While mid-market M&A is slowing down, technology deals are speeding up, and private equity firms are ramping up investments in the sector. The opportunities are coming from long-term advancements that make information technology (IT) services less expensive and easier to distribute than ever before. The most significant is cloud computing, which harnesses networks of computers hosted on the Internet.
One firm that has made dozens of investments in cloud computing is Thoma Bravo. With offices in Chicago and San Francisco, the firm won Mergers & Acquisitions’ 2014 M&A Mid-Market Award for Deal of the Year for the $930 million purchase of cloud-based TravelClick. In 2015, Thoma Bravo closed a $1 billion fund and recently teamed up with Silver Lake Partners to purchase SolarWinds Inc. (NYSE: SWI) in a take-private deal valued at $4.5 billion. The target develops IT software and has been migrating its offerings from the site-license model to the cloud subscription model.
Another middle-market PE firm that has made its mark backing tech companies is HGGC, which won the 2014 M&A Mid-Market award for Private Equity Firm of the Year. The Palo Alto, California, firm is led by Rich Lawson, who serves as CEO and previously co-founded Sorenson Capital, and counts among its partners former San Francisco 49ers quarterback Steve Young.
Recent investments made by HGGC include the purchase of Dealer-FX, which provides online services in the auto service industry. The deal follows the firm’s 2014 acquisition of AutoAlert. In the marketing services arena, HGGC recently merged Selligent, which boasts clients including Audi (ETR: NSU), BNP Paribas Fortis, Samsung Electronics Europe and Mercedes-Benz , with StrongView, which has customers, including Yahoo (Nasdaq: YHOO), Oriental Trading and Overstock.com (Nasdaq: OSTK).
One newcomer is ParkerGale, which opened up shop in 2014. The Chicago firm is currently raising a $200 million fund to invest in buyouts of profitable founder-owned tech companies. ParkerGale announced its first two acquisitions in November. The firm completed the purchase of aerospace data company Aircraft Technical Publishers from its founders and bought OnePlus Corp., which provides automated monitoring for waste collection systems. Mergers & Acquisitions predicts more tech-focused PE firms to emerge.