Venero Capital Advisors

Have you noticed that #WorkTech M&A has been booming? Over the last two quarters have had more than 200 acquisitions in the space – a multi-year record. What has been driving this flurry of activity? 1) The opportunity for WorkTech vendors remains huge. And acquisitions helps buyers capture a bigger share of the pie, faster 2) Valuation expectations between buyers and sellers have converged, after 2+ year adjustment period Will this trend continue? It certainly looks like it... M&A activity among WorkTech businesses has shown exceptional resilience despite the macro environment. Also, VC funding for WorkTech businesses is gradually recovering, adding another positive note to the mix. This and much more, including sector trends, valuation multiples, M&A drivers and growth outlook, in Venero's report on 2Q 2024 WorkTech M&A and Fundraising Activity. https://lnkd.in/eMXVBPZ5

We're #hiring a new German-speaking Senior Associate / Vice President, Investment Banking (M&A). Apply today or share this post with your network.

Raised $1.8B+. Last valued at $8.3B. Selling for $150M-$200M. Big troubles in unicorn land. 🦄 A lot of investors are finding out the hard way that exit markets aren’t sufficiently large enough, or active enough, to support all the money that went into tech companies in recent years, especially those with crazy high valuations. Throwback to the company I met a few weeks ago, who had raised at 25x ARR and were wondering if they can turn around and exit at the same valuation a few months later.

#WorkTech kicked off Q1 2024 with a 30% quarterly increase in VC funding, but deal volume remained flat. Last year, revenue growth for most businesses slowed materially, so what are now the expectations for the coming quarters? In this latest Venero market update we explore: ➡ What the Q1 2024 numbers mean for WorkTech ➡ What is the outlook for 2024 and 2025 ➡ How has M&A activity been developing, and ➡ What are latest valuation multiples and trends Download the full report from Venero's website. 👉 Link in the first comment #hrtechnology #futureofwork #marketupdate #corporatefinance #investmentbanking #venturecapital #funding #mergersandacquisitions

Founders, if you are not ready, please don't get sucked into a funding round simply because you get approached by an excitable VC. 🛑 Have them wait until you feel confident about running a strong fundraising process and have all your ducks in a row. Without a clear process, you can end up wasting a lot of time talking to investors and end up with a sub-optimal round. You will generally get the best combination of great investors and favourable terms (valuation/dilution) when you can generate some healthy competition. #startupadvice #fundingprocess #founders #investors #venturecapital

🤝 Both Dayforce and Freshworks are sizeable public B2B #hrtech businesses, catering to essential business needs across medium-sized and large enterprises. Yet, their solutions and valuation development differ markedly. Dayforce is an HCM suite, focusing on HR, payroll, WFM, and talent intelligence. It is a large player for mid-sized to large enterprises in North America, boasting 6,393 customers and 6.84 million users, with average revenue per customer of $239K. Freshworks offers CRM solutions for customer service and IT Service Management, with a broad reach across 67,100 customers globally. It serves SMBs, with a much larger customer base and lower average annual revenue per customer of $9.7K. On valuation, Dayforce and Freshworks paint very different pictures at first glance: 💰 Since its IPO in 2018 the market cap of Dayforce increased by 267% to $11.1bn, while Freshworks is struggling to reach its September 2021 IPO valuation of $10.1bn with a current market cap of $5.6bn. ⏳ This could be explained by the timing of the Freshworks IPO, which was during a period of peak valuations for SaaS businesses across the board. Valuations are comparable and Freshworks is even valued higher when comparing EV / Revenue, with Dayforce at 5.6x and Freshworks at 6.9x. The lower multiple for Dayforce could come as a surprise when taking into consideration profitability and recent growth of both companies: 📊 Both Dayforce and Freshworks have seen growth at roughly 20% year on year in 2023. In FY23, Dayforce achieved a net income of $54.8 million, marking a $128.2 million increase YoY. Similarly, Freshworks, although not yet profitable, reduced their net loss by nearly $100 million to $137.4 million in FY23, compared to the previous year's net loss of $232.1 million. 📈 It is even more notable, considering that Dayforce spends around 20% of revenue on Sales & Marketing, while Freshworks invests a whopping 60%. 🚀 However the framing of these growth rates could not be more different: Dayforce emphasized an average deal size increase of 22%, a retention rate of 97.1% and rising customer satisfaction NPS scores across Services and Support. 📉 Freshworks sees their 19% topline growth in FY23 as below expectations, attributable to the cautious spending of SMB customers in the current tight macro environment (buying fewer software seats, in some cases even reducing the number of seats). ❓Does the higher revenue multiple imply higher expectations for future growth and more green field opportunity for Freshworks going forward? Is it a premium for them achieving profitability much earlier in their company history given their smaller size? Happy to discuss in the comments. #futureofwork #hrtechnology #worktech #valuation #kpis

