Computers and Technology

Skipping the Prom: Adaptive Insights Drops IPO for $1.55 Billion Workday Buyout




Adaptive Insights was set to go public on Thursday, the latest cloud-based technology company poised to cash in.

But a funny thing happened on Adaptive’s way to an initial public offering: Enterprise-software company Workday (ticker: WDAY) agreed on Monday to buy the company for about $1.55 billion in cash to strengthen its financial-planning products.

Workday will acquire all shares outstanding of Adaptive, including the assumption of $150 million of unvested equity issued to Adaptive employees. The transaction is expected to close in the fall.

Workday shares are down 0.2% to $123.65 in midday trading.

The last-minute acquisition is a vivid illustration of the value of software companies. Last week, Microsoft (MSFT) paid a whopping $7.5 billion for open-source development platform GitHub; a few months earlier, in April, Salesforce.com (CRM) laid out $6.8 billion on software startup Mulesoft.

Indeed, the shares of more than two dozen software-subscription companies worth at least $1 billion–including Salesforce, ServiceNow (NOW), and Zendesk (ZEN)–are up more than 40% so far this year. The S&P 500 Technology Index is up 14%.

What is more, the 50 companies in the Bessemer Venture Partners Cloud Index trade for an average of 7.8 times revenue over the next 12 months, up 27% from a forward sales multiple of 6.1 at the beginning of the year.

Adaptive’s last-minute decision to sell rather than go public isn’t totally shocking, either. Large tech companies are willing to pay a premium for software startups headed for an IPO.

In early 2017, Cisco Systems (CSCO) snapped up AppDynamics, which helps companies monitor application performance, for $3.7 billion, shortly before AppDynamics was to go public.

Sign up to Review & Preview, a new daily email from Barron’s. Every evening we’ll review the news that moved markets during the day and look ahead to what it means for your portfolio in the morning.



Source link

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *