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Enterprise Stack – Q3 2020 Market Review

By Vinay Saraiwala 29 Oct 2020

After a fall-off in valuations and a hiatus in deal activity in March/April 2020, enterprise software has performed very well and deal activity has been high through Q3. We’ve been pleased to advise on 5 transatlantic software deals year to date, reflecting continued high levels of interest from US strategics and PE in European software companies.

HIGHLIGHTS OF THE QUARTER:

Public market performance:

  • The share price fall in March across enterprise software caused by Covid-19 was followed by a strong resurgence across most of its sub-sectors:
    • Our index of Pure Play SaaS vendors is up 92% over the last 12 months, and up over 50% on pre-Covid levels,
    • The median EV/Revenue 2020E multiple for our index is 10.6x (compared to a 6-year median of around 6.4x).

M&A activity:

  • Not surprisingly, M&A activity fell significantly in Q2 2020, with total global deal volume of 281 deals compared to an average of 490 deals per quarter in 2019.
  • Deal volume has bounced back in Q3 to 436 deals, with multiples at pre-Covid levels.
  • Deal activity has been driven both by publicly listed buyers, continuing to seek growth via acquisition, as well as by PE, both through their portfolio companies and via direct platform investment.

With the technology sector continuing to perform well through this unprecedented year, we expect to see a continuation of PE and strategic interest in acquisitions through the rest of 2020 and into 2021. 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.

 

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Vinay Saraiwala

Analyst

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