by Scott Denne
Technology vendors coming off recent IPOs were notable contributors to last year’s booming M&A market. Now Dropbox, with its IPO less than a year behind it, has inked its latest and largest deal, suggesting that such companies could play an important role in this year’s market, although the slowdown in new offerings makes that look less likely.
With the $230m acquisition of HelloSign, Dropbox has become the latest company from the 2018 vintage of business technology IPOs to ramp up its acquisitions. According to 451 Research’s M&A KnowledgeBase, Dropbox spent more on this purchase than any in its history. And while Dropbox was once a prolific acquirer of small startups, it hadn’t printed a deal since November 2017.
Likewise, DocuSign, which hadn’t ever spent more than $40m on a single transaction, paid $220m for SpringCM in a July 2018 deal that followed the buyer’s public stock debut by three months, our data shows. Another member of the 2018 class, Zscaler, inked its first-ever acquisition following its IPO in March. And firms from slightly older vintages made more impactful moves. Cloudera (2017) and Twilio (2016) printed their first $1bn-plus transactions last year. Cision, which went public via a reverse merger in 2017, has spent $350m across two deals since the start of this year.
As my colleague Brenon Daly noted in the introduction to 451 Research’s Tech M&A Outlook 2019, last year saw a record 15 IPOs from business technology vendors, although the pace slowed down in the back half of the year, when just five of those entered the public markets. A late-year decline in stock prices helped put on the brakes and a government shutdown effectively closed the market for new offerings in the opening month of 2019.
A possible recurring shutdown in three weeks could keep the SEC from processing filings from would-be public companies. But even if the US government remains functioning, the public markets may not be as hospitable for new offerings. A November survey from 451 Research’s VoCUL shows that 47% of consumers are less confident in the stock market than they were 90 days earlier. That’s up from 30% when asked the same question a year earlier.