Dassault continues to acquire for growth

Contact: Ben Kolada

Continuing its search for external growth opportunities, 3-D modeling software vendor Dassault Systèmes says it is paying $205m for manufacturing software provider Apriso. The deal pushes Dassault into the manufacturing operations management software industry and provides cross-sell opportunities for both companies.

The all-cash transaction values Apriso at 4.1x last year’s sales. An Apriso press release earlier this year noted that sales growth over the past seven years exceeded 20% on a compound annual growth rate (CAGR); software revenue specifically grew at a CAGR of 31% over the same period. Last year, software represented 65% of total revenue, with services accounting for the remaining 35%. Jefferies & Company advised Apriso on its sale.

The deal is primarily a product expansion for Dassault, making manufacturing operations software available to customers that are currently using its DELMIA manufacturing and production modeling software. With Apriso, Dassault also expands its presence in a variety of industries, such as consumer goods, packaged goods, high tech, life sciences, transportation and mobility, aerospace and defense, and industrial equipment.

Beyond the sales rationale, Dassault also appears to be seeking more outlets to further its growth. We previously wrote that, although the greater European economy continues to struggle, Dassault was able to announce a pair of acquisitions in April due in part to the fact that the company is still growing total revenue. With this purchase, its fourth this year, Dassault has already tied the number of M&A moves it made in its most acquisitive year, 2011. And with a large war chest – nearly $2bn (€1.5bn) in cash and short-term investments at the end of March – Dassault has enough firepower to keep announcing expansion acquisitions.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Venturing into healthcare

Contact: Ben Kolada

With angel investors increasing competition for early-stage capital raises and later-stage rounds dominated by more elite firms, mid-tier tech-focused VC firms may be smart to pivot their portfolios toward the emerging healthcare IT (HIT) sector. Those who do will find a growing market with much less competition for deals.

Market demand for advanced healthcare will grow as the senior population expands. According to the federal Administration on Aging, about one in eight Americans was at least 65 years old in 2009, the latest year for which data is available. However, seniors’ share of the population is expected to grow to nearly one-fifth – 19% – by 2030.

Some VC firms are starting to take note. At the HealthBeat conference, which started yesterday and ends today in San Francisco, three firms are taking a closer look at HIT investments. Morgenthaler Ventures, Norwest Venture Partners and Venrock Associates are judging pitches in two competitions with five finalists each – seed-stage-only startups and startups that have only raised up through a series A. Among the prizes for the seed-stage contestants is a $250,000 convertible bridge loan from Venrock.

These firms’ interest in healthcare IT gives some credence to the industry’s potential value, but they also prove that we’re still in the early stages of investment in HIT. For example, just four out of Norwest’s 109 active investments are in the HIT sector. For an opportunity comparison, more than 150 startups vied for one of the 10 positions the firms are judging.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Checking the pulse of health IT

Contact: Ben Kolada

Healthcare IT is alive and well, as evidenced by the emergence of new consumer technologies, exceptionally high valuations and investments by some of the largest old-line technology vendors. New regulations, advances in sensor technologies and ‘big data’ analytics are driving many aspects of this market for both consumers and enterprises.

New devices that track fitness, sleep and other personal health metrics are driving adoption of healthcare IT by consumers. Nearly every new wearable technology product being introduced offers some health-monitoring component. The consumer healthcare IT market is already moving from hopeful hype to valuable reality, with Jawbone recently reportedly paying more than $100m for BodyMedia. BodyMedia is Jawbone’s third acquisition; all were announced this year and all focused on healthcare.

For enterprises, Cerner’s $50m acquisition (excluding $19m earnout potential) of bootstrapped employee healthcare management software vendor PureWellness shows the variety of businesses that can make money in enterprise healthcare IT. And consolidation in the health information exchange (HIE) sector continues to go off for about 10x sales. Meanwhile, ad-supported electronic health record (EHR) startup Practice Fusion is widely expected to be considering an IPO soon. The company’s growth is attributed in large part by government initiatives incentivizing medical practices to adopt EHRs.

As for investments, Oracle recently participated in the $45m second tranche of Proteus Digital Health’s series F financing (which brought the round’s total to $62.5m). Proteus offers an ingestible sensor, used by patients to monitor internal health and by clinicians to monitor clinical trialists’ drug dosing. The plummeting cost of genome sequencing has led to a rise of big-data bioinformatics startups hoping to help make sense of the mountains of genetic data. Startups such as Bina and Spiral Genetics have recently raised capital from traditional VC firms.

Dassault comfortably announces two acquisitions

Contact: Ben Kolada

Even though the European economy is still struggling and M&A is an inherently risky business, Dassault Systèmes was able to comfortably announce a pair of acquisitions today, at least partly because the company is still growing. The purchases of Archividéo and FE-DESIGN are its first purchases in nearly a year.

