Business Intelligence and Analytics companies have recently been popular acquisition targets for principal and strategic investors alike. While TIBCO and Qlik partnered with Private Equity investors, Birst, BeyondCore, DataRPM, Platfora, and Prevero were acquired to strengthen platforms of larger software firms. Despite the abundance of acquisitions, we do not expect any slowdown in deal flow. In fact, we believe there are 4 distinct reasons why deal flow should pick up in 2018:
Strong demand-side tailwinds. Businesses across industries and geographies focusing on leveraging the ever-increasing abundance of data to enable real-time, data-driven decision-making. This will drive growth from both new adopters, as well as seat count increases from current customers. Various sub-segments of BI and Analytics are believed to see CAGRs of 10% to 30% through 2021, which will surely attract investors. Smart Data Discovery, Prescriptive Analytics, Self-service Data Preparation, and Search-based Discovery companies are expected to see the highest growth rates.
Rapid Evolution of BI and Analytics Capabilities. Long gone are the days of traditional BI platforms. Companies with visual data discovery products are experiencing pressure from competitors to evolve their products to smart data discovery, ideally complemented by natural language query, search-based data discovery, and automated analytics. These products are not only making BI and Analytics more accessible, agile, and embeddable, but can also provide greater depths of insights at a faster pace. While there is a significant installed base of traditional BI platforms, especially in the enterprise segment, new deals will be dominated by modern BI platforms, data science platforms and analytic applications. Given that the talent and skillset required to develop modern BI and Analytics products is incremental to those historically required (e.g., incremental skills in machine learning and artificial intelligence), leading BI and Analytics companies will be inclined to consider acquisitions of newer, innovative players.
Attractive value creation levers. Given the favorable market environment and evolving BI and Analytics product capabilities, an attractive set of value creation levers is emerging. As enterprise customers continue to increase seat counts and as solutions become easier to implement, the land-and-expand sales strategy will become less effective. At the same time, set-up and execution of data discovery and analytic work flows are becoming simpler (thanks to interactive data discovery and automated analytics). Therefore, BI and Analytics companies will see a declining need for service personnel and shorter implementation timelines, which will translate into higher margins. As typical enterprise software sales models and leaner service organizations become more prevalent, investors will find opportunities to optimize go-to-market strategies with proven enterprise software playbooks.
Abundance of Acquisition Targets. We encounter plenty of attractive acquisition targets across various segments of BI and Analytics. While modern BI platforms, data science platforms and CPM suites are most likely to attract investor interest, we continue to track hundreds of companies, both public and private, across all sub-segments of BI and Analytics.
