Author: Ben Kolada

MediaMath strikes twice in Akamai deal

Ben Kolada

Contact: Ben Kolada, Tejas Venkatesh

Marketing analytics startup MediaMath and CDN giant Akamai have engaged in a two-pronged deal that should help accelerate MediaMath’s already astounding growth rate. MediaMath is acquiring Akamai’s Advertising Decision Solutions assets and data cooperative, and is gaining exclusive access to Akamai’s pixel-free technology, which tracks online user behavior without using tracking pixels.

Adding to its already successful TerminalOne platform, MediaMath is picking up Akamai’s advertising data management platform and opt-in data-sharing cooperative. MediaMath says the assets will help its advertiser clients better profile audiences and predict audience behavior.

Terms of the transaction also provide MediaMath with multiyear, exclusive access to Akamai’s pixel-free technology. The traditional method for advertisers to collect user data has been to install tracking pixels on users’ computers when they access websites. However, Akamai’s pixel-free technology bypasses that strategy. Since Akamai has access to a significant portion of Web traffic through its content delivery and site acceleration services, it can directly observe user behavior. Its pixel-free technology leverages its content delivery roots to track user online behavior without the need to install tracking pixels.

We’d note that even before the addition of Akamai’s assets, MediaMath had done quite well for itself. With primarily organic growth, the company, founded in 2007, grew revenue last year to $180m, more than double the $78m it recorded in 2011.

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CyrusOne’s steady rise

Ben Kolada

Contact: Tejas Venkatesh, Ben Kolada

CyrusOne, the colocation bull that has now changed hands three times since 2007, debuted on the Nasdaq today with a valuation topping $1bn. The fast-growing company was spun off of Cincinnati Bell but is still majority owned (72%) by the regional telco. Shares popped during early trading, continuing the company’s history of creating considerable wealth for each of its owners.

The datacenter company, which is structured as a real estate investment trust, sold 16.5 million shares at $19 per share, higher than its previously guided $16-18 range. The IPO raised a total of $313.5m, though underwriters have an option to sell an additional 2.5 million shares. Shares jumped approximately 10% when they hit the Nasdaq and held the gains through midday trading. CyrusOne currently sports a market cap of about $1.3bn.

CyrusOne operates 24 facilities, primarily in the Ohio and Texas markets. The company offers colocation services aimed at enterprise-class customers requiring highly available facilities, engineered for dense power and reliability. Morgan Stanley and Bank of America Merrill Lynch were joint bookrunners for its IPO.

This is the third time shares of CyrusOne have traded hands since 2007. And in each transaction, its value has steadily climbed, creating considerable wealth for each of its owners.

CyrusOne’s rising valuation

Date Liquidity event Valuation
January 18, 2013 IPO $1.3bn
May 12, 2010 Sale to Cincinnati Bell $525m
July 11, 2007 Sale to ABRY Partners $130m

Source: The 451 M&A KnowledgeBase

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Telcos playing a new hosting game

Ben Kolada

Contact: Ben Kolada

Datacenter operator Digital Realty Trust on Wednesday announced that it paid $80m for a three-property portfolio of datacenters from French telco Bouygues Telecom. The deal could signal yet another robust year in Internet infrastructure M&A, but also shows that telcos are playing different strategic cards in the ongoing hosting game.

Last year set a record in Internet infrastructure M&A deal volume with 110 acquisitions announced, according to The 451 M&A KnowledgeBase. The record is particularly notable as it comes at a time when telcos are weighing alternative options to acquiring hosting properties. With the exception of NTT Communications, which announced three hosting acquisitions last year, telcos have largely been out of the M&A arena.

In fact, as evidenced by Bouygues’ divestiture, telcos are now considering strategies other than buying or owning high-growth hosting businesses. For example, the Digital Realty-Bouygues deal is structured as a sale-leaseback transaction, in which datacenter specialist Digital Realty will own the facilities but Bouygues will lease and operate them. Other telcos, such as Cincinnati Bell, have also decided to pass their hosting facilities on to vendors more versed in the business. Cincinnati Bell is spinning off its CyrusOne hosting unit into a publicly traded entity. CyrusOne will debut on the Nasdaq tomorrow, planning to sell 16.5 million shares $16-18 each.

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Fiserv acquires Open Solutions and its debt

Ben Kolada

Contact: Ben Kolada, Tejas Venkatesh

Fiserv has acquired fellow financial software company Open Solutions, adding new clients and bolstering its offerings for credit unions and banks. Fiserv is buying Open Solutions from Carlyle Group and Providence Equity Partners, paying $55m for the target’s equity and assuming $960m in debt. While Open Solutions’ enterprise value (EV) this time around is about 20% less than its price in its 2006 take-private, its equity value is a much smaller fraction of the previous transaction.

