Author: Scott Denne

Telecity scoops up European colo peer Interxion

Scott Denne

Contact: Scott Denne Penny Jones Mark Fontecchio

TelecityGroup dishes out 45% of its stock to nab fellow European colocation player Interxion in a $2.2bn deal. The acquisition is the largest European multi-tenant datacenter transaction that we’ve tracked (nearly twice the size of Digital Realty’s purchase of Sentrum’s datacenter portfolio in 2012). The combined company will be better positioned to deflect some of the regional pricing pressure resulting from increased investment in the European datacenter market.

The deal values Interxion at 6.3x trailing revenue, or 15.3x EBITDA. Interxion shareholders are getting 45% of the combined company, but Interxion’s revenue and EBITDA contributions are slightly less than that percentage. We’d attribute the valuation bump to Interxion’s higher growth rate – 11%, compared with 7% for Telecity last year. Though this move is all about building a larger regional player, it’s worth noting that Interxion, through last year’s pickup of undersea cable hub SFR Netcenter, gets Telecity an outlet into other markets.

Subscribers to 451’s Market Insight Service can access a detailed report about this transaction here, as well as a strategic update on Telecity’s fourth-quarter results.

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

Nielsen nabs data exchange eXelate

Scott Denne

Contact: Scott Denne

Nielsen becomes the latest company to pay a striking multiple to acquire an audience data manager with the purchase of eXelate. Though lower in price, the transaction values the company on par with BlueKai, an eXelate rival that Oracle bought last year.

Like eXelate, several other data management platforms have landed significant premiums. BlueKai, eXelate, Aggregate Knowledge and RUN were all valued above 5x trailing revenue, multiples that were driven by a wide pool of potential acquirers from ad agencies, enterprise software vendors and marketing data services firms – all categories of businesses that are eager for software that can manage audience-targeting data across multiple marketing and advertising channels.

With eXelate, Nielsen adds a service that amalgamates data from a variety of marketing data services providers, publishers and other sources to better target digital advertising. The target also offers software for advertisers to mix in their own customer data to inform advertising and marketing decisions. Bringing that in-house provides Nielsen with an opportunity to better leverage its audience segmentation, offline media measurement and consumer purchase data into the digital realm.

GCA Savvian advised eXelate on its sale.

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Digital commerce software’s second coming

Scott Denne

Contact: Matt Mullen

Nearly 20 years ago, there was a burst of exuberance for digital commerce software companies, with commerce and Web vendors gaining attention and massive valuations. However, the sheer complexity and lack of market readiness meant that many ambitions remained unfulfilled.

Today the market is ready and though the complexity is still there, the urgency and potential rewards are now greater. Commerce technology is tricky stuff and those that want to add it are unlikely to want to build their own, making the remaining independent players ideal acquisition targets.

Many of the largest social business application providers (IBM, Oracle, SAP, etc.) have already put a stake in the ground in this market. And many will look for tuck-ins. Though a number of players are aging, the necessary partnerships and technologies they’ve built over the years are not easily replicated. There’s also an influx of venture capital into this market, particularly among SMB-focused companies that could make for compelling acquisition targets.

Look for a forthcoming report detailing the potential acquirers and targets in the digital commerce software space.

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Ericsson makes another OSS play

Scott Denne

Contact: Scott Denne

Ericsson takes another nip at the OSS/BSS market with its purchase of TimelessMIND. The acquisition of the Canadian provider of operations and billing support systems follows a record year for M&A at Ericsson as the networking equipment vendor battles the maturation of its core business. This is the fifth OSS/BSS supplier that Ericsson has picked up since its $1.2bn reach for Telcordia in mid-2011.

The Swedish carrier equipment vendor inked two such deals last year (MetraTech and GEOSS) on its way to seven acquisitions in the year, tying its personal best. With just 30 employees, though, TimelessMIND is among its smaller transactions. OSS/BSS is one of the categories Ericsson has focused on to extend its offering beyond carrier equipment. The company has stated goals of expanding into media infrastructure and cloud infrastructure. It also made a pair of energy management purchases last year.

Despite the dealmaking (13 announced transactions in the past 24 months), Ericsson isn’t returning to growth. Revenue was flat (in constant currency) at $29bn in 2014 and has been flat for several years. Its North American business declined 8% in the year, led by a slowdown in mobile broadband products. That decline was mitigated by growth in emerging markets and services. As the North American market is a leading indicator for its telecom business, Ericsson has a few more years to eek growth out of those new initiatives.

