The number of software industry acquisitions fell in 2009 from the year before, and the value of those deals also declined, according to a recent report on merger trends.
The number of M&A deals decreased by 16%, from 837 in 2008 to 699 last year, according to the report from financial services firm Berkery Noyes. Total transaction value dropped from US$45.43 billion in 2008 to $39.30 billion in 2009.
The company noted that activity picked up in the second half of 2009, with moderate increases in number and value. Second-half aggregate value was approximately $21 billion, up from around $18 billion in the first half, while 358 deals were made in the second half as opposed to 341 in the first six months of 2009.
Mary Jo Zandy, managing director for media, software and online at Berkery Noyes, said that the recent recession had a negative effect on the final numbers for the year. “Software companies were skeptical to invest within the past year, but the times seem to be changing, which will help the industry,” she said.
Out of the 699 transactions that occurred in 2009, 14% of the volume (101 transactions) and $5.52 billion of the total value was from deals driven by financial considerations, while strategic transactions accounted for the remaining percentage. In 2008, financial transactions consisted of 13% of the volume and 23% of the total value.
Since 2006, when strategic transactions reached their highest volume number at 954, there has been a steady decline in that category every year. The number of deals in the software industry has also decreased every year since 2006, losing about 250 total transactions over the past four years.
Of companies active in M&A within the software industry in 2009, Oracle and The Carlyle Group were the busiest with eight transactions each. Oracle’s acquisition of Sun Microsystems for $7.1 billion was the largest announced software transaction in 2009. The acquisition has yet to close, though. Nearly two-thirds of the acquisitions last year had values up to $90 million.
Zandy said that despite Oracle and The Carlyle Group leading the software industry in transactions last year, she does not see this having any effect on how other companies pursue their business needs in the future.
“This is a major industry that will not be dominated by two companies,” she said. “There are positive signs within the past couple of months that show an increase in overall volume and value with changes coming during the gradual improvement in the economy.”