It Is a Strong Market But It Is Not Crazy

May 12, 2015

It Is a Strong Market But It Is Not Crazy

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This month, there were at least a dozen meaningful financings and m&a transactions announced among information technology companies in the areas that we cover. Several of these were at fairly strong valuations. See the list below. It is a strong market but it is not crazy – this is not 1999 redux.

Yes, there are those few “unicorns” – those relatively small companies with huge $1 billion+ valuations that the press likes to tout. But unicorns are still rare. Some of those valuations may well be crazy, but for the majority of firms that we see, valuations reasonably reflect solid, growing, well-led, technology-based companies with substantial growth potential and proven recurring-revenue models, in a strong and stable economy with low interest rates.

The best of these information technology firms are those that are leveraging improvements in computing power, bandwidth, security, storage and other emerging technologies and combining them with mobile and cloud capabilities to meet well-defined customer needs – while offering low-cost, often SaaS-based, services. Perhaps not all these firms are capable of turning accepted wisdoms on their heads; some can be just as disruptive to the status quo simply by offering smarter solutions that are easier to use and at lower cost.

We have seen it in the B2C space with firms such as Uber and Airbnb. And now it’s coming to B2B. As it does, scores of strategics and financial investors have looked to get in on the next-next thing. Some of the results are on the list below. It is a fun time to be in this business.

The report below focuses on our current sense of m&a values, activity, and trends for the dozen plus very specific sectors that we follow and sometimes lead. Some of the notable deals this past month include:

  • Permira Advisers and Canada Pension Plan Investment Board agreed to acquire Informatica (Nasdaq:INFA) for $5.3bn – valuing the company at $4.8bn;
  • Domo, a Big Data player, raised $210mm in Series D round led by BlackRock – valuing the company at about $2bn;
  • Prosper Marketplace, the peer-to-peer lender, raised $165mm in series D funding led by Credit Suisse and SunTrust – valuing the company at about $1.9bn;
  • OSCAR Insurance, a relatively new firm that uses Big Data analytics and technology to keep premiums low, raised $145mm – valuing the company at up to $1.5bn;
  • Funding Circle, another peer-to-peer lender, raised $150mm led by new investor DST Global – valuing the company at more than $1bn;
  • Shopify has filed to raise $100mm in an IPO – valuing the company at about $1bn;
  • Singapore Telecommunications Ltd. (Z74.SI) “Singtel” agreed to acquire Trustwave for $810mm – valuing the company at about $826mm; and
  • Interactive Data Corporation is rumored to have plans to sell or IPO – valuing the company as high as $5.5bn.

Read the full version of our May Market Update here: http://bit.ly/1FboID0 and leave us your comments below.

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