The Big Deal – The Rising Tide of SaaS M&A

Note: This was initially included in the Seedchange Digest, our weekly look at early stage investment trends and companies impacting the space.


 

This week, Oracle acquired NetSuite in a deal worth $9.3B. That is the second largest acquisition ever made by Oracle and, depending on whether you consider LinkedIn an Enterprise SaaS company, either the largest or second largest Enterprise SaaS acquisition of the year.

If you remember, Enterprise SaaS valuations (and the perception of the business model) took a major hit earlier this year after a few high profile firms missed earnings and other macro factors impacted the sector.

Coupled with the LinkedIn deal, the Oracle/NetSuite news may prove to be a big deal for other companies in the space and has already played a role in boosting SaaS valuations relative to other indices.

The main reason? “Comps”.

Analysts of all types – from investment banking to VC – love comps and the 19% premium paid by Oracle has, as Anshu Sharma of Storm Ventures noted, means that eventually every SaaS company at scale is candidate for a premium acquisition.

Want to learn more about Enterprise SaaS? We wrote a primer on on investing in the space.