SaaS surges in the rising Software M&A swell

 

After 2 quarters into 2012, weve tracked over 230 SaaS deals, with a market value of $17.5 B where terms were announced, with a median deal value of $54 M. And, theres little sign of the trend slowing given current incoming deal flow. The continued migration to the SaaS model is putting pressure on the traditional application vendors to offer SaaS options, leading to cannibalization of historic license and services revenues as customers demand SaaS offerings, and to heightened M&A activity to capture leading edge solutions. Witness the strength of the pure-play public SaaS companies, with Corums SaaS Index now trading at a median of over 5 X revenues and 18 X EBITDA, far above the 3.5 X revenue valuations of vendors such as SAP and Oracle.
Weve seen some staggering transaction valuations during this past quarter, including Intuits acquisition of Demandforce, offering marketing automation for SMBs, for $423 M, at a lofty 11.4 X revenues. Giant SAP continues on their acquisition path taking out business commerce solutions provider Ariba for $4.5 B, or 9 X revenues. Francisco Partners picked up manufacturing solutions vendor and prior Corum client Plex Systems for a reported $160 M, or 4 X revenues, while Blackbaud acquires fundraising software provider Convio for $325 M, at 4.5 X revenues.

Were optimistic for the outlook for 2012 and beyond for SaaS as the virtues of applications in the cloud gain further momentum, and the well-funded larger vendors continue to scoop up attractive smaller SaaS targets.

 

Posted by , Chairman Emeritus on 20 August 2012
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