Internet Application Software Business Valuation Multiples
For 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.