2016 has been witness to record M&A activity among publicly traded SaaS companies. In a recent report, JP Morgan analyst Mark Murphy pointed to six acquisitions of public SaaS companies in the year thus far, versus only three for the full year of 2015, two in 2014, two in 2013, and five in 2012.
The companies that have been bought out so far this year were all small caps: Marketo Inc MKTO, SciQuest, Inc. SQI, Incontact Inc SAAS, Opower Inc OPWR, Textura Corp TXTR and Cvent Inc CVT.
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Interestingly, JP Morgan’s report highlighted, three of these companies, Marketo, SciQuest and Cvent were all purchased by private equity firms. This could be signaling a trend of “Shifting Private Equity Appetite.” Private equity seems to now be less interested in “low-growth, late-stage, on-premise software businesses” like Informatica LLC INFA or Tibco Software Inc. TIBX, and more drawn toward “younger, higher-growth SaaS businesses.”
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This trend could be a reflection of “moderating growth rates and valuations in spaces whose strategic buyers have already made their moves,” Murphy concluded.
Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.
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