Advanced Computing in the Age of AI | Friday, May 20, 2022

Software Sector Among Tech Leaders in Deals, Funding 

Software industry mergers and acquisitions reached $3 billion during the second quarter of 2020, driven in part by the shift to cloud computing and cloud-native applications along with the need for heightened cybersecurity.

Those trends were also reflected in the growing number of venture investments in software services startups, industry observers said.

The largest software deal during the second quarter, according to Atlas VPN, was the $715 million acquisition of Conga by Apttus, a business process automation vendor. Conga is a cloud-based document management provider. Atlas VPN, which provides secure online connections, cited GP Bullhound as its source for recent purchase prices.

In its quarterly survey of the software services sector, the investment advisor noted that “serving mobile and distributed workforces [will be] critically important for the economy and business operations” during the pandemic.

Other deals of note during April, May and June included NetApp’s (NASDAQ: NTAP) $450 million deal for Israeli cloud infrastructure manager Spot. The cloud data services and software-defined infrastructure vendor based in Sunnyvale, Calif., said the acquisition of Spot would help it reduce customers’ public cloud costs as it transitions to offering “application-driven” infrastructure.

In May, IT professional services advisor Cognizant acquired Collaborative Solutions, a finance and HR consultant, for $385 million, making it the third largest deal during the period behind a pair of $400 million acquisitions by Facebook (Giphy) and Verizon (BlueJeans).

Meanwhile, Microsoft (NASDAQ: MSFT) beefed up its security tool chest in June with its acquisition of CyberX, an Internet of Things security specialist. According to GP Bullhound, the deal was worth $165 million. Microsoft said the deal would complement its Azure cloud IoT security capabilities, including the ability to determining what IoT devices are connected to networks and managing the security of new devices.

The other large cloud security acquisition during the second quarter was cybersecurity vendor Rapid7’s deal for DivvyCloud, which specializes in protecting cloud and application container deployments from misconfigurations and other vulnerabilities. That deal was pegged at $145 million.

As M&A activity grows in the software services sector, so too do investments in startups. For instance, Maryland-based enterprise technology investor SaaS Ventures reported a recent spike in investment deals.

“This tells us that enterprise tech innovation is being adopted nearly universally, especially as companies try to adapt to a Covid-19 world,” the tech investor said this week. “Based on the numbers, we are seeing that some sectors, like e-commerce enablement tech, are seeing major tailwinds, while others, such as real estate tech, are facing strong headwinds.”

About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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