May 26, 2022

last night private Shareholder Thoma Bravo said it had agreed to acquire Anaplan for $10.7 billion. Shares in the financial planning software company have plummeted over the past six months, giving the private equity firm an opportunity to strike.

The stock market hasn’t been kind to SaaS companies in recent months, which makes us wonder if we’re seeing the start of a private equity trend targeting weaker SaaS companies.

To answer this question, let’s quickly break down the Anaplan transaction and get a better idea of ​​whether Thoma Bravo is paying a premium for this company. From here, we can get an idea of ​​how much types of private equity are willing to pay for modern technology companies.

We then apply what we’ve learned to a large number of public SaaS companies that can respond to requests from other private equity firms. Remember that private wealth is as rich as ever in terms of available dry powder, and money can find a purpose.

Private equity firms are looking for strong market positions and a large list of high-value clients with room to grow, which today’s cloud companies have in abundance.

As part of the Anaplan-Thoma Bravo deal

Anaplan said fourth-quarter revenue rose about 33% to $162.7 million, of which $148 million came from subscription sources, compared to last year. Compared to last year, sales were up just under 32%, meaning fourth-quarter growth was in line with full-year results.

Converting the company’s Q4 revenue to current sales revenue, we apply this figure (approximately $651 million) to the purchase price of $10.7 billion to arrive at a revenue multiple of approximately 16.4 times the deal value.

Remember, we’ve seen software company valuations drop to the point where SaaS companies, which are up over 30% today, have reduced their earnings multiples to 12x when we compare future earnings projections to their current ones. Compared to this number, the price of the Anaplan deal seems full.

Indeed, Thoma Bravo paid a premium of around 46% ($66 per share) for the software company’s shares compared to pre-deal prices, close to Anaplan’s PE price in Q4 2021. To be precise, over the past six months, Anaplan’s stock has peaked at just $66 per share, exactly in line with Tom Bravo’s offer.

This gives us a nice little base to work from: software companies trading at low prices today could be sold to individuals by their estimates in the fourth quarter of 2021.

If so, we’re quite curious to see who else might be in line to give up their position as an independent company. And we mean more than a few names.

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