Tag: Nasdaq

Making money with coupons

Ben Kolada

Contact: Ben Kolada

Online coupon directory vendor RetailMeNot, formerly known as WhaleShark Media, filed its IPO paperwork on Monday. A total of seven investment banks crowded onto the offering, which could initially value the company in the ballpark of $800m. Meanwhile, a recent high-priced buyout and a couple of more coupon deals that we hear are in the pipeline could make 2013 a breakout year for the online couponing industry.

RetailMeNot has grown dramatically since its incorporation as smallponds in 2007. Through organic and inorganic growth, RetailMeNot increased total revenue 80% to $145m last year. The company primarily did business as WhaleShark Media throughout its lifetime, but rebranded as RetailMeNot this year, taking the name of a startup it acquired in 2010 and whose websites now account for the majority of its traffic.

No fewer than seven investment banks have piled onto the offering, with Morgan Stanley taking the lead left spot. RetailMeNot plans to trade on the Nasdaq under the symbol SALE.

The midpoint valuation of recent comparable transactions suggests that the company could debut at about $800m, or roughly 5x its trailing sales ($155m as of March 31). RetailMeNot was valued at 5.6x trailing sales in its $159m sale to WhaleShark Media in 2010. More recently, we estimate that Slickdeals was valued at 4.6x sales in its quiet sale to Warburg Pincus at the turn of this year.

At least two other coupon companies will be closely watching RetailMeNot’s debut. We’ve heard that CouponMom and dealnews have also been in the market recently.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

CyrusOne’s steady rise

Ben Kolada

Contact: Tejas Venkatesh, Ben Kolada

CyrusOne, the colocation bull that has now changed hands three times since 2007, debuted on the Nasdaq today with a valuation topping $1bn. The fast-growing company was spun off of Cincinnati Bell but is still majority owned (72%) by the regional telco. Shares popped during early trading, continuing the company’s history of creating considerable wealth for each of its owners.

The datacenter company, which is structured as a real estate investment trust, sold 16.5 million shares at $19 per share, higher than its previously guided $16-18 range. The IPO raised a total of $313.5m, though underwriters have an option to sell an additional 2.5 million shares. Shares jumped approximately 10% when they hit the Nasdaq and held the gains through midday trading. CyrusOne currently sports a market cap of about $1.3bn.

CyrusOne operates 24 facilities, primarily in the Ohio and Texas markets. The company offers colocation services aimed at enterprise-class customers requiring highly available facilities, engineered for dense power and reliability. Morgan Stanley and Bank of America Merrill Lynch were joint bookrunners for its IPO.

This is the third time shares of CyrusOne have traded hands since 2007. And in each transaction, its value has steadily climbed, creating considerable wealth for each of its owners.

CyrusOne’s rising valuation

Date Liquidity event Valuation
January 18, 2013 IPO $1.3bn
May 12, 2010 Sale to Cincinnati Bell $525m
July 11, 2007 Sale to ABRY Partners $130m

Source: The 451 M&A KnowledgeBase

For more real-time information on tech M&A, follow us on Twitter @MAKnowledgebase.

A vote of confidence?

Ben Kolada

Contact: Ben Kolada

There’s no denying that behavior in the equity markets is one of the main influencers on big-ticket M&A. Stock market stability provides a vote of confidence for corporate acquirers to pursue large, game-changing deals. Without stable markets, the valuation gap between buyers and sellers becomes too wide for potential sellers to accept. As a result, when the equity markets dip, so too does deal volume.

Nearly every drop in the tech-heavy Nasdaq Composite stock index coincided with a drop in both the volume and value of acquisitions of publicly traded technology companies. (Note: we’ve limited the scope of this research to the acquisition of Nasdaq- and NYSE-listed companies valued at more than $250m.) The number of acquisitions of large public companies tracks the stock market so closely that while the Nasdaq ended 2011 basically flat from the prior year, so too did the number of large tech transactions.

