PE bags another elephant

Extending this year’s record pace of private equity (PE) spending, Siris Capital plans to pay $2bn to take private. The transaction matches the largest deal Siris has made, according to 451 Research’s M&A KnowledgeBase. Debt-heavy, which has been public since 2005, has struggled with a declining number of subscribers in recent quarters.

The web hosting vendor has been slowly reorganizing its operations in recent quarters, and Siris’ offer reflects its transition. Terms call for the buyout shop to pay $25 for each share of, below the company’s share price last October. There’s a six-week ‘go shop’ included in the agreement, with the transaction expected to close in Q4.

Siris’ reach for marks the 10th deal announced by PE firms so far this year valued at $2bn or more. That nearly matches the total number of 11 similarly sized transactions announced in the first half of the two previous years combined, according to the M&A KnowledgeBase.

Of course, as active as the financial acquirers have been, they still have some distance to go to catch up to their corporate rivals, which had been largely unchallenged in the tech M&A market until just a few years ago. The M&A KnowledgeBase shows these strategic buyers have already announced 20 deals valued at $2bn or more this year. (451 Research subscribers can see more on the relentless rise of PE and the impact it is having on the tech landscape in our special two-part report: Part 1 and Part 2.)

Still, the dramatic increase in elephant hunting by PE firms is changing the top end of the tech M&A market. Of course, that is being driven by the unprecedented amount of capital buyout shops have to put to work. Estimates for the total amount of dry powder available to PE firms to go shopping in the tech industry is estimated in the hundreds of billions of dollars, with a handful of tech-focused shops raising single funds that top $10bn. Several other buyout firms have announced multibillion-dollar funds of their own. On top of that, the leverage available to PE shops multiplies their true purchasing power.

Buyout firms are putting that money to work at a record rate. Already this year, they have announced $71bn worth of transactions, according to the M&A KnowledgeBase. For perspective, that’s almost three times the average amount spent in the first half of the years since the start of this decade.