IT Services Software Valuation Metrics
Elon Gasper
In IT Services, KPIs and multiples differ between developed and emerging markets and merit their own analysis. Developed markets have seen notable growth in sales multiples, with the current ratio the highest in over a year. In Emerging Markets, decreasing ratios are the story, with sales multiples holding constant until a recent pullback, and EBITDA multiples still lower than second half of ‘15.
An arms race in acquisitions of CRM integrators saw buyers seemingly choosing randomly between Salesforce and Microsoft. However, when we cluster deals by the revenue of the acquirer, a clear pattern emerges, bigger buyers prefer Salesforce integrators, for instance, as services giants such as IBM, Accenture and India’s Mindtree all made Salesforce-related acquisitions.
As buyer revenue falls, acquisitions of Dynamics CRM integrators increase. This doesn’t mean the Dynamics ones are only for little buyers; large companies like Capita and Itelligence have all acquired a Dynamics integrator, too.
Finally, IBM alone showed no discrimination between the alternate platforms, purchasing Salesforce cloud integrator Bluewolf for $240M at 2.7x revenue and a UK Dynamics CRM SaaS integrator, Optevia.
Our analysis shows that bigger buyers, like IBM, are all arming with smaller SaaS implementation and consulting businesses in order to take a bigger share of the cloud.
And that’s our report at the half. Back to you, Bruce.
Bruce Milne
Thank you for that great report. A lot is happening.
I mentioned before that you should keep an eye on how many companies you’ve heard of before, and you realize there’s a lot of money coming out of PE, Vista, IBM, Cisco, people like that, but also a lot of companies that are not necessarily tech companies, such as GM buying. But a lot of firms you just don’t recognize. If you recognize less than half, you’re in the majority. A lot of times these things go as high as 70% with folks not recognizing buyers. This one was pretty good with lots of well-known companies in there, but the point is that lots of buyers out there you haven’t heard of.