Workday scouts its 14th acquisition: Scout RFP (Deal Summary, Company Background and Coverage Highlights)

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Workday’s deal to buy Scout RFP makes this its 14th acquisition, according to crunchbase. Spend Matters has been covering Workday and Scout RFP, and we have some quick takes on this deal. 

Material sourced from: First Take Analysis: Workday’s Acquisition of Scout RFP (Part 1: Scout Background, Strengths/Weaknesses, Deal Rationale) and Workday to acquire Scout RFP for $540 million in cash

 Transaction Background:

  • Workday, a finance and HR solutions provider, is set to acquire the easy-to-use sourcing provider Scout RFP in a $540 million cash deal
  • Spend Matters estimates the valuation of the transaction was materially in excess of 15X revenue
  • Workday Ventures was previously an investor in Scout
  • Workday’s 700+ financials customers all represent logical “upsell” targets for Scout
  • Scout will be Workday’s 14th acquisition (when closed)
  • Workday expects the transaction to close in the company’s fourth quarter fiscal year 2020, prior to Jan. 31, 2020, “subject to the satisfaction of customary closing conditions, including required regulatory approval.”
  • Scout’s 160+ employees will join workday
  • Both companies are headquartered in the Bay Area

Scout Background:

  • Scout RFP is a fast growing provider in the source-to-pay technology area with a central focus on sourcing technology (also offering limited support for targeted supplier management and contract management requirements)
  • At the time of the acquisition announcement Monday, Scout RFP had 240+ customers and annual year-over-year customer growth (2018 to 2019) of over 50% based on reported data to Spend Matters
  • Scout has been a long-time partner of Workday and has joint integration efforts accelerated earlier in 2019

 Spend Matters M&A Coverage Highlights

  • “Scout is not losing in the market because of the 60% of the functionality it is missing or only partially addressing; it is winning because of the 40% that it has included is incredibly easy to use.”
  • “Scout RFP has proven that can be a successful entry point into organizations with other procurement systems and/or those that have been less successful with the adoption of alternative sourcing technologies.”
  • “Scout also has easy event creation and event management, which is augmented by savings tracking with automated reporting, supplier information management, category (and category template) management …”
  • “Scout RFP’s growth and current rate of customer additions relative to peers is proof that its approach to driving customer adoption is resonating with users.”
  • In recent SolutionMap customer ratings, “Scout scored in the top tier across a range of SolutionMap’s customer rating areas, including net promoter score (recommend this provider), meet the expectations ...”
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Voices (2)

  1. Jason Busch:

    Valuation is much more of a science than an art in established markets. SaaS is an established market. Scout hit some excellent growth metrics for a SaaS firm along with customer retention levels, hence the valuation. Valuation in this case has nothing to do with DCF, WACC, etc. You can argue with the market for valuing companies the way it does (and the enthusiasm for companies that exceed the rule of 40) but don’t argue with Workday’s modeling. Trust me, anyone who has been in corporate development is worried more about being wrong than being perfectly correct. It is a risk adverse function in 90% of cases.

  2. Keith Stulper:

    Congratulations to the Scout Team for pulling this off. That said, this is absolutely insane. Definitely a sign of a bubble. NONE of the previous mergers and acquisitions in this space came anywhere close to this valuation – at best 2-3x revenue.
    Workday way-overpaid, no matter what synergies they believe they will have with existing customers…

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