prevent attacks and the downstream damage they can cause. Results advised phishing simulation and security awareness platform, Terranova Security on its strategic acquisition by HelpSystems; this will allow HelpSystems to add security training into its existing product mix and at the same time widen Terranova’s offering using its extensive tools in compliance
The outlook for the second half of 2022 will see demand for attractive private market assets continue, as public market volatility persists. Vendors delivering mission-critical solutions will find they continue to attract attention from investors and strategic acquirers alike, with valuations holding for the most sought-after capabilities
Notes: Based on share prices as at 30th June 2022; indices weighted by market capitalisation Sources: Capital IQ and Results analysis
Note: For Security, 75th percentile values have been overlaid (shaded lighter) to illustrate next-generation vendors Note: EV = Enterprise Value; financials calendarised to December year end; median values reported See Selected Publicly Traded Companies here for details of companies included in each category. Source: Capital IQ
Sources: Press releases, Capital IQ, Mergermarket, 451 Research and Results analysis
Note: PE shown as acquirer when acquisitions made through portfolio company; parent shown as acquirer when acquisition made through group subsidiary / group Sources: Press releases, Capital IQ, Mergermarket, 451 Research and Results analysis
(1) In certain cases EV/Revenue and EV/EBITDA are publicly reported estimates; TTM financials have been used where possible; EV = transaction value scaled to 100% shareholding plus net debt (incl. minority interests). Note: Earnout considerations excluded in the calculation of the enterprise value Sources: Press releases, 451 Research and Results International analysis
Sources: Pitchbook, Press releases, Crunchbase and Results analysis
Notes: Based on share prices as at 30th June 2022; indices weighted by market capitalisation. Sources: Capital IQ and Results analysis
Note: Based on share prices as at 30th June 2022 Sources: Capital IQ and Results analysis
(1) These companies IPO’d within the last 12 months, the share price movement represents the change between the stock’s IPO date and 30th June 2022 Note: Based on share prices as at 30th June 2022 Sources: Capital IQ and Results analysis
(1) These companies IPO’d within the last 12 months, the share price movement represents the change between the stock’s IPO date and 30th June 2022 Note: Based on share prices as at 30th June 2022. Sources: Capital IQ and Results analysis
(1) All SaaS represents the median of all stocks in Large Cap, Mid Cap and Small Cap, with no weighting applied Notes: EV = Enterprise Value; financials calendarised to December year end; median values reported See Selected Publicly Traded Companies here for details of companies included in each category. Sources: Capital IQ and analyst reports
(1) Number of companies with applicable multiples in Q2 2022 index; Notes: EV = Enterprise Value; financials calendarised to December year end, which can impact the multiples at the start of each year as the base is shifted forward; weekly tracking of valuation multiples commenced in July 2015, October 2014 – September 2015 tracked on a quarterly basis, therefore a linear progression has been assumed between quarters up to July 2015. Dotted line represents median since data has been tracked Source: Capital IQ
Note: Calendarised to December year end; $ millions, except share price data; multiples capped at 20x EV / Revenue and 50x EV / EBITDA; net debt includes minority interest. Sources: Capital IQ and broker reports
Note: Calendarised to December year end; $ millions, except share price data; multiples capped at 20x EV / Revenue and 50x EV / EBITDA; net debt includes minority interest. Source: Capital IQ
Note: Calendarised to December year end; $ millions, except share price data; multiples capped at 25x EV / Revenue and 50x EV / EBITDA; net debt includes minority interest.. (1) F-Secure has recently announced plans for a separation of the business: F-Secure (Consumer Security) and WithSecure (Corporate Security) on 30th June 2022– Share price performance reflects consolidated entity, (2) Share price movement includes bid premium for SailPoint and Tufin Source: Capital IQ
Note: Calendarised to December year end; $ millions, except share price data; multiples capped at 100x EV / Revenue and 50x EV / EBITDA; net debt includes minority interest. Note: Market cap classifications categorised by CY2022E revenue or LTM where CY2022E revenue not available: Large Cap: revenues greater than $900m; Mid Cap: revenues between $300m and $900m; Small Cap: revenues less than $300m Source: Capital IQ