SEG-Software Index IT Conglomerates

SEG’s Monthly Flash Reports track the financial performance and valuations of approximately 300 software companies, categorized in nearly 30 product categories across the on-premise software, SaaS and Internet sectors.  This post highlights the performance of the SEG-Internet Index Video Games product category as shown in the SEG December Monthly Flash Report.  To view the performance of dozens of other product categories, download the latest complimentary Monthly Flash Report here: http://www.softwareequity.com/research_flash_reports.aspx

In the month of December, the IT Conglomerates category achieved a median EV/Revenue multiple of 2.2x, TTM Revenue Growth of 8.2%, and EBITDA Margin of 25.6%. Notable companies outperforming their respective category include:

  1. On an EV/Revenue multiple basis, Oracle Corporation outperformed the category with a multiple of 3.1x.
  2. On a TTM Revenue Growth basis, Microsoft Corporation drastically outperformed the category with a revenue of 14.7%.
  3. On a TTM EBITDA Margin basis, Microsoft Corporation and Oracle Corporation outperformed this category with a margin of 42.4% and 42.0%, respectively.





Oracle acquires Taleo

Transaction Details
Date: Announced on 2/9/2012
Enterprise Value:  $1.8 billion
Seller Revenue (TTM):  $309 million
Revenue Multiple (TTM):  6.0x
Premium:  The purchase price is 18% and 24% above Taleo’s one day and month prior valuation
Payment Terms:  100% cash

Oracle Business Description

Oracle Corporation is an enterprise software company that develops, manufactures, markets, distributes, and services database and middleware software, applications software, and hardware systems worldwide.  The company was founded in 1977 and is headquartered in Redwood City, California.

Taleo Business Description

Taleo Corporation provides SaaS based talent management software solutions. The company’s products provide medium and large enterprises with a wide range of talent management solutions including sourcing, recruiting, and onboarding to performance management, goals management, development planning, succession planning, compensation, and learning.  Taleo Corporation was incorporated in 1999 and is headquartered in Dublin, California.

SEG’s Perspective

Oracle’s acquisition of Taleo marks its second, billion dollar acquisition of a SaaS provider in the last four months.  In November, the Company acquired RightNow for $1.5 billion, a TTM revenue exit multiple of 7.0x.  Oracle’s acquisition of Taleo falls on the heels of Taleo’s acquisition of Cytiva Software, a Software Equity Group client.  In December 2011, SAP acquired SuccessFactors, another provider of talent management software, for $3.5 billion.  The Taleo and SuccessFactors acquisitions are evidence the HR management (HRM) market, a superset of talent management, has become sizable enough to regain the attention of the large ERP providers who are quickly losing sales to emerging SaaS providers.  According to Forrester, the HRM market reached $4.8 billion in 2011 and is expected to grow to $6.1 billion in 2014, representing an 8% CAGR over that time period.  Talent management is growing even quicker.  Over the same time period, this sub-segment of HRM is expected to grow at a 17.0% CAGR.  Taleo, a leading provider in talent management, is growing much quicker, closing fiscal 2011 with TTM revenue growth of 30.2%.  Yet, given Oracle’s $36 billion of revenue in 2011, Taleo’s growth and revenue contribution hardly registers on Oracle’s P&L.  Make no mistake, the acquisition of Taleo is about extending Oracle’s legacy HR product suite with talent management capabilities, acquiring a proven SaaS platform to potentially leverage for other product lines, and ensuring Oracle remains competitive with SAP.

SaaS M&A Market Overview

The SaaS M&A market is hot.  In 2011, there were 200 SaaS M&A transactions, up 91% from 2010’s 105 M&A transactions.  Valuations are ramping as well.  The median EV/Revenue exit multiple climbed to 3.7x in 2011, up from 3.2x in 2010.  Among the early adopters of SaaS, the talent management space is one of the most active SaaS M&A product categories, accounting for 10% of all SaaS transactions in 2011.

Our 2012 Annual M&A Buyer Survey, a comprehensive survey of 200 corporate development heads of the largest software buyers in the world, confirmed that SaaS M&A will continue to be highly active in 2012.  Of our respondents, 46% stated that it was “very important” or “essential” their acquisition targets be “all or substantially SaaS/subscription based”.  By contrast, only 13% of buyers indicated SaaS was “very important” or “essential” in 2010.

SEG’s HR Management Experience (SaaS and Software)

Software Equity Group has consummated 10 HR Management SaaS and software acquisitions in recent years. Specific expertise includes selling companies providing applications for employee recruitment management and onboarding, employee performance management, employee training & learning management, employee time and attendance, employee benefits administration, employee expense management, & employee shift scheduling.  Buyers of these clients have included Taleo, Kronos, Kaplan, Administaff, Wolters Kluwer, & EBIX…to name a few.  To learn more, please contact Kris Beible at kbeible@softwareequity.com.

SEG-Software Index Enterprise Resource Planning

SEG’s Monthly Flash Reports track the financial performance and valuations of approximately 300 software companies, categorized in nearly 30 product categories across the on-premise software, SaaS and Internet sectors.  This post highlights the performance of the SEG-Internet Index Video Games product category as shown in the SEG December Monthly Flash Report.  To view the performance of dozens of other product categories, download the latest complimentary Monthly Flash Report here: http://www.softwareequity.com/research_flash_reports.aspx

In the month of December, the Enterprise Resource Planning category achieved a median EV/Revenue multiple of 2.7x, TTM Revenue Growth of 17.6%, and EBITDA Margin of 24.1%. Notable companies outperforming their respective category include:

  1. On an EV/Revenue multiple basis, SAP and Oracle Corporation outperformed the category with multiples of 3.4x and 3.1x, respectively.
  2. On a TTM Revenue Growth basis, Deltek outperformed the category with a revenue of 28.6%.
  3. On a TTM EBITDA Margin basis, Oracle Corporation and SAP outperformed the category with a margin of 42.0% and 37.1%, respectively.





SEG-Software Index Development Tools and Open Source

SEG’s Monthly Flash Reports track the financial performance and valuations of approximately 300 software companies, categorized in nearly 30 product categories across the on-premise software, SaaS and Internet sectors.  This post highlights the performance of the SEG-Internet Index Video Games product category as shown in the SEG December Monthly Flash Report.  To view the performance of dozens of other product categories, download the latest complimentary Monthly Flash Report here: http://www.softwareequity.com/research_flash_reports.aspx

In the month of December, the Development Tools and Open Source category achieved a median EV/Revenue multiple of 1.0x, TTM Revenue Growth of 29.0%, and EBITDA Margin of 9.9%. Notable companies outperforming their respective category include:

  1. On an EV/Revenue multiple basis, Red Hat, Inc. outperformed the category with multiples of 6.6x.
  2. On a TTM Revenue Growth basis, GeekNet and Magic Software Enterprises Ltd. outperformed the category with a revenue of 42.0% and 38.2%, respectively.
  3. On a TTM EBITDA Margin basis, Microsoft Corporation, Oracle Corporation, and Adobe Systems Incorporated outperformed the category with a margin of 42.4%, 42.0%, and 34.6%, respectively.