Earlier this week, Facebook filed for a $5 billion IPO that could value the company at between $75 and $100 billion. Just over two-dozen U.S. companies have a market cap that size, and this would be the largest IPO ever.
For many of our clients and professional partners in the tech and deal industries, the filing begs the questions: Will there be a Facebook effect? Will this IPO be the rising tide for all ships? Our answer to both is a definitive "no."
Marty Wolf, Founder and President of martinwolf⎪M&A advisors, was quoted in an article published this week in Wall Street Journal Blogs on his views of Facebook's IPO filing.
Marty said, "It's a one-off. There's nothing else like it.... Facebook's coattails are a mile wide and an inch deep."
Marty was also quoted saying that, "The most significant thing Facebook's IPO will do is create a pricing umbrella. And that umbrella is a big one."
Simply put, here at martinwolf we see Facebook as an outlier that will not have much effect on tech deals.
This is counter to what we published in our year-end analysis of our MW IT Index® for 2011, which showed SaaS companies' valuations rising. Increased valuations are being driven by the land grab competition for SaaS market share among de facto SaaS leader Salesforce.com and traditional enterprise software companies IBM, Oracle, and SAP.
Our analysis shows that SaaS as an industry is on the rise for the next 24 months. Other SaaS companies are being gobbled up at a premium as we have noted.
So, in analyzing valuations of industries, Facebook is not an industry, but rather an "anomaly company".
It is similar to when Google went public. Google enabled other companies to be born. Under the Google umbrella, many companies have been created.
We are seeing the same for phenomenon for Facebook. But, Facebook will not drive up the cost of other IPOs nor the market as a whole.
We are not banking on it.
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