Welcome to the 2019 full year edition of the Enterprise Stack – Results International’s quarterly market update for the enterprise software sector.
Review of 2019 in the Enterprise Stack:
- Public stocks performed exceptionally well during the year with the RI SaaS index showing median valuations of 11.0x revenue in mid-November (a record high) and ending the year at 10.7x, a long way above the historical median of 6.2x (since we started tracking the index). In addition, all of the RI tracked enterprise software indices showed growth across the year, with Adtech and Martech rising by c.75%.
- Salesforce’s acquisition of Tableau ($16.3bn) represented the year’s largest enterprise software transaction, followed by the $11bn take-private of Ultimate Software by a Hellman & Friedman-led investor group. Other large strategic software vendors were notably less acquisitive in 2019 as they sought to embed capabilities acquired during a highly active 2018 (none of Microsoft, IBM, Oracle, SAP or Adobe made acquisitions valued at >$1bn this year).
Review of 2019 predictions:
- After turbulent macroeconomic forces drove uncertainty in the public markets during Q4 2018 we predicted that companies could increasingly postpone or abandon IPOs, in turn boosting activity in the private markets.
- The number of companies going public has declined overall, with private investors continuing to hold both abundant levels of capital and a keen appetite to invest in innovative technology solutions, representing a highly attractive alternative (with little to no regulatory burden). Data-mining business Palantir notably paused its IPO ambitions this year, looking instead to private markets in order to raise capital.
- 2019 still delivered a number of high-profile and highly successful B2B SaaS IPOs however, including Zoom (89% up on IPO price), Dynatrace (58%), Medallia, (48%) and Croudstrike (47%), amongst others.
- Following a number of high-profile data breaches in 2018, we predicted cybersecurity activity to rise as Boards increasingly focus on the issue.
- In 2019 Results International acted as the exclusive financial advisor to cybersecurity services consultancy Intragen on receiving investment from FPE Capital, and shortly after to Monterro-backed Outpost24 on its acquisition of threat detection business Pwnie Express.
- VMware delivered one of 2019’s standout transactions; acquiring Carbon Black ($2.1bn), taking the cloud-based endpoint security business private.
Predictions for 2020:
- Security will continue to be a Board-level priority as the increased interdependency of many enterprises on one another’s technologies leads to concerns over a greater risk of exposure; particularly across borders (see Huawei’s proposed roll-out of 5G technology across Europe & USA).
- HCM (human capital management) software vendors will look to innovate further, delivering deeper insights, analytics and automation in order to increasingly embed its place as high value-add, business-critical tools and to fight back against creeping commoditisation.
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.