Capped price. The median acquisition price of these companies was $5.3bln. There’s a lesson here: there are only so many acquirers that can spend billions in cash and/or company stock to make acquisitions. Once you get to $5bln+ in valuation, the universe of corporate acquirers (Salesforce, Microsoft, Adobe) and private equity firms (Thoma Bravo, KKR, Clearlake) that can afford you shrinks, such that IPO becomes the primary viable option. And of course, SaaS IPO’s don’t grow on trees (there were 27 in 2021).
Low burn. The EBITDA burn of these companies relative to revenue was pretty negligible with median EBITDA that was break-even (0% margin on median).
SaaS comps continue to be strong, but fell from last quarter. Of the 126 SaaS companies we follow, the average public SaaS business is trading at 17.9x revenue while the median is 12.2x. In Q3, the average was 20.0x.
The trend is still on. The chart in the picture shows median revenue multiples we’ve collected since Q4 2014. During that period, the median SaaS multiple has ranged from 4.6x to 14.1x with an average of 8.4x.
Premium gets a premium. Premium SaaS businesses trade at premium multiples. In the data set, 68 companies trade at greater than 10x revenue, 50 trade at greater than 15x, and 37 trade at greater than 20x.
SaaS businesses are healthy. There is almost no debt on these businesses (except McAfee) as banks don’t like ‘asset-lite’ businesses like software. Additionally, these companies have $402mm of cash on the balance sheet on median, plenty relative to annual burn (recall EBITDA is -$16mm). The number of years of cash on the balance sheet is less important given that these businesses are generally cash flow positive (median of $42mm); only 35 out of the 126 companies have negative cash flow. Note that 69 out of the 126 have negative EBITDA, but again that’s acceptable so long as the growth is present and cash flow overall is positive.
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