My own recent experience, and more objective data, indicate that enterprise SaaS M&A activity just keeps increasing.  The data (below) from Software Equity Group, includes enterprise and non-enterprise SaaS transactions. If you dig into the details, you will find the enterprise segment is especially hot in:

• verticals (e.g., healthcare, education, financial services and hospitality),
• marketing and sales automation,
• BI,
• and several other segments

 

 

 

 

 

 

 

 

 

Who is Buying?  Everyone!

Enterprise SaaS M&A activity continues unabated for several reasons:

• The stock market is up and technology stocks are out-performing the overall market so far this year.
• The Enterprise SaaS IPO window is back open as evidenced by:  Cloudera, Yext, Okta, Mulesoft, and almost AppDynamics (see here).
• PE and VC firms specializing in Enterprise SaaS have large new funds and are investing aggressively.
• Strategic buyers in software are also trying to bulk up and/or make the transition to the cloud.  Salesforce, Oracle, Adobe, PTC are all active buyers.
• Industry 4.0 buyers like GE, Cisco, and Siemens are also now in the mix.

If enterprise software is eating the enterprise, which it most certainly is, no company can afford to ignore the extent to which it may have to become a software company.  For industrial companies like GE, buying its way into becoming a software company may be the fastest way to achieve this.  The same may be true for Cisco.

When Everyone is Buying, Valuations Are Sky High

Just take a look at some of these valuations:

• Okta has a $2 billion+ enterprise value and is trading for about 15x EV/LTM revenue
• Mulesoft has a $3 billion+ enterprise value and is trading for about the same EV/LTM revenue multiple as Okta
• Qualtrics just raised at $2.5 billion, with an expected revenue of $250 million in revenue in 2017, so 10x expected revenue
• Yext will go public today at a valuation that likely will exceed $1 billion, or an 8x EV/LTM revenue
• AppDynamics sold to Cisco at a valuation of $3.7 billion or a 16x EV/LTM multiple of revenue

These are eye-popping valuations for enterprise SaaS software.  It used to take years to see valuations like this, now it is just weeks!  All of which suggests it may be a good time to be a seller!!