Contact: Brenon Daly
A unicorn is rumored to be on the block, with several market sources indicating that disaster-recovery startup Datto is looking for a buyer. We understand that Morgan Stanley is running the process. While Datto secured a $1bn valuation in a growth round of funding two years ago, we are hearing that current pricing would add a solid – but not exorbitantly rich – premium to that level.
According to our understanding, early discussions with buyers have bids coming in at about $1.3bn for Datto. Our math has that rumored price valuing the 10-year-old startup at 6.5x this year’s sales of roughly $200m. (Estimates in 451 Research’s M&A KnowledgeBase Premium, which features in-depth profiles and proprietary insight about specific privately held startups, indicate that Datto generated $160m in sales last year, up from $130m in 2015. Click here to see Datto’s full profile in our M&A KnowledgeBase Premium.) The company sells its backup and recovery products to SMBs, with virtually all sales going through the channel.
With its scale and business model, Datto appears almost certain to end up in the portfolio of a private equity (PE) firm, assuming the company does trade. There is precedent. Datto’s smaller rival Axcient was consolidated by eFolder earlier this summer in a transaction that was at least partially backed by financial sponsor K1 Investment Management.
More broadly, PE shops, which have never had more money to spend on tech in history, have been increasingly looking to the IT infrastructure market to make big bets. Already this year, buyout shops have announced three deals valued at more than $1bn, according to 451 Research’s M&A KnowledgeBase. Unlike those targets, which were all owned by fellow PE firms, Datto founder Austin McChord still holds a majority stake in his company.
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