SaaS Megatrend - Capstan at the M&A Advisory Forefront

LONDON, April 25, 2014 /PRNewswire/ --

Mayfair based investment banking firm Capstan Capital Partners continues to demonstrate its ability to successfully close deals in the SaaS (Software as a Service, often referred to as on-demand software) sector by being named as the financial advisor to the UK media giant Guardian Media Group in the recent sale of its subsidiary GMG Property Services to LDC, the private equity arm of Lloyds Banking Group. Guardian Media Group was advised by Hamish Shah, the Head of Capstan's technology, media and telecoms practice.

Established in 2007, GMG Property Services is the UK's largest supplier of software, technology and design solutions to the property industry. Its circa 6,700 strong branches comprise some of the UK's leading residential sales agents, residential letting agents and managers of letting properties. The company that was sold for over 11.0x reported EBITDA is another success story in the fast growing market for on-demand software. Sven Peter, Capstan Capital Partners Chairman, believes that the small and mid-cap SaaS market will see significant uplift in M&A transaction volumes due to the strong solutions demand from the corporate market.

Hamish Shah adds that he sees a clear trend emerging whereby private equity buyers increasingly seek to acquire market leading SaaS companies and subsequently employ incremental capital to pursue a buy & build strategies in existing and adjacent markets. The aim being to create a position of critical mass and scale with a view to an eventual high premium exit to large corporate tech house. The levels of competitive tension seen in auctions combined with double digit growth rates within in the SaaS sector collectively result in an environment where SaaS specialists can command attractive valuations.

Capstan's view is backed by world leading IT research firms such as Gartner that foresaw explosive growth five years ago, just before Microsoft introduced their leading SaaS product "Outlook 365". Gartner's researchers predicted spending in the global SaaS market to grow beyond $22bn by 2015. Western Europe's share in global SaaS revenues is continuously catching up with those in the US which still dominate this new market with an estimated share of well over 50%. Asia Pacific and Latin American regions, on the other hand, represent only small fractions of the current SaaS market but firms' interest is developing quickly.

Modular software applications developed by industry experts for business users offer SME companies significant leaps in productivity, says Konstantin Krebs, CEO of Capstan Capital Partners: "We believe increasing transaction volumes with SaaS companies in capital markets and M&A are the tell tails for the sector's fast growing significance", he adds. The spending rise is attributable to greater familiarity with SaaS technology, growth in related PaaS (platform as a service) offerings and IT budget planning. Forrester, another consultancy, predicts that software will see the strongest growth rate of any IT category in 2014 at 7.8%. One of the biggest contributors will be SaaS, according to their estimates.

Increased emphasis on SaaS by dominant on-premises application vendors like SAP and Oracle should also push M&A and investment activity in the sector. The stock of one of the leading SaaS product companies, Salesforce.Com, tells the story: its price went up six fold over five years.

Contact:
Louise Abbott-Little
Email: info@capstan-capital.com
Tel: +44(0)20-7101-7530