$Smartsheet (SMAR.US)$ being purchased for $8.4b - 7x CY24 s...

$Smartsheet (SMAR.US)$ being purchased for $8.4b - 7x CY24 sales / 36 FCF. 6x CY25 sales / 29x FCF. Yowza.

SMAR is the "higher-end" work management SaaS solution that 1) has a ton of competition, 2) faces the existential $Microsoft (MSFT.US)$ deathstar risk, and 3) may need to navigate AI risk as it is a workflow solution.

Company has been decelerating rapidly to the mid-teens (net rev addition of 216m in CY22, 191m in CY23 and estimated 161m in CY24). Let's say the 84% GM is sustainable, R&D can be reduced from 23% of revs YTD to 15%, S&M can be reduced from 47% of revs YTD to 30% (pretty competitive market), and G&A can be reduced from 15% of revs YTD to 6%. That implies a 33% GAAP OM and, assuming a 23% tax rate, a 25% net margin.

I personally wouldn't pay more than 16x earnings power for this business which seems to have a ton of duration risk. 16 x 25% = 4x sales. 20x is 5x sales. Expensive deal...

Also, what's the exit here? Not sure any of the big SaaS companies will want it - am sure they had a look in the sale process. Not sure it has much strategic value. And not sure public markets will be excited about this down the road - if growth keeps slowing, will be valued on FCF when it re-appears and the earnings power assumptions above indicate this company might take years to grow into the buy-out valuation.