- Credit Suisse analyst Fred Lee reiterated Underperform on Coupa Software Inc (NASDAQ:COUP) with a $60 price target.
- Vista is in talks to acquire COUP, Bloomberg reported.
- Vista's founder and CEO recently (Aug-22) discussed the company valuation approach in this market.
- He highlighted that the company focuses on EV/R/G, acquiring below the long-term historical average of 0.41.
- Using current growth rates in the mid to high teens would arrive at a share price in the $45 area.
- The average EV / LTM Rev multiple that Vista paid over the last two years was 9.7x. Vista's historical M&A range would imply a $60 - 70 takeout range.
- Raymond James analyst Brian Peterson noted that Coupa has consistently been mentioned as a SaaS asset that would be attractive to PE buyers. He long viewed the asset as a potentially attractive takeout candidate.
- This is mainly because Coupa has already amassed a platform that has driven synergies through M&A and could be a vehicle for further M&A beyond the current Business Spend Management (BSM) offering.
- He also notes that Coupa has not been as aggressive as some software vendors in ratcheting up pricing or pushing a back-to-base sales motion, prioritizing acquiring new logos.
- In a stricter macro, he thinks the former may become more critical to the growth algorithm, which may be easier to accomplish as a private company.
- While Coupa also has clear FCF margins, any PE takeout would need to consider COUP's ~$2.2 billion in gross convertible notes, with his math suggesting net debt of ~$1.3 billion.
- As for a potential takeout multiple, he pointed to recent takeouts for AVLR and PING, supporting a takeout price of $68 - $80.
- Price Action: COUP shares closed higher by 6.38% at $62.69 on Friday.