Archividéo is a 3-D modeling vendor based in Rennes, France. Its software is used for urban planning, and could be particularly valuable to Dassault’s operations in emerging economies such as China. It has more than 250 customers, including cities, utilities and technology companies. Karlsruhe, Germany-based FE-DESIGN, on the other hand, provides product design optimization software to more than 200 customers. The acquisition fits into Dassault’s product lifecycle management segment, which is its fastest-growing business.

Terms weren’t disclosed on either transaction, but the deals aren’t likely to significantly impact Dassault’s financials. The pair of acquired companies adds just 70 employees to Dassault’s payroll. FE-DESIGN, the larger of the two based on headcount, generated only €5m ($6.6m) in revenue in its fiscal 2012.

The acquisitions come at a time when Eastern and Western European acquirers are staying out of the M&A game. As their home markets continue to sputter economically, the number of deals announced by European buyers so far this year has dropped 16.7% compared with the year-ago period. (That is slightly more than the 15.6% decline in tech transactions so far this year across the globe.)

Dassault, however, could comfortably announce a pair of acquisitions (however small they may be) because the company is still posting revenue growth. That’s noteworthy when we consider that the stagnant European economy accounted for 44% of the company’s total sales in its first quarter. Total revenue in Q1 grew 5.7% over the year-ago period.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Undressing demand for wearable technologies

Contact: Ben Kolada

Still in the fad phase, wearable technology is gaining market interest, driven by new devices being introduced both by tech companies and old-school consumer goods firms. The advent of these new Internet-connected form factors, such as ‘smartwatches,’ fitness and health devices, will spur the creation of new application markets in the technology industry.

Demand for wearable technology is specifically being seen in interest for an Apple iWatch, a smartwatch that many expect will be released later this year. According to a recent report by ChangeWave Research, a service of 451 Research, prerelease demand for the iWatch already matches what the iPad and Intel Mac saw before their respective debuts.

The likely launch of the iWatch and overall emergence of new wearable technology devices, such as Google’s Glass, Nike’s FuelBand, Jawbone’s UP and various devices from Fitbit, will create new markets in application software. For example, there’s already an investment syndicate, called Glass Collective, made up of VC firms Google Ventures, Andreessen Horowitz and Kleiner Perkins Caufield & Byers, that are ready to fund companies building new ways to use Google’s Glass device.

Our senior mobile analyst, Chris Hazelton, believes these devices will create extremely tight bonds between users, the cloud and very likely new technology players. For example, unlike smartphone and tablet apps that are used infrequently or once and discarded, Google Glass apps will be persistent, following and advising a user throughout their day.

If you already own a wearable tech device, or are planning to buy one, let us know what you think of this sector and which applications you think will become most valuable. You can tweet us@451TechMnA or contact us anonymously.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Taking it easy

Contact: Ben Kolada

J2 Global has announced the acquisition of Backup-Connect International, another characteristic play of its usual M&A strategy. Although its recent purchases of Ziff Davis and IGN Entertainment seemed to signal that j2 would focus on larger and inherently more difficult acquisitions, we read the company as still being more of an opportunistic acquirer – taking what it can if the taking is easy.

At a high level, the acquisition of Netherlands-based Backup-Connect is yet another geographic play meant to add global depth to j2’s business continuity services. With Backup-Connect, the company has now announced four acquisitions in this sector: two in Ireland, one in the US and now one in the Netherlands.

The fact that this is j2’s first foray into the Netherlands suggests that the country hasn’t historically been a strategic focus, although it does provide a handy base for continental European operations. Also, the company’s main dealmaker didn’t have to travel far to do the deal: j2’s global head of M&A, Jeroen van der Weijden, operates out of Amsterdam.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Will Sprint side with strategy?

Contact: Ben Kolada

DISH Network’s $25.5bn offer for Sprint Nextel represents a 13% premium to SoftBank’s October bid, but its lack of mobile experience may ultimately cause the company to lose the deal. Stock plays a major component of both transactions (32% for DISH versus 30% for SoftBank), meaning the future value of either deal will be dependent on which company – SoftBank or DISH – will be able to better execute in the mobile market. Arguably, the answer is SoftBank.

Without a doubt, SoftBank understands the mobile market, and therefore would understand Sprint’s business more than DISH. Mobile is an entirely new arena for DISH. SoftBank, on the other hand, generated some $22bn in mobile revenue alone last year. To put that in perspective, that’s nearly double the total revenue DISH generated over the same period.

Meanwhile, we’d also point out that DISH’s investors already have doubts about the deal. Following the announcement, the company’s shares fell more than 5% throughout the day, though they did recoup some of the losses by midday.

