Contact: Brenon Daly
Tech companies are increasingly being outbid for the startups they want to acquire by a deep-pocketed rival that hasn’t been heard from in a while: Wall Street. In our recent survey of corporate development executives, nearly half of the respondents (46%) reported that they expected the IPO market to offer more competition in 2014 for target companies. In the seven-year history of the 451 Research Tech Corporate Development Outlook Survey, the threat of dual tracking has never been ranked that high.
A quick look at some of the platinum valuations being lavished on recent IPOs certainly helps explain why startups are looking to exit to the public market rather than sell out. By our count, roughly a dozen tech companies that went public this year – representing, astoundingly, about half of the entire IPO class of 2013 – currently trade at a valuation of greater than 10 times trailing sales. A few recent debutants have been bid up by public investors to the point where they are trading at more than 30x trailing sales.
Looking ahead to next year, corporate development executives, who represent the main buyers in the tech M&A market, expect to see a record number of new offerings. On average, respondents guessed that 29 tech companies would go public in 2014. That’s higher than previous years, when the forecast has ranged basically from the low- to mid-20s. (You can see more on the IPO market outlook, as well as M&A activity and valuation forecast, in our full report on this year’s survey.)
Projected number of tech IPOs
|
Source: 451 Research Tech Corporate Development Outlook Survey
For more real-time information on tech M&A, follow us on Twitter @451TechMnA.