Following reports that the SAS Institute was looking for a buyer, the longtime independent analytics provider announced plans to prepare for an IPO.
The Wall Street Journal originally reported last month, and TechTarget independently confirmed that SAS was in talks to acquire it by Broadcom, a $ 24 billion conglomerate that has been a developer since it was founded as a division of Hewlett-Packard in 1961 and supplier of semiconductors for 15 to 20 billion US dollars.
However, just a day later, those talks broke off and James Goodnight, co-founder and CEO of SAS – widely known as Dr. Goodnight is called. in math – emailed everyone insisting that SAS was not for sale.
Now, however, it appears that SAS, which was founded in 1976 when it was part of North Carolina State University and based in Cary, NC, took a different path; Instead of looking for a buyer, she is planning an initial public offering (IPO).
“Today we announce our intention to be ready for an IPO by 2024,” Goodnight said in a video.
Assuming SAS actually goes public, it will likely raise more than the $ 15-20 billion it would have attracted if it had been acquired by Broadcom.
An IPO makes much more sense than an acquisition. … An IPO would leave the corporate culture unchanged.
Boris EvelsonSenior Analyst, Forrester Research
With sales of around $ 3 billion in recent years, the company could generate nearly double its revenue, according to R “Ray” Wang, founder, chairman, and senior analyst at Constellation Research.
“It’s a lot, a lot early, but … I think they’re going to do better than $ 15 billion in the IPO,” he said. “Minus the fact that they came to the cloud more slowly and have an older user base, they should be in the $ 27 billion to $ 30 billion range if you look at the comps out there.”
Previously, Wang had speculated that the conversations with Broadcom, which valued SAS at five times total sales of about $ 3 billion in 2020 and a little less than seven times total sales, were just a ruse to get another potential buyer like Microsoft, with whom SAS maintains a deep partnership.
IPO vs. takeover
An IPO is a preferable next step for SAS than an acquisition, as it would allow the seller to stay intact and be in control of their own destiny, said SAS spokeswoman Shannon Heath.
James Goodnight, co-founder and CEO of the SAS Institute, announced that SAS plans to go public before the beginning of 2024.
“Dr. Goodnight’s greatest concern is that the company will continue to thrive and move forward together, not dismantled, separated or merged with any other organization,” she said. “We have an incredible brand and it has to stand on its own.”
Similarly, analysts said that going public would be preferable as it would allow SAS to maintain its current culture and keep its identity unchanged.
“An IPO makes a lot more sense than an acquisition,” said Boris Evelson, principal analyst at Forrester Research. “SAS has been a private company for 45 years, so the corporate culture is changing because of [mergers and acquisitions] would be a challenge. An IPO would leave the corporate culture unchanged. SAS is [also] a very well-known, popular brand name, and an IPO ensures that the brand name lives on. “
Evelson added that integrating SAS ‘products with those of another vendor would be complex and an IPO would avoid this complication.
“SAS offers a very wide range of products, solutions and professional services,” he said. “Integrating these into an existing business, especially with overlapping products, solutions and services, will be challenging and will take time and effort. An IPO allows most SAS employees to focus on products and customers, not the ones Post-merger integration to get distracted. “
Kjell Carlsson, also a principal analyst at Forrester, said an IPO was the better way for SAS.
“An IPO is better for everyone – customers and employees,” he said.
However, an IPO does not solve a major problem for SAS, namely who will succeed Goodnight – now 78 years old – as CEO.
The potential successor was Oliver Schabenberger, who was COO and CTO at SAS in his final years before moving to SingleStore as Chief Innovation Officer in early 2021.
However, with Schabenberger gone, there is no obvious candidate, according to Carlsson.
“Going public does not solve SAS’s executive succession problem, which may have been a key factor in the Broadcom discussions,” he said. “[New CTO] Bryan Harris has a background in helping SAS with its cloud strategy, but he’s not the leading provider of applied statistics / data science [Schabenberger] was, and [Goodnight] is.”
Additionally, an IPO could limit a future CEO’s ability to make significant strategic changes, Carlsson continued.
“An IPO also limits the flexibility of future executives to steer SAS in a dramatically different direction [Goodnight] will almost certainly continue to play an oversized role in the company’s decisions, “he said.” Presumably this is one of the causes that led to it [Schabenberger’s] Departure.”
Wang noted that an IPO was preferable to a takeover as it would keep SAS leadership intact.
Additionally, he said it was unlikely that SAS would seek a buyer in the meantime, ahead of its eventual IPO, which would likely come at a time when valuations for tech companies are at all-time highs.
“There’s no point doing this unless you’re serious about going public,” said Wang. “There’s a lot of Unlocked Value.”
Preparing for the IPO
If SAS pulls through and goes public, preparations need to be made, the seller said.
Among other things, SAS needs to refine its financial reporting structure, streamline some of its operational processes, and increase its focus on those aspects of its analytics platform that have potential for growth.
A little over two years ago, SAS announced plans to invest $ 1 billion in advanced intelligence capabilities to help modernize its platform. Since then, it has used portions of that investment to add automated machine learning and enhanced natural language processing and computer vision capabilities, along with other AI investments.
Most recently, after presenting its expanded product and marketing partnership with Microsoft last year, SAS presented cloud-native support for its analytics platform in AWS and Google Cloud in May 2021.