Category: VC

Violin does a bit of portfolio roundout ahead of expected IPO

Brenon Daly

Contact: Simon Robinson, Brenon Daly

Violin Memory has made a technology-and-talent play, adding GridIron Systems in what’s likely to be the last bit of portfolio roundout before the flash-based storage specialist goes public. The purchase of GridIron is part of Violin’s strategy to maximize its addressable market in the emerging solid-state storage space, and specifically allows it to accelerate the performance of applications residing on existing SAN storage systems at large enterprises and service providers.

Violin didn’t disclose how much it paid for GridIron but we have heard from market sources that it wasn’t much money. As we understand it, GridIron was heading toward a wind-down and Violin is merely picking up some key IP and personnel from the company. The target’s website has only a skeletal list of executives, without a CEO or CFO. A year ago, GridIron indicated that it had some 50 employees, but Violin is expected to take on less than half that number. We’ll have a full report on the transaction in our next Daily 451.

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DoJ raises its voice against Bazaarvoice deal

Brenon Daly

Contact: Brenon Daly

In a highly unusual move, the US Department of Justice (DoJ) filed a lawsuit Thursday afternoon against a company that has already closed an acquisition of a rival firm, alleging the deal is anticompetitive. The DoJ says Bazaarvoice did not report its $152m cash-and-stock purchase of fellow online customer review site PowerReviews to either the DoJ or Federal Trade Commission. The transaction was announced May 24 and closed quickly thereafter, on June 12.

The DoJ, which began investigating after the deal had already closed, didn’t specify exactly what part of the acquisition it would seek to unwind. The release said only that the lawsuit ‘seeks to restore competition’ in the marketplace, and DoJ representatives didn’t respond to requests for clarification.

For its part, Bazaarvoice said it spent six months explaining that there would be ‘robust and ample’ competition in the social commerce marketplace following the Bazaarvoice-PowerReviews combination. The company plans to fight the lawsuit and indicated it expects to be ‘fully vindicated.’

As we noted at the time of the acquisition – which was Bazaarvoice’s first purchase, coming just three months after its IPO – the deal represented a significant bet on being able to move down-market, expanding Bazaarvoice’s voice-of-customer platform to SMBs. At the time of the announcement, PowerReviews had more customers (1,100) than Bazaarvoice (737), but only slightly more than one-tenth the revenue.

Whatever the outcome, Wall Street’s reaction to the lawsuit was immediate. Bazaarvoice shares were unchanged at about $9 each for virtually the entire session Thursday. But when the DoJ announcement came out in the final hour of trading, the stock plummeted 15% to about $7.50. The selling pressure continued on Friday, with the stock dipping to $6.65 – the lowest level for the shares since their debut last February. All in, the DoJ’s lawsuit has trimmed $165m from Bazaarvoice’s market value.

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Imation continues storage push with Nexsan acquisition

Brenon Daly

by Simon Robinson

Imation, a company perhaps best known for selling consumer CDs and DVDs, has announced that it has acquired 14-year-old storage systems specialist Nexsan for $120m in cash and stock. Though Nexsan has been seeking a buyer for some time, the company has a good-sized and well-established business serving SMBs and enterprises. Imation, which says the purchase is part of its own strategic transformation that has seen it focus on storage and security, plans to use the move as a platform to begin targeting this audience more directly with Nexsan’s range of purpose-built storage systems and appliances.

Under terms, Imation is handing over $105m in cash and $15m in stock. We understand that Nexsan generated revenue of about $90m in 2012, meaning Imation is paying roughly 1.3 times trailing sales. The acquisition of Nexsan is the largest purchase Imation has done in a half-decade and substantially thins its treasury. At the end of September, Imation, which is burning cash, had $186m in cash and equivalents. Click here to see our full report.

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

Tech M&A recovery stalls in 2012

Brenon Daly

Contact: Brenon Daly

After two straight years of post-recession increases in tech M&A spending, the value of transactions announced in 2012 slipped lower. For the just-completed year, we tallied deals valued at roughly $177bn across the globe. That’s a 21% drop from 2011 and slightly below the level of 2010.