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

Syncsort boosts its mainframe-to-Splunk links with William Data buy

Scott Denne

Contact: John Abbott

Syncsort acquires mainframe networking monitoring and security tools provider William Data Systems in an effort to recast the mainframe for modern workloads and applications. Syncsort was formed in the mid-1960s to improve the native sort utility that came with early-generation IBM mainframes. But these days, Syncsort is more likely to be talking about modern apps like Hadoop and Splunk.

Syncsort says the networking and security data collected by WDS’s Zen product suite will complement its ‘Big Iron to Big Data’ strategy by linking high-volume transactional data from the mainframe to big data analytical platforms, including Splunk Enterprise and Splunk Cloud. The Zen tools, which span monitoring, alerting, tracing, vulnerability tracking, encryption and authentication, will be integrated into the recently launched Syncsort Ironstream product, which provides real-time mainframe operational intelligence from within Splunk Enterprise. It will also be used in conjunction with Syncsort’s Hadoop-based data-integration tools that connect the mainframe to Apache Spark, Tableau, Amazon Redshift, QlikView and other modern analytical platforms.

Syncsort hired a new management team in 2013, led by CEO Lonne Jaffe, who in previous corporate strategy roles at CA Technologies and IBM had been heavily involved in M&A. The company’s first buy was Circle Computer Group in September 2013, adding technology for moving large amounts of data between mainframe databases and more modern platforms, without changes to the applications.

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Infosys makes first move into software, automation with Panaya buy

Scott Denne

Contact: Scott Denne Katy Ring

Infosys ushers in its new acquisition strategy with the $200m pickup of Panaya. Never a habitual dealmaker – the IT outsourcer has averaged less than one transaction a year, rarely spending more than $50m – its past M&A efforts have focused on IT and BPO vendors. With the purchase of Panaya, Infosys is taking a different track.

Since taking the helm last fall following a series of management departures amid shrinking market share, CEO Vishal Sikka has announced that ‘big data,’ artificial intelligence and, of course, ‘innovation’ would be the hallmarks of Infosys’ growth strategy. The Panaya buy shows that he meant it. Panaya sells software for managing and automating updates to ERP systems. That has clear cost synergies with Infosys’ core business, and also presents opportunities to expand new lines of revenue.

Not only is this Infosys’ first software acquisition, the valuation is well beyond what it’s accustomed to paying. Infosys’ management says the price tag values Panaya at 6x revenue. While they wouldn’t specify if that’s forward or trailing revenue, either of those is well past the 1-2x TTM revenue that Infosys paid in most of its prior deals (entirely services businesses).

We’ll have a more detailed report on this transaction in tomorrow’s 451 Market Insight.

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Strategy games

Scott Denne

Contact: Scott Denne

Mobile game developers are playing with different M&A strategies. So far, none are winning. Mobile gaming is a high-growth but hits-driven business, making it tough for one company to grab and maintain market share. That doesn’t mean they’re not trying.

King Digital Entertainment, maker of the ‘Candy Crush’ series, thinks it can predict where lightning will strike. The company is making its second purchase post-IPO with its $45m reach for Z2. In acknowledgement of the uncertainties of this particular market, there’s also a $105m earnout attached to the deal. That’s similar to King’s pickup of game studio Nonstop Games last year – $16m upfront with an $84m earnout.

Zynga has taken a different approach that has yet to pay dividends. The company has bought businesses that have already produced a hit. It has, we hope, learned that predicting what will be a hit is as difficult as predicting how long a hit will last. Zynga’s M&A strategy is more expensive than King’s in that it pays more upfront, with a small or no earnout. The company spent $180m in 2012 to buy OMGPOP right at the zenith of its ‘Words with Friends’ game. Last year, it snagged NaturalMotion for $487m. In addition to a game studio, that transaction got it some unique technology to apply across its portfolio, but it hasn’t been enough to slow its fall. Despite the addition of NaturalMotion’s revenue to 11 months of last year’s top line, Zynga’s sales dropped 21% to $690m in 2014.

Glu Mobile is among the few employing a winning strategy. The company has been scooping up inexpensive, well-known brands that it can revamp for mobile games. This has led to a portfolio of modest hits. Nothing that would move the needle for Zynga or King. Even with Glu’s success (revenue doubled year over year in the most recent quarter), Wall Street values the company at 2x trailing revenue (slightly below Zynga’s multiple and just above King’s).

