Category: Web analytics

Sometimes M&A begets M&A

Scott Denne

Contact: Scott Denne

TIBCO Software has acquired BI vendor Extended Results to bolster its Spotfire data visualization business, which it bought for $195m in 2007. After five years of organically growing Spotfire, Extended Results is TIBCO’s third Spotfire add-on this year. Its growing interest in the sector likely comes from both competitive M&A pressure and the market’s overall growth.

Extended Results offers BI software that enables executives to access key metrics on their mobile devices. The target provides TIBCO Spotfire with a mobile delivery mechanism for its visualization products. Terms of the deal weren’t disclosed, but we know TIBCO has so far spent a total of $85m to purchase businesses complementary to Spotfire. Extended Results had 50 employees. Cascadia Capital advised the company on its sale.

To a degree, we believe the transaction was driven by competitive M&A pressure in data visualization, as well as the sector’s growth potential. For example, QlikTech, one of TIBCO Spotfire’s biggest rivals, got into data visualization in May with the $7.6m acquisition of NComVA. Meanwhile, other tech firms have been active here this year, with Salesforce.com buying EdgeSpring, Datawatch picking up Panopticon Software and Pentaho reaching for Webdetails. And for a market check, Tableau Software, the largest stand-alone data visualization software provider, is expected to double its revenue this year, to $258m.

TIBCO’s BI and data visualization M&A

Date announced Target Deal value
September 18, 2013 Extended Results Not disclosed
June 11, 2013 StreamBase Systems $52m
March 25, 2013 Maporama Solutions $6.9m
July 8, 2008 Syndera $1m
June 19, 2008 Insightful Corp $25m
May 1, 2007 Spotfire $195m

Source: The 451 M&A KnowledgeBase

Adobe back in the market for marketing, drops $600m on Neolane

Brenon Daly

Contact: Brenon Daly

In its second-largest acquisition for its Marketing Cloud, Adobe Systems says it will hand over $600m in cash for marketing automation (MA) vendor Neolane. The purchase of Neolane, which is expected to close in Q3, trails only Adobe’s pickup of Omniture for $1.8bn in 2009 in terms of spending on deals to build out its Marketing Cloud. Collectively, these transactions have cost Adobe more than $3bn.

Although Adobe declined to discuss Neolane’s financials, the Paris-based startup has said it generated 2012 revenue of $58m, which would put it at roughly the same size as rivals Marketo and HubSpot. In terms of valuation, however, Neolane is a good bit off of Marketo’s market cap of some $870m.

We would chalk up the disparity in valuation to two main reasons. First, Neolane’s on-premises business is about as large as its subscription business, while Marketo is a pure SaaS company. Further, we understand that Neolane grew about 40% last year, which is a solid rate but just half the pace of the free-spending – and deeply unprofitable – Marketo. Through midyear, we would pencil out that Neolane generated roughly $70m in trailing 12-month revenue.

Adobe’s MA move comes after many other tech giants have already snapped up MA vendors, including salesforce.com paying a record $2.5bn for ExactTarget earlier this month. Other tech giants that have made significant MA acquisitions include IBM (Unica), Teradata (Aprimo), Oracle (Eloqua) and Intuit (Demandforce). Valuations for those transactions have ranged from 4.4x trailing sales to 11x trailing sales.

Select marketing automation transactions

Date announced Acquirer Target Deal value Price-to-sales valuation
June 27, 2013 Adobe Neolane $600m 8.6x*
June 4, 2013 salesforce.com ExactTarget $2.5bn 7.6x
December 20, 2012 Oracle Eloqua $956m 9.7x
April 27, 2012 Intuit Demandforce $424m 11.4x*
December 22, 2010 Teradata Aprimo $525m 6.3x
August 13, 2010 IBM Unica $523m 4.4x

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

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

Thoma Bravo hopes to unlock value from Keynote in LBO

Brenon Daly

Contact: Brenon Daly

After focusing its recent M&A activity on rounding out existing portfolio companies, buyout shop Thoma Bravo made another ‘platform play’ on Monday, offering $395m for Keynote Systems. Under terms, the private equity firm will pay $20 per share, or a total of $395m, for the 18-year-old testing and measurement vendor.

The deal, which is expected to close by September, comes at a time when Keynote is struggling to put up growth. Business across its two operating units – the core Internet measurement products as well as the newer mobile testing offerings – have both been flat so far this fiscal year. Further, the company has seen its operating and net income drop this year as some customers have recently narrowed Keynote projects or put them off.

