In the red-hot SaaS SI market, which is the next shop looking to sell?

 

Contact: Brenon Daly

With¬†IBM picking up Meteorix, we hear there’s another Workday-focused SI currently on the market. CPSG, a Dallas-based shop, is slightly bigger than Meteorix, as well as much more profitable, according to our understanding. And it’s seeking a much richer valuation on its exit.

CPSG posted $25m in revenue in 2014, and the company is reportedly forecasting $35-40m for full-year 2015. Unlike other software implementation firms, however, CPSG throws off a fair amount of cash. It should generate more than $10m of EBITDA this year.

The growth and cash flow at CPSG have the company and its advisers at Robert W. Baird & Co. looking for a top-dollar exit. Current second-round bids are coming in at roughly $140m. (For comparison, subscribers to 451 Research’s M&A KnowledgeBase can see our estimate for the valuation IBM paid for Meteorix.)

Assuming CPSG does print, it would be the latest in a string of SaaS application implementation vendors to sell. Just in the past two months, we have seen three significant SIs snapped up by major service providers in a shopping spree that totals more than $600m. Moreover, these buyers are paying 2-3x their own valuations in their acquisitions, reflecting just how desperate they are to bulk up their practices in the fast-growing SaaS space.

Recent SaaS-focused SI M&A

Date announced Acquirer Target Description Deal value
August 11, 2015 CSC Fruition Partners ServiceNow SI See 451 Research estimate
September 15, 2015 Accenture Cloud Sherpas Salesforce, ServiceNow SI Not disclosed
September 28, 2015 IBM Meteorix Workday SI See 451 Research estimate

Source: 451 Research’s M&A KnowledgeBase

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