Every year, here at Corum we leverage our unique vantage point in the marketplace to develop the Top 10 Disruptive Trends that we see driving deals. We take the thousands of interactions with tech companies through our educational conferences; the research for events like this one; and our thousands of conversations with buyers and synthesize it into the leading list of its kind every year. These are the trends that you want to understand, as a CEO considering the tech M&A market today or as a buyer seeking to make acquisitions, because they are shaping the tech M&A environment.
One of the reasons we continue to see extraordinarily strong tech M&A in the last year, even with somewhat chaotic economic news, is that the sheer amount of disruption happening creates the change that drives strategic imperative for buyers—properly positioning your company in relation to this disruption is critical to getting the true value of your company. Well positioned companies get sold. So let’s take a look at our Top Ten Disruptive Trends for 2023.
As in the past, our “Foundational” trends are those that are changing things at a core level of society, technology or the economy, while “functional” trends describe how that disruption is playing out in specific markets and technologies. Let’s dig in.
People-Centric Productivity remains our leading trend—at a basic level, that’s what software is all about, and now perhaps more than ever. The changes in employment patterns sparked during COVID seem to be holding up, with unemployment still at historic lows and worker shortages continuing to be a fact of life across the globe. AI was supposed to put everyone out of a job, but even with advances, that hasn’t happened – the individual worker is more valuable than ever, wielding AI and tech to become more productive than ever. This is driving demand for tools that enable companies to attract, retain and empower employees at every level.
This has the most relevance for human resources deals, and both 2021 and 2022 set deal volume records in that space. Here at Corum, we definitely saw an uptick in HR deals, including reference checking platform Vitay acquired by Sureswift Capital and analytics platform People Insight acquired by HireRoad.
This trend is also a key driver of interest in automation technologies that make workers more efficient, either by automating repetitive tasks, with Robotic Process Automation being a key sub-trend here, or knowledge and decision support tools that enable more less experienced workers to fill the gaps being left by the waves of retirements across industries. Vertical software companies with those capabilities in particular should be taking a look at today’s market.
Composite Commerce remains a key driver of tech M&A. Today’s consumers have more options than ever when it comes to how they get the things they want, whether groceries, apparel, or food from their favorite restaurant. Do you go inside? Curbside pickup? Delivery? Through an app or on the web—or maybe by text or even an old fashioned phone call? Direct, or through an app or exchange? Every business selling to consumers has to consider all of these angles, and it’s becoming more and more true in the B2B sector as well.
In addition to technology and services enabling digital transformation across retail—like Corum client Retail Consult acquired by Gyrus Capital—we’re seeing significant interest in customer experience management tools that ensure a uniform and seamless interaction regardless of the context. Corum client Solvemate, acquired by Dixa, enables and enhances customer support especially for ecommerce companies, while Better Branches, which we sold to Embrace Software, focused on unifying the customer experience at credit unions over both video and in-person visitor management.
Meanwhile, software companies continue to find that enabling and controlling the digital flow of payments across all these channels is a way to both drive revenue and create value for both their customers and their customers’ customers.
Actionable Analytics is a broad term for the variety of technologies that play a role in harvesting the massive amount of data being created every moment, and turning that data not into descriptive visualizations and dashboard, but rather prescriptive decision support that enables faster, better decisionmaking up and down the corporate ladder. These are usually not generic analytical tools, but tend to be embedded in the platforms that can access the data necessary to run the numbers and point to optimal actions, as well as the supporting data management technologies underlying the entire data infrastructure that make these advanced analytics possible.
Corporate performance management is a relevant sector here, headlined by the $1B take-private of Anaplan by Thoma Bravo at a 16x revenue multiple, but you can see it the principles here driving deals in every sector, like HR analytics deal mentioned before, Corum Client People Insight, or, another Corum Client, Motivbase, was acquired by Lux Research for its unique capabilities to leverage predictive anthropology and big data to drive improved consumer research, while yet another client, Rented, a provider of dynamic pricing models for vacation rentals, was acquired by Travelnet Solutions.
One of our new trends is Enterprise Ops, technology leveraging the continuous delivery concepts of devops not only on the development side, but throughout the enterprise. This means software that provides visibility across the pipeline and allows organizations to scale and monitor compliance and identify risks effectively across the company and its target market. When you make yourself invaluable across the entire value chain, from problem identification to development, QA, monitoring and delivery—it means you have an opportunity to build the kind of long-term customer relationships that buyers always love to see, especially if you’re doing this with a vertical focus.
This is true for companies providing that kind of full-stack capability, across devops, salesops, cloudops, MLops—all the ops—such as DevOps automation platform ReleaseIQ, acquired by CloudBees. But it’s also true for point solutions that slot into these broader platforms, enabling project and portfolio management by measuring business outcomes in the value streams all across the enterprise, such as Qualibrate, an SAP-focused testing SaaS acquired by DevOps platform Copado.