M&A activity last year was undermined by a heightened level of economic and political uncertainty. In Europe, the lingering debt crisis flared to a point where in mid-2012, the 17-nation Eurozone appeared to be fraying beyond repair. Meanwhile, in the US, dark clouds of uncertainty rolled out of Washington DC due to the outcome of national elections and, more importantly, the unresolved ‘fiscal cliff.’ Overhanging all of this is the fact that the global economy slowed in 2012, and is likely to further slow in 2013.

Still, against that difficult backdrop, there were a few notable transactions in 2012. SoftBank’s $20bn purchase of a majority stake of Sprint stands as the largest tech/telco deal in a half-decade. Cisco’s $5bn acquisition of set-top box software vendor NDS Group last March is the serial acquirer’s second-largest transaction ever. Meantime, big-ticket SaaS acquisitions continued to gain pace, with Ariba, Taleo, Eloqua and Kenexa all taken out last year in deals valued, collectively, at $8.8bn.

Global tech M&A

Year Deal volume Deal value
2012 3,539 $177bn
2011 3,759 $225bn
2010 3,270 $188bn
2009 3,030 $143bn

Source: The 451 M&A KnowledgeBase

A bearish outlook for tech IPOs in 2013

Brenon Daly

Contacts: Brenon Daly

In our just-published report on our annual survey of corporate development executives, the shoppers told us they don’t expect to have to outbid the public market when they consider acquisition targets. Almost half (47%) said they anticipate the IPO market to offer ‘less competition’ in 2013, which is three times higher than the 15% that predicted ‘more competition.’ (For comparison, last year one-third of responses (33%) forecasted more competition from IPOs, while one-quarter (26%) indicated less competition.)

The chilly outlook for offerings underscores just how difficult the IPO market has become. In the back half of 2012, there have been only about a half-dozen tech offerings. Although there have been some eye-popping market caps created (for instance, Workday, which came public in mid-October, now trades at $8.5bn), there just haven’t been enough to see a real threat of ‘dual tracking,’ according to corporate buyers.

If anything, the IPO market will be even quieter in 2013. The median forecast from our corporate development executives called for just 20 offerings, down from about 25 offerings in each of the two previous surveys. Click here to see our full report on the outlook for tech IPOs and M&A in 2013 from a key market participant: corporate development executives.

Projected number of tech IPOs in coming year

Period Median response
December 2012 for 2013 20
December 2011 for 2012 25
December 2010 for 2011 25
December 2009 for 2010 15
December 2008 for 2009 5

Source: 451 Research Tech Corporate Development Outlook Survey

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Tech buyers pull in their M&A plans for 2013

Brenon Daly

Contact: Brenon Daly

Even as 2012 is shaping up to be a lackluster year for tech M&A, next year could be even quieter. In 451 Research’s annual survey of corporate development executives, these buyers dramatically pulled in their acquisition plans for 2013. Just 38% of corporate shoppers said they would be increasing their M&A activity in the coming year – the lowest forecasted activity level in the six years of our survey.

On the other side, fully one out of five respondents (20%) indicated they would be slowing their purchases in the coming year, up significantly from the previous two years. It’s also important to note that the dour forecast for 2013 is coming off an already low base. With just two weeks of the year remaining, tech M&A spending for 2012 is all but certain to come in below the level of both 2011 and 2010. That would snap two straight years of increased spending.

The views of corporate development executives are an important indicator of the overall health of the tech M&A community, as they go a long way toward setting the tone in the market. We will have a full report on the survey results – including the outlook for valuation and specific types of acquisitions – in tomorrow’s Daily 451.