Public company acquisitions relative to Nasdaq activity

Source: The 451 M&A KnowledgeBase, 451 Research

By early 2012, the Nasdaq had effectively regained the level it held before the credit crisis. Despite this bull run, however, there’s very little certainty or stability in the equity markets. Although not a flawless metric, we can use predictions for the IPO market as a gauge of 2012 activity. A stable stock market is desired before a private company hits the public stage. According to our 2011 Tech Banking Outlook Survey, which forecasts activity for 2012, bankers expect the public markets to be stable enough to welcome 25 new technology firms this year – the same number predicted for 2011.

But the number of IPOs is only half of the equation, as subsequent stock performance shows longer-term confidence in the newly public companies’ businesses. In 2011, we saw a number of fairly successful tech IPOs, many of which came from the consumer technology sector, such as LinkedIn and Zynga. But some of these vendors’ initial good fortunes were short-lived. LinkedIn, for example, has lost one-quarter of its market value since the company debuted in May 2011, and Zynga is trading below its offer price.

Among the top issues affecting stock markets are progress toward resolving or containing the European debt crisis and an agreement by the US congress on a bipartisan plan that would reduce the federal deficit by at least $1.3 trillion over the next 10 years. A full 85% of tech bankers surveyed answered that progress on the European debt crisis would increase M&A activity, while 73% said the same about progress on reducing the federal deficit. However, neither of these issues seems likely to be resolved anytime soon. The European sovereign debt crisis appears particularly hairy, after credit rating agency Standard & Poor’s recently downgraded nine major European nations’ credit ratings. Meanwhile, presidential election season in the US is likely to cause most to focus on campaigning rather than the federal deficit. While many weigh their options in voting for the next US president, the stock market may lose its vote of confidence, and deal volume could decline as a result.

In a flash, Fusion-IO plans secondary

Brenon Daly

Contact: Brenon Daly

Just eight months after first filing its IPO paperwork and a scant five months after debuting on the NYSE, Fusion-io has already indicated that there will be a lot more of its shares hitting the market in the coming days. The flash memory specialist plans to sell $100m worth of stock in a secondary, with insiders slated to sell another $250m. In its June IPO, Fusion-io raised more than $200m, selling over 10 million shares. In that offering, insiders sold only 1.5 million shares.

Even though other companies often get slammed for insiders ‘running for the exits’ when selling such a large slug of equity so quickly after the offering, Fusion-io stock barely moved when it announced the secondary. If nothing else, that was consistent with the vendor’s overall stunning aftermarket performance. It priced at $19, first traded in the low $20s and was flirting around $36 on Monday afternoon. And although the stock is highly volatile, with some 10% intra-day swings, it only dipped briefly below its offer price in late September. Overall, any investor who bought on the opening day in June is up about 50%, compared to a flat performance during that period on the Nasdaq.

In that way, Fusion-io is rather unique among the other enterprise technology firms that have gone public so far this year. Cornerstone OnDemand, which went public in March, hit the market at about $19. While Cornerstone held that level for its first four months as a public company, it has been underwater for the last four months. It is down about 25% while the Nasdaq has flatlined. Even more dramatically, Responsys has sunk to just half the level it first traded back in April. Although Responsys had been slipping steadily since early September, the online marketing vendor got buried last week when it warned – in just its third report to Wall Street – that sales in the final months of 2011 would increase only about one-third the rate that revenue had been growing.

No bear market for M&A in August

Brenon Daly

Contact: Brenon Daly

Boosted by two blockbuster transactions, spending on tech deals announced in August surged to $40bn, the second-highest monthly total since the end of the Great Recession. In fact, the aggregate deal value for the just-completed month came in roughly 2-3 times higher than typical monthly spending over the past year. (The exception, of course, came in March, when AT&T announced its $39bn cash-and-stock acquisition of T-Mobile. However, that deal may not go through, as the US Department of Justice earlier this week moved to block the combination, which would create the largest US wireless carrier.)

