Dell uses M&A (again) to go it alone in storage

Contact: Brenon Daly

Dell’s reach for AppAssure Software continues the tech giant’s trend of using M&A to reduce its reliance on outside vendors for its $2bn storage business. Most notably, the purchase of Compellent two years ago – following its unsuccessful effort to land 3PAR – reduced Dell’s long-standing partnership with storage powerhouse EMC. In a similar vein, Dell’s acquisition Friday morning of AppAssure is likely to trim its business with data-protection specialist CommVault. (Dell is CommVault’s largest OEM partner, accounting for roughly 20% of that company’s total revenue.)

Terms weren’t revealed but we would expect that Dell paid more than $100m for AppAssure. (Whatever the amount, the deal almost certainly represents a sterling return for Bain Capital, which is AppAssure’s sole backer, having put just $6m into the five-year-old startup.) According to our understanding, AppAssure generated about $20m in 2011, triple the level from the previous year.

For comparison, CommVault stock currently trades near its all-time high. CommVault’s steady run has put the company’s valuation at an eye-popping $2.3bn, or nearly 6 times the expected $400m in revenue for its current fiscal year, which wraps up next month. Word of Dell’s purchase of rival AppAssure put some pressure on CommVault’s high-flying shares. On an otherwise bull-market day on Wall Street, CommVault stock dipped 4% on trading that was more than twice as heavy as average by early Friday afternoon. We’ll have a full report on this deal in tonight’s Daily 451.

GRC=Get Ready for Consolidation

Contact: Brenon Daly

After a pretty thin stretch of deals in the governance, risk and compliance (GRC) market, Thomson Reuters reached for startup Paisley Consulting last week. The deal comes after the two companies partnered for a year, but not in the conventional manner. Rather than the big company reselling the startup’s wares, Paisley actually resold Thomson’s tax and auditing product, Checkpoint. The two companies also had a fair number of joint customers.

We understand that Paisley wasn’t really looking for a deal. Founded in 1995, Paisley is still run – and was majority owned – by its founding husband-and-wife team of Tim and Stacey (née Paisley) Welu. (The pair will continue to run the business after the acquisition.) The Minneapolis–based company took only one round of outside money, a $10m slug in 2003 from Insight Venture Partners. Despite its beginnings, Paisley was no mom-and-pop shop. We understand the company is set to finish 2008 with sales of more than $40m.

The Thomson-Paisley pairing comes after several large software companies, which would be the most conventional buyers of GRC startups, inked deals of their own. Oracle stayed close to home, and grabbed existing GRC partner LogicalApps last year, while SAP made a big play for Virsa Systems in mid-2006. (As a side note on SAP’s move, we would mention that longtime Oracle executive Ray Lane sat on Virsa’s board and helped broker the initial partnership that led to the purchase.)

With Paisley gone, there are still a few high-profile GRC vendors in the market. BWise, which has its roots in the Netherlands, has a strong presence in Europe; OpenPages, which started life as a content management vendor before focusing on GRC; and a company that’s not unlike Paisley, Archer Technologies, which my colleague Paul Roberts recently profiled. We understand that both BWise and Archer, which is about half the size of Paisley, have been talking with potential suitors throughout the year. However, a month ago, Archer sold a 40% stake of the company to Bain Capital Ventures, which likely takes it off the block for now.