Stay up to date on M&A and Investments in Data & Analytics - The Market Update Q2 2019

This quarter: M&A - Why Tech Giants buy analytics companies at a premium, and Investments: The decline of Hadoop in numbers

First, 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 we will comment on this later. 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? Salesforce obviously strengthens its Analytics portfolio (that was bolstered by the 2016 acquisition of data discovery specialist BeyondCore and currently mainly consists of Einstein Analytics) with the transaction, as rivaling tech giants like Oracle, Microsoft and SAP have expanded their own Analytics platform capabilities. The acquisition of Tableau should help Salesforce upgrade its outdated reporting frontend through much more sophisticated visualization and dashboarding capabilities. The cloud native Salesforce solutions are also supposed to support Tableau in getting lifted up to hybrid and multi cloud scenarios, also enabled by Salesforce’s acquisition of API integration platform Mulesoft in 2018.

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 2007/2008. These companies at that time each generated revenues of appr. $1 Billion while being profitable, similar to Tableau that also reached appr. $1 Billion in revenue for 2018 but also generated a loss. Somebody has to pay for the high Tableau purchase price, so the software pricing might remain high – 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 increases the competitive pressure among the cloud vendors.

On the technical side, Tableau for years could be deployed on the hyperscaling cloud platforms Azure, AWS and Google Cloud. An obligatory migration to the Salesforce infrastructure could possibly deter 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?

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 and extend successes like TensorFlow in advanced analytics. Google placed great emphasis in the announcements on the continued multi-cloud integration capabilities of Looker, sending a message to the growing amount of customers fearing a lock-in in the cloud offerings of Amazon and Microsoft.

The Performance Management market in Germany continues to consolidate with the acquisition of CPM and BI vendor cubus AG by Serviceware SE, a Frankfurt-based provider of Enterprise Service Management (ESM) software. With this transaction Serviceware can extend its capabilities for digitizing and automating 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 Analytics platform as the company’s CEO announced. Hence, the deal that creates an enterprise with $100 Million revenue and 700 employees enterprise is also motivated by the ongoing convergence of BI and Analytics topics.

INVESTMENTS

The year 2019 also shows, that Advanced 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 behavior 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 5th highest 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. If you followed recent turmoils at the two large remaining distributors Cloudera and MapR you will not be surprised by the funding history in the Hadoop ecosystem.

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

Maximilian Gluchowski, CEO of Data Invest

Dr. Carsten Bange, CEO of BARC