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

Could Publicis make the next play in social advertising?

Scott Denne

Contact: Scott Denne

Today’s announcement by Perion Network that it will buy France’s MakeMeReach marks the second acquisition in social advertising in a week. As we pointed out in a longer report, the rapid growth of advertising dollars into social networks, the coming diversification of platforms and a hodgepodge of startups serving the category are laying the ground for a busy year of M&A activity for businesses that enable buying ads on social media.

Now that Perion and Marin Software , two ad-tech vendors, have bought into the space, who will be the next acquirer? We believe Publicis Groupe, one of the largest ad agency holding companies, will make the next move here. Publicis isn’t new to social. It’s inked some recent, modest purchases of social agencies overseas (Italy’s Ambito5 and China’s Net@lk) and in 2011 nabbed a majority stake in social creative agency Big Fuel. Also, Publicis, with its recently closed pickups of Sapient and RUN, has shown a larger appetite than most agency holding companies to own tech-enabled services and software firms.

Keeping in mind that appetite for tech and Publicis’ existing capabilities in social (mostly in creative, not executing media buys), Facebook API partners such as SocialCode, Ampush, Adaptly, SHIFT and Kinetic Social would make a good match with Publicis. Valuation could trip up a potential deal, though. Most of the above listed vendors are venture-backed and might have expectations for software-like multiples, rather than the services-like multiples that Publicis typically pays (though it has gone higher, as it did with RUN ). A possible solution would be for one of the social advertising vendors to sell off its managed services business to Publicis. That would get Publicis the services business it’s more comfortable with and allow the remaining social ad firm to become the self-serve software provider that most in this space now aspire to be.

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

Voltage is key to decrypting HP’s M&A

Scott Denne

Contact: Scott Denne

HP’s acquisition of encryption vendor Voltage Security suggests that it’s being more disciplined on price than it had been before its M&A break. It is HP’s first security deal in four and a half years. Terms of the transaction weren’t disclosed, though encryption hasn’t garnered the high multiples that other categories of security have produced.

In the year before its reach for Autonomy shut down its M&A program, HP paid north of 10x trailing revenue on four of six purchases (and 7.7x on another). Compare those valuations with multiples in the maturing encryption space – SafeNet and Cryptzone both traded hands last year a hair below 3x trailing revenue, while earlier deals in the space, namely Symantec’s pickups of GuardianEdge and PGP, both went for 4x.

As the hangover from Autonomy fades, HP’s M&A is starting to come back online, and it has printed three acquisitions in the past 12 months. Security is likely benefiting from some M&A attention as it’s a bright spot in a declining software portfolio. In each of the past two years, HP’s enterprise software sales have ticked down a few percentage points. Security has been a growing part of that business, but could be at risk. According to a survey by TheInfoPro, a service of 451 Research, 40% of HP’s security customers anticipate spending less with that provider than they did the previous year (only Websense customers reported a higher percentage of reduced spending).

Blackstone Advisory Partners advised Voltage on its sale.

We’ll have a detailed report on this transaction in tomorrow’s 451 Market Insight.

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NIMBOXX wraps up VDI deal

Scott Denne

Contact: John Abbott

NIMBOXX looks to make its mark on hyperconvergence by scooping up Virtual Bridges’ VDI assets. VDI is one of the most common use cases for hyperconvergence, and by incorporating Virtual Bridges’ VERDE software, NIMBOXX gets full ownership of a software stack that it had previously offered only through partnerships. That full ownership should enable the company to significantly undercut the prices fielded by market incumbents Citrix and VMware.

The acquisition is a quick way for NIMBOXX to expand and strengthen its expertise in a key market segment. Since NIMBOXX came out of stealth last year, it’s seen hyperconvergence go mainstream with the introduction of EVO:RAIL by VMware and, more recently, Citrix’s purchase of Sanbolic’s file system software for use in its own hyperconverged VDI appliance, the WorkspacePod.

By building out its entire stack based on the KVM hypervisor, NIMBOXX reckons it has both pricing and technology advantages over the incumbents. The VERDE buy is a good fit for two very specific reasons. One, the VERDE software has also been built based on KVM. And two, the team is local, headquartered in NIMBOXX’s hometown of Austin. The transaction leaves Virtual Bridges with Bridgepoint, the cloud orchestration software it launched last year.

We’ll have a detailed report on this transaction in tomorrow’s 451 Market Insight.

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