I recently returned from speaking at SaaS University hosted by Softletter in Washington DC. This event attracted a good turnout of SaaS executives and industry leaders from around the globe. The outlook from attendees was very upbeat, with most companies experiencing good growth, strong customer acceptance and high user retention rates.
As Corum is a sell-side M&A advisor, I stressed the value of the right business model, and those things that software executives need to focus on to build value. With respect to building value, we continue to see a healthy premium being paid for SaaS companies. We model the so-called SaaS factor which tracks at about a 50% premium to the traditional license vendors. This, of course, varies by month and sector, but the premium for SaaS companies is very real. Buyers and investors are quite simply quick to embrace the SaaS model, and our data on valuation multiples for both public companies and recent transactions reflects that. And, its not just the vertical and horizontal applications solutions that are getting all the attention, but also those companies that provide support for SaaS and cloud technologies on the infrastructure side. A couple of examples include recent deals by CA and IBM, both at significant multiples of revenue. We also see strong demand for SaaS companies in our interaction with buyers, so if you have a viable SaaS solution, it could be a good time to test the M&A market before the sizzle of SaaS dies down.