Contact: Scott Denne and Kenji Yonemoto
Responding to the need for new monitoring and management tools to match the growing adoption of infrastructure technologies such as containers and cloud, VMware has reached for Wavefront. The deal embodies the craving for the latest technologies in infrastructure management M&A through the start of the year.
That craving stands in stark contrast to last year, when divestitures and aging assets led to a record $15.3bn spent on infrastructure management targets, according to 451 Research’s M&A KnowledgeBase. Less than four months into the year, buyers have already shelled out $5.6bn, skewing toward younger and growing businesses fetching higher multiples.
While VMware hasn’t disclosed terms of the transaction, it’s likely paying a premium valuation as Wavefront, an early-stage company with about 50 customers, landed a $52m series B less than six months ago. The acquisitions of AppDynamics ($3.7bn) and SOASTA ($200m) – which like today’s deal, were done to improve the buyers’ ability to cope with new types of application deployments – have helped drive up multiples. The median multiple for the category stands at 4.2x trailing revenue this year, compared with 3.4x in 2016.
The pressure to pay up for these technologies could continue. Our surveys show that new forms of application deployment are rising among enterprises. In 451 Research’s most recent Voice of the Enterprise report, 48% of respondents expected their spending on cloud to increase by more than 11% in 2017 and similar surveys have shown a growing shift toward using containers and microservices in production, not just testing and development, environments.
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