Tag: WatchGuard

Bygone buyouts

Brenon Daly

While overall tech spending on M&A has fallen about one-third so far this year, the once-bustling leveraged buyout (LBO) business has virtually disappeared. Just how much? It’s literally dimes instead of dollars. Buyout spending has plummeted from more than $100bn during the first three quarters of 2007 to just $12bn so far this year. That’s about the level of LBOs in 2004, before buyout shops were really looking at tech companies and before banks were comfortable lending for deals in the unproven and cyclical industry. (Of course, we have new problems in the credit market these days.)

Still, LBOs are getting done, despite the disappearance of debt and, in some cases, even the banks that were backing the buyouts. Earlier this week, for instance, Bedford Funding took home on-demand talent management vendor Authoria for $63m, the first of what we expect to be several deals by Bedford in the fragmented human capital management market.

Also, Nokia said earlier this week that it plans to sell its security appliance unit to an unnamed financial buyer. Several sources have indicated that one of the lead suitors for Nokia’s firewall and VPN business is Vector Capital. The San Francisco-based buyout shop already has experience with a security hardware company, having teamed with Francisco Partners to acquire WatchGuard Technologies, the maker of the Firebox UTM appliance for the midmarket, for $151m in July 2006.

PE deal flow

Period Deal volume Deal value
Q1-Q3 2004 38 $13bn
Q1-Q3 2005 42 $28bn
Q1-Q3 2006 67 $38bn
Q1-Q3 2007 102 $101bn
Q1-Q3 2008 67 $12bn

Source: The 451 M&A KnowledgeBase

Barracuda bares its teeth

Brenon Daly

Never known as a shy or retiring competitor, Barracuda Networks has lobbed an unsolicited bid to acquire Sourcefire for $7.50 per share in cash. (Full report.) That works out to a slight 13% premium on Sourcefire’s closing price ahead of the bid, and essentially where the shares began 2008.

We look at Barracuda’s bid as setting a ‘floor price’ for Sourcefire. It is certainly an opportunistic offer, as Sourcefire has been burned on Wall Street. (The company didn’t help itself when it came up short of investors’ expectations in its first quarter as a public company a year ago.) To get this deal closed, however, we suspect Barracuda will have to raise its bid. Investors have already pushed Sourcefire shares above the offer price.

To push this deal along, Barracuda can draw on the experience of one of its two outside backers, Francisco Partners. The buyout shop took IT security appliance vendor WatchGuard Technologies private in July 2006 after a protracted and bitter campaign.