More than half of the overall spending in August came from just two announced transactions: Google’s $12.5bn purchase of Motorola Mobility and Hewlett-Packard’s $11.7bn pickup of Autonomy Corp. (Incidentally, those deals spanned the range of valuations, with Google paying less than 1x sales for Motorola’s handset business while HP is paying more than 10x sales for the information management vendor.) In addition, there were other transactions of note in August, including the $3bn buyout of Emdeon, Datatel’s $1.8bn reach for SunGard’s education division and Windstream Communications’ $891m consolidation of PAETEC.

Overall, dealmakers remained surprisingly busy in August. For the fourth month in a row, we tallied more than 300 deals, a level that’s about one-third higher than it was a year ago. The activity is all the more unexpected when we think back to the whip-sawing markets we had in the first week or so of August, not to mention the fact that the Nasdaq shed 7% of its value in the month. At one point in August, the index sank to a level it hadn’t hit since early October 2010.

M&A flowers in April

Brenon Daly

Contact: Brenon Daly

The strong M&A spending continued in April, pushing the value of tech deals announced so far in 2011 to the highest level in four years. Through the first four months of the year, dealmakers have announced transactions valued at $111bn – more than the total, collectively, for the same period in the previous two years.

April came in at $26bn, the second-highest month for spending since the Credit Crisis and roughly twice the average monthly spending over the past nine months or so. The high spending in just-completed April comes after March’s $63bn of deal value, a monthly total that harkened back to the go-go days of tech M&A.

The main reason that 2011 is on track for a post-recession record level of spending is the return of the big deal. Obviously, the year-to-date totals are inflated by AT&T’s $39bn proposed cash-and-stock purchase of T-Mobile USA in March. But in addition to that transaction, which is the largest telco acquisition is a half-decade, there have been 21 other deals valued at more than $1bn so far this year. That handily tops the 10 10-digit deals in 2010, four in 2009 and 12 in 2008.

Why the confidence among the significant shoppers? We suspect that it has something to do with the fact that the Nasdaq, which is up 8% so far this year, has reclaimed the level it held in late 2007 before the Credit Crisis lopped it in half.

A decoupled and depressed tech M&A market

Brenon Daly

Contact: Brenon Daly

As we were putting together our full report on M&A last year and the outlook for this year, we couldn’t help but notice the fact that 2010 basically slumped to an end. On average, spending hit just $12bn in each of the last four months of 2010, down from about $20bn for the summer months. Not only that, spending in the September-December period last year substantially lagged the same time in 2009, with three of the four monthly totals in 2010 actually declining, year over year.

The rather muted M&A activity toward the end of 2010 stands out even more because there was a lot of confidence in the equity markets during that time. Despite a long-standing correlation between the two markets, dealmakers basically sat on their hands during the tremendous rally in the final months of 2010, which essentially accounted for all of the gains on the indexes last year. The Nasdaq jumped 17% last year, although more than a few tech companies wrapped the year with tidy triple-digit gains in their stock prices.

To explain the unusual decoupling between the equity and M&A markets in 2010, we might point to the unprecedented government intervention in the debt and credit markets. In the short term, the measures have helped buoy those markets, even if some of the underlying problems (unemployment/underemployment and foreclosure rates) remain alarmingly unresolved. There was no Washington-brokered ‘stimulus package’ for dealmakers. (Again, see our full report to get more details on activity and valuations in the year that was, and what to look for in the year that’s here.)

And the Golden Tombstone goes to …

Brenon Daly

Contact: Brenon Daly

In addition to asking corporate development executives in our annual survey to look ahead and predict M&A activity and valuations in the coming year, we also asked them to look back and tell us which deal of the previous year they thought was the most significant. The winner for 2010? Intel’s $7.7bn purchase of McAfee, an unexpected transaction that landed the largest stand-alone security company inside the dominant supplier of microprocessors. At nearly twice the value of the previous largest security deal, it’s a risky bet that security will become another integral consideration around silicon, along with power consumption and performance.

The landmark Intel-McAfee pairing barely edged out Hewlett-Packard’s contested acquisition of high-end storage vendor 3PAR in the voting by corporate development executives for the Golden Tombstone for the top deal of the year. Past winners of the highly coveted award include Oracle-Sun Microsystems (2009), HP-EDS (2008) and Citrix-XenSource (2007).

