SaaS Valuations

SaaS M&A and IPO activity has now demonstrated several strong years and shows no signs of decline.  SaaS IPO valuations over the last 24 months remain exceptionally healthy, with current median Revenue Multiples of 13.65 X. This is exceptionally robust when compared to the multiples for the broader, only partially SaaS, Horizontal Sector of 3.6 X Revenue, and the Vertical Market multiples at 2.5 X.

SaaS M&A transactions are tracking high as well, at 4.7 X Revenues, and these transactions represent a premium of over 200% compared to traditional legacy solutions.

SaaS has long been focused on broader horizontal applications, but examining the recent IPOs and M&A transactions, we note the emergence of many hot verticals, including medical/pharma, construction management, and supply chain, along with horizontals like marketing automation, HR, and digital commerce. Many of the major ERP vendors, including SAP and Oracle, continue  to snap up point solutions as they round out their SaaS offerings in an increasingly Cloud-based marketplace.  We expect to see continued strength in SaaS valuations going forward as ISV’s and end users alike continue to reap the benefits of this delivery model.

Posted by , Chairman Emeritus on 20 January 2014
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