Contact: Scott Denne
Fortinet has always been a bargain shopper, picking up IP assets and down-on-their-luck startups. The $44m acquisition of Wi-Fi company Meru Networks is Fortinet’s largest deal (by a factor of seven), and it hasn’t strayed from its M.O. The transaction values the publicly traded target at 0.4x trailing revenue – the lowest multiple on record for a Wi-Fi router vendor, according to 451 Research’s M&A Knowledgebase.
Meru posted a few years of growth leading up to its 2010 IPO, though it’s stalled since then, with annual revenue hovering at $90m-$105m. Meru’s stock is down more than 90% since its debut. Wall Street hasn’t been kind to Wi-Fi providers of late. Ruckus Wireless is down 16% and Aerohive 30% since they began trading in 2012 and 2014, respectively.
An acquisition of Meru was not unexpected (the company had retained Deutsche Bank Securities late last year as an adviser to pursue a sale or merger of the company); however, Fortinet as the acquirer was certainly not expected. Meru’s recent announcement of 802.11ac Wave 2 products as well as its new cloud-managed service for MSPs were targeted as much at potential suitors looking to fill in roadmap gaps as customers. This transaction arrives too late to capitalize on the 2015 E-Rate spending cycle, and it’s still uncertain if the internal networking funding will continue into 2016 and beyond. Regardless, this was an inexpensive pickup of key technologies, IP and talent in a growing market.
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