We suspect that the competition for next year’s Golden Tombstone may be even more intense, at least according to one indication in our survey. (See our full report on the survey.) When we asked corporate development executives about how likely they were to do ‘transformative acquisitions,’ more than half (52%) said they planned to do one of these risky, bet-the-company kind of transactions. In our 2009 survey, just one out of five respondents said that.

Frightfully light M&A totals in October

Brenon Daly

Contact: Brenon Daly

The economic recession may be (officially) over, but the recession in tech M&A lingers on. If anything, it’s getting deeper, with the fourth quarter starting at a particularly sluggish pace. In the just-completed month of October, we tallied only 243 deals worth a collective $11.7bn. Not only is that substantially below the same month last year, but it also significantly lags the average monthly M&A activity that we’ve recorded so far this year. The reason? Corporate buyers largely sat out the month.

Year over year, the number of deals in October 2010 declined 15%, while spending dropped 22%. Similarly, when compared to earlier months in 2010, October is going down as one of the weakest months for acquisitions. Through the first three quarters of the year, the average number of monthly transactions stood at 268, or about 9% higher than the 243 deals in October. (Indeed, only one month in 2010, August, has recorded fewer deals than October.) The drop-off in M&A spending in October is even more pronounced. The total value of transactions hit just $11.7bn, which is 25% lower than the average monthly spending of $15.7bn in the nine months leading up to October.

Obviously, we don’t want to read too much significance into a single month worth of numbers, particularly in a business as inherently lumpy as M&A. Nonetheless, we might suggest that M&A has joined a number of other markets that have largely been bypassed by the recovery. Clearly, the impact of tech acquisitions not getting done is nowhere near as significant, for instance, as the dreadful employment picture (one out of 10 Americans out of work) or the seemingly intractable housing mess (banks will likely foreclose on more than one million homes this year). But the continuing tech M&A slump is still worth noting as yet another sign of how far we are from where we once were

Oracle parlays new interest in chips into small stake in Mellanox

Brenon Daly

Contact: John Abbott

When Oracle started hinting recently about its growing interest in chip vendors, Mellanox Technologies was at the top of our list of potential acquisition candidates. It turns out that Oracle is indeed interested in Mellanox, but only in a chunk of it. Oracle said earlier this week that it bought 10% of Mellanox’s ordinary shares on the open market.

Oracle didn’t reveal the price it paid for Mellanox or when it was in the market. But on a back-of-the-envelope basis, the stake probably represents about a $70m bet on Mellanox. (The company has about 35 million shares outstanding, and the price has been bumping around $20 each for much of the past month.) Other significant investors in Mellanox include Fidelity Management & Research, with an 11.7% stake, Alger with 7.5%, and the company’s CEO, Eyal Waldman, who owns 5.3% of the company.

As it picked up the chunk of equity, Oracle was quick to add that the purchase is for investment purposes only, and is not the start of a larger play for Mellanox, friendly or otherwise. Its stated motive is to solidify common interest in the future of InfiniBand.

Mellanox is one of only two suppliers making silicon for InfiniBand switches and adapters, the other being QLogic. It formed a close relationship with Sun Microsystems eight years ago, and more recently, its chips have been used within Oracle’s Exadata and Exalogic data-warehousing and storage appliances. In return for Oracle’s dollars, Mellanox will make Oracle Solaris one of its core supported OS platforms. But it will continue to work with Oracle’s rivals, including IBM, Hewlett-Packard and Dell.

As far as datacenter communications fabrics go, InfiniBand has maintained its technical lead over Ethernet and it looks like it will be doing so for a while to come. Even so, Mellanox has also launched a parallel set of 10Gb Ethernet products in the past few years in order to maintain its growth. And it’s also been looking to diversify into the consumer space, if reports that it recently tried (apparently unsuccessfully) to acquire fellow Israeli company CopperGate Communications for $200m are true. Privately held CopperGate develops chips for home entertainment devices and digital home broadband networking.