San Diego’s Software Equity Group Sees Software M&A Deals Ramping Up in 2011
almost 20 percent last year in comparison to 2009, according to Ken Bender, who founded the Software Equity Group in 1992. The firm has represented both sides in M&A deals, but the firm works mostly for the software companies getting acquired.
The software business in general is recovering from the contractions that occurred during the Great Recession, and software company valuations are expected to increase by 10 to 15 percent in 2011. “It should be a good year if you’re a seller in certain categories,” Bender says.
Ken Bender
“What’s really changed is the mindset among buyers, which has resulted from the fact that 65 percent of software M&As were written off or written down within three years,” Bender says. These days, buyouts are far less likely to be a CEO-driven decision at public software companies. “Dozens and dozens of companies like IBM and Autodesk have shifted from CEO-driven, top-down acquisitions to a consensus-driven process that includes finance, production management, R&D, and all the other major departments. So deals are taking twice as long. It’s not that they’re not closing, but they are taking twice as long and requiring more due diligence.”
The longer process also means more deals are washing out, with a deal “mortality rate” that Bender estimates is two to three times higher than it was before the recession began in 2008.
“The buyers are extraordinarily focused on what plays to their core business,” Bender says. The priority for about 40 percent of the buyers is to enhance
In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here.
Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University.
Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.
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