Market Update

Politicians and Radical Deconstructionists probably won’t kill this market. Our April 2017 Market Update

April 2017

Dear Clients and Friends,

The report that follows tracks deals and trends in the dozen+ segments of the information technology universe that we follow, and sometimes lead.

As any pundit will tell you, in most of the developed world the m&a market and the overall economy are strong – and have been since 2010. There are plenty of people who are willing to take risks (a sine qua non in this business); and who are willing to pay high prices for companies that have scale, unique defensible products, and a track record of success. And this very success is a sign of strong economies. While no bull market lasts forever, it looks so far as if the demise of this one will be brought about by something other than partisan politicians – although some of them keep trying.

Strong economies are not inevitable. They are the product of carefully intertwined legal, financial and political structures that work; systems of taxes, fiscal policies, laws, regulations and trade pacts that are reasonable, stable and predictable – and administered by people with domain expertise. There is no doubt that these systems can be improved. But in most of the developed world, the post-World War II systems have led to innovation, job growth and wealth creation for many, while avoiding wars and famine, and those are not small things.

The challenges to these systems are many – be it tax policies that distort markets, rejection of trade pacts, xenophobia, the appointment (or election) of unqualified people to positions of power, or attempts at the “radical deconstruction of the administrative state”. The good news is that most of those responsible for implementing these systems seem to be doing a pretty good job at keeping the crazies at bay. In spite of inflammatory rhetoric, the UK officials charged with implementing Brexit are coming to see that they have to be careful. There are signs that the same can be said of those responsible for implementing some of the more radical proposals that came out of the recent US election – although the jury is still out.

A vibrant economy is completely dependent on buyers and sellers having confidence in political, regulatory and financial systems that are fair, stable, predictable – and competently administered. So far it looks as if our politicians won’t actually kill that.

The report below highlights some of the more interesting deals this month. Some of the more interesting deals include:

  • Vista Equity Partners (Austin, TX) agreed to acquire D+H for $3.5bn, an implied 2.8x LTM revenue and 14.6x LTM EBITDA,
  • CA (NASDAQ:CA) agreed to acquire Veracode for $614mm,
  • Travelers (NYSE:TRV) agreed to acquire Simply Business from Aquiline Capital Partners for $490mm,
  • Wolters Kluwer (ENXTAM:WKL) agreed to acquire Tagetik from White Bridge Investments for €300mm (~$317mm), an implied 5.2x LTM revenue,
  • FactSet (NYSE:FDS) acquired BISAM Technologies from Aquiline Capital Partners for $205mm, an implied 7.3x 2016 revenue.

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