Broadview's cloud revenues grew to $90.9 million in 2016, up from $78.5 million in 2015, according to a Q4 2016 investor presentation viewed by ChannelE2E. But there are some challenges within those figures. Chief among them: Broadview's traditional revenues are falling faster than the cloud revenues are growing. So overall company revenues are declining a bit -- $288.8 million in 2016, down from $291.1 million in 2015, the company's investor presentation says.
Windstream's Broadview Buyout Valuation
What's the deal's actual valuation? ChannelE2E looked at the key financial metrics to calculate exactly that. The math looks like this:
- Broadview's EBITDA was $48.5 million in 2016, according to that Q4 2016 financial report.
- Windstream paid $227.5 million for Broadview, so the deal's valuation is only about 4.7 times Broadview's 2016 EBITDA ($227.5M/$48.5M).
That's not a big premium. In fact, it's more of a market discount -- likely triggered by Broadview's legacy business, which continues to contract. The valuation suggests that Windstream sees Broadview as a value play that will unlock cost synergies and lots of cloud opportunities over the long haul.
Traditional MSPs -- the ones serving SMB customers without necessarily owning their own intellectual property -- are often valued at around 5X to 7X EBITDA. But MSPs with intellectual property -- particularly those with SaaS-centric IP -- can fetch around 8x to 10X EBITDA or so. For more on MSP and CSP valuations, visit the ChannelE2E FAQ section.
Pressuring UCaaS Valuations?
8x8, a hosted VoIP provider, apparently has been seeking a buyer since around February 2017. Similarly, ShoreTel -- which is shifting from hardware products to cloud services -- has been seeking a potential strategic buyer since August 2016.