The price Thoma Bravo is paying reflects the operating challenges at Keynote, which traded above the $20 bid for much of 2011. The dividend-paying company holds nearly $60m in cash and short-term investments. Backing out that amount from the $395m equity value for Keynote gives an enterprise value of $335m, or about 2.7 times the $125m in trailing sales the company has put up.

Keynote’s valuation of 2.7x sales is almost exactly the midpoint of Thoma Bravo’s two previous take-privates, the $195m buyout of Mediware Information Systems last September and the $1bn acquisition of Deltek in August. Since those LBOs, the buyout shop has been busy doing deals to bulk up its portfolio companies, including two follow-on acquisitions for Mediware as well as recent bolt-on deals for Blue Coat Systems, LANDesk Software and Tripwire.

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

A big ‘DATA’ debut for Tableau

Brenon Daly

Contact: Brenon Daly

Big ‘DATA’, indeed. Tableau Software, which debuted Friday on the NYSE under the ticker DATA, created nearly $3bn of market value in its hotly anticipated IPO. The data discovery and analytics vendor becomes the latest enterprise-focused software company to command a platinum valuation on Wall Street.

Tableau priced its 8.2 million shares at $31 each, raising some $254m in the offering. Not that the company particularly needed the outside cash: It has been running in the black since 2010 and has an accumulated deficit of just $5.8m. And Tableau has been printing black numbers while doubling revenue, a rare combination that clearly resonated with investors.

After pricing at $31, shares changed hands at about $48 each in the early aftermarket. Based on the (non-diluted) share count of 58 million shares from the prospectus, the market is valuing Tableau at $2.8bn.

That’s 14x a loose projection of roughly $200m in sales for 2013. We penciled out that number based on the (probably conservative) assumption of nearly 60% growth in revenue from the $128m recorded in 2012. Whatever the exact numbers, it’s safe to say that Tableau has secured a double-digit multiple of this year’s sales.

The rarified valuation is all the more noteworthy because of Tableau’s throwback business model: It sells on-premises licenses, rather than subscriptions, which typically command higher multiples. Of course, when license sales are doubling – as they have at Tableau in each of the past two years – Wall Street can get comfortable with the model.

As a final thought, we would note that the license model certainly hasn’t hurt Splunk, which went public a year ago. While that company doesn’t compete with Tableau, the fellow self-described ‘big data’ play lines up rather closely with Tableau.

As mentioned, both fast-growing companies sell their software through licenses rather than subscriptions, and both get about 30% of total sales through maintenance and services on that software. Further, the similarities extend to what the market says the companies are worth: Splunk is valued at $4.6bn, or 23x last year’s revenue, compared with Tableau debuting at $2.8bn, or 22x last year’s sales.

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

The Facebook effect

Ben Kolada

Contact: Ben Kolada

Facebook’s stratospheric growth has had a profound impact on technology entrepreneurship and exits. In addition to creating some $60bn of market value in its own recent IPO, the company has spawned an ecosystem of vendors hoping to further monetize its one billion customers. A myriad of startups have popped up over the years to help advertisers, marketers and brands manage and deliver their message across Facebook’s platform, which some bulls on the company consider something like a new operating system.

Several of these startups are finally starting to show material sales. As a result, the market overall is being targeted by tech titans looking to become advertising and marketing vendors of choice for agencies and brands. That has led to a dramatic rise in the volume of acquisitions of tech firms serving this segment. Last year set the record in both the volume and value of acquisitions.

Dealmaking this year, however, has already shattered that total spending record: The $3.6bn spent so far this year on social-related companies is already twice the 2011 total. The M&A is being driven by phenomenal growth rates in the social media market. As a proxy for that, consider Facebook’s monthly active user (MAU) count, which has grown at a compound annual growth rate of 132% from its founding in 2004 to 2011.

The social media sector’s growth is leading to top-dollar prices for hot startups. Buddy Media, probably the largest social media marketing platform vendor, increased revenue 250% last year. On Monday, salesforce.com officially announced that it is paying $689m for Buddy Media. Meanwhile, Google and Meebo made their pairing official: Google is reportedly paying $100m for the social networking and user engagement vendor. Oracle just paid an estimated $325m for social marketing provider Vitrue to gain capabilities competitive to what Buddy Media offers. (And the enterprise software giant tucked in Collective Intellect for social media monitoring on Tuesday.) And finally, even old-line vendor IBM has inked a high-priced deal in the market, likely paying north of $200m for social sentiment provider Tealeaf Technology last month.

Source: The 451 M&A KnowledgeBase *Includes transactions in social software, social networking and related categories.

