Imperva: the strong, silent type

Contact: Brenon Daly

As far as tech IPOs are concerned, the two latest offerings could hardly be more different. Last week, we had the debut of Groupon – the daily deals site that is either the next Amazon or the next, depending on the point of view. The debate around Groupon raged loudly and publicly, dominating last week’s financial news broadcasts and financial sites. In contrast, Imperva quietly crept onto the public market on Wednesday, with little fanfare. (The company didn’t even get to ring the opening bell on the NYSE, where it started trading today. Instead, it’ll be doing the honors on Thursday.)

For all of the differences in attention for the two companies, however, there’s one important similarity: performance. Both offerings priced above their expected range and then surged in trading. Groupon, which has created more than $15bn in market value, is still above water. In its offering, Imperva has also put up a strong debut. The data security vendor priced its five-million-share offering at $18 each, above the expected range of $14-16. In midday trading, Imperva stock was changing hands at $24.50. With more than 22 million shares outstanding, Imperva’s offering created more than a half-billion dollars of market value.

Different exits at different prices

Contact: Brenon Daly

Imperva’s pending IPO offers a fairly intriguing counterpoint to the trade sale of rival Guardium nearly two years ago. In 2009, both companies would have been rather similarly sized (basically, $35-40m) and posting roughly comparable growth rates.

Rather than continue as a stand-alone vendor, however, Guardium took a relatively rich bid from IBM for what we understand was about $232m, or about 6 times trailing sales. For a deal that was announced in November 2009, when the overall market was only starting to recover from the credit crisis, Guardium’s valuation looked positively platinum. (It was even more shiny when we consider that the Boston-based company raised just $21m in venture backing.)

But now with Imperva’s IPO, we may well get to see what Guardium might have been worth if it had opted for the other exit. (Obviously, there are a lot of flaws built into standing Imperva as a proxy for Guardium, and doing so glosses over the impact of time and risk on the return. But, arguably, it’s still a useful exercise.)

Nonetheless, assuming that Imperva can garner roughly the same trailing valuation that Guardium got in its sale, that would imply an initial valuation of about $330m – or roughly $100m more than its rival’s clearing price. That $330m would work out to about 4.5x this year’s expected revenue, which seems like a reasonable starting point for Imperva when it does hit the NYSE. (See our speciual report on Imperva’s offering.)

Imperva impervious to consolidation

Contact: Brenon Daly

The next exit for a database security vendor appears likely to be an IPO. Word is Imperva has picked Goldman Sachs and Deutsche Bank Securities to lead its offering, with a prospectus likely to be filed in the next few weeks. The Redwood City, California-based company is thought to be running at roughly $60m in revenue.

If Imperva does indeed go public, the IPO would cap a run of a half-dozen deals in a sector that has seen purchases by some of the biggest technology providers on the planet. Among the companies that have bought their way into the database security market over the past two years are Oracle, IBM and McAfee. That’s not to say those big players have been paying big prices.

With the exception of Guardium’s sale in November 2009 to IBM, which we valued at $232m, the other transactions have been modest ones. And the most recent deal has been less than modest: BeyondTrust likely paid only a few million dollars for Lumigent last week. In fact, as we tally the aggregate value of all M&A in the database-monitoring space, we suspect that the total bill will be less than the value Imperva creates in its IPO.