Software M&A Valuations

The median software industry exit multiple for all of 2011, measured as a multiple of trailing twelve months revenue, was 2.1x – just slightly above 2010’s median exit multiple of 2.0x and, for the first time in four years, equal to 2007’s pre-recession median M&A exit multiple (Figure 45).  Viewed quarterly, the median exit multiple was highly volatile in 2011, mirroring the volatility of the public markets, reaching 2.5x in 2Q11 before dropping to 1.8x in the final quarter (Figure 46).

Lest every software entrepreneur who reads this report multiply his/her company’s TTM revenue by 2.1 to determine current fair market value, we must emphasize that the 2011 median exit multiple is simply that – a median – the midpoint of a very broad range of exit valuations.  Perhaps more useful is our calculation that in 2011, 21.8% of software M&A deals with an ascertainable exit multiple were valued at a 1.0x EV/Revenue or less, while only 11.8% had a EV/Revenue multiple of 6.0x or greater (Figure 47).

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