Every year Corum uses its unique vantage point in the marketplace to identify the Top 10 Disruptive Tech Trends that drive M&A deals. These include foundational trends ‒ technology and societal trends that change things at a basic level ‒ and functional trends that mirror how foundational trends play out in the marketplace. Here are the top 10 disruptive trends we see for 2021.
Artificial Intelligence continues to be the technology that underlies and enables many of the other trends and deals we've seen globally. Companies that apply AI with a B2B SaaS model and make their customers more effective are seeing some of the highest demand in today's Tech M&A environment. So too are companies with the data and feedback loops that are necessary to enable AI itself.
Corum's client, Fing, acquired by Lansweeper, is a perfect example. Fing leverages AI against data from its tens of millions of users and turns it into a highly precise device recognition engine that will enhance Lansweeper's network discovery capabilities. That combination of data, AI, and application is powerful.
We saw this sort of deal across sectors, including Coupa Software's megadeal for AI-enabled SCM optimization software maker Llamasoft; Zebra Technology's $575M acquisition of AI-enabled workforce management platform for retail Reflexis; and DocuSign's acquisition of Seal Software, an AI-based contract management SaaS provider, for $188M. Similar deals could be found at all sizes and in all markets, driving more and more buyers outside of tech, a trend that has steadily increased over the last five years, with healthcare exploding in the last year.
Looking ahead, demand for feedback loops will continue, datasets and applications directly tied to business challenges through methods like AI-based robotic process automation and anomaly detection.
Before AI became mainstream, analytics of various kinds drove technology value. They still are, particularly when enabling better decision-making in real-time and empowering executives and employees at all levels to respond to practical insights quickly.
Often empowered by AI, IoT, and other advanced technologies, and with a base of structured "data fabrics" to handle scaling and resilience, the analytic tools in demand today address business performance in environments where time and competition are key factors. They are not merely visualization displays but highlight specific actions geared towards specific results.
This "data-driven insight" was explicitly the thesis behind TIBCO's acquisition of Information Builders for nearly $1B. But the trend drove deals at every scale, with actionable analytics a key feature in many sectors and applications such as IT problem analysis, financial decision support, and portfolio management.
Solutions that embed decision support and tailored analytics into purpose-built tools and platforms will continue to be in high demand by acquirers who see the value they bring to customers as safe bets in the long term. This trend will also empower companies with access to sufficient data across their customer base to offer benchmarking analytics to those same customers—that's one reason behind Medallia's acquisition of consumer intelligence platform Sense360 to a valuation of nearly 15x revenue.
2020 was the year when the line between online and offline commerce collapsed, as COVID-19 made the ability to sell remotely a matter of survival for every area of commerce. Behavioral changes expected to take years were compressed into a few weeks in the spring, and the reverberations of the shift will be felt for years.
The impact on tech M&A was as close to immediate as you can get. Including food delivery megadeal consolidation in the summer, like Uber's acquisition of Postmates for $2.7B and Just Eat's acquisition of Grubhub for over $7B. But it also saw deals like Walmart's acquisition of peer-to-peer delivery application JoyRun, and the acquisition of Shopkeep payments SaaS for $440M, nearly 9x revenue, by Lightspeed POS.
This trend included all technologies that enable remote transactions, ranging from disruptive retail tech to real estate. For example, Standard Cognition, a leader in autonomous checkout, bought Checkout Technologies, an API developer for frictionless checkout, and real estate technology platform Compass acquired Corum client Modus's platform that digitizes the home-closing process.
2021 will see continued demand for vertical technology tools that digitize complex transactions and enable remote digital commerce, particularly in spheres where it hasn't previously been preferred or even possible. Other in-demand companies include those that provide analytics, martech, and logistics for curbside, in-store, and other innovative pickup options. Broadly, there will be significant interest in tech that enables consistent, personalized customer journeys both online and off.
COVID-19 didn't just change the way we buy and sell, but also how we work. Remote collaboration tools became vital components of every business— essentially overnight ‒ and the security implications came to the fore nearly as quickly. From "Zoom-bombing" to unemployment fraud, the response to the pandemic opened a wide array of opportunities for bad actors to steal information, identities, money, and more, exploiting both technical deficiencies and the unfamiliar nature of this new, remote world.
That new world isn't going away, as the benefits of lower cost and increased flexibility look to endure well beyond the pandemic. Companies that provide maintain, leverage, and secure the remote infrastructure that makes it all possible are notably valuable.
