Tag: LANDesk

Though relatively small, Thoma Bravo’s Mediware buy signals larger trends

Ben Kolada

Contact: Ben Kolada

Although Thoma Bravo’s $195m reach for Mediware Information Systems isn’t exactly a market-moving acquisition, tech dealmakers will note that the transaction underscores a pair of larger trends in tech M&A. The deal continues the consolidation in the medical-focused IT vertical, as well as hints at the reemergence of buyout shops as volume acquirers.

Thoma Bravo is handing over $22 in cash for each share of Mediware’s stock, a 40% premium to the day-prior closing price, and the highest price Mediware’s shares have ever seen. The transaction values Mediware’s equity at $195m. However, the medical management software vendor’s $40m in cash holdings, and no debt, reduces its net cost to $155m. Using that enterprise value figure, Mediware is valued at 2.4 times trailing revenue and 8.8x trailing EBITDA.

Mediware’s sale is the latest acquisition in the rapidly consolidating medical-focused IT vertical. In July, Huntsman Gay Global Capital sold Sunquest Information Systems to Roper Industries for $1.4bn, or about 10x projected EBITDA, and One Equity Partners acquired M*Modal for an enterprise value of $1.1bn, or 2.4x trailing sales. We’ve recently noted that medical speech recognition and transcription companies in particular seem to be receiving considerable buyout interest.

While the Mediware acquisition shows the health of medical-focused tech M&A, it also points at somewhat of a reemergence of private equity firms as volume acquirers. Thoma Bravo, including its portfolio companies LANDesk and PLATO Learning, has already announced five acquisitions this year. PE firms were also especially active in August, with Carlyle Group shelling out $3.3bn for Getty Images.

PE activity also comes while some strategics are sitting on the sidelines. For instance, CA Technologies, which has historically announced about four acquisitions per year, has only announced one this year – the purchase of process automation software veteran Paragon Global Technology. The deal, announced this week, is CA’s first disclosed transaction in more than a year. Also, Symantec has been out of the market since March.

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Do-or-die time for LANDesk divestiture

Brenon Daly

Contact: Brenon Daly

It’s do-or-die time for the LANDesk divestiture, with the period of exclusivity with the most serious bidder set to expire Friday. Buyout shop Thoma Bravo is said to be the last remaining party at the table for the systems management vendor, which Emerson Electric has been trying to shed for more than six months. The current betting is that Thoma Bravo, which has done a half-dozen deals so far this year, will not take home LANDesk.

Thoma Bravo, of course, already has a play in this market – one that it got thanks to another public company divestiture. The private equity (PE) firm picked up the IT asset management division from Macrovision (now known as Rovi) in February 2008, renaming the business Flexera Software. Flexera has since bolted on four other businesses, including the purchase of ManageSoft in May. As my colleague Dennis Callaghan has noted, the hypothetical pairing of Flexera and LANDesk would bring some overlap, but would add technology for endpoint security management, service desk, remote control, power management and application virtualization that Flexera doesn’t have on its own.

While the combination makes sense strategically, we have heard that the process is snagged financially. Several sources have indicated that the asking price for LANDesk has come down from more than $300m early in the process to $250m now. (LANDesk sold for $416m back in April 2006 to Avocent, which was subsequently acquired by Emerson.) At the current level, LANDesk would be valued at more than eight times EBITDA, according to our understanding. That might prove a little rich for Thoma Bravo.

LANDesk nearly done

Brenon Daly

Contact: Brenon Daly

After a nearly half-year process, Emerson Electric is close to having LANDesk off its books. Emerson, which picked up the systems management vendor when it acquired Avocent for $1.2bn last fall, classifies LANDesk as a ‘discontinued operation’ and hired Greenhill & Co to advise it on the divestiture. We understand that final bids are being submitted right now, and a deal announcement is expected in two weeks or so.

Although it’s unclear who will end up with LANDesk, several sources have indicated that the buyer is likely to be another company, rather than a buyout shop. (Corporate castoffs often land in the portfolios of PE firms for a period of ‘rehabilitation’ before being snapped up by another company. Indeed, that was the path for LANDesk, which was sold off by Intel in 2002 to a pair of PE buyers, Vector Capital and VSpring Capital, before being bought four years later by Avocent.) Of course, a PE buyer could pair the LANDesk property with an existing portfolio company to enjoy some of the cost savings that generally allow strategic buyers to outbid pure financial buyers.

In an earlier report, my colleague Dennis Callaghan highlighted a few potential buyers for LANDesk, including virtualization vendors, hardware companies and security firms. However, we understand that the obvious suitors in those sectors are no longer in the process: VMware and Lenovo, both of which have key partnerships with LANDesk, are said to have moved on.

Another corporate buyer that we can scratch off the list? Novell. Apparently, the company was aggressively courting LANDesk early in the process, including offering a rumored high price in exchange for exclusivity. Of course, Novell has other issues to contend with, and may well be a seller of the overall company rather than a buyer of other assets.

LANDesk on the block

Brenon Daly

Contact: Brenon Daly

When Emerson Electric picked up Avocent for $1.2bn last fall, we noted that the acquisition made a great deal of sense as a way for Emerson to get deeper into the datacenter. We also noted that the systems management business that Emerson was inheriting because of Avocent’s earlier purchase of LANDesk looked ‘increasingly out of place.’

No surprise, then, that Emerson has formally begun a process to sell off the LANDesk unit. What is kind of a surprise, however, is the fact that LANDesk is shaping up as a comparatively pricey divestiture. We’ve heard talk of 2 or even 3 times sales for the $150m business. That could get the price back to roughly the $416m that Avocent originally paid for LANDesk back in 2006.

The reason LANDesk is going for a richer multiple than the conventional 2x sales for a divestiture is that there appears to be a number of interested parties for the business. As my colleague Dennis Callaghan outlines in a new report, LANDesk could appeal to virtualization vendors (notably existing partner VMware), hardware providers (notably existing partner Lenovo) and security firms, which might be looking to match Symantec’s pickup of Altiris. (Incidentally, Big Yellow paid about 3.5x trailing sales in its big systems management buy.)

Additionally, the size and stability of LANDesk is also expected to draw interest from buyout shops. We understand that Greenhill & Co, which advised Emerson on the purchase of Avocent, is also handling the planned unwind of LANDesk. Emerson already classifies LANDesk as a ‘discontinued operation’ and plans to have the divestiture done this year.