Further consolidation among tech businesses that specialise in software development and quality assurance, with two significant deals announced in the past week.
Tricentis, the test automation vendor backed by PE firm Insight Venture Partners acquired Neotys, the French performance testing specialist whose key product is NeoLoad. Terms were undisclosed, however according to Sandeep Johri, Tricentis's CEO, most of Neoty's shareholders have rolled their stakes into the merged business.
"Covid has accelerated demand for testing, and five-year plans companies had for automating testing have become three-year plans," Johr told QA Financial. And while the pandemic has shone a spotlight on performance and load testing as financial firms in particular have had to move quickly to keep up with increased customer demand for online services, the even more important driver for the acquisition is the growing demand from clients for broader DevOps platforms. Larger financial firms, in particular, want to reduce the number of external technology vendors they are dealing with and it's becoming more difficult for smaller suppliers to scale up.
Since PE firm Insight Venture Partners bought a majority stake in Tricentis via the company's $165 series B financing in 2017, "Software-as- a service companies and DevOps companies have seen a huge increase in their multiples," noted Johri. Tricentis is growing revenues at a rate of 40% annually and will be a $200m revenue company by the end of 2021, he added.
The other big deal announced recently is the acquisition by Thoma Bravo, the $73bn tech-focused investor, of a "strategic stake" in Applitools, the San Mateo-based AI visual testing firm founded in 2013. Again, terms weren't disclosed, but one press report suggested an implied valuation of $250m, which compares - for example - with the $330m paid last year by NYSE-listed Keysight Technologies for Eggplant, the test automation tool vendor.
Kevin Formby, who heads up Keysight Technologies financial services business, talked about his firm's acquisition of Eggplant at our recent QA Financial Digital Forum. One point he made was that smaller banks, as well as the largest, now want access to expanded DevOps platforms. Better software testing, he said, could be critical to their winning back a competitive advantage over fintech challengers. You can watch our Q&A session with Kevin Formby here.