Spirent secures its testing platform with Mu

Brenon Daly

Contact: Brenon Daly, Eric Hanselman

A relatively infrequent shopper, Spirent Communications has picked up Mu Dynamics, adding security testing for applications to the company’s performance-testing portfolio. The deal, which is only the British company’s second acquisition in the past half-decade, was announced last week and closed Monday. Spirent paid $40m in cash for Mu, which is projected to contribute about $18m in sales next year. (We understand that talks got going only in December, with Duff & Phelps’ Pagemill Partners unit advising Mu.)

The purchase of Mu Dynamics should also help Spirent expand its market, both in terms of customers and products. Traditionally, Spirent has sold its performance analysis offering as a hardware-based platform to network equipment manufacturers that use it to test the performance of products before they launch them. (It primarily competes in this market with Ixia, although Spirent is much larger and more profitable than its rival.) With Mu, Spirent will get a software product that can be more quickly and easily deployed, even within corporate IT departments.

As more and more applications are run on virtualized infrastructure, the process of testing is adapting. Where hardware-based systems have traditionally been used in test environments, it’s much more difficult to connect them to the virtual and ‘cloudy’ application deployments that are predominating. Spirent’s move will give it tools to address these environments. Ixia has also developed product capabilities in this area. Software versions of testing products can also scale well to match the increased scaling demands placed on applications.

Additionally, Spirent obtains Mu Dynamic’s small – but potentially disruptive – cloud-based testing division called Blitz.io, which bumps up against startups such as SOASTA, Apica, AppDynamics, LoadStorm and other SaaS testing providers. Blitz.io already has some 15,000 users.

While both the performance and security of applications is important to increased cloud application adoption, security is turning out to be a far more significant factor. In a survey earlier this year, ChangeWave Research, a service of 451 Research, found that companies gave higher marks to the reliability of cloud apps than they did to the security of them. Further, of the companies that are not currently running cloud applications, one-third of them cited ‘security concerns’ as the reason they have passed so far. That was twice as high as any other concern voiced by the more than 1,500 respondents to our survey.

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

Splunk soars in rip-roaring IPO

Brenon Daly

Contact: Brenon Daly

In a rip-roaring debut, Splunk soared onto the public market Thursday in an IPO that created more than $3bn of market value for the data analytics vendor. That’s a heady, double-digit valuation for a company that’s likely to generate only about $200m in sales this year. (Just as we predicted in last week’s special IPO report, the company has captured the attention of Wall Street. Subscribers can click here to read what else we see coming in the IPO pipeline in the next few months, and how the offerings are likely to fare.)

But Splunk’s rich pricing simply reflects the tremendous opportunity that the company has in front of it. If the name ‘Splunk’ conjures up images of exploring a cave, or ‘spelunking,’ we might suggest that a more accurate way to view the company is one ready to run – and run quickly – into a wide-open greenfield.

The company, which has already garnered 3,700 customers across a broad number of industries, makes the pitch that any company with large amounts of data is a potential customer. Splunk’s core offering is a search product that helps users make sense of the ever-increasing volumes of data, much of it machine-generated.

After it got going in 2003, Splunk had most of its use cases around IT operations and security. However, the company has expanded its product to also cover application performance management, online customer experience monitoring, marketing and beyond.

Originally, Splunk’s seven underwriters set a range of $8-10 for each share, but then ended up pricing at double that level at $17 each. In the aftermarket, the stock nearly doubled again, changing hands in the low $30s in mid-Thursday trading on the Nasdaq. (It trades under the ticker SPLK.)

A final interesting little market anecdote about the offering: With roughly 100 million shares outstanding, Splunk is starting its life as a public company at almost exactly the same amount ($3.3bn) that Hyperion Solutions finished its life as a public company. Splunk’s current CEO Godfrey Sullivan was previously CEO at Hyperion, which sold to Oracle five years ago.

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

Few targets left in FEO, but are there any buyers?

Ben Kolada

Contact: Ben Kolada

In the past year, networking vendors have acquired many of the independent front-end optimization (FEO) startups, further narrowing the field in this already niche sector. In fact, there are only a few notable independents left. But is this really a race to consolidate the market, or are acquirers simply adding these capabilities to their portfolios by picking up properties at fairly cheap prices?

