Updata secures a bargain from CA

Contact: Brenon Daly

When CA Technologies ‘partnered’ with Indian outsourcing firm HCL Technologies to try to offload its security business in November 2007, we termed the move a ‘kind-of, sort-of’ divestiture that was unlikely to fit well with either party. Three and a half years later, the full divestiture is finally done: CA sold it to Updata Partners last week. Although terms weren’t disclosed, we understand that Updata is paying only about $10m for the business, a price that reflects just how much the division had suffered under the joint venture. The roughly $50m in sales at the unit is less than half the level it was at the time of the CA-HCL accord.

The fact that CA got any money for its security assets surprised some. We hear from several participants that at least one bidder put forward a ‘cashless’ offer, offering to take the unit off of CA’s hands for only the assumption of liabilities. (We gather that there was some interest in the business from a few of the larger, privately held security vendors, while from the financial world, both Platinum Equity and Symphony Technology Group were rumored to be bidders.) However, the deal was a very complicated one, not the least of which because there were some questions about the revenue sharing with HCL.

The split ownership, exacerbated by uneven commitments from the two sides, meant that the security business itself was rather starved, particularly for sales and marketing support. (It didn’t help that the division focused on consumers and small businesses, while its corporate parent, CA, targets enterprises. CA will continue to sell enterprise security offerings, which is primarily its identity and access management software.) Out from under the untenable ownership structure, the security unit will likely enjoy renewed focus and resources from its soon-to-be owners at Updata as the buyout firm tries, first, to stabilize the business and then ultimately get it growing again. The deal should close next month.

Signal Hill draws a bead on Updata

Contact: Brenon Daly

The aftershocks just keep reverberating across the tech banking landscape. Three months after Stifel Financial acquired midmarket bank Thomas Weisel Partners, another non-tech bank has used M&A to build up its tech advisory practice. On Tuesday, Signal Hill announced that it has purchased Updata Advisors, with all six of Updata’s bankers joining the Baltimore-based firm that has its roots in Alex. Brown.

The deal marks the fourth acquisition of a bank with at least one tech advisory credit so far in 2010. That compares to just six acquisitions in all of 2009. However, this year’s activity trails the massive consolidation we saw during the Wall Street turmoil of 2008, when no less than 14 banks – ranging from boutiques to multibillion-dollar financial giants – got snapped up.

Financial terms weren’t disclosed. But we understand that Updata’s partners rolled over their equity into Signal Hill and now hold a minority stake in the bank. Talks between the two sides played out rather quickly, just over the past three months or so. The firms are neighbors, and are relatively well-known along the mid-Atlantic seaboard. (To be clear, Updata Advisors – the M&A wing of Updata – will be moving under the Signal Hill brand, while the investment arm, Updata Partners, will continue doing business on its own.)

For Updata, the deal comes at a time when it has rung up a fair number of recent advisory credits. The boutique has five prints so far this year, including advising ChosenSecurity on its sale to PGP and PurchasingNet’s sale to Versata. Last year, Updata had sole buyside credit for Compuware’s $295m purchase of Gomez. Overall on our league table, Updata ranked 16th in 2009 and 10th in 2008 in terms of number of advised transactions.

Versata bags Everest

Contact: Brenon Daly

In half of the recent buys by Versata Enterprises, Updata Advisors has worked on behalf of the acquisitive enterprise software provider. In the latest purchase, however, the boutique advisory firm swung to the other side of the desk. On Friday, Versata, the Austin, Texas-based company that used to go by the name Trilogy, picked up Everest Software for an undisclosed sum. (We hear from a source that Everest was running at a bit more than $10m in revenue. However, the vendor’s top line suffered recently because it sold predominantly to retailers, as well as SMB customers – both of which have been hit disproportionately hard by the ongoing recession.)

Since December 2007, Updata has advised Versata on its acquisitions of Nuvo Network Management, TenFold and Evolutionary Technologies International. Switching over to the sell side for Everest is perhaps understandable for Updata because its sister firm – Updata Partners, which does venture investing – had put money into the CRM vendor. Other backers of Everest include Sierra Ventures, Boulder Ventures and Actis Capital. Founded in 1994, Everest had pulled in around $20m in funding.

Incidentally, we would note that in a press release announcing its sale, Everest took the unconventional step of thanking all of its backers. Even though we understand that the investments in Everest didn’t necessarily produce the returns that had been hoped for, it’s nonetheless a classy move by Everest. Too few companies do that. Most executives and investors simply and quietly move on to ‘the new, new thing’ without taking time to acknowledge the money and time that people put into the first venture. So the sale of Everest probably wasn’t a high-dollar deal, but the firm did take the high road.