Remote Trust also depends on core infrastructure, such as Corum clients Metro Data Centers, acquired by DartPoints, and ip.access, a provider of end-to-end solutions for cellular communications, including 5G, acquired by Mavenir. It also includes zero-trust security solutions like remote browser isolation pioneer Light Point Security, which Corum sold to McAfee.
Other key areas where this trend will drive value include anti-fraud tools, identity management, biometrics, and purpose-built collaboration solutions with features and integrations directly relevant to particular markets. Remote trust is also an area where companies fulfilling blockchain's promise of an "Architecture of Trust" could see M&A interest the year ahead.
The "low-code revolution" is an excellent example of technological trends and business needs converging to create unique M&A opportunity. In recent years buyers have made clear their preference for predictable, recurring revenue derived from self-service SaaS solutions. This focus has created huge returns on investment, particularly for Private Equity companies and their tech platforms.
But it has also created significant heartburn and missed opportunities in the more complex environments where software has necessarily carried a significant amount of services burden.
Enter low-code technologies, and even in some cases, no-code. From sprawling factory floors to niche regulatory pain points to the local vagaries of first and last mile logistics, technology can now leverage the best practices built around low-code development to offer highly configurable and customizable solutions as straightforward SaaS solutions in areas where it wasn't feasible in the past, pleasing both customers and potential acquirers. That's why we're now seeing low-code, everywhere, as a key M&A trend. Companies that distill their own deep wells of expertise into software platforms that partner with the boots-on-the-ground knowledge and experience of "citizen developers" will see real opportunities in the 2021 M&A market.
Successful horizontal firms like AppSheet, acquired by Google at the beginning of 2020, will see interest. But we expect to see more deals like FINEOS' acquisition of Limelight Health for its low-and-no code solutions aimed at the insurance industry; Holland Capital's investment in low-code SaaS developer Usoft, a specialist in aviation and agriculture applications; and even in Cisco's $730M acquisition of customer experience platform IMI Mobile, where low-code workflow capabilities were called out specifically as a deal driver. Related and enabling technologies, like Robotic Process Automation and Business Rules Engines, will also see benefits from this trend.
Focused IT Services
Specialization continues to be the key to premium value in the services space, both through the recurring revenue provided by managed services firms and the vital reinvention work around digital transformation. Consulting firms, system integrators, and other services firms that apply deep, specific levels of knowledge are driving higher levels of demand.
Tech services firms are caught in a paradox, with software companies attempting to digitize and automate everything that is possible, but with digitization and automation itself requiring ongoing customization, maintenance, and redevelopment. The value of one-off project revenue is declining, but deep domain knowledge and resulting long-term customer relationships are increasingly important—especially when leveraged into predictable, recurring managed services revenue streams.
Firms at the leading edge of key trends and high-value verticals are attracting attention worldwide, particularly from PE firms. On a large scale, we saw this with Veritas Capital's creation of a health and human services digital specialist, Gainwell Technologies. This grew out of a $5B DXC Technologies spinout—acquired at 3.6x revenue multiple.
This trend extends to integrators with focused expertise in complex ecosystems—where Infosys paid $200M at 3x revenue, for Salesforce specialist Simplys, and TTEC Digital paid $48M for AWS integrator VoiceFoundry.
Looking forward, we are seeing notable interest in companies working in emerging tech ecosystems, like Qlik, Atlassian, Snowflake, and ServiceNow.
COVID-19 put the Healthtech Continuum to the test, bringing the demographic, technological, and regulatory trends disrupting the health care market for the last several years to a fine point. Health care and disease prevention took center stage in everyone's life during 2020. There was also a much slower shift of the healthcare system towards a holistic view of the patient, and systems centered on patient outcomes rather than acute relief.
Last year showed that traditional inpatient health systems need a unified view of patients across the continuum of care, both before and after entering facilities. Requiring integration with telemedicine and patient engagement on the one hand and distributed services in post-acute and palliative care settings on the other.
Telemedicine, long-held up by reluctant providers, suddenly snapped into the mainstream, creating opportunities like Teladoc's $18B megadeal of Livongo Health—nearly 90x trailing 12m revenue. In care coordination, CarePort Health was acquired by WellSky, the former Mediware, for over $1.3B and 13x revenue.
2020 also brought into stark relief the importance of drug discovery and clinical trials. So expect to see more deals on that end of the continuum, such as Signant health's acquisition of Virtrial and Archimed's acquisition of Actigraph in a cross-border deal.
This trend also means continued demand for companies filling needs in specific niches, such as Corum Client PBS Endo, a leader in endodontic software, acquired by dental supplies and technology giant Henry Schein.
