SaaS and M&A
Just wrapping up two days at SoftLetter’s SaaS University in Austin, Texas. Attendance was strong, with over 100 software executives from around the world attending more than 30 diverse sessions on how to build and grow your SaaS company. Interestingly, very few of these companies were native SaaS apps, so most represent a hybrid business model, with some revenues from SaaS, but most from their traditional on-premise, perpetual license models.
I sat through a number of interesting sessions on SaaS pricing, channel development, contracts, sales compensation, managing product releases, etc. Notably, according to Gartner Group’s Sharon Mertz, despite all the press on the rise of SaaS, the volume on spending for on-premise applications is 9 times that spent on SaaS. And, Salesforce.com represents 15% of all SaaS revenues, and over half of that in the CRM space.
My presentation on how to value a SaaS software company had good attendance, with many parties interested in how to build value in anticipation of an M&A exit. Our research shows that of the 3,600+ software M&A transactions completed in 2011, only 200 were SaaS. Conclusion: there's lots of room for both SaaS and on-premise solutions, and SaaS is not likely to dominate for some years to come, although it does enjoy a much higher growth rate and will therefore command greater attention, especially in M&A.
With rising valuations, consolidation across most software and technology markets, threats of rising tax rates in the US, and the significant cash hordes available for acquisitions by technology companies, this promises to be a strong year for software M&A.
Posted by WardCarter, Chairman on 02 March 2012