M&A, IPOs & Exits

Why The LinkedIn Acquisition is So Important to SaaS

echojason@gmail.com'

Jason Lemkin

So, Microsoft bought LinkedIn for $25.6 billion dollars.  That headline shocked all of us the other day.  But if you step back, it’s not that impressive, the raw number itself.

After all, as a public company, LinkedIn was worth $32 billion just a few months earlier, and had been on one heck of a run through the end of 2015:

Screen Shot 2016-06-15 at 9.25.24 AM

 

Viewed this way, $25.6 billion isn’t really all that exciting.  Because it’s not like LinkedIn was some private company before that, like WhatsApp.  That $20 billion acquisition (by the time of closing) was just as shocking, but we didn’t already have years of public company market cap to compare it to.

So why does it matter?  Because the $25,600,000,000 was in cold, hard cash.

It matters because until LinkedIn, M&A liquidity has not been impressive in SaaS.  Now, in ’16, maybe for the first time, it is.  Yes, Salesforce bought ExactTarget for $3b+.  But that was the biggest SaaS M&A deal for quite some time.  HP bought Autonomy (not SaaS, but enterprise software) for $11 billion, but that was written off as a huge error.  Oracle bought a bunch of mature stuff for a bit less and a bit more than a billion (Eloqua, Responsys, Taleo) and SAP bought mature, public Successfactors and Concur … but those deals were all of mature, and mostly public companies, so a bit of a yawn.

Screen Shot 2016-06-15 at 9.32.37 AMThe liquidity we’ve had has also been hard won.  Box had to wait a year to go IPO, to get to its $1.x billion valuation.  That’s hard work my friends.  🙂  Getting epic SaaS valuations and liquidity is harder than B2C.  You don’t get the viral effects.  And the multiple revenues, at least these days, aren’t that great.  They really aren’t impressive.

Until now, no one has really, truly opened up the checkbook in SaaS/B2B (yes, I know, LinkedIn is only partly B2B).  Now, someone has.  Like Facebook went deep for WhatsApp, Microsoft went deep for LinkedIn.  They spent a huge amount of cash to

The deals before were … conservative.  Almost all of them.  Even, and maybe even especially, the $1b+ ones.

Now we have our WhatsApp.  The Big, Risky Bets in SaaS M&A with real $$$$ on the line.

This is mostly good for all of us founders.

Published on June 15, 2016
  • Tom Blue – Lead411

    I also think what is crucial here is the realization of how important Data/Intel is. People talk about saas and streamlining processes, but one of the most important pieces of your SaaS is having good data within it.

  • I agree with Tom, if you can how engagement and long session time. PLUS you own the chain completely in one or even better ALL parts of the business then you create very sticky solutions that carry on gening ARR…

Share This