Contact: Scott Denne
Often a bidder, never a buyer, Elliott Management looks set to make its first take-private of a tech company, reaching an agreement to buy network-monitoring vendor Gigamon for $1.6bn. The infamous activist investor has often agitated for sales of publicly traded tech companies and launched offers of its own, but has yet to bring one over the finish line.
Elliot’s list of unsuccessful – and typically unsolicited – bids for public tech companies goes at least as far back as its 2008 offers for Epicor and Packeteer (although it had once invested alongside Francisco Partners in a 2006 take-private). More recently, it was rebuffed by LifeLock, which negotiated with Elliott before reaching a deal to sell to Symantec. It’s worth noting, however, that Elliott was only unsuccessful in its role as buyer. As an investor, it has often made money on unsuccessful bids. For example, in the case of LifeLock, Symantec’s acquisition ultimately drove the value of Elliott’s LifeLock shares roughly 80% higher than the price it paid six months earlier.
For Gigamon, a sale to Elliott seems preferable to staying public. A downward revision of its guidance at the end of last year opened the door for Elliott to accumulate a 7% stake in the business. And today it’s announcing a sale to Elliott, rather than hopping on an investor call to explain a third-quarter miss on its revenue guidance. Despite that trajectory, Gigamon is fetching a healthy valuation, trading for 5.3x trailing revenue, two turns above the valuation that rival Ixia fetched in its sale to Keysight earlier this year.
Unlike earlier attempts, Elliott pursued Gigamon through its dedicated private equity (PE) vehicle, Evergreen Coast Capital. The combination of activism and private equity in a single investment group adds yet another strategy to a PE landscape that’s grown increasingly diverse as limited partners continue to cram cash into PE funds, leading to a record number of tech buyouts. In the official start to its PE strategy, Elliott joins an expanding list of PE investors willing to pay more than $1bn on tech transactions. So far this year, almost one in five $1bn-plus PE deals have been printed by a firm that’s never done a transaction of that size, compared with just one in 10 last year, according to 451 Research’s M&A KnowledgeBase.
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Source: 451 Research’s M&A KnowledgeBase
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