Mergers and acquisitions (M&A) activity amongst enterprise software and IT and business services surged to a five year high of $182 billion in 2018, driven by deals from Microsoft, Oracle, Adobe and SAP.

Hampleton Partners, an international technology M&A advisory firm, found consistent growth in transaction volume, multiples and valuations of enterprise software deals.

In the second half of 2018, there were a total of 629 deals in the enterprise technology sector, up 35 per cent since the lowest recorded number of 465 in 2013. For the IT and business services sector, Hampleton counted 421 transactions in 2018, including seven deals worth over a billion dollars and dozens more valued in the hundreds of millions.

Amongst the highest value ‘megadeals’ closed in 2018 was IBM’s $33.4 billion all-cash acquisition of open-source software provider Red Hat.

Meanwhile, Broadcom acquired CA Technologies, an IT management software vendor, for $18.9 billion at a premium of approximately 20 per cent.

Miro Parizek, founder of Hampleton Partners, said there was a “land grab” going on for innovative software and IT companies.

“On the one hand, verticals such as HealthTech and FinTech are experiencing rapid growth and are compelled to update and adapt their systems, software and processes simply to keep up the pace and survive in the face of their competition.

“On the other hand, large strategic and legacy players are pursuing a comeback to the market, acquiring innovative, horizontally applicable software to remain relevant and versatile,” he continued.

Parizek added that his consultancy anticipates growth in M&A activity across the enterprise software and IT sectors, spurred by advances in machine learning and artificial intelligence for software-as-a-service and cloud-based software.

“As new players, large strategic acquirers and private equity firms all remain poised to capitalise on the integration of new tech and talent into established businesses, we will see higher competition, deal flow and valuations,” he concluded.

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