Document and Workflow Automation Technology M&A Transactions by US-Based Acquirers

Between Q1 2020 and Q2 2024, $12 billion was deployed across 253 M&A
transactions in the workflow and document automation technology sector by US-based acquirers.

Document and workflow automation technology refers to systems and
tools designed to automate the creation, processing, and management of
documents and workflows within an organization. This technology leverages advanced features such as optical character recognition (OCR), artificial intelligence (AI), and machine learning (ML) to capture, extract, and process data accurately from various document types. It integrates with major software systems like ERP and CRM to streamline operations, reduce manual errors, enhance productivity, and ensure compliance with industry standards.

Document and workflow automation companies typically trade at enterprise value to revenue multiples of 1x to 10x. Enterprise value to EBITDA multiples are substantially higher with companies in this sector typically trading between 15x to 30x. This significant premium indicates a high-growth industry where companies are anticipated to grow their revenues significantly over time. Acquirers are willing to pay a premium for these companies based on their current EBITDA positive state, future growth potential, and the strategic value they provide.

• The valuation multiples are based on a sample set of private and public workflow and document automation technology companies in the sector. The data was collected on July 11, 2024.
• The sample set typically trades at an enterprise value to revenue multiple range between 1x and 10x, staying consistent in this range as the enterprise value of the business increases.
• Average enterprise value to EBITDA multiples varied significantly, typically ranging between 15x and 30x. This shows that acquirers are willing to pay significant premiums for businesses already chieving a positive EBITDA.
• A positive EBITDA in the technology sector typically indicates that the company has achieved good product-market fit and proven commercial traction. This is due to the technology being initially capital intensive to develop, which is then sold at high gross margins, increasing profitability through driving revenue.

• Between Q1 2020 and Q2 2024, over $12 billion was deployed across 253 M&A transactions in the document and workflow automation technology sector by US-based firms, with an average deal size of $48 million.
• Q2 2022 reflects the period with the most significant deployment of capital, $3.1 billion, while Q2 2021 experienced the highest deal count, 28. 
• While the deal count shows variability, it consistently reflects at least 5 deals per quarter. This consistency indicates a stable interest in deal-making, even as the investment sizes and market conditions fluctuate.
• The largest transaction was the acquisition of Bottomline Technologies by Thoma Bravo for $2.6 billion, which was completed on May 13, 2022.

• US-based acquirers predominantly favored domestic document and workflow automation companies, making up 75% of the deal count (190 deals) and 85% of the capital invested ($10.6 billion).
• The average deal size for US-based firms was $55 million. This is significantly larger than the second largest average deal size, which was for Canadian-based companies at $28 million.
• The second highest number of deals by US-based acquirers went into United Kingdom-based businesses, with 19 deals done.
• A majority of the capital invested in the Netherlands by US-based acquirers in this sector was driven by the acquisition of Bynder by THL Partners for $605 million in January 2023.

• A significant majority of the deal count (157 deals) and capital invested ($7.8 billion) into document and workflow automation technology companies by US-based acquirers was done through a buyout or leveraged buyout. 
• The average deal size in buyouts and leveraged buyouts was around $50 million. The transaction structure with the highest average deal size ($73 million) was the secondary buyout, which accounted for $1.5 billion of the capital invested through 21 deals. 
• There was significant activity in mergers and acquisitions, as through 96 deals over $4.5 billion of capital was invested with an average deal size of $48 million.
• Add-on transactions also showed significant activity, accounting for 25% of the total deal count (111 deals) with lower average deal sizes at $2.5 million.

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The enterprise value to revenue multiple of the transaction came to 4x, which is aligned with typical transactions of that size within the industry, as discussed earlier. At the time of being acquired, TrueContext had revenue figures of $24 million TTM and gross profit of $21 million. Their EBITDA was -$1.3 million.

The demand for document workflow and automation technology has consistently increased due to the need for efficiency, accuracy, and cost reduction. Automation minimizes human error and speeds up processes, leading to significant productivity gains. As businesses increasingly adopt digital transformation strategies and remote work, the reliance on automated systems will continue to grow, ensuring streamlined operations and enhanced data security. This trend is expected to persist, driven by ongoing technological advancements and competitive pressures.

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