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Deal Tracker: March infotech deal volume slides, big valuations hold

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Deal Tracker: March infotech deal volume slides, big valuations hold

March extended February's correction in the U.S. information technology M&A market, as volumes retreated 31.2% from the same month in 2021.

The year-over-year slowdown occurred against the prior year's historic comparisons. Deal volumes were up 85.1% year over year in March 2021 as the market roared back from 2020's pandemic-driven slump. Last month's 196 infotech transactions outpaced most monthly volumes from 2019, according to data from S&P Global Market Intelligence.

Deal values saw a similar trajectory, as a general decline in valuations across technology equity markets brought deal values back to 2019 levels, according to 451 Research data.

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Several high-profile deals were printed this March under the shadow of rising interest rates, inflation and geopolitical concerns. Three transactions topped the $1 billion mark, two of which carried valuation premiums reminiscent of 2021's record highs.

The biggest deal of the month, and the second-largest deal announced in 2022, was private equity firm Thoma Bravo LP's $10.75 billion acquisition of enterprise software vendor Anaplan Inc. That deal's gross transaction value represents an enterprise value of 17.6x trailing-12-month revenue, the third-highest multiple paid by Thoma Bravo among its 85 deals with available valuations in the 451 M&A KnowlegeBase.

The Anaplan acquisition was the second-largest take-private deal of 2022, behind the $17.18 billion takeout of Citrix Systems Inc. announced in February.

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Thoma Bravo is set to pay the ninth-highest multiple of any private equity acquisition recorded in 451's KnowledgeBase. The firm will pay $66 per share for Anaplan, representing a 55% premium against the target's stock price five days before the acquisition announcement. That represents a discount to Anaplan's 52-week high of $70.25.

With 13 deals penciled in 2021, Thoma Bravo was the third most active technology acquirer tracked by 451, and the firm is not showing signs of slowing down. Thoma Bravo has already headlined three deals in 2022, or nine deals including acquisitions by its portfolio companies, according to 451. The company said it intends to use Anaplan as a "platform for further acquisitions."

In the second-largest acquisition of March, Alphabet Inc.'s Google will pay another outsized premium to offer Mandiant Inc.'s cybersecurity operations to its cloud platform clients.

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Not unlike the enterprise software sector, cybersecurity targets have commanded hefty premiums over other information technology vendors in recent months, and the $7.55 billion gross transaction value for Mandiant represents an approximately 11.6x enterprise value-to-revenue multiple. The 2021 average multiple for cybersecurity targets was about 9.0x, according to 451. By comparison, the average multiple across all of technology and telecommunications was 4.2x for the same year.

In the third-largest transaction of the month, HP Inc. will pay a gross transaction value of $3.48 billion for audio and videoconferencing technology provider Plantronics Inc. The target's implied enterprise value lands at 1.9x revenue, a 47% premium over Plantronics' stock price five days before the deal was announced.

451 Research is part of S&P Global Market Intelligence.