Projected change in M&A activity

Period Increase Stay the same Decrease
December 2012 for 2013 38% 42% 20%
December 2011 for 2012 56% 30% 14%
December 2010 for 2011 52% 41% 7%
December 2009 for 2010 68% 27% 5%
December 2008 for 2009 44% 33% 23%

Source: 451 Research Tech Corporate Development Outlook Survey

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A mixed November for tech M&A

Brenon Daly

Contact: Brenon Daly

Lifted by three deals each valued at more than $1bn, tech M&A spending in November jumped 63% to $11.4bn. That marks the second consecutive month where spending increased, year-over-year, and only the fourth month that has been the case in 2012.

With just one month to go in the year, overall spending in 2012 is almost certain to come in lower than each of the past two years. So far this year, the aggregate value of transactions is about 20% lower than the first 11 months of last year and 7% lower than the same period in 2010.

In November, a trio of significant deals – each representing distinctly different strategies – contributed to the year-over-year increase in spending. (Although we should note, on an absolute basis, the November total came in lower than the average spending of about $15bn in the preceding 10 months of 2012.)

The largest transaction of the month, RedPrairie’s $2bn take-private of JDA Software Group, was an old-fashioned consolidation move. Meanwhile, Priceline.com’s $1.8bn reach for Kayak.com represented a platform expansion, while Cisco Systems made a pricey cloud play with its $1.2bn purchase of Meraki.

2012 monthly activity

Month Deal volume Deal value % change in spending vs. same month, 2011
January 342 $4.1bn Down 65%
February 280 $10.4bn Up 16%
March 292 $16.8bn Down 30%
April 282 $14.1bn Down 47%
May 314 $15.6bn Down 47%
June 301 $13.3bn Down 20%
July 338 $21.1bn Up 52%
August 279 $10.3bn Down 74%
September 281 $5.8bn Down 38%
October 289 $32.6bn Up 125%
November 278 $11.4bn Up 63%

Source: The 451 M&A KnowledgeBase

Zillow steps up its shopping

Contact: Tejas Venkatesh

After going public in the summer of 2011, real estate website Zillow has gone on an acquisition spree, purchasing five companies for an aggregate value of more than $80m. On Monday, it announced its latest buy: rental search website HotPads for $16m in cash. The San Francisco-based company, which took in just $3m in funding from Meakem Becker Venture Capital, helps Zillow access a younger and more rental-focused audience.

The deal comes just three weeks after Zillow announced the acquisition of mortgage-pricing SaaS provider Mortech for $17.5m. Sensing increased competition, Zillow has picked up the pace of its M&A program, buying three companies in the past two months. (The vendor has been able to cover those purchases, in part, by a well-timed secondary offering in September. It raised more than $150m – twice as much as it landed in its mid-2011 IPO – in early September, selling shares at about $40 each. The stock is now roughly $25.)

Zillow isn’t alone in stepping up its M&A activity. Move Inc, the owner of REALTOR.com, has inked two pickups of real estate websites in the past two months, after being out of the market for more than a year. We wonder now if fellow real estate website Trulia will also go shopping. The company certainly has the money, following its IPO two months ago in which it raised about $100m.

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.

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

Talking M&A, once again

Brenon Daly

Contact: Brenon Daly

It’s hard to get a read on the M&A market right now. For instance, many companies are struggling to put up any growth – and yet are still getting rewarded with above-market valuations. Meanwhile, overall M&A spending is currently running about one-quarter below last year, but we just recorded the single largest tech deal in a half-decade.

To get a view on the M&A market – from the actual participants in it – please join us Thursday, November 8 at 1:00pm EST for our semiannual webinar on the M&A Leaders’ Survey, a joint survey from 451 Research and law firm Morrison & Forrester. (451 Research subscribers can also see our full report on the recent survey.) To register for this free webinar, click here.

In the webinar, we’ll cover what’s happening in the market right now as well as the outlook for the next half-year, both in terms of M&A activity and valuations. We’ll also have specifics on where deals are getting hung up. In addition to the broad market overview from 451 Research, Morrison & Foerster will offer insight on key findings about term sheets, escrow and other fundamental parts of M&A agreements. Please join us for the webinar on Thursday at 1:00pm EST by registering here.

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