SAP’s $8 billion acquisition of Qualtrics, just days before its planned IPO, reveals a new trend, according to analysts at Needham — acquirers are willing to spend big bucks for the best companies out there.
Companies are prioritizing “higher quality” companies over “a more blended approach, acquiring both high-growth industry leaders and more opportunistic value-orientated targets,” wrote Needham analyst Scott Berg in a note to clients published Tuesday.
“While the list of public software company acquisitions has been relatively short,” Berg wrote, “the aggregate valuations have been at a premium level that we consider to be at the upper end of historical ranges.”
Now with the stock market in a correction, even high-growth and otherwise well-placed public software companies suddenly look like they could be for sale — which is great news for large acquirers.
Neeham chose these five companies based off the criterea that they all have “consistent growth with strong ownership of their respective end markets.” It also excluded recently-public companies like Anaplan and Zuroa since leadership has indicated that they wish to stay independent, as well as larger SaaS companies like Salesforce, which few acquirers could afford.
Here’s who Needham thinks are the most attractive software companies for potential acquirers.