SaaS acquisition multiples

by

Sammy Abdullah

Only 9 exits. There have only been 9 public companies acquired since December 2020. Acquisitions of this size don’t happen often. Note that we have incomplete data for one of those companies (FireEye) because as part of the acquisition, a material subsidiary called Mandiant was spun-off ($400mm revenue of $941mm combined revenue), so we do not have all the data for FireEye as a standalone subsidiary.The businesses on median traded for 8.7x trailing twelve month revenue of $833mm with YOY growth of 18%. Note, that means the multiple on the current ARR was inside of 9x since these companies are growing. While that growth may sound low, it’s pretty impressive for companies with nearly $1bln of revenue, so any multiple discount from slower growth should be more than offset by the premium these companies receive for size and the fact that these are control investments. There’s a lesson here as well: it’s fun to raise money from VC at 20x revenue, but recognize that the likelihood of keeping such a high multiple at acquisition is low. It takes a lot of growth to make up for the overpayment and achieving a good venture return for the investor. We always recommend keeping dilution low by taking the money you need at a reasonable valuation as opposed to too much capital at a high valuation. That’s how you avoid down-rounds and restructurings.Visit us at blossomstreetventures.com and email us directly at Private equity is leading the way. 9x revenue. Of the 9 acquisitions shown, only one was made by a strategic (Salesforce). All the rest were made by private equity, with Thoma Bravo actually making 4 of the 9 acquisitions. Again, there are very few firms that can afford a multi-billion dollar acquisition. Not surprisingly, the highest multiple of the group is Salesforce’s, paying 33x revenue for Slack.sammy@blossomstreetventures.com