Analysts See Sharp Premium On Vista's Speculated Takeover Of Coupa Software

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  • Credit Suisse analyst Fred Lee reiterated Underperform on Coupa Software Inc COUP with a $60 price target.
  • Vista is in talks to acquire COUP, Bloomberg reported
  • Vista's founder and CEO recently (Aug-22) discussed the company valuation approach in this market. 
  • He highlighted that the company focuses on EV/R/G, acquiring below the long-term historical average of 0.41.
  • Using current growth rates in the mid to high teens would arrive at a share price in the $45 area.
  • The average EV / LTM Rev multiple that Vista paid over the last two years was 9.7x. Vista's historical M&A range would imply a $60 - 70 takeout range.
  • Raymond James analyst Brian Peterson noted that Coupa has consistently been mentioned as a SaaS asset that would be attractive to PE buyers. He long viewed the asset as a potentially attractive takeout candidate. 
  • This is mainly because Coupa has already amassed a platform that has driven synergies through M&A and could be a vehicle for further M&A beyond the current Business Spend Management (BSM) offering. 
  • He also notes that Coupa has not been as aggressive as some software vendors in ratcheting up pricing or pushing a back-to-base sales motion, prioritizing acquiring new logos. 
  • In a stricter macro, he thinks the former may become more critical to the growth algorithm, which may be easier to accomplish as a private company. 
  • While Coupa also has clear FCF margins, any PE takeout would need to consider COUP's ~$2.2 billion in gross convertible notes, with his math suggesting net debt of ~$1.3 billion.
  • As for a potential takeout multiple, he pointed to recent takeouts for AVLR and PING, supporting a takeout price of $68 - $80.
  • Price Action: COUP shares closed higher by 6.38% at $62.69 on Friday.
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