Next up, Macro-Resilience. Whenever you hit uncertain economic times, you’ll see a certain amount of reversion to the mean when it comes to what buyers are looking for. The good news about today’s tech M&A market is that there’s a huge diversity of buyers with different priorities, but we’re definitely seeing the medians shifting a bit--from growth to profits, and also towards some of the more boring, stable markets like government and defense, such as Corum client Caseload, which makes software for appellate justice agencies, acquired by Volaris. Buyers are always seeking mission-critical software, but certain markets are themselves more mission-critical than others.
It also means counter-cyclicality becomes more important, not only for markets but also for technology. Software platforms that demonstrably help customers drive efficiencies and succeed in both to boom times and the lean times will see strong demand.
Additionally, an increased focus on profits means more opportunities for profitable services business models, which brings us to our next trend—Focused Managed Services. This is the prism through which most buyers are seeing services deals these days, going after both the predictability of recurring revenue and long-term relationships, and well as the deep, specific domain knowledge that makes those customer relationships possible. This can be a focus by sector, like our sale of cybersecurity services provider Creative Breakthroughs deal in cybersecurity. Or, it can be by ecosystem, such as the sale of our client Vetasi, a leader in the IBM Maximo space, to Bentley. Or it can be both, in the case of Retail Consult, which narrowly targets Oracle implementations in the retail space. Generally speaking, it’s easier to sell a hammer than a toolchest, so this kind of focus can definitely drive buyer demand—but I would add that the aforementioned increase in attention to profitability means increased interest even for generalist managed services firms with predictable, recurring revenue and strong overall metrics.
I’d add that we’re seeing strong demand for these sorts of services companies in the healthcare space, which brings us to our next trend, the Healthtech Continuum. Traditional inpatient health systems need a unified view of patients across the continuum of care, both before and after they enter the facilities, while outpatient providers of all kinds need comparable capabilities, often purpose built for their practice area. So, providers of healthcare technology continue to work fill gaps across the continuum of care while enabling the value-based care model, and software and related technology companies driving those initiatives forward are seeing demand. That’s what drove Alpha II’s acquisition of Health eFilings, a Corum client and clinical data analytics provider. It’s also what drove deals that Corum did in deeper healthcare niches like McCreadie Group, a leader in pharmacy software for researchers and clinicians, acquired by Cordance, and Breaking Free, a leader in behavioral health software for addiction recovery, acquired by LifeWorks. And it’s not just the US, either—we recently sold Latvian healthtech leader Blue Bridge technologies to Everfield Software.
Moving from one sector that’s been in the news to another, let’s look at Smart Logistics. The global supply chain itself continues to take a beating, as the reverberations from the pandemic continue, while additional disruptions build on top of the preexisting challenged, like the sanctions resulting from the invasion of Ukraine, or the major global shifts we’re seeing in manufacturing. All of this makes supply chain and logistics technologies even more important. This includes the broader tools enabling composite commerce, ecommerce, B2B and every other kind of commerce, like order fulfillment, parcel shipping, warehouse management, fleet management and routing software, like Corum Client RouteRank acquired by Netcetera But it also includes highly specialized solutions, such as pharmacy supply chain software maker Trulla, another Corum Client, acquired by Spend Mend, and cash holding and logistics technology provider Planfocus, also a Corum Client, acquired by Sesami.
Next up is the Regtech Systems trend, one we’ve profiled in the past but that has been driven back to prominence especially by the rise of new Environmental, Social & Governance, or ESG requirements and regulations going into effect worldwide. We were already living in a world where regulations were getting to the point where compliance was only possible by way of technology, and now that regulatory bodies know that this sort of automation is possible, more and more of it is being directly or indirectly mandated. There are few things buyers love more than customers who are required by law to buy your product. But as in most M&A contexts, the highest demand is not for platforms seeking to be all things to all people, but those narrowly tailored solutions that can become a component of a larger Regtech System. Here at Corum, we sold LeaseEagle, a lease management SaaS platform that enables compliance to specific lease accounting standards, to MRI, and Coradine, the leading electronic logbook app enabling pilots to maintain flight time compliance, to FlightSchedule Pro.
Finally, we’re still seeing all nine of these trends converge on underserved sectors and deskless workers in the Blue Collar Software trend. From the deep vertical niche software that is in huge demand from private equity funds of all sizes, to broader segments like construction, agtech, energy and manufacturing, the digital transformation sweeping the blue collar sectors continues to be one of the key facts of life in tech M&A. Here at Corum we had examples of both. There were deals in these broader blue collar markets, like selling iConstruct, a provider of Building Information Modelling software for construction that went to Hexagon, or VIA Information Tools, a Manufacturing Execution System, sold into TA Associates’ new Manufacturing tech platform, Advantive. But we also saw deals in narrow niches, for example selling Azpiral, a leader in loyalty tech for gas stations and convenience stores, to PDI.