Contact: Brenon Daly, Dennis Callaghan
Sometimes it’s just easier to go shopping behind closed doors. We were reminded of that as Keynote Systems indicated that it plans to go private in a $395m sale to private equity (PE) firm Thoma Bravo. As we look at the PE shop’s portfolio companies, it’s striking how quickly the M&A pace has picked up once the companies can reach into the deep pockets of their new owner, and do so out of the glare of Wall Street.
Consider the M&A activity of Blue Coat Systems. The security company averaged about one acquisition every other year in the decade leading up to its December 2011 take-private by Thoma Bravo. So far in 2013, Blue Coat has already done two outright acquisitions, including paying what we hear is a double-digit multiple for Solera Networks. (451 M&A KnowledgeBase subscribers can see our estimates for terms of the Blue Coat-Solera pairing by clicking here.) Thoma Bravo also rolled Crossbeam Systems, which it already owned, into Blue Coat last December.
Similarly, Tripwire had done only one deal in the nearly decade and a half before it sold to Thoma Bravo in mid-2011. (And the security firm’s sole foray into M&A was a tiny asset purchase that only set it back $3m.) Earlier this year, it made a significant bet of more than $100m on nCircle, which bumped up total revenue by about one-quarter. And based on the early progress on that transaction, we understand that Tripwire may be looking to make another similarly sized acquisition in the coming quarters.
The Keynote leveraged buyout (LBO) isn’t expected to close until fall, and even after that the company’s new owners will probably want some time to more deeply understand and take some preliminary steps to get the test and measurement vendor growing again. Revenue has been flat so far this fiscal year as some customers have recently narrowed Keynote projects or put them off.
But once business is shored up, we could imagine Keynote returning to the M&A market, from which it has been absent since October 2011. My colleague Dennis Callaghan speculated in a report on the LBO that Keynote may also look to expand its capabilities in pre-deployment testing or even add content delivery network technology through acquisition.
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