MGI Research

Friday, Nov 27th

Last update03:17:28 PM GMT

SaaS Valuation 2012: What Price is Right?

Price : $399.00

Research Summary

Our growth-based valuation approach to Software as a Service (SaaS) companies has received significant industry recognition and use. Five public SaaS acquisitions confirmed our SaaS valuation model last published in March of 2011. During 2011 and 1Q2012, SaaS companies maintained and even expanded the valuation premium gap to the rest of the software sector. Even though adoption of SaaS among business and IT buyers has grown meaningfully in 2011 and Q12012, production use indicates a very early stage of adoption. As the market matures, revenue growth remains the dominant valuation factor. Other SaaS valuation variables such as cash flow growth, expansion in GAAP profitability, and a premium for dominant market share are likely to gain prominence by 2014-2015. This Research Note provides updated valuation benchmarks and a revised SaaS valuation formula. It reviews key operating data, risks to SaaS valuations, equity market performance, and MGI’s outlook for SaaS M&A.

Key issues include:


  • SaaS Valuation Formula 
    • How to value a SaaS company? 
    • How to value SaaS companies of at different stages of development?
  • Current SaaS Valuation Benchmarks 
    • How multiples have evolved over the last 12 months and what is the outlook?
  • SaaS Valuation Drivers 
    • What determines valuation multiples for SaaS companies?
  • Rankings Analysis and Tables 
    • Valuation: The most and least valuable SaaS companies 
    • Growth: Fastest and slowest growing software companies 
    • Profitability: Most and least profitable 
    • Efficiency: Most and least efficient/ Best operating execution
  • SaaS M&A Outlook 
    • Who are the potential SaaS M&A targets?
  • Valuation Risks 
    • What are the risks to the SaaS valuation multiples? 
    • How does performance impact the valuation of every SaaS company?
  • Deferred Revenue Analysis 
    • How do SaaS companies compare to Enterprise Software firms in terms of deferred revenue growth? 
    • When is a big pile of deferred revenue not a positive?
  • Growth and Profitability in SaaS 
    • Who are the fastest growing SaaS companies and how does that growth compare to Enterprise Software firms? 
    • How does profitability affect valuation multiples?
  • Stock Market Performance 
    • Leaders and laggards

Includes numerous charts and tables with detailed data on SaaS and Enterprise Software companies.