Contact: Brenon Daly
A little more than three months after going public, FireEye is handing some $883m of that newly minted equity – along with $107m in cash – to acquire Mandiant. We would note this is one of the few times in the past decade that a high-flying debutant has used its IPO to pull off a transaction like this. In fact, most of the other fast-growing enterprise tech companies that have gone public in the past two years and trade at double-digit valuations have done only small tuck-ins (Splunk, ServiceNow) or stayed out of the M&A market altogether (Workday, Tableau Software). And that’s despite having boatloads of cash and richly valued shares thanks to their offerings.
And to be clear, this equity-heavy acquisition wouldn’t have been possible without an IPO, or at the very least, privately held FireEye would almost certainly have had to give up far more of the company if it wanted to acquire Mandiant. (As it is, FireEye is only giving up 13% of the company, but will add about 40% to its revenue this year.) Recall that when FireEye raised a round almost exactly a year ago, the company was valued at slightly more than $1.1bn, according to our understanding. The company is now worth more than $6bn on the Nasdaq.
Based on total consideration of $990m, the deal stands as the eighth-largest infosec transaction. (The largest deal in the sector, of course, is well known to many of many FireEye executives, a number of whom came over from McAfee after its $7.7bn sale to Intel.) Although FireEye is handing over nearly $1bn for Mandiant, by many measures it is getting a bargain. For starters, there’s the currency it is using. FireEye will cover approximately 90% of the purchase of the startup with its own richly valued equity. At a market capitalization of $6.2bn, FireEye is valued at almost 40 times expected 2013 revenue of $157m. (For those who prefer non-GAAP financials, that works out to 25 times projected 2013 billings of $245m.)
The unusual acquisition certainly found solid support on Wall Street. Investors bid FireEye stock up more than 20% to the highest point of its short history. Shares of FireEye, which first traded in the mid-$30s in September, topped $50 in mid-Friday trading. We’ll have a full report on the transaction on the 451 Research website later today.
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