Although Sprint hasn’t yet provided an official response to the DISH bid, we expect that it will staunchly defend itself against DISH, much like it is defending Clearwire against a DISH takeover.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Going mobile

Contact: Ben Kolada

In the past few years, mobile marketing M&A and IPO activity has been dominated by firms that pushed out ad impressions to consumers. The purchases of Quattro Wireless and AdMob more than three years ago were the most notable examples, with the two deals combining to create more than $1bn of M&A value. Turning to the other exit, the IPO last year of Millennial Media briefly created nearly $2bn of market value for that company. With these transactions, mobile ad publishing became an accepted form of mobile marketing.

But mobile advertising isn’t only about pushing ads out to consumers. In fact, this model may not even be the most effective. (That may be underscored by the performance of Millennial Media on the NYSE. Shares have lost about three-quarters of their value since the debut, and are now valued at just $500m.)

At the ad:tech conference, which wrapped up Wednesday in San Francisco, we noticed the emergence of a handful of startups attempting new ways to enable businesses to advertise themselves on smaller, mobile screens.

Rather than pushing out ad impressions, DudaMobile, for example, helps businesses ‘mobilize’ their own websites. Its software requires no coding knowledge. The company apparently has proven itself enough to recently expand its series B financing from $6m to $10.3m. In a similar vein, we’ve heard that bootstrapped Bizness Apps, which provides a template for small businesses to easily build custom-made apps, is experiencing considerable growth.

To our subscribers: What do you think is the next big trend in mobile advertising? Which companies or mobile advertising markets do you think are most valuable? Let us know @451TechMnA or anonymously at kb@the451group.com.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Ripe time for spoiled fruit

Contact: Ben Kolada

While we’re in a season of slim pickings for tech M&A, one market that’s ripening is the sale of spoiled fruit. Major tech companies such as Microsoft and VMware are now selling flagging businesses at an unusually quick clip.

There are a variety of reasons why companies would sell assets during every part of the economic cycle. But right now, as growth slows across much of the established tech markets, companies are increasingly focusing on the relatively few areas that are recording sales increases. (To continue our gardening metaphor, it’s similar to a person cutting off a dying bulb so that the rest of a plant can flourish.)

Microsoft, for example, announced its second asset sale in as many months, selling its Mediaroom IPTV distribution platform to Ericsson. (Last month, Microsoft sold its Atlas Advertiser Suite assets to Facebook.) Mediaroom was part of Microsoft’s Entertainment and Devices Division (EDD), which includes Xbox, Skype and Windows Phone assets. EDD revenue rose in FY 2012 primarily due to Skype and Windows Phone revenue, but has declined 8% in the two quarters since as Xbox sales sank.

And in the case of VMware, the sizzling growth of its core virtualization software in previous years allowed it to expand into new markets. But as the company’s top-line expansion dipped to 22% in 2012 from 32% in 2011, it announced a refocus of its business. VMware sold its SlideRocket assets in March, and may consider selling other noncore businesses.

Select asset sales in 2013

Date announced Target – asset Acquirer Deal value
April 8 Microsoft – Mediaroom assets Ericsson Not disclosed
April 3 Google – 3LM BoxTone Not disclosed
April 1 IBM – ShowCase software division Help/Systems Not disclosed
March 14 TeleNav – enterprise mobile business FleetCor Technologies $10m
March 5 VMware – SlideRocket business ClearSlide Not disclosed
February 25 HP – webOS assets LG Electronics Not disclosed
February 19 Oracle – Lustre assets Xyratex Not disclosed
February 5 United Business Media – data services businesses Electra Partners $251m
February 4 News Corp – IGN Entertainment j2 Global/Ziff Davis $50m
January 28 Sierra Wireless – AirCard business NETGEAR $138m
January 24 WebTech Wireless – NextBus business Cubic $20.9m

Source: The 451 M&A KnowledgeBase


For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

Rackspace adds error monitoring with Exceptional buy

Contact: Ben Kolada, Agatha Poon

Rackspace has acquired developer-focused Web application error-monitoring and hosting startup Exceptional Cloud Services. The acquisition is meant to drive further adoption of Open Cloud. With Exceptional’s offerings, Rackspace is positioned to be a one-stop shop for developers with its cloud platform, network management and application performance monitoring.

Terms weren’t disclosed. Exceptional was founded in 2010 and had 10 employees at the time of its sale (the transaction closed last Friday). The company hadn’t taken outside funding. We’d note that Exceptional’s founder, Jonathan Siegel, already had experience with a company that sold to Rackspace. Siegel was an adviser to Cloudkick, which Rackspace bought in December 2010 for about $30m.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.