Australian Software Bubbled And Popped, NZ Mostly Popped And Asia Just Fizzled!
Listed software companies in ANZ and Asia experienced the same explosive burst in valuations as their US counterparts, but there are some important differences.
Take ANZ for instance. During the first dotcom boom of the late ’90s, the region’s listed tech sector was small and lacking diversity. As such it never achieved the lofty heights of value compared to the US, despite producing a few early digital successes like Search engine Looksmart and ad serving platform Sabela — bought by 24/7 for about $A100 million right under the nose of Doubleclick.
On the Enterprise software front at the time, only a handful of companies like Mincom — a mining software company subsequently bought by ABB in 2001 — and small business accounting pioneer MYOB offered hints of long-term promise.
This time around, since 2015 the listed tech sector in Australia has massively outperformed the general market by a factor of four — growing by 192 per cent compared to 48 per cent. It also exceeded the performance of the US tech sector relative to its total market, which doubled the broader market returns. However, Australian SaaS and software companies contributed less to this growth than some of the other digital unicorns — in particular Afterpay, which was acquired by Square in August 2021 for $A39 billion.
(Afterpay doesn’t feature in this analysis as we consider it part of our fintech sector. But it’s worth noting that since its value crashed and burned, it is no longer one of the top global 1,000 companies by valuation.)
The NZ market did not get the same explosive growth as its counterpart in Australia — it grew 121 percent vs 83 percent for the total market. However, sadly for Kiwi tech businesses, the decline was almost as sharp as Australia’s — falling 41 percent, versus 42 percent.
ANZ Software
The absolute multiple levels may differ from that seen in the US, but the percentage expansion and subsequent contraction in ANZ SaaS multiples looks very similar to US markets. And while current revenue multiples for Australian SaaS companies — just under 5x — stand up well in absolute terms against US levels, it’s worth noting that the wider current spread across the (relatively small) cohort is creating more noise in the data.
ANZ Enterprise multiples were largely stagnant pre-2020, before some COVID volatility and subsequent settling at lower levels. While the larger end of the Enterprise segment saw a significant uplift in multiples (up to 15x revenues), the smaller end really didn’t join the party and is currently trading below long-run revenue and EBITDA measures.
Asia Software
The story in Asian markets is very different again. The last seven years have seen a broader surge in the China market, driving Software values to highs around 2015–2016, and relatively modest multiple movements over the more recent bull run.
It’s equally true, however, that any gains over that bull run period appear to have been given up over the last six months. SaaS multiples (4.6x) and Enterprise multiples (3.2x) have fallen back to 2018 levels.
