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Where are we headed with Big Data M&A. Are values at risk?

Feb 23, 2016

Where are we headed with Big Data M&A. Are values at risk?

Enterprise Data , , 0 Comments

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.

EDA Graph

EDA Graph 2

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.

Ken Marlin

Ken Marlin

Ken Marlin is Managing Partner and Founder of Marlin & Associates and the author of "The Marine Corps Way to Win on Wall Street: 11 Key Principles from Battlefield to Boardroom" (St. Martin's Press 2016).

Over the course of more than 30 years Ken has advised scores of U.S. and international middle-market technology enabled firms on the best ways to buy, sell, grow and thrive. Along the way, he's been an entrepreneur (three times), a tech company CEO (twice), a senior corporate executive (twice) and an investment banker.

Seventeen years ago, Ken embarked on a journey to create a different sort of investment bank - one that would meld the investment banking skills he learned over 20 years on Wall Street with lessons he learned as a tech entrepreneur and the principles he learned during the decade he spent on active duty as a U.S. Marine Corps infantry officer. Today, Marlin & Associates is one of the most active M&A advisers in the information technology arena.

Institutional Investor Magazine has five times named Ken as one of II’s “Tech 50” and the II “FinTech 35” - both of which honor the most influential figures in the financial technology data and analytics sector.

Outside the office, Ken is a trustee of the Madison Square Boys and Girls Club, which serves underprivileged kids throughout the five counties of New York City; and an active supporter of the Phoenix House Foundation, The Wall Street Warriors Foundation, The Marine Corps Heritage Foundation, University of the People, the Hurricane Island Outward Bound School, and Outward Bound Peacekeeping.

Ken’s book has garnered strong reviews and is consistently ranked among the top in governance, finance and leadership. One reviewer called it a compelling vision to improve Wall Street by returning to solid core values like taking the long view, behaving with honor, delivering excellence and working for a cause greater than money.

Ken earned a BA from the University of California (Irvine), an MBA from UCLA, and a post-MBA Advanced Professional Certificate in Corporate Strategy from New York University. He lives in New York City with his wife, daughter, a dog, a cat and turtle.

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