valuation multiples bell curve Valuation multiples for software companies  continue to remain steady in comparison to the prior period ranging from 2.6 X to 3.8 X gross revenues.  In translating those m&a multiples to the Gaussian bell curve above we can put that range in blue.   Depending on the type of software company and its gross revenues will determine where that company specifically sits on the bell curve. Valuation multiples for legacy software systems  in which an upfront fee is collected with annual maintenance billing will tend to find themselves deep left of center (no political pun intended) in the 2.1% green shaded area of the bell curve in which EBITDA multiple valuation will be in the 3X range.  These companies that do not have a cloud or SaaS solution to up-sell its existing customer base will find themselves being lumped into the "buggy whip" category.  However, there is a cottage industry of buyers that are acquiring these software companies as annuity plays.  In which sales, marketing, administration (SG&A) and development expenses are cut leaving an adequate support staff behind to keep the existing clients happy.  Owners of these software companies may want to consider doing the same instead of selling. As you move to the right of center on the bell curve you won't find conservative entrepreneurs there.  These are the "geeks in the garage" who have developed brand new technology that is a cloud based, software as service (SaaS) mobile application.  The SaaS multiples of these companies can push into the beige area and beyond.  In a review of nearly 100 transactions within the software sector since January of 2012, twenty percent (20%) were in the mobile space.  For each Instagram that grabs the headlines there are many others that were sold like AisleBuyer (Intuit), HipLogic (Zynga), Kima Labs (Groupon) and Karma Science (Facebook).  Although mobile acquisitions are currently white hot, nipping at the heels of mobile acquisition multiples in both SaaS multiples paid and acquisition popularity are cloud application providers such as just announced Buddy Media (Salesforce.com), Vitrue (Oracle), Drilling Info (Battery Ventures & others), Compliance360 (SAI Global), and DecisionView (IMS Health). Lastly,  cooling off  back into the mid range of the bell curve, there were many software application acquisitions.  To name a few BlueCoat Systems (2.8x revenues - Teachers Private Capital), Magna Design Automation (3.6x revenues - Synopsys) and 2nd Story Software (3.7x revenues - InfoSpace). To learn more about what valuations multiples you can expect to see for your business, contact us or complete the confidential contact form and we follow up with you shortly. More...

Internet Application Software Business Valuation Multiples

internet software business valuation multiplesFor year to date 2011, within the Internet and application software industry, business valuation multiples remained steady. However, there was nearly a 50% decline in the number of announced transactions.  During the first six months of 2010 there were approximately 17 privately held completed deals within the Internet or application software industry versus 9 deals for the same time period in 2011.  In 2010 there were two transactions over $1 billion dollars;  Stone Point Capital and Hellman & Friedman's acquisition of Sedgwick Claims Management Services at an estimated 2.0x multiple of gross revenues and Madison Dearborn Partners acquisition of 51% controlling interest of TransUnion for $1.02 billion dollars which equates to a 1.8x multiple of gross revenues.   For 2011 the largest announced deal appears to be KKR's $425 million dollar deal for Ipreo. February 2, 2011 - Lake Capital, the lead investor, acquires equity in Empower Software Solutions, reportedly for $140 million a 2.2x multiple of gross revenues May 11, 2011 Arlington Capital Partners recapitalizes and acquires equity in Iron Data Solutions, reportedly for $130 million a 5.2x multiple of EBITDA May 23, 2011 - Kohlberg, Kravis, Roberts (KKR) announced a definitive agreement to acquire Ipreo reportedly for $425 million a 12.1x multiple of EBITDA  or an estimated 1.5x multiple of gross revenues. A review of the 47 announced transactions within the Internet software and application software sector for the past eighteen months establishes a range (per individual announced deal) of business valuation multiples from .06x on the low side to 9.3x of gross revenues on the high side with the majority of the deals falling within 1.8x to 3.4x multiple of gross revenues. [Post: http://www.imergeadvisors.com/2011/06/internet-application-software-business-valuation-multiples]   More...

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