Silver Creek comes out golden in sale

Contact: Brenon Daly

Although terms weren’t disclosed in Oracle’s reach for Silver Creek Systems earlier this week, we suspect the startup can claim something that not one of the nine companies that Oracle gobbled up in 2009 can say: it garnered an above-market valuation in the deal. The trade sale also undoubtedly generated a decent return for Silver Creek’s backers, which hasn’t been the case in many recent sales of VC-backed companies.

A pretty lean operation, Silver Creek has raised some $14m since its restart as a data-quality vendor back in 2002 and hasn’t needed to raise money since 2005. We believe Oracle may have ended up paying twice the amount that Silver Creek raised, since we understand there was at least one other bidder. The acquisition essentially formalizes an OEM relationship that the two companies have had since April, as my colleague Krishna Roy noted in her report on the transaction.

Whatever price Silver Creek ended up getting, it’s a notable uptick from last summer, when we were writing about how a startup in a similar market had pulled off an improbable deal that – if everything falls into place and full earnouts are earned – might just make its backers whole again. (See our earlier item on Exeros’ gamble and ultimate sale to IBM.) Also keep in mind that Big Blue only picked up some of the assets of the data discovery startup, not the whole company and its employees, as is the case with Oracle’s reach for Silver Creek. All in all, Oracle’s purchase of Silver Creek is yet another sign that the tech M&A market continues to rebound, even if it hasn’t yet fully recovered.

IBM-Exeros: the wind-down and the bid-up

Contact: Brenon Daly

Even in the ongoing recession, the fundamental economic laws concerning supply and demand still haven’t been overturned. That’s at least one lesson we can draw from the recent sale of the assets of data discovery startup Exeros. Although terms weren’t disclosed, we believe IBM paid about $13m for Exeros. While that hardly seems like a blockbuster exit for a VC-backed startup that raised some $19m, we would note that the price is four times higher than the offer Exeros received from its first bidder.

As we understand the process, SAP offered just $3m for the assets. Exeros gambled and let the ‘no shop’ period expire on SAP’s bid and then successfully enticed IBM. (Big Blue will slot in the Exeros technology alongside a number of other tools in its Information Management portfolio.) One source added that IBM agreed to an earn-out that could take the final price up to $20m, potentially making Exeros’ backers whole on their investment.

Whatever IBM ends up handing over for Exeros, the target should probably consider any amount over SAP’s initial bid a windfall. The last time we spoke with Exeros (in mid-September, just before capitalism as we know it ended), the unprofitable startup said it was looking to raise a third round of funding that would carry it through to break-even status. Of course, we can all imagine how those fundraising conversations must have gone.

So instead of drawing down money, Exeros was wound down. However, the resulting transaction wasn’t like the dozens of scrap sales that we’ve seen in recent months, where a single buyer pushes the price down so low that the startup’s investors get just pennies on the dollar. With both SAP and IBM bidding, Exeros’ backers may well break even. And that’s not a bad return, given what they were facing.