Compuware pays big for dynaTrace

The news yesterday that Compuware paid a large multiple for dynaTrace should not come as a surprise to anyone. It was reported that they paid $256m on revenues of $26m meaning a trailing revenue multiple of 9.8x

While this may seem high (by way of comparison, it was reported that CA paid 10.8x for Nimsoft), I believe that we will more deals in infrastructure and applications mgmt being done at these levels.

We need to remember that this market is worth billions and is undergoing a seismic shift. Take a look at the success of Solarwinds, Nimsoft, Service-now and others and you will see a market that is ripe for disruption. Often the incumbent products are simply not ready for the speed of change of IT today.

A vc that I met with recently said to me “one of the reasons that we like this space is that the value multiples can get really high” and clearly this is true.

But, a word of caution to would be entrepreneurs thinking they can tap into a river of gold. For every successful company in this space, there are many, many failures. It is very disjointed, with hundreds of companies both large and small, and it takes not only great product to be successful, it also takes a great sales/marketing team and tremendous customer support and satisfaction.

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