by Scott Denne
Medallia is looking to become the latest software vendor to test Wall Street’s appetite for new enterprise tech offerings as it unveils its IPO prospectus. The experience management software provider, however, lacks the growth of recent debutants and isn’t likely to come to market with the kind of extravagant multiple that many of the year’s offerings have fetched.
The customer and employee experience software developer’s sales rose 20% to $314m in its most recent fiscal year. Its topline expansion accelerated to 32% in the last quarter, yet that’s still behind the numbers put up by many other enterprise companies to enter the public markets this year. CrowdStrike, PagerDuty, Slack and Zoom Video, for example, are all growing around or above 50% annually and boast valuations ranging from 20-70x trailing revenue.
Medallia isn’t likely to garner a price in that range when it comes public. Still, the offering will likely push its valuation well past the $2.4bn it commanded in a February fundraising. Its main competitor, Qualtrics, sold to SAP for $8bn – or 21.5x – on the eve of its own IPO. Medallia is likely to fall short of that multiple when it begins trading on the NYSE, although it could fetch a premium if it follows Qualtrics’ lead and sells the whole business.
As we’ve noted in the past, there are many potential acquirers, such as Adobe or Salesforce, of customer experience management vendors and a paucity of potential targets with Medallia’s scale. Would-be buyers may have difficultly finding other targets with the breadth of Medallia’s experience management and analytics software. Wall Street investors, on the other hand, have many options for investing in faster-growing software providers.