Investment bank Oppenheimer expects M&A activities to pick up, with companies like Zoom and Twilio being potential targets
Investment bank Oppenheimer expects that due to market expectations of the Federal Reserve starting to cut interest rates in September, investment and M&A activities may pick up. The bank points out that Confluent, Dynatrace, Elastic NV, JFrog, SentinelOne, Twilio, and Zoom Video could be potential acquisition targets. Analysts believe that the potential deal prices may be 40%-50% higher than their current valuations. Oppenheimer also predicts that Gitlab and Rapid7 may be acquired
According to the financial news app Zhitong Finance, investment bank Oppenheimer stated that due to market expectations of the Fed starting to cut interest rates in September, M&A activities may pick up. The bank pointed out that the likelihood of acquisitions for Confluent (CFLT.US), Dynatrace (DT.US), Elastic NV (ESTC.US), JFrog (FROG.US), SentinelOne (S.US), Twilio (TWLO.US), and Zoom Video (ZM.US) is medium to high.
Analyst Ittai Kidron stated, "We believe buyers (especially PE buyers) may be more willing to use debt to finance larger deals and are expected to refinance at lower rates in the near/medium term."
Kidron mentioned that the potential deal prices may be 40%-50% higher than their current valuations. He said, "We believe potential acquisition targets should have one or more of the following characteristics: (1) high gross retention rates; (2) strategic fit with larger platform products; (3) provide opportunities for larger strategic or financial buyers to improve GTM/execution challenges; (4) attractive valuation and strong potential for cash flow generation."
Oppenheimer indicated that Gitlab (GTLB.US) is highly likely to be acquired at a P/E ratio of 10-12 times. Zhitong Finance reported last month that GitLab is exploring a sale, and this San Francisco-based company has attracted acquisition interest from peers such as cloud monitoring company Datadog (DDOG.US).
Rapid7 (RPD.US) is another company that Oppenheimer believes is highly likely to be acquired, with the deal price potentially reaching 4.5-5.5 times revenue. Activist investor Jana Partners has accumulated shares of Rapid7 and plans to push for a sale. Rapid7 has received an offer from private equity firm Thoma Bravo, but believes that there is a significant price gap between the private equity firm and the cybersecurity company.
The bank believes that another tech company with a high likelihood of being acquired is Zoom (ZM.US), with a potential P/E ratio of 4-5 times. Zoom Video may attract buyers including Google, AT&T, T-Mobile, Verizon, and financial sponsors
