San Ramon, CA, March 6, 2012 -- Martinwolf M&A Advisors today released a new report on trends in SaaS company valuations for 2011 based on the MW IT Index®, the first-ever Index measuring enterprise value of technology services companies. The report, entitled The martinwolf Report on The Top 10 SaaS Companies of 2011, reveals two key findings:
- All Index companies in the SaaS category experienced accelerated growth in 2011 that led to a 163% premium in revenue valuation multiple based on 12 months trailing revenue over traditional software companies.
- Median enterprise value for the top 10 SaaS companies was more than 2x that of second 10 -- 7.4x 12 months trailing revenue compared to 3.2x. This split creates a new class of SaaS companies -- "leaders among leaders."
The report further concludes that while growth for the SaaS category will continue to outpace that of traditional software for the next 12-24 months, individual companies' growth rates and enterprise values will vary as the market matures and companies segment and specialize. Specifically:
- Companies in newer SaaS segments such as Infrastructure as Service (IaaS) and Platform as Service (PaaS) will grow faster than other SaaS companies.
- Companies with specialized solutions for HR, real estate, restaurant services and other industries will grow faster than other SaaS companies.
- The battle for supremacy in SaaS among the largest enterprise software players, especially IBM, Oracle and SAP -- all of whom made key acquisitions in 4Q2011 -- has put enormous pressure on the enterprise value of the de facto market leader, Salesforce .com, whose stock peaked in July 2011 at $159 per share.
Said Marty Wolf, Founder and President of martinwolf, "These market developments have implications for both buyers and sellers of SaaS companies. Buyers should expect to pay more for companies in hot segments and sellers can look forward to higher prices depending on which segments they serve. When it comes to valuations, what you do matters.
Added Wolf, "While we expect this accelerated growth in the SaaS category to continue for the next 12-24 months, recent acquisitions in the SaaS space send a clear message for sellers: Being the first company to sell in any specialized segment of SaaS matters because the second company usually sells for half the price of the first one. In other words, if you snooze, you lose."
The new SaaS report is based on the MW IT Index, a proprietary analysis by martinwolf. The MW IT Index is an index whose securities are weighted according to the market value of their outstanding shares. It measures 120 companies traded in the U.S. stock markets (NYSE, NASDAQ and OTC) in the categories of IT Services & Business Process Outsourcing (BPO); IT Supply Chain Services; and Software, including SaaS.
The MW IT Index starts on December 31, 2007 with a value of 1,000. All companies in the Index are on Scoreboard, see: http://martinwolf.com/mw-intelligence. The complete index can be accessed at MW IT Index. For a PDF copy of the new Top 10 SaaS companies report, go to martinwolf Top 10 SaaSiest.