FEO focuses on getting a browser to display content more quickly, as opposed to dynamic site acceleration and other services that use network optimization to speed content delivery. For the most part, the FEO segment has been made up of a handful of startups. However, consolidation in the past year took three of these companies out of the buyout line. In May 2011, AcceloWeb sold to Limelight Networks for $12m and two months later Aptimize sold to Riverbed for $17m. Terms weren’t disclosed on Blaze Software’s recent sale to Akamai, but we’re hearing that the price was in the ballpark of $10-20m. That leaves Strangeloop Networks as one of the last companies standing, and its fate is basically secured. After the Blaze deal severed Strangeloop’s partnership with Akamai, the company is likely to find an eventual exit in a sale to remaining partner Level 3 Communications.

Firms interested in entering this sector shouldn’t fret over potentially losing Strangeloop to a competitor. Instead, they should actually reconsider their entry into the FEO market. FEO providers, both past and present, have done little to validate the space. According to our understanding, Aptimize was the largest of the acquired vendors, and its revenue was only in the low single-digit millions. The fact that each target sold for no more than $20m further suggests that the market isn’t yet living up to expectations.

Selling to Facebook

Ben Kolada

Contact: Ben Kolada

Rather than buy into Facebook after it debuts on the open market, many companies may consider selling to the social networking giant after its IPO. Facebook is already rich with cash, and is about to become much richer. Meanwhile, its M&A strategy has so far focused on acquiring smaller startups for their IP and engineering talent, but the company has said it may do bigger deals in the future.

According to The 451 M&A KnowledgeBase, Facebook has so far bought 25 companies, mostly for their specialized employees such as software engineers and product designers, but also for complementary technology. The company has been fairly cash conscious in its transactions, preferring to motivate acquired personnel with stock options rather than upfront cash payouts – in fact, Facebook spent just $24m in cash, net of cash acquired, on the deals it closed in 2011.

While innovative startups with skilled personnel, particularly those in the collaboration and social networking sectors, should still consider selling to Facebook a viable exit, midmarket and larger technology firms should also consider Facebook a potential suitor. In both public reports and in its IPO prospectus, the company has said it could put its treasury to work on larger deals. And it will certainly have the fire power – adding proceeds from its $5bn public offering to its treasury would bring its total spending power to nearly $9bn (including cash and marketable securities).

Facebook could apply some of its rationale for buying smaller vendors to larger acquisitions. For complementary technology, it could target a larger mobile advertising network (it picked up development-stage rel8tion in January 2011). The lack of a mobile ad platform is a gaping hole in Facebook’s portfolio, especially considering it had 425 million mobile monthly active users at the end of 2011. A company similar to AdMob (which sold to Google) or Quattro Wireless (acquired by Apple) such as Millennial Media or Jumptap would go some way toward filling that gap. For regional expansion and consolidation, Facebook could make a move for any of a number of international competitors, including Cyworld in Korea, Mixi in Japan, Vkontakte in Russia or Renren in China. As the trend toward consumerization in the enterprise continues in the form of social networking and collaboration (salesforce.com’s Chatter or Oracle’s Social Network come to mind), Facebook could look at an enterprise offering as well. The leading candidate in this sector would be Jive Software, one of the most prized properties in the social enterprise space with a market valuation of about $1bn.

SuccessFactors works the other side of the deal

Brenon Daly

Contact: Brenon Daly

In one of the quickest M&A turnarounds, SuccessFactors has gone from a seller to a buyer in just a matter of days. The human capital management (HCM) vendor announced over the weekend that it would be selling itself to SAP for $3.4bn in cash, the largest-ever SaaS deal. The ink was hardly dry on that transaction when SuccessFactors said on Tuesday that it will hand over $110m for Jobs2Web, a recruiting marketing platform with about 150 customers. (For the record, the mammoth SAP-SuccessFactors pairing is expected to close in the first quarter of 2012, while SuccessFactors’ purchase of the Minnesota-based startup should be done by the end of the year.)

The addition of Jobs2Web makes a great deal of sense for SuccessFactors, and in some ways, it shares some similarities to another deal earlier this year – salesforce.com’s $326m pickup of Radian6. In both cases, the startups added technology around mining social media sources and powerful analytics to expand the acquirer’s existing product portfolio.

There are even more similarities between Jobs2Web and Radian6, besides simply having numerals in their names. Both startups were founded far from any of the typical launch pads for tech companies. Jobs2Web has its headquarters in Minnetonka, Minnesota, while Radian6 was in the even more remote location of Fredericton, Canada.

But more importantly, both targets were incredibly capital efficient, each raising about $5m in VC on their way to a solidly valued exit. (Updata Partners was the sole institutional backer for Jobs2Web, which was advised in its sale by Raymond James & Associates.) According to our understanding, Jobs2Web garnered a valuation of roughly 6 times sales in its sale, while Radian6 was valued north of that.