Blackpeak Capital is pleased to present our latest ANZ technology market update for the period ending January 2022 – click on the link below:
For more information contact:
+61 416 335 455
The global tech ecosystem has escalated to a feverish pitch since briefly getting crushed by COVID in the spring of 2020. Tech company formation, revenue and hiring growth, and the viral spread of technology to every aspect of our lives has propelled the sector to be the #1 industry, representing $6.9T in GDP, ahead of manufacturing, finance, healthcare, and everything else. Entrepreneurship, VCs, PEs, bankers, and public investors have stoked the flames of the raging tech industry’s growth with a flood of capital, manpower, and creativity.
While not all of the fruits of technology utilization are pleasant – e.g. 10 hours of screen time a day – there is so much of our lives that have been altered/improved in the way we work and live by the introduction of new technologies. 24% of the S&P 500 is represented by technology and the public software index has risen by 218% since April 2020, outperforming the S&P 500 by more than 2x. Annual technology M&A transaction value, which peaked around $600B pre-COVID, will cross over $1.3T this year. The tech IPO market will be up 7x in 2021 compared to its ten-year median. The SPAC market, which did not exist two years ago, will put up $480B in M&A value and over $100B in IPO proceeds in 2021. Public SaaS valuations, which have fluctuated between 5x and 10x revenues over the last 10 years are at roughly 16x.
In this post-COVID world, the sun has shined on technology, and tech PE funds have been making a ton of hay. By our last count, there are now over 300 tech PE funds with 3,700 portfolio companies and over $1.5T under management. Led by Vista, Hg, TA, Thoma, and Insight, tech PEs have done 1,200 of the 3,700 tech deals thus far in 2021. The latest tech funds to be announced are ginormous: Insight at $20B, Silver Lake at $20B, Thoma at $22B and Vista at $22B. Rumor has it that Thoma currently has five funds in the market raising a total of $34B in dry powder ready for deployment in 2022. AGC has now done 15 transactions with Thoma including PDFTron and Greenphire. With this amount of fund raising, AGC think there should be a few more deals to come!
Near zero interest rates, sky high public valuations, and strong PE returns are drawing LP allocations into these tech funds. In turn these tech funds will be doing larger deals, more go privates and a lot more PE to PE deals. The number of “club” deals has rocketed in the last two years and for several good reasons. The growth and quality of the 3,700 PE Port Cos makes for good hunting. In addition, a PE selling 51% of a Port Co to a fellow PE versus exiting 100% benefits from a big step up in basis (not to mention cash plus bragging rights), a continued position in a great company and a new partner to carry the torch going forward.
The PE funds have rapidly deployed a ton of capital for company building, acquisitions, and shareholder liquidity. In many cases, they have also advanced their portfolio companies’ capabilities across multiple fronts driving organic growth as well as acquisitions. Value creation from these activities has been enormous, and in some cases, it has been good enough to just rely on the benefits of growth and multiple expansion. As they say, it’s good to be in the right place at the right time, and technology private equity has been in the right place at the right time in a COVID world.
Tech venture growth funds have now emerged to be contenders for investing in these hyper-scaling young private tech companies. The days of venture capital checks capping out at $20M strictly for primary investment have been blown away by these new age venture growth funds like Tiger, Softbank and Founders. In the last three years, the top 150 venture growth funds have logged over 15,000 minority investments, with the top five combining for nearly 2,000. These funds are writing checks at a furious pace, sized between $5-200M with commitments made over a cup of coffee on the back of a napkin. Deals are done with limited due diligence, 30-day closings, standard preferred terms, sky high valuations, and passive investors. In many cases, the venture growth minority check is beating out the PE majority check with a higher valuation and the lure of not giving up control.
In AGC’s annual PE report, they have surveyed more than 50 of the top tech-focused PEs. With heavy participation from many of the top PEs, they gathered four years of stats on tech M&A activity, total assets under management, total number of majority-owned portfolio companies, and total number of platform deals.
Click to download AGC’s report: AGC-Tech-PE-Annual-Report-Dec-2021
Blackpeak Capital is launching its inaugural “Blackpeak 40” which endeavours to identify the top 40 private technology companies in ANZ as measured by the Rule of 40 metric. The Rule of 40 is a common metric used by technology growth investors to assess the trade off between revenue growth and profitability (as measured by EBITDA margins).
To be eligible to participate companies must meet the following criteria:
1. Private technology companies based in Australia or New Zealand
2. FY21 revenues of greater than A$5m and less than A$100m
Based on the responses received the Blackpeak team will seek to verify the information and produce a top 40 list based solely on the Rule of 40 metric. The winner will be offered a complimentary strategic review by Blackpeak Capital (typically valued at up to A$100k).
To apply please click on the link below and fill out the form (should only take a few minutes):
Note: any information provided will be treated as confidential and will not be published with the exception of the aggregate Rule of 40 metric for those companies that qualify (ie. the component parts of revenue growth and EBITDA margins will not be published).
Applications close on 30 November 2021.
For more information contact:
+61 416 335 455
About Blackpeak Capital
Blackpeak Capital (https://www.blackpeakcapital.com.au/) is a leading independent corporate advisory firm with offices in Sydney and Melbourne providing corporate finance and strategic advice to clients. Blackpeak offers independent, objective advice and is focused on building long-term relationships with clients to assist them achieve their growth ambitions and create value for their shareholders. Blackpeak has established a track record of advising leading technology growth companies in ANZ on IPOs, private capital raisings and M&A transactions.
Blackpeak is pleased to announce that it acted as exclusive financial adviser to SuperChoice on its sale to Potentia Capital. SuperChoice is a leading provider of digital transaction solutions with its software platform supporting complex, mission-critical superannuation, payroll (STP) and insurance processes. Potentia Capital is a Sydney headquartered private equity investment firm focusing on technology, technology-enabled services, and software businesses.
The announcement from SuperChoice and Potentia is below: