The record for quarterly SaaS M&A deal volume has, once again, been broken as the quarter posted 251 transactions in 3Q18. For the first time in several quarters, Analytics & Business Intelligence (BI) eclipsed CRM & Marketing in terms of deal count.
3Q18 SaaS M&A Highlights
Quarterly SaaS M&A transaction volume reached a record of 251 deals in 3Q18. This deal count surpassed the previous record posted in 2Q18 (226 deals) by 11.1%, thus setting 2018 deal count on track to outpace 2017.
The Analytics & BI product category eclipsed CRM & Marketing in terms of deal count, as the category posted 42 transactions in 3Q18. The highest percentage of deals within Analytics & BI software were due to strategic buyers (including Facebook, Workday, and Salesforce) who looked to acquire strategic assets to round out their product offerings
The median TTM revenue multiple(1) has oscillated between 4.2x and 4.6x over the past six quarters. Although the multiple dipped slightly in 3Q18, the quarter’s 4.3x EV/Revenue remained within this range.
The slight dip in 3Q18’s multiple can be attributed to several 4Q17 deals with high multiples that have been removed from the calculation, including Sage’s acquisition of Intacct (9.7x), WiseTech’s acquisition of Digerati (8.6x), and Descartes’ acquisition of MacroPoint (8.5x).
eCommerce software posted the highest EV/Revenue over the past three years. This category includes notable deals by Salesforce (Demandware, 10.5x) in 2Q16, and Adobe (Magento, 11.2x) and Square (Weebly, 7.2x) in 2Q18.
Over the last several quarters, there has been an approximate 60%-40% split between targets with a horizontal focus vs. a vertical market focus. This trend continued in 3Q18 as vertically focused targets comprised 39% of all SaaS M&A transactions.
Healthcare, Education, and Financial Services software lead all other vertical deals in terms of deal count. Typically, Healthcare software targets rank the highest in terms of deal count due to the sector’s large TAM. In 3Q18, Education software M&A was largely driven by the general increase of digital adoption within the industry and the need for document management tools. Financial Services software M&A was driven by the need for risk management tools to round out platforms within the industry.
Public Sector software appeared on the radar this quarter, with GTY Technology Holdings making a majority of the acquisitions within this sector
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