Capped price. The median acquisition price of these companies was $6.3bln. There are only so many acquirers that can spend billions in cash and/or company stock to make acquisitions. Once you get to $5bln+ in valuation, the universe of corporate acquirers (Salesforce, Microsoft, Adobe) and private equity firms (Thoma Bravo, KKR, Vista, Clearlake, Fracnsico, Symphony) that can afford you shrinks, such that IPO becomes the primary viable option. And of course, SaaS IPO’s have become rare: there were 40 in 2021 but only one (Klaviyo) since January 2022.
No burn. These companies don’t burn, but they also weren’t wildly profitable. On median, EBITDA margin was -2%. Profitability isn’t a requirement to get acquired, and these acquisitions fly in the face of “Rule of 40”, which in our view is just a lazy saying.