Earlier today, the tax and accounting division of Dutch publishing giant Wolters Kluwer announced the acquistion of Italian enterprise performance management (EPM) vendor Tagetik for 300M Euros, or about $318M.
Founded in 1986, Tagetik was a strong regional European player in on-premises EPM and about 2.5 years ago had raised $37M in capital in order to attack the USA market and accelerate their transition from on-premises to cloud computing.
The press release said Tagetik was valued at 300M Euros off 57M Euros in 2016 revenues, of which 35% are “recurring in nature.” At a hybrid on-premises / SaaS software company you have two types of revenue that’s recurring in nature: (1) SaaS subscription fees and (2) on-premises annual maintenance fees. Doing some back of the envelope math (detailed below), you end with Tagetik breaking into a roughly $13M SaaS business and a $47M on-premises business.
If you buy that analysis, then we can do some valuation guestimation.
While we know the overall multiple of 5.3x revenues, we need to estimate separate multiples paid for the estimated $13M SaaS business vs. the estimated $47M on-premises business. While there is an infinite number of ways to weight the two pieces compromising the total valuation, my best guess is that Wolters Kluwer paid 10x revenues for the SaaS business and 3.9x revenues for the on-premises business, generally in line with the notion that $1 of SaaS revenue is worth about $2.5 to $3.0 of on-premises.
Market-wise, this is not the first EPM vendor to acquired by an off-axis competitor. Axiom was acquired by vertically oriented management consultancy Kaufman Hall in 2014 (and has since generally disappeared from the regular EPM market). My belief is that Tagetik awaits a similar fate.
“The acquisition of Tagetik tightly aligns with our vision to expand our position in the faster growing areas of the corporate tax and accounting market,” said Tax & Accounting Division CEO Karen Abramson.
While Wolters Kluwer has a strong tax and accounting division, only one piece of EPM (consolidation) is generally sold to accounting. Planning, in all its forms, represents about 65% of the EPM market and that is sold to FP&A, not tax and accounting. Bridging that gap, both in terms of buyer and mentality, should not be easy for Wolters Kluwer. I suspect this means Tagetik will play a dimishing role in the mainstream EPM market going forward.
But either way, congratulations to co-CEOs Marco Pierallini and Manuel Vellutini on a successful sale of their company. Felicitazioni!