Q: Which merger and acquisition trends, if any, do you expect to unfold in the next 12 months?
I expect more mega-mergers: $2b-$10b+ deals.
Why? These are the Best of Time in Cloud and SaaS, as odd as that still seems. Multiples and share prices are at all time highs. Public SaaS companies are now worth more than $1 trillion collectively, and Apple alone $2 trillion:
With those massive valuations generally come insane expectations of growth, not just for now, but for a decade to come. The fastest fix perhaps if you’re worried about meeting those expectations? You buy that growth. And if you are going to buy growth, you want to buy the biggest, fastest-growing thing you can afford. Not some tiny startup that might take years to get to material revenue or market share.
Twilio buying Sendgrid for $2b+ was an early example. With Twilio then seemingly priced to perfection, and with investors expecting huge growth rates … they bought the biggest thing in email API they could afford, not the smallest. If you are worth $20b-$1T+, you often don’t want to wait for a small acquisition or internal initiative to bear fruit. You want that revenue and that customer base now. And you pay up to get it.
M&A heats up in good times, and shuts down in bad times. With Cloud stocks at unprecedented valuations, M&A is going to heat up even more.