Contact: Scott Denne
As valuations and deal volumes come off of last year’s high, Oracle is heading in the opposite direction. With today’s acquisition of Textura, the database giant has printed its fourth deal of 2016, after just two in all of last year. Despite that, it is not necessarily a bargain shopper. In today’s transaction, Oracle is paying $663m, or 7.6x trailing revenue, for construction management SaaS vendor Textura. Not cheap, but better than it would have spent a year ago for the target, when its shares were trading two turns higher. The purchase continues a trend that accounted for much of Oracle’s 2014 spending spree on vertically focused software (MICROS being the most notable example).
Oracle seems to come to the table more often when the market is a bit more favorable to buyers. Last year’s drop in acquisitions corresponded with an overall 18% annual rise in average valuation-to-revenue multiples (excluding those targets with less than $10m in TTM revenue), according to 451 Research’s M&A KnowledgeBase. Similarly, the largest jump in average valuation in the past decade – 36% in 2010 – witnessed Oracle’s second-lowest spending ($1.9bn) during that same period.
All signs point to a continued favorable environment for Oracle to go shopping. In our December 2015 survey of bankers and corporate development executives, nearly two-thirds of respondents anticipated a decrease in valuations in 2016. That’s almost double the previous high-water mark – or low-water mark, depending on your perspective – in our survey. Not to mention, overall deal value was down to $72bn in the first quarter of this year, from $121bn a year earlier. Even with today’s transaction, however, Oracle is still tracking below its historical pace.
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