TBP Spotlight – KKR Acquires BMC Software

BMC Software

KKR Acquires BMC Software

Deal Financials

Enterprise Value ($m): Undisclosed

Transaction Overview

  • On May 29, 2018, private equity firm KKR announced its acquisition of BMC Software, a provider of IT Operations and Service Management, outbidding fellow private equity firm Thoma Bravo.
  • While IPO markets have opened up in recent months with software companies like Zuora and DocuSign going public, BMC still chose this transaction over a potential IPO.

BMC’s Long History of M&A

  • BMC Software, formerly traded on the NASDAQ as BMCS and the NYSE as BMC, has a history of executing M&A transactions on both the sell-side and the buy-side.
  • Between its IPO in 1988 and its privatization in 2013, BMC made over 25 acquisitions including data center automation software company BladeLogic, which it acquired for $854 million, 12.0x LTM Revenue, in April 2008.
  • In May 2013, BMC was taken private by a consortium of private equity firms including Bain Capital, Elliott Management, Golden Gate Capital, and Insight Venture Partners. The transaction valued BMC at 3.1x LTM Revenue for an Enterprise Value of $6.9 billion.
  • Since then BMC has transacted more selectively, acquiring only four companies in the past five years.

Same Industry, Different Strategies

  • As the ITSM market continues to grow at 15% year-over-year, according to MarketsandMarkets, large players in the space have demonstrated the success of two different value creation strategies.
  • ServiceNow leads the ITSM software industry with a 3-year CAGR of 43% and a 5-year CAGR of 54%, propelled by its technology-focused investments and ecosystem-centric strategy. Following a path similar to Salesforce’s, ServiceNow has established itself as an ITSM market leader trading at $30.5 billion in Enterprise Value, or 14.6x LTM Revenue.
  • On the other end of the spectrum, mature players in the ITSM space like BMC, CA, and IBM have adopted a strategy of value creation through debt-driven M&A, organically growing at a slower pace to afford higher profitability. With KKR’s acquisition being rumored to value BMC at $10 billion, 45% higher than the company’s 2013 valuation, this strategy has proven itself similarly viable to ServiceNow’s. Read more about ServiceNow and its competitors in TBP’s ServiceNow Ecosystem Report.

Recent ITSM Transactions

About True Blue Partners, LLC
True Blue Partners is a boutique M&A advisory firm that serves lower mid-market enterprise software, service and solutions companies. It brings the rigorous strategic and financial perspective of bulge bracket firms with a company building approach and a steadfast partnership that only an independent boutique firm can deliver. For more information please visit www.truebluepartners.com or email us at info @ truebluepartners . com.

TBP was NOT an advisor to this transaction.