5 pros and cons of Ellie Mae going private

The $99 per-share price shocked analysts. “The fact that someone would pay 20 times 2020 EBITDA or higher for a business that is going to grow revenue 3% to 5% a year was surprising,” said Henry Coffey, a managing director with Wedbush Securities.

But even though there is a go-shop period, a higher offer is unlikely, he said.

“You got everybody in the mortgage industry saying that mortgage tech need to evolve for the next generation, that’s an expensive process. And someone just paid 20 times EBITDA for this company.”

But the price may indicate Thoma Bravo is taking a long-term approach with Ellie Mae.

“The valuation was big in my view, but if you have a four- or five-year view, and you view some of these industry trends on the health of the channel as temporary cyclical, you come out at a better end,” Campbell said.

However, analysts at William Blair were not taken aback by the offer. “We believe the multiple paid is either fair or attractive. We note that the average 2019 adjusted EBITDA multiple for other real estate technology/information services firms we cover is about 22 times, so this multiple seems relatively in line with the broader group,” it said in a report.