Zendesk and Anaplan: A Tale of Two Very Similar, And Very Different, $10 Billion SaaS Acquisitions
The public markets have changed so, so much in just a few months
So two big PE $10B deals happened in SaaS this week, one agreed, the other closed. And the difference are so stark, they highlight all the changes in SaaS in just a few months:
- Zendesk agreed to be acquired a PE syndicate for $10.2 Billion, going private
- Anaplan’s deal to be acquired by PE firm Thoma Bravo for $10.4 Billion closed.
Not only were the prices basically identical, but so were a few other facts:
- Both had a nice, roughly similar premium price (usually necessary to get a deal done to acquire a public company): Anaplan a 41% premium to their trade price, and Zendesk 34%
- Both were growing at very similar rates, Anaplan at 32% year-over-year and Zendesk at 30%
So same price, same growth, looks pretty much the same, Zendesk and Anaplan, right?
Well there’s one big difference: the revenue multiple.
So put differently, Anaplan was signed when the market was still strong, but closed in June when the market had cooled. Zendesk was signed for the same price, the same week as Anaplan closed — but by that time so much had changed.
-> And in the span of just those few months, Zendesk sold for, in essence, 43% of the price Anaplan did, on a revenue multiple basis. Anaplan sold for 14x ARR — Zendesk for 6x. And Zendesk growing as fast as Anaplan at more than twice the revenue is “better”. It’s harder to maintain that same level of growth at more than twice the ARR.
(And yes, Zendesk also said No to another PE offer months prior at a much higher price).
This won’t be a shocker to some. SaaS multiples have fallen sharply. But it also viscerally shows how much the bar has changed for a $10B PE acquisition in SaaS in just a few months.
A few months ago, a top public company growing a decent but not epic 32% at $700m ARR could sell to PE for $10B.
Today, you’d have to be at a $1.6B in ARR to do the same.
The bar to being a true decacorn is so much higher than it was. You have to do well over $1B in ARR now to be worth $10B. Yet, founders have only partially adjusted to the new world.
A much, much harder and higher hill.
Did Anaplan get an amazing deal? Seems like it — today. Was Zendesk forced by activists to sell “cheaply”? You can’t argue that when they paid 40% higher than the public share price. And when no one else made an offer.
We’ll see in a year or two which world we really are in. A world where Anaplan got an amazing deal. Or one where Zendesk was a steal.
I’m betting on the latter. But as a founder, you can’t be delusional. You have to operate like the former.