In the time since Carlyle Group and Providence Equity took Open Solutions private to Monday’s sale to Fiserv, the company’s debt has ballooned. Open Solutions had roughly $448m in net debt when it announced that it was being taken private. That amounted to about one-third (36%) of its total EV. The company’s debt has nearly doubled in the past six years and now accounts for nearly all (95%) of its EV.

Although Open Solutions’ debt does appear troubling, Fiserv is recognizing some financial benefits from the acquisition. Open Solutions has had a history of losses, which means that tax breaks are available to Fiserv. The net present value of those breaks is $165m, which will ultimately reduce the total cost of the acquisition from $1.01bn to $865m.

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Is DISH desperate for spectrum?

Ben Kolada

Contact: Ben Kolada

Eager to enter the cellular market, DISH Network has announced that it is interested in acquiring Clearwire for $3.30 per share, or about $4.8bn. The deal is actually a ‘take two’ for DISH, and shows the company’s desire (desperation?) to enter the wireless market. However, the market for wireless spectrum is so tight that those with such assets aren’t likely to sell them.

With mobile bandwidth consumption exploding, wireless spectrum is among the most coveted assets by wireless carriers. Over the past two years, there have been a handful of high-priced spectrum acquisitions announced by AT&T, Verizon, T-Mobile and Sprint. The DISH proposal values Clearwire’s spectrum at $2.2bn.

DISH’s desperation to enter the wireless market is apparent in the fact that it previously tried to acquire some of Clearwire’s spectrum assets before Sprint announced that it would buy the remainder of Clearwire it didn’t already own. Obviously, the DISH-Clearwire deal never came to fruition, and the new transaction is likely to fail as well for the same reason.

This time around, spectrum is again at the top of the list of concerns. In responding to the offer, Clearwire issued a press release summarizing a list of Sprint’s objections. First and foremost, Sprint argues that its pending agreement with Clearwire prohibits the company from selling spectrum assets without Sprint’s consent.

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End of an encryption era?

Ben Kolada

Contact: Ben Kolada

There has been considerable consolidation in the drive encryption sector over the past half-decade, most recently with Dell acquiring OEM partner Credant Technologies. However, with Dell taking Credant off the table, meaningful consolidation may be complete as there are few potential buyers left.

Dell is buying its OEM disk encryption software partner Credant in what could be seen as a tech tuck-in. The acquisition provides Dell with the IP rights to technology it already sells – Credant’s Data Protection Suite was available on Dell’s laptops and workstations as a preconfigured option. Terms weren’t disclosed, but we’re hearing that Credant generated trailing revenue in the $20-30m ballpark. (We’ll have a full report on the transaction in our next Daily 451.)

After earlier rounds of consolidation in this sector by security giants Symantec, McAfee and Check Point Software, there aren’t many potential acquirers left. In fact, it appears that the number of likely targets may outnumber the likely acquirers. Although M&A in this sector seems to be either at its end or near it, two remaining targets we would point to are still-independent vendors WinMagic and Zecurion.

Similar acquisitions to Dell buying Credant

Date announced Acquirer Target Deal value TTM revenue
September 22, 2011 Wave Systems Safend $12.8m Not disclosed
April 29, 2010 Symantec GuardianEdge Technologies $70m $18m
April 29, 2010 Symantec PGP $300m $75m
October 8, 2007 McAfee SafeBoot $350m $60m*
November 20, 2006 Check Point Software Technologies Protect Data [dba Pointsec] $586m $63.8m

Source: The 451 M&A KnowledgeBase *451 Research estimate

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A return to dealmaking for Epicor?

Ben Kolada

Contact: Ben Kolada

After Apax Partners combined ERP giants Epicor Software and Activant Solutions last year, the new firm has been fairly quiet in the M&A market. Now that the dust has settled on the $2bn combination and declining revenue has been reversed, we wonder if the ‘new’ Epicor might return to the M&A market in fuller force.

Neither Activant nor Epicor had fully recouped the losses they suffered during the recession. But Apax’s Epicor announced fiscal 2012 results today that show revenue is steadily growing. On a trailing basis, Activant and Epicor combined posted revenue of $813m in the 12 months leading up to their pairing. Revenue for the just-closed fiscal year, which ended September 30, rose 5% to $855m.

