Technology & Software

Private Equity groups and institutional investors have long been attracted to technology and software providers due to the fundamentals of the business model. Several key factors include:

1. The need for all small businesses and emerging enterprises to outsource multiple business processes and functions to remain cost competitive and to gain access to capabilities/expertise/resources/tools otherwise unaffordable;


2. Macro-business trends driving market dynamics such as the increased need for mobility, risk management and governance requirements;


3. Highly fragmented mid-market;


4. Economically efficient model driven by recurring revenues (long-term contracts, valuations, high switching costs);


5. Operational performance driven by people performance, scalable customer acquisition and cost models


6. Increased dissatisfaction with service levels from Fortune 500 vendors presents small business and mid-market opportunities.


7. The median software industry exit valuation grew 46% during 2009 but still closed the year below 2008's median TTM revenue exit multiple. (SaaS exit valuations were 1X-5X TTM revenue)


8. Seventy-three public software companies issued multiple announcements in 2009 expressing their intent to buy smaller software companies in 2010.

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