Analytics sellout: Rise of the Tech Giants – M&A and Investments in Data & Analytics Market Update Q2 2019

Analytics sellout: Rise of the tech giants

M&A and Investments in Data & Analytics – Market Update Q2 2019

The quarterly Market Update on M&A and investments in the Data & Analytics software market is brought to you by Data Invest, the company marketplace, and BARC, the leading independent market analyst for Data & Analytics and other enterprise software segments.

 

This time on Data Invest M&A and Investment Market Update: Why Tech Giants are buying at a premium and Investments: Is Hadoop dead?

Firstly, let’s address the obvious elephant in the room: Yes, CRM top dog Salesforce has acquired Visual Analytics provider Tableau for quite a hefty amount of money – and of course you will read about our view on the deal in this newsletter. But Q2/2019 has provided us with many more transactions and investments that are worth a look – such as Google’s acquisition of Looker, Sisense’s purchase of Periscope Data or LogiAnalytics taking over Zoomdata. Besides these acquisitions, we also saw a number of big investment rounds regarding Aera Technology, Sumo Logic, Logz.io and Exabeam.

Mergers & Acquistions

So why did Salesforce buy Tableau for the striking price of $15.7 Billion? The cloud native Salesforce solutions are supposed to support Tableau getting lifted up to hybrid and multi cloud scenarios – the software had been offered as a cloud solution in Europe since 2016. The uplift is also enabled by Salesforce’s acquisition of API integration platform Mulesoft in 2018. Apart from that, Salesforce obviously also strengthens their Analytics portfolio (that currently mainly consists of Einstein) with the transaction, as rivaling tech giants like Oracle, Microsoft and SAP had expanded their own platform Analytics capabilities with acquisitions of competitors such as Workday or Nutanix. The acquisition of Tableau might even help Salesforce upgrade their outdated reporting frontend through much more sophisticated visualization tools.

However, we also see a few arguments why the purchase price of trading share price plus a 42% premium might have been a bit high: First of all, the price itself is extreme – it roughly equals to the total prices that were paid for Cognos, Hyperion, BusinessObjects and Outlooksoft together in 2007. These companies at that time each generated revenues of appr. $1 Billion while being profitable but at a lower growth than Tableau. Somebody has to pay for the high Tableau purchase price, so the software pricing might remain as high as it is now – whereas Microsoft clearly increases price pressure with PowerBI. And then there also is Google’s recent purchase of Looker, a comparable strategic portfolio extension acquisition that might outstrip Salesforce’s transaction.

On the technical side, Tableau for years has been deployable on the hyperscaling cloud platforms Azure, AWS and Google Cloud. An obligatory migration to the Salesforce infrastructure could possibly deter a lot of Tableau’s customers. In this context, the Salesforce management has announced to operate the newly bought software independently. But then again, where are economies of scale through shared ecosystems and cross-selling potentials to be found?

It reads like an M&A-fairytale in the Data & Analytics industry: “Software vendor of natural-language-based BI & Analytics joins forces with global Search Engine monopolist.” Another acquisition that created a lot of buzz was Google’s takeover of Looker. As enterprise holding Alphabet announced in early June, the company was bought for $2.6 Billion. The transaction may yield Google a positive net present value due to a number of reasons: Looker’s regional sales focus currently is on the North American market – through Google, they ascend to being a global player. The acquired target has been one of the most successful Data & Analytics startups of the past years, already recording over $100 Million annual run rate and more than 1,600 customers. Chances are, they might continue their success story in a global scale. On the acquirer’s side, Google had a need to step up their Analytics capabilities to capitalize on their strong BigQuery technology for data storage. Through the continued multi-cloud integration functions of Looker, Google is also able to place their own cloud offering beside the other leading cloud solutions of Amazon and Microsoft.

Another deal worth mentioning from Germany was the acquisition of CPM and BI vendor cubus AG by Serviceware SE, a Frankfurt-based provider of Enterprise Service Management (ESM) software. By means of the transaction, Serviceware is able to enrich their capabilities for digitizing and automizing service processes with CPM and BI functionalities and therefore with corporate finance elements. The company had already acquired Knowledge Management specialist SABIO in 2018. The addition of cubus to the portfolio might also help Serviceware with internationalization as cubus realizes more than 40% of their revenues outside of Germany, several of their 160 customers being situated in North America.

Another trend of the last few years is established BI vendors taking over smaller Advanced Analytics providers to enhance their Data Science capabilities. A very good, recent example for this deal case is Sisense’s acquisition of Periscope Data. Over the past years, the acquirer has risen to one of the leading Self-Service BI software providers but their Analytics tools had been more of a black box for the targeted business professional user. Periscope Data in contrast provides their customers with Advanced Analytics solutions designed for data scientists that require more coding knowledge. With the acquisition, Sisense is evolving from an end-to-end BI platform to a complete Data Science and Analytics platform as the company’s CEO announced. Hence, the deal that creates $100 Million revenue generating and 700 employee engaging enterprise is also motivated by the ongoing convergence of BI and Analytics topics.

Investments

The year 2019 also shows, that Analytics remains the most interesting Data & Analytics sub segment for investments. Fractal Analytics, a provider of Machine Learning software for Image & Video Analytics as well as Text Analytics and AI solutions received a $200 Million funding. The company whose flagship product “Customer Genomics” helps marketing departments assess complex customer behaviour at an individual level has maintained a 40 percent year-over-year over the past seven quarters.

The Big Data Analytics vendor Sumo Logic also was able to get another $110 Million funding to fuel further growth and expansion for their leading cloud-native Machine Learning Analytics platform. The company is currently valued over $1 Billion at $100 Million in revenues and 2,000 customers worldwide. Through the investment, Sumo Logic is the 5thhighest funded Data & Analytics company of the past five years. Another renown software provider that surpassed the $1 Billion valuation mark is Collibra. The company received a $100 Million investment from an investor group led by CapitalG, Alphabet’s growth equity investment fund. The funding is supposed to be used for further expansion of the product portfolio and to accelerate growth across the business. Collibra plans to extend the AI and Machine Learning capabilities both within their cloud Data Management platform as well as their support initiatives for Data Science teams.

Another company that net a remarkable funding in the second quarter of 2019 is Aera Technology. The software vendor provides their customers with an AI-backed “self-driving enterprise” solution that optimizes and automatizes supply chain decisions. The invested money is meant to help Aera with more marketing power.

As a discussion-provoking fact, we want to draw your attention to an analysis of the relative investment shares in the Data Management & Data Integration segments – and ask you as our cherished reader a question: Is Hadoop dead – or is the market just saturated?

If you liked our M&A and Investment Market Update for Q2 2019 remember to subscribe and get periodic updates of the market.

Follow & contact the authors of this market update for more information:

Maximilian Gluchowski, CEO of Data Invest

Dr. Carsten Bange, CEO of BARC

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