PE Consolidations Expected to Continue in Tech
News, insights and updates from the team at Bloom Equity Partners
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2022 Notable SaaS Deals, Lower-Mid Market
SaaS 2022 M&A summary:
Private equity capital overhang and fierce strategic competition catalyzed SaaS M&A activity and buoyed EV/Revenue multiples in 2022, despite broader macroeconomic turbulence.
Tech PE Firms are leveraging strategic consolidations
The “Buy to build” sector consolidation playbook, seems to be a growing trend amongst tech’s biggest financial acquirers. Record levels of dry powder paired with weak public valuations and antitrust efforts limiting strategic acquisitions, PE-backed consolidations should continue in 2023.
A recent S&P report highlighted a few notable consolidation strategies:
Vista Equity Partners <> ERP SaaS
Vista has made more than 40 acquisitions in the enterprise resource management space over the past five years.
Thoma Bravo <> Cybersecurity
Thoma Bravo has spent an estimated ~$37B on cybersecurity companies since 2017.
This is more than 10 times the amount invested by the largest industry buyer.
Industrywide, PE firms completed $23.08 billion of cybersecurity deals last year, almost three times the total for strategic buyers
The challenge for these platform plays is that these larger companies are harder to exit and the IPO market may take some time to stabilize. Aggressive antitrust policies may also play a challenge.
Quote of the Week: M&A Trends
Investors, both corporates and private equity, have sizable investment capital at the ready to take advantage of current valuations with many companies in need of liquidity while financing costs remain high
- Spencer Klein, M&A Partner @ Morrison Foerster
Deals From Across the Industry
What We Look For: Our Investment Criteria
We're big fans of mission-critical technology and software businesses with a competitive moat and a sticky and diversified customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure.
Investment Criteria
Industry: Enterprise Software and Tech-Enabled Services
Geography: North America, Europe, or Australasia
Revenue: $3M - $20M (>70% recurring)
Growth: 5%+ annual revenue growth
Retention: >80% annual customer retention
Profitability: Positive EBITDA or near breakeven within 12 months
Investment Type: Operational control required
Business Characteristics
Significant recurring revenue
Sustainable competitive advantage with high switching cost
No heavy mandatory R&D spend, with a repeatable and scalable S&M process
Strong organic and inorganic growth potential
Capital efficient
Strong management team
If you or someone you know is considering selling or taking investment, we might be able to help out. We also just launched our referral partner program! If you want to be compensated for sharing business leads make sure to join.
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What We’re Reading and Listening To…
📚 Exceptions to the Rule of 40: Why Good SaaS Companies Sometimes Fall Below the Threshold
📚 Private equity deals and few IPOs: how 2023 looks for tech
Favorites from the Ecosystem
Investors👇…..
Operators👇….
End Note 🔚
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