Welcome to the Q1 2018 edition of our Enterprise Software Report – Results International’s quarterly market update for the enterprise software segment. The enterprise software sectors we track in this market overview include (i) Infrastructure, (ii) Security, (iii) ERP (comprising diversified, financial accounting and SCM software vendors), (iv) Analytics, (v) Human Capital Management, (vi) AdTech/Martech, (vii) HealthTech and (viii) Other Vertical. We also look at those players that have a SaaS-first business model. In addition to this summary, we produce separate quarterly reports that focus specifically on Security (The Cyberscope), Marketing technology (The Barometer) and HealthTech (The Heartbeat).
The 2018 Enterprise Software sector is flourishing with high deal activity and noteworthy blockbuster deals in the first quarter. 424 deals were announced in the sector, the strongest quarter since Q2-16, with North American deals continuing to lead the way. Salesforce, which we noted for its lack of deal making in our 2017 Market Review, has hit the ground running with a $5.9B acquisition of MuleSoft, who had IPO’d just last year at a valuation of $2.1B. Previous multi-billion dollar infrastructure software transactions have not come close to the multiple paid for MuleSoft at 19.9x revenue, made all the more impressive by the fact MuleSoft’s operating losses have grown year over year. With the acquisition, Salesforce has become the go-to for enterprises in the cloud era, providing the ability to move legacy application data from on-premise databases into the cloud. Other enterprise software aggregators will no doubt be contemplating how they too can further integrate CRM, ERP and infrastructure to expand their enterprise cloud computing offering, with SAP’s acquisition of Callidus Cloud ($2.3B) this quarter providing more proof of this trend.Read More
We’ve seen a number of new entrants and returning acquirers in the market (such as RELX Group and Salesforce) and we believe this trend will continue as more acquirers in different verticals look to meet strategic requirements and drive digital transformation at every level of the enterprise. In addition, business process and back office automation solutions, particularly those using artificial intelligence, machine learning and robotic process automation, will represent further areas of interest to organisations in more nascent verticals still heavily reliant on using on-premise solutions (e.g. education, manufacturing and retail).
The IPO market this quarter also had two new listings (Zscaler and Cardlytics) – a sign of things to come in 2018: many fast-growing companies, and especially those operating a SaaS business model, are also primed for listing later this year, such as Carbon Black who filed to go public early into Q2. Technology stocks have come under intense regulatory scrutiny in recent times (particularly with GDPR coming into effect next quarter, with its importance emphasized by Facebook’s recent data scandal), however software for the enterprise has largely shown great resilience as reflected by our global indices. This will give those considering listing great confidence that with strong fundamentals they will be able to weather market turbulence, alongside the knowledge that even after listing they can still exit at strategic multiples, as evidenced by MuleSoft. With SaaS valuations still tracking impressively at over 6.5x revenue on public markets, now is a good time as ever to be looking for shareholder liquidity via M&A or fundraising.
The remainder of 2018 therefore represents a great opportunity for enterprise software businesses. We hope that you enjoy this document and look forward to discussing the data and underlying themes with you. If you are contemplating fundraising, exit or growth through acquisitions, please do get in touch.
We hope that you enjoy the document and look forward to discussing the data and underlying themes with you.Read Less