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The Changing Face of the Enterprise Acquirer

July 1, 2015

2014 was a landmark year for tech exits, which increased around 60% year-over-year by both volume and value, with double the number of “unicorn” exits over $1B. Most press attention was focused on WhatsApp—in a class of its own as a $20B acquisition—along with Nest, Beats, Oculus and Twitch. The excitement around these deals makes sense given their magnitudes (all broaching the hallowed 10-figure mark) and their media-friendly value propositions: the next generation of lifestyle and entertainment tech. This spate of consumer M&A was also interesting because the list of acquirers reads like a who’s who of tech titans, all of whom have been sitting on historically high mountains of cash: Google, Apple, Facebook and Amazon.

But what about the B2B side of the story? In 2014, enterprise received its due press largely around IPOs in the category. Box and New Relic added to the “unicorn” exit list; Zendesk, HubSpot and MobileIron posted solid $600-800MM EV offerings at around seven times revenue; Five9 and Workiva priced somewhat under the radar with smaller deals; while Hortonworks clocked in at a banner time-to-IPO of only three years. The year was another strong showing for enterprise in the public markets, continuing the steady flow of pricings at high revenue multiples (eight to 11 times).

B2B acquisitions didn’t get nearly as much attention as consumer exits or IPOs outside of one or two big buyouts. That’s particularly interesting because despite all the big consumer developments, 2014 was an even bigger blowout for enterprise. By my calculation, approximately 110 B2B companies were acquired for $30MM or above, up nearly 100% year-over-year. That includes 11 “unicorn” acquisitions, versus just five in the prior year. But the makeup of companies doing the buying wasn’t quite the traditional lineup of big tech players you might expect, as was the case for the consumer counterparts. The changing face of the enterprise acquirer, in my view, is the truly interesting trend to note, and one theme in particular stood out to me.

In 2014, a range of enterprise buyers made their vertical M&A strategies clear. Healthcare IT was a particular highlight, with Siemens Healthcare/Cerner, Aetna/bswift, GE Healthcare/API Healthcare and 3M/Treo Solutions at the top of the list. Blackbaud—now the 800-pound gorilla in non-profit management software following its acquisition of Convio—continued to consolidate its position by acquiring two companies for approximately $200MM total. Even more interesting, however, was increased acquisitiveness from traditionally non-tech businesses. One interesting example is transportation and logistics; legacy players in that space, C.H. Robinson and RoadRunner, each closed deals valued at over $100MM. A few others include Banco Bilbao/Simple, CEB/KnowledgeAdvisors and Kaufman Hall/Axiom EPM. I expect vertically oriented buyers will continue to invest in M&A as industry-oriented SaaS startups mature and traditionally offline businesses seek to subvert competition from lower-overhead tech-enabled offerings. It’ll be interesting to see how these trends (as well as overall enterprise exit activity) play out as we progress further into 2015.

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