Billions at play in Data Management M&A
When a company is acquired for billions of dollars, everyone in that company’s sector takes note. But when the deal is a public company being taken private — essentially a recapitalization event — what exactly are the implications for the rest of the sector?
Thoma Bravo announcing its acquisition of data integration and data management vendor Talend likely has many investors, acquirers, and entrepreneurs asking just that.
Having previously been an enterprise software industry analyst and currently working as an M&A and fundraising banker specialized in the AI & Data Technologies industry, I will share my quick take on what this deal means.
First, a look at the valuation — Thoma Bravo announced it is buying Talend for $66 per share, the highest price Talend’s shares have ever seen. TB is valuing the entire acquisition at $2.4 billion, which implies an enterprise value of about $2.58 billion when including net debt.
That EV represents a lofty trailing revenue multiple of 9x. For comparison, when Thoma took Qlik private in 2016, it valued the BI company at 4.2x trailing sales. Put another way, unprofitable data management company Talend was valued at more than twice the valuation Thoma paid for analytics company Qlik, which had a small profit before its sale. Similarly, Talend is also being valued higher than competitor Informatica when it was taken private for 5.1x trailing sales in 2015. Informatica was also profitable.
This isn’t commentary on Talend’s valuation, per se, but on the rising value of data management companies overall.
Consolidation?— The Talend transaction is part of a growing list of data management acquisitions announced over the past year by tech, non-tech, and financial acquirers.
In January, industrial conglomerate Philips announced it was paying $635m for medical device data management provider Capsule Technologies. In its largest-ever acquisition, Twilio announced it was paying $3.2 billion for Segment, which solves customer data management challenges. Valuation wasn’t disclosed, but ICON believes Segment was valued at 13–20x trailing sales, perhaps higher. ServiceNow, Qlik, Minitab, and even Nike have all announced smaller data management acquisitions in the past several months. On the financial acquirer side, PE firm Providence Strategy Growth purchased master data management company Semarchy.
PE platforms oftentimes consolidate their sectors. Qlik, for example, has announced seven acquisitions since Thoma Bravo took ownership, including three last year. For its part, Talend has only disclosed three acquisitions to date, but its M&A strategy could change under Thoma’s guidance.
We expect future consolidation in the data management sector will be driven largely by demand and supply. Businesses have long been moving toward data-informed decision making and have invested significantly in analytics technologies. However, these initiatives oftentimes fail due to poor data access, painfully slow time to value, and poor data quality.
Demand is there, and the supply of data management tools is catching up. Consider this: right now, ICON is tracking more than 200 active data management companies as part of its AI & Data Technologies initiative. Many of those companies are offering new ways to solve old problems. In the past, data management has largely centered around data integration and data quality, but today’s data management products have evolved toward ELT, dbt, data lakes, data catalogs, data pipelines, DataOps, data lineage, data monitoring, training data management, data meshes, and myriad other advanced tools.
Where could consolidation happen? Look to Europe — The most heavily funded, privately owned data management companies are in the US, many of which have raised hundreds of millions of dollars. Of course, investment and acquisition opportunities abound here, but investors and acquirers seem to be increasingly looking to Europe for deals in this sector.
In February, former ICON client and data integration leader Matillion, HQ’ed in the United Kingdom, raised $100m mostly from US firms. Qlik and ServiceNow have each also announced acquisitions in Europe, acquiring Blendr.io and Sweagle, respectively — both targets were based in Belgium. And although now headquartered in Redwood City, CA, Talend was founded in France and still has more than 400 employees there according to LinkedIn.
The continent is also home to a number of data management companies that don’t appear to have taken institutional financing. TimeXtender, based in Denmark, offers a platform to automate data management for modern data estates, and Clover, in the Czech Republic, offers a suite of data management tools. In Germany, Uniserv offers a platform serving customer data, master data management, and data quality needs. The list goes on.