After having some time to digest the merger, we wonder if the new Epicor may return to dealmaking. In their previous lives, Epicor and Activant were fairly frequent acquirers. The two companies combined had announced a dozen deals in the decade leading up to their merger. Since selling to Apax, the new Epicor has done just three, two of which were sub-$10m tuck-ins.

However, Epicor recently made a move that signals it may return to big-ticket M&A. In October, Epicor closed its $155m acquisition of ERP, SCM and BI software vendor Solarsoft Business Systems, which was doing about $90m in annual revenue.

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SEOmoz’s acquisition announcement gets listed

Ben Kolada1 Comment

Contact: Ben Kolada

Search engine optimization (SEO) specialist SEOmoz could also be considered a public relations expert. Rather than issuing a staid press release that follows the typical format, the company announced its acquisition of GetListed on Tuesday in rare form that included both style and substance. Having one characteristic without the other can cause a release to be a flop, but when combined together the impact can be profound.

Privately held SEOmoz announced on Tuesday the $3m cash and stock acquisition of GetListed, also privately held, using both a more formal press release and a ‘ransom note’ format.

The strategic rationale for the deal makes sense. The purchase of GetListed provides SEOmoz with software tools that SMBs use to analyze and utilize free local marketing outlets, such as Google Places. The deal adds a local component to SEOmoz’s otherwise geo-agnostic software.

But the substance of the announcement arguably carried more weight than the rationale of the fairly small transaction. Privately held companies are not required to disclose sensitive details of acquisitions, such as price, and very few choose to do so.

In providing both substance (the price of the transaction) and style (the ransom note format), SEOmoz was able to generate considerable media coverage. For example, a quick Google search for ‘seomoz’ and ‘getlisted’ generated more than three times as many results as a search for ‘urban airship’ and ‘tello’ – a pairing that was announced the same day.

Though perhaps a stretch, after seeing the success of its own public relations model, we wonder if SEOmoz may want to offer public relations capabilities to its customers. If it decides to go this route, one likely target would be young startup AirPR, which provides a platform for companies to find public relations professionals.

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A late April Fool’s

Ben Kolada

Contact: Ben Kolada, Tim Miller

Contrary to a published press release (and several media outlets that took the bait), Google is not acquiring Wi-Fi provider ICOA. A poorly written press release published Monday morning led many to initially believe the deal was being done for $400m. However, a cursory look at the announcement’s grammatical errors, as well as the 3,700x price-to-trailing sales multiple, gave clue that something was amiss.

The oddball pairing had the flavor of one of Google’s notorious April Fool’s pranks, but neither Google nor ICOA was laughing. Representatives from both companies told us the announcement was false and both denied publishing it. ICOA even went so far as to say they are not having this kind of conversation with anyone at the moment.

That’s not to say the prank didn’t have a purpose. One explanation the release was published is rooted in the volatility of penny stocks, and the relative ease of inflating a penny stock’s value. Following the announcement, shares of ICOA, which trade at less than a penny on the OTC Pink Sheets, shot up nearly five-fold on heavy trading volume. Throughout the swing, more than 300 million shares traded hands, compared with the stock’s three-month average daily trading volume of less than three million shares.

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AOL’s MapQuest ‘Discovers’ Everlater

Ben Kolada

Contact: Ben Kolada

In a fairly rare M&A move, AOL has acquired online travel journal startup Everlater to expand its MapQuest offering into the travel industry. The announcement coincides with the launch of MapQuest Discover, an interactive travel planning and discovery tool. Although this appears to be AOL’s first acquisition specifically for MapQuest, it may not be the last.

Founded in 2008 and based in Boulder, Colorado, Everlater provides a free online travel journal for consumers, as well as a paid customer engagement and travel planning product called Concourse for companies in the tourism industry. The startup lists six employees on its site and had secured about $750,000 from incubator TechStars and venture firm Highway 12 Ventures. Terms of its sale were not disclosed.

The move by AOL is an attempt to reinvigorate its staid MapQuest mapping assets, with an apparent focus on consumers (MapQuest’s B2B licensing services revenue has been declining). The acquisition of Everlater also appears to be the first inorganic move AOL has made specifically to expand MapQuest beyond navigation to providing original travel content and planning features. (We’d note, though, that AOL has bought other local content companies, including Patch Media and Going Inc in 2009.)

To expedite the growth of MapQuest’s travel content and interactive features, AOL could do additional small acquisitions in the travel and tourism sector, similar to what TripAdvisor has done over the past half-decade. In the past five years, TripAdvisor has announced nearly a dozen travel-related acquisitions, including the recent pickups of Wanderfly, Where Ive Been and EveryTrail.

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