Q: I have a glass half-full CSU question.
The valuation of CSU has compressed due to concerns about AI and CEO departure for health reasons. What about the valuation of the thousands of smaller companies that CSU targets for acquisition? Will these much smaller companies undergo even greater AI related valuation compression, and offer truly excellent, perhaps generational, opportunities for CSU to acquire? I would think that if small software companies are worried about loosing to AI, it would become a buyers market and CSU could selectively capitalize on the opportunity.
Appreciate your thoughts. Thanks
The valuation of CSU has compressed due to concerns about AI and CEO departure for health reasons. What about the valuation of the thousands of smaller companies that CSU targets for acquisition? Will these much smaller companies undergo even greater AI related valuation compression, and offer truly excellent, perhaps generational, opportunities for CSU to acquire? I would think that if small software companies are worried about loosing to AI, it would become a buyers market and CSU could selectively capitalize on the opportunity.
Appreciate your thoughts. Thanks
5i Research Answer:
We have more CSU comments posted this morning. We would agree that AI can create an opportunity as well as a threat. One issue is valuation. CSU has fairly strict M&A guidelines, and AI-related companies are of course not cheap. But, just as sentiment has shifted for CSU, it also has for potential software acquisitions if they are not getting an AI premium. Many private companies might not get a premium, and, depending on the company and the perceived threat from AI, valuations could certainly be attractive for a public entity such as CSU that still commands a premium multiple.