Welcome to the latest edition of member firm Silverpeak's Benchmark report – Application Software Sector, a review of key company valuation metrics in the US, UK and European application software sectors. By reviewing sector median averages, their aim is to provide a set of software industry benchmarks against which individual company performance can be measured.
This quarter, they have also created a COVID-19 index, analysing its impact on the Enterprise Value of various sub-sectors within our data set.
The unprecedented COVID-19 pandemic has resulted in a U-turn of last quarter’s growing revenue multiples, which has also amplified the decline of EBITDA multiples across all categories. Europe, UK Small & Mid and US Vertical revenue multiples have all sunk to pre-2015 levels.
US Horizontal revenue multiples have fallen dramatically since their immense growth of 22% last quarter. But, for the first time since mid-2017, US Horizontal EBITDA multiples are now higher than US SaaS multiples, despite having a 3% lower median EBITDA margin.
US SaaS revenue multiples have crashed by 28%, to a similar level to Q2 2017, despite only a 1% decline in forecast revenue. In practice, most revenue guidance has been suspended. The multiples fall was amplified for EBITDA multiples, where they now lie at 23.7x, plummeting 40% since last quarter.
Proportionate falls in revenue multiples have been greatest in the US. However, reduction in forecast growth is greatest for UK Small & Mid and Europe, both reducing by 1/3 to c.10%.
With hundreds of millions of pounds worth of deals under his belt, Paddy specialises in private equity, software/SaaS, digital and tech enabled services. His entrepreneurial spirit and pragmatic approach allows him to tackle a wide range of “complicated” or “difficult” deals with ease, in addition to more straightforward situations.
Over the years Paddy has crafted a reputation for being open, honest and frank with his past, present and prospective clients. His eye for detail is never compromised despite his passion for chasing the deal. Known for his ability to distill vast amounts of detail into key salient points, Paddy prides himself in communicating clearly all options available to his clients.
Paddy is a founding member of the international M&A network Globalscope, with active members on every continent.
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Beauty is not all that is in the eye of the beholder..... so is valuation