The New Year started out with a bang for companies in all four segments of the Enterprise Data & Analytics space. More than a dozen transactions of significance were announced including deals by Bessemer, Bloomberg, IBM, Moody’s, Oracle and Thoma Bravo. EV-to-revenue multiples as well as EV-to-EBITDA multiples for all four segments remained relatively strong, despite a backdrop of volatility in the capital markets. There was one cautionary note, however.
Within the Enterprise Data & Analytics market we have defined a subsector that we call Data Analytics Software – Focused (DAS-F), consisting of companies that primarily sell data analytics software solutions. The sector includes firms such as Hortonworks, Qlik, Tableau and Splunk. For the past three years, this sector has enjoyed some of the strongest valuations in the broader industry, with EV-to-revenue multiples of around 5.4x trailing revenue. A few firms in the sector enjoyed much higher multiples. A key driver of these strong values was very strong expected top line growth – in some cases exceeding 100% annually. Recently, expectations for top line growth for several companies in this sector moderated a bit, and with that, some valuations slid as well.
As you will see from the above charts, since the start of the year (through February 18th), on average, values for the DAS-F sector are down about 33% (vs. about a 6% drop in the S&P 500). EV-to-forward revenue multiples declined to an average of 2.5x, with average forecast annual revenue growth now at about 17%.
We remain bullish on the entire Enterprise Data & Analytics industry, including the DAS-F sector as do many buyers and investors. That’s why we expect continued strong m&a activity. But volatility is real, GROWTH MATTERS, and not all firms are equal. It’s an interesting time to be in this market. We are actively advising sellers, buyers, and investors on strategic and financial transactions. Please let us know how we can help.
Read our full Enterprise Data & Analytics Market Update HERE.
We will be attending the upcoming Gartner Business Intelligence & Analytics Summit in Dallas, TX on March 14-16. If you plan to attend and would like to meet, please feel free to contact me or Jeff Trongone – our lead in this area.