Contact: Scott Denne
SolarWinds has scooped up Librato for $40m in a deal that’s a low-water mark among its recent acquisitions. The previously prolific dealmaker slowed the pace of acquisitions in 2014, making just one purchase – the $67m acquisition of Pingdom – after two $100m-plus purchases in 2013 and more than a half-dozen smaller deals over the previous two years.
Even though it’s smaller, the purchase of the cloud application monitoring business is equally aggressive as recent deals. SolarWinds expects Librato to add $2-3m in revenue to the top line this year, meaning that the network and systems management company is likely paying in the neighborhood of 20x TTM. According to the 451 M&A KnowledgeBase, its three previous deals were all done at trailing revenue multiples between 5-13x.
After anticipating slowing growth heading into 2014, SolarWinds finished the year with $429m, up 28% from 2013 and ahead of where management was guiding early in the year. Although SolarWinds is better positioned to entertain M&A, it’s likely to stick to the same strategy it began around 2013 – hunting for deals that expose it to new markets, rather than tuck-ins aimed at adding features and upselling a target’s existing customers on other parts of the SolarWinds portfolio. Librato is in-line with the current strategy since it expands SolarWinds into systems monitoring for cloud-hosted applications.