Image Credits: sorbetto / Getty Images
The private equity firm said it agreed to acquire Anaplan for $10.7 billion. The financial planning software company's stock has fallen steeply in the last six months, giving the PE firm a chance to swoop in.
The stock market hasn't been great for software-as-a-service companies in recent months, which makes us wonder if we're seeing the beginning of a trend of private equity taking aim at vulnerable firms.
To answer that, we need to unpack the Anaplan transaction and understand if the premium is being paid by the buyer. We will be able to figure out how much private equity is willing to shell out for modern tech companies.
We'll apply what we've learned to a host of public SaaS companies that could find themselves answering inbound calls from other private equity concerns. Private equity is richer than it has ever been in terms of available dry powder, and that money could be looking for a target.
Private equity firms look for strong market positioning, and a large and valuable customer catalog with room for growth, all of which modern cloud companies have in surplus.
Anaplan said fourth-quarter revenues rose to $162 million, of which $148 million came from subscription sources. The Q4 growth rate was similar to the full-year result, as revenue rose just under 32%.
If we convert the company's Q4 revenue into run-rate revenues, we can get a revenue multiple of around 16.4x for the transaction.
When we compare forward revenue projections against their present-day value, we have seen declines in software company valuations to the point where some companies have had their revenue multiples cut to the 12x mark. The Anaplan deal price is full-fat compared to that number.
The PE firm is coughing up close to a Q4 2021 price for Anaplan when compared to pre-deal prices, as evidenced by the 46% premium paid for the software company. Over the past six months, Anaplan shares peaked at just over $66 a share, right in line with the offer from Thoma Bravo.
Software companies that are trading at depressed prices today could possibly sell to private entities for their Q4 2021 valuation high-water mark.
We're curious about who else could be in line to give up their status as an independent company if that's the case. We have a lot of names in mind.
All Rights Reserved © 2024