In the process of selling your company, you agree heads of terms, including headline valuation, and the buyer has completed several months of due diligence. Then, surprise, the cash proceeds on closing are lower than expected. Welcome to the world of purchase price adjustments. In this article we look at the most common form of price adjustment in M&A, known as the Net Working Capital Purchase Price Adjustment. #mergersandacquisitions #corporatefinance #investmentbanking #workingcapital

What does Accenture’s acquisition of Udacity signal for Corporate Learning & Development vendors, demand for AI upskilling / reskilling and M&A valuations? 1️⃣ Competition in Corporate Learning is fierce. This impacts KPIs and therefore M&A valuations. Udacity was rumoured earlier this year to be in acquisition talks with Upgrad, with an asking price of $80 million… a precipitous drop in value for a company that raised almost $300 million and sported a $1 billion valuation in 2015. 2️⃣ When major vendors like Accenture enter a space, competitors take notice. Accenture plans to invest $1 billion into LearnVantage, a new artificial intelligence-native learning platform to help enterprises reskill and upskill their people in technology, data and AI. Udacity will be part of that. 3️⃣ Upskilling / reskilling is a major topic for businesses globally, especially at the enterprise level. But Accenture acquired Udacity really to train its customers on AI. This particular acquisition says more about the major impact AI will have, than anything else. The Learning market beyond AI remains huge. #corporatelearning #learninganddevelopment #artificialintelligence #skills #futureofwork

Don't launch an M&A process unless you have a strong understanding of the three pillars that underpin successful M&A transactions. 🥇 The second(*) most important determinant of value in M&A is timing. Timing is key for most things in life, but certainly for M&A. 🤔 Consider selling your company in December 2019 (pre-Covid) vs. April 2020... Or Jan 2022 (stock market peak) vs. March 2022 (stock market collapses by 50%). Just months later, a world of difference. There are two types of timing: - timing you can control - timing you cannot control 🤷♂️ Market timing, you cannot control. This is the first pillar of value maximization, and it includes any market tailwinds / headwinds, buyer / investor sentiment and broader industry / competitor dynamics. 💪 Then there is Company timing. This, you can control. It is the second pillar, and includes the KPI's of the business (are they trending in the right way), the size of the company (are you happy with where you are, or do you want to grow more), shareholder objectives / expectations (is everyone in agreement on what they want), etc. 🤞 Ideally, market timing and company timing will be aligned. This is optimal. In any case, you should understand both. 🌐 The buyer universe is the third pillar of M&A value maximization. Here, you need to understand the types buyers that could be interested in acquiring your company, the strategic rationale that will motivate them to explore a transaction, the level of diligence they are likely to undertake in order to assess your company’s appeal, as well as the valuation multiples they are likely to offer. 👉 Contemplating M&A? I'm Managing Partner at Venero Capital Advisors, the world's #1 ranked investment bank for #HRTech and #WorkTech businesses. Drop me a note or schedule an appointment and we can help you assess your options. (*) If timing is the second most important factor in M&A, what is number 1? It's who is sitting at the other side of the negotiating table. Talking to a highly motivated buyer trumps all else. #mergersandacquisitions #corporatefinance #investmentbanking #hrtechnology #futureofwork #valuations

🎉 Promotion time! Congratulations to Simon Costa on his promotion to Vice President, M&A and to Evangelos Kotsonis, CFA on his promotion to Associate, M&A. Wishing you continued success in the new roles!