Healthy exits, no matter the path

by Brenon Daly

On the heels of Dynatraces blockbuster $7bn IPO, it looked like the exit of choice for other fast-growing infrastructure monitoring startups had swung to Wall Street. Datadog and Sumo Logic are both thought to be tracking to an offering of their own. But as SignalFx showed, an outright sale can be pretty lucrative, too.

Splunk said it will hand over a cool $1.1bn in cash and stock for SignalFx as it looks to expand its core log management into infrastructure monitoring. (To put the deal into perspective, SignalFx’s exit price is more than Splunk has spent, collectively, on the 10 previous acquisitions it has announced, according to 451 Researchs M&A KnowledgeBase.) To pay for its largest-ever purchase, Splunk will spend $600m in cash and $400m in equity for SignalFx. (451 Research subscribers can look for a full report on the transaction on our site later today.)

Of course, SignalFx is much smaller than either Datadog or Sumo Logic, and probably had a few years before hitting IPO-able numbers. (Subscribers to the Premium version of our Private Company database can see our specific estimates for Datadogs recent annual revenue as well as full revenue estimates for the past half-dozen years at Sumo Logic.) So an IPO for SignalFx probably wasn’t imminently in the cards, despite the six-year-old vendor pulling in a growth-sized round from crossover investor Tiger Global Management in summer.

Instead, SignalFx took a bid that likely valued it in the neighborhood of 20x sales. Assuming that multiple is at least directionally accurate, it does line up rather closely with a deal in the market that had elements of both exits. In early 2017, Cisco Systems paid $3.7bn for AppDynamics, picking up the application performance monitor just days before it was set to price its IPO.