After Anaplan, which SaaS company will private equity target next?

We could be in for a period of aggressive deal-making

Last night, private equity firm Thoma Bravo said it agreed to acquire Anaplan for $10.7 billion. The financial planning software company’s stock has declined sharply in the last six months, which likely gave the PE firm a chance to pounce.

The stock market hasn’t been kind to SaaS companies in recent months, which makes us wonder if we’re seeing the beginning of a trend of private equity taking aim at vulnerable SaaS firms.

To answer that, let’s quickly unpack the Anaplan transaction and better understand if Thoma Bravo is paying a premium for this company. From there, we’ll be able to get an idea of how much private equity types are willing to shell out for modern tech companies.

Afterward, we’ll apply what we’ve gleaned to a host of public SaaS companies that could find themselves answering inbound calls from other private equity concerns. Don’t forget that private equity is richer than it has ever been in terms of available dry powder, and that money could be looking for a target.

Private equity firms look for strong market positioning, and a large and valuable customer catalog with room for growth, all of which modern cloud companies have in surplus.

Inside the Anaplan-Thoma Bravo deal

Anaplan said fourth-quarter revenues rose about 33% to $162.7 million — of which $148 million came from subscription sources — from a year earlier. On a full-year basis, revenue rose just under 32%, meaning that its Q4 growth rate was similar to its full-year outcome.

If we convert the company’s Q4 revenue into run-rate revenues, we can apply that figure (about $651 million) against its $10.7 billion purchase price to get a revenue multiple of around 16.4x for the transaction.

Recall that we’ve seen declines in software company valuations to the point where SaaS companies growing at more than 30% today have had their revenue multiples cut to the 12x mark when we compare forward revenue projections against their present-day value. Compared to that number, the Anaplan deal price seems to be full-fat.

Indeed, with Thoma Bravo paying a roughly 46% premium ($66 per share) for the software company’s shares when compared to pre-deal prices, the PE firm is coughing up close to a Q4 2021 price for Anaplan. To be precise, Anaplan shares peaked at just over $66 a share over the past six months, right in line with the Thoma Bravo offer.

This provides a neat little framework for us to work with: Software companies that are trading at depressed prices today could perhaps sell to private entities for their Q4 2021 valuation high-water mark.

If that’s the case, we’re quite curious about who else could be in line to surrender their status as an independent company. And we have more than a few names in mind.