Another Corum client shows this trend's breadth, with Carenity, a social network and research platform for patients with chronic diseases, acquired by BID Equity. Healthtech innovators like Carenity that enable consistent, responsible access to patient data and a holistic vision of care will continue to be attractive M&A targets in 2021.
The upending of supply chains in the spring of 2020 followed by a drastically different demand flow through the rest of the year, tested technology up and down the supply chain. As the implications and reverberations play out over the coming months, we'll continue seeing significant M&A among companies that help the physical world compete with the speed of digital ‒ even as both worlds change beneath our feet.
This trend drove megadeals like Coupa Software's $1.5B acquisition of SCM optimization SaaS Lllamasoft. Also, Epicor and E2Open were both acquired by Private Equity—at $4.7B and nearly 6x revenue, and $2B and over 8x revenue, respectively.
Sourcing and supplier management tools are also seeing interest, such as QAD's acquisition of Corum client Allocation Network.
As a component of the Composite Commerce trend, we'll continue to see demand for data-driven software platforms that automate the management of shipping and storage, transport systems, supply chains, IoT sensors, and more. This is another area where we could see blockchain deals. Given the massive volume of data that logistics represents, there's also a significant need for robust analytics and artificial Intelligence.
A diverse set of global buyers is racing to acquire and apply this technology, all competing in a $10T industry that is climbing to $16T by 2026.
Regulatory technology is mission-critical for banks, financial institutions, and the enterprise. Additionally, the events of 2020 gave new import to health and safety compliance. In many cases, technology is the only option for efficient and effective compliance with complex regulations ‒ especially when significant regulatory volatility collides with drastically altered circumstances caused by the pandemic and other factors. But these changing and uncertain times mean that those with technology to help navigate this labyrinthine but unavoidable landscape are in a good position.
The Regtech Systems trend drove deals across sectors. Fintech saw the largest deals, with Nasdaq paying $2.7B for anti-fraud and money laundering automation platform Verafin and Moody's spending $700M for Regulatory Datacorp and its AML and anti-fraud analytics. Elsewhere, tax compliance specialist Avalara added TTR's tax research and automation capabilities for $377M and spent $97M for Business Licenses LLC and its compliance and filing SaaS platform.
Privacy continues to be a significant factor in compliance, especially where it intersects with big data, such as in Snowflake's purchase of Cryptonumerics and its AI-enabled privacy management software.
And Environment Health & Safety remains an active market, with Nasdaq acquiring OneReport and Cority acquiring Eviance, among other deals.
Regtech trends also drive govtech deals, such as Corum Client Aware 360's sale of its asset management platform for municipalities to Certified Tracking Solutions, and For the Record, another Corum Client and a global leader in court audio capture and automated transcription, acquired by Bison Capital.
The diverse regulatory impacts across jurisdictions and industries make this a particularly fertile ground for M&A. The acquisition of companies with point solutions and specific domain expertise is a part of the ecosystem, with larger players seeking to add the pieces they need to stay relevant and flexible.
Blue Collar Software
Skilled labor occupations make between 50% and 60% of all workers, and those workers are seeing their roles and industries transformed by disruptive technology. Change is ongoing in building, selling, moving, planting, harvesting, inspecting, maintaining, repairing, and more across multibillion-dollar industries like construction, agriculture, transportation, manufacturing, and many others.
A key feature of the Blue Collar Software trend is the leapfrogging of traditional on-premise solutions, proceeding directly to AI-enabled, SaaS-first, mobile-first, and IoT-integrated systems. But in practical industries, bottom-line results mean more than buzzwords. Hence, tech with clear productivity gains have the advantage in opportunities across quoting, billing, time tracking, asset management, and more.
We’re seeing demand for technologies across large and small markets. For example, in mining Corum sold MineMax to Vela, and MineRP is being acquired by Epiroc. In small markets, like the quick-lube oil change industry, where we sold leading software maker Integrated Services International to Fullsteam.
Looking forward, we expect the construction space to be particularly active, driven by the post-COVID boom in that sector. Buyers like Insightsoftware, Bentley, Thoma Bravo, Procore, and ECI—with three deals—all made acquisitions. And tech for narrow, sustainable niches will continue to be in demand as well.
Technology companies considering an exit cannot ignore the disruptive technologies changing lives and transforming markets. Even the largest firms must adapt to these trends or fall behind. No company has the foresight always to lead the innovation curve, so the most successful acquire the pioneering companies with the expertise to help them continue that disruptive success.