Technology ventures that are developing software for videoconferencing, collaboration and e-commerce tools are becoming hot acquisition targets for large companies and investors during the pandemic.

Lifesize, a videoconferencing software company based in Texas, in August announced a deal to purchase collaboration-tool maker Kaptivo, citing a growing demand for remote-work apps. Lifesize itself was acquired by Marlin Equity Partners in March. The terms of the deals weren’t disclosed.

“We see a long-term step change in the usage of remote-collaboration tools for both business and education,” said Peter Spasov, Marlin’s senior managing director. Spasov said the acquisitions of Lifesize and Kaptivo “capitalise on that trend.”

Miro Parizek, principal partner for technology at M&A advisory firm Hampleton Partners, said Covid-19 is reshaping workplace practices, following lockdowns and travel restrictions.

He said the shift to remote work over the past few months — in some cases marking a permanent change — has refocused the sights of many corporate and private-equity buyers to acquisitions that help build capabilities in digital communications and e-commerce, such as online payments and financial services, supply-chain logistics and last-mile fulfillment software.

Hampleton expects robust M&A activity in the second half of the year, as corporate and private equity buyers “jockey for position in the new, post-pandemic business environment,” Parizek said.

Despite the global economic disruption sparked by the outbreak, Hampleton recorded 602 enterprise-software M&A deals in the first half of the year, down just 5% from the same period in 2019. Total disclosed deal value was $34bn, down from $71bn, the report said.

Most of the largest deals so far this year were struck early in the first quarter, before the coronavirus initially took hold in the US and Europe, according to Hampleton.

Verizon Communications in April agreed to buy videoconferencing company Blue Jeans Network, paying less than $500m for a major Zoom Video Communications rival, a person familiar with the terms told The Wall Street Journal.

The platform gives Verizon the ability to help its corporate customers develop telemedicine, remote learning and virtual training services, a Verizon spokeswoman said at the time.

Max Azaham, a senior research director at Gartner Inc., said the Verizon transaction came even as deal activity slowed during the spring, when the outbreak began to spread at a faster rate.

“Verizon acquiring BlueJeans was a swift contrarian move by an acquirer, acting early to gain a strategic asset for videoconferencing, which continues to surge” as companies find workarounds for closed offices, Azaham said.

Similarly in the fintech space, according to Azaham, as banks and other financial services close branches or restrict hours, many are accelerating the use of online digital tools. At the same time, online shopping, food orders and other e-commerce transactions have soared during the pandemic, as more people stay in their homes.

Mastercard in June announced an $825m deal to purchase open-banking platform Finicity, a 10-year-old Salt Lake City software maker that aggregates users’ financial data in real time. The tool helps third-party banks, mortgage lenders and other digital services to quickly access a customer’s financial data.

“When looking at potential M&A opportunities, we are focused on finding those opportunities that would be a good strategic fit,” said Craig Vosburg, Mastercard’s president of North America. “Some of those considerations include expanding and strengthening our product and service offerings or providing us with new capabilities,” he said.

Allen Bonde, vice president and research director for digital transformation at Forrester Research, said he expects the number of deals to accelerate in the second half of the year, when ongoing funding for tech startups become scarce as early-stage investors tighten their belts.

“We see a lot of deals out there for enterprise-software firms with deep pockets as orphaned startups scramble for an exit,” Bonde said.

Source: Wall Street Journal


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