November 10, 2014

Postmortem: Big Data Analytics

Capitalizing on the Noise

In March, MergerTech published its overview on the Big Data analytics market, titled “Big Data Analytics: Capitalizing on the Noise”. We highlighted 99 software vendors operating in the space and broke them out into the following segments:   advertising/media apps, analytics/visualization, analytics infrastructure, business intelligence, data as a service (DaaS), infrastructure as a service (IaaS), operational intelligence, structured databases and vertical applications.

In the eight months since that report, the consolidation and funding activity has increased dramatically, as we had anticipated. Amongst the 99 companies we had originally included in our Big Data competitive landscape, we have since seen six software vendors acquired in the time by the likes of Wipro, TIBCO (since bought out by private equity firm Vista Equity), Teradata and Twitter.

More importantly, we have seen 40 total M&A acquisitions (see table below) relative to the 99 companies we originally included in our report (over $20B in transaction value amongst transactions with disclosed values). These 40 transactions include the aforementioned six vendors which were acquired along with an additional 34 acquisitions made by the companies covered in our original competitive overview that operate on a smaller scale than the more established software names in the space. The bulk of these 38 transactions, while not garnering the media attention of Facebook’s acquisition of WhatsApp would generate, represent the quintessential exit strategy for a high-growth, private software vendor seeking a market exit.

Last Monday, French-based ad agency Publicis Groupe announced the intention to acquire marketing consultancy Sapient for $3.7B (2.5x enterprise value/LTM revenues) in an all-cash transaction. This transaction underscores how various industry heavyweights are coming to appreciate and, more importantly, value companies that are able to provide digital expertise in consulting (read: analytics) and software offerings. The sheer volume of acquisitions since March made by the likes of Twitter (10 acquisitions), Oracle (5), VMware (4) and SAP (3) highlights the increasing need for incumbents to make acquisitions to bolster their analytical platform.

Looking to 2015, MergerTech anticipates further M&A in the advertising space as entrenched players look for strategic acquisitions akin to Publicis’s rationale for the Sapient acquisition. In addition, we believe the analytics/visualization space remains crowded and ripe for additional consolidation following the acquisitions of Karmasphere (Fair Isaac) in April and Opera Solutions (Wipro) in October.

It is also worth noting that investor interest in the market remains resilient despite concerns that the space may be approaching bubble-like valuations. Since March, 16 of the original 99 names have received additional private equity funding – to the tune of approximately $1.5B, with the median funding round coming in at $33M. Taking the current investment environment into consideration, it would appear as if more established names in the arena would have the cash (and/or equity) on hand to make further acquisitions.

by Ryan Brookman
Associate, MergerTech

Click here to see the updated Big Data Landscape (as of 11/10/14)
Click here to the Big Data transactions since March of 2014