Wall Street thinks these 5 public software companies could get acquired in mega-deals amid the market downturn (COUP, EVBG, SPSC, MDSO, TYL)

ryan smith qualtrics CEO

Big tech acquirers are more willing than ever to spend big on the best companies on the market, according to a note published by the investment firm Needham.
And with the stock market currently in a correction, some of the best public companies are for sale, wrote analyst Scott Berg.
These are the five public software companies deemed most attractive to potential acquirers, according to Needham.

SAP's $8 billion acquisition of Qualtrics, just days before its planned IPO, reveals a new trend, according to analysts at Needham — acquirers are willing to spend big bucks for the best companies out there.

Companies are prioritizing "higher quality" companies over "a more blended approach, acquiring both high-growth industry leaders and more opportunistic value-orientated targets," wrote Needham analyst Scott Berg in a note to clients published Tuesday.

"While the list of public software company acquisitions has been relatively short," Berg wrote, "the aggregate valuations have been at a premium level that we consider to be at the upper end of historical ranges."

Now with the stock market in a correction, even high-growth and otherwise well-placed public software companies suddenly look like they could be for sale — which is great news for large acquirers.

Neeham chose these five companies based off the criterea that they all have "consistent growth with strong ownership of their respective end markets." It also excluded recently-public companies like Anaplan and Zuroa since leadership has indicated that they wish to stay independent, as well as larger SaaS companies like Salesforce, which few acquirers could afford.

Here's who Needham thinks are the most attractive software companies for potential acquirers.

Coupa Software

Coupa Software, a business spend management software company, has a $3.2 billion market cap. That's down from a high of $4.7 billion in September.

"While it may not have a clearly defined competitive moat similar to other vendors discussed in this report, we believe Coupa to be one of the more innovative vendors in the business spend management software market and one of the few pure-play multi-tenant SaaS vendors in a space ripe for secular transition to a cloud platform," wrote Berg.

SPS Commerce

SPS Commerce, a cloud-based supply chain management company, has a market cap of $1.5 billion. That's down slightly from a high of $1.7 billion in September.

"We believe this ability to connect the past with the future of within its targeted end market is what would make SPS Commerce a valuable asset to either a strategic or financial acquirer. The SPS Commerce platform is also unique with how it can scale from the very small customers to the large and complex," says Needham in its note.

Medidata Solutions

Medidata, a clinical trial software company, has a market cap of $4.3 billion. That's down from its high of $5.3 billion in July.

Neeham actually has a "hold" rating on the company, because the firm is concerned that the company won't meet its growth targets.

"However," wrote Berg, "we believe Medidata’s dominant market position in EDC (Electronic Data Capture) working with 18 of the top 25 pharmaceutical companies combined with their increasingly competitive platform product set could prove attractive to a financial or strategic buyer."

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