Insights into Value Creation and Exit Trends for Technology Companies

This Edition's Question
Who is buying northwest software companies?

We looked at software company exits (M&A) for the trailing 5 years (July 2014 - June 2019) 

in Oregon and Washington to get the answer and we compared to the rest of the United States.

The Quick Answer

94% of acquisitions were done as corporate strategic investments.

68% of the acquisitions were done by private companies.

20% of the acquiring companies are headquartered in California, followed by 13% in Washington.

The Longer Answer

Acquisitions by Investment Category NW N
Acquisitions by Investment Category US N

Corporate Strategic Investments Dominate

Strategic investments are leading the way over private equity.  94% of the software company M&A transactions in the northwest were strategic which is on par with the US as a whole at 90%.  A small number of the transactions categorized as strategic were actually backed by PE, but this was a relatively small percentage overall. 

It's also clear from the data that interest in northwest software companies shot up in the 2017/2018 time frame, largely due to the increasing number of available firms  in Oregon and Washington.      

Acquisitions by Acquirer Ownership NW Nu
Acquisitions by Acquirer Ownership US Nu

Private Companies Are Making More Acquisitions Than Public

Approximately two thirds of the northwest company software acquisitions over the past five years were done by private companies.  Although there have been fluctuations from year to year, this is consistent with the rest of the US.  

Buyer by Headquarter and Year NW.png
Buyer by Headquarter and Year US.png

California Buyers Are Leading The Way

California buyers have taken a big interest in northwest software companies in the last 24 months.  In addition, across all US acquisitions, they have made 2.5 times the number of transactions than the next closest states of New York and Texas.  Acquirers from Washington and Oregon are also increasing in transaction volume. 

Acquirers by Name NW.png
Acquirers by Name US.png

No Surprise Here - The Big Tech Companies Are The Big Buyers

The usual big tech company names are atop the list of acquirers across the country with Microsoft making the most in the northwest.  An interesting note is that Smartsheet (HQ in Bellevue) has made four acquisitions in less than 24 months with two of these being other northwest software companies.  From a PE perspective, Vista is making the most acquisitions across the US and in the northwest.  EQT (from Sweden) has taken an interest in northwest companies lately with recent acquisitions of Acumatica and ZEMAX.

Insights From Intermediaries and CEO's

It's important to identify potential buyers of your company to aid in planning for your eventual exit.  They suggest developing a running list of buyers, to monitor the trends in the market and your sub sector, and to build relationships with individuals within these companies.  

Data Source:  Crunchbase + interviews with intermediaries and CEO's