Category: M&A

Who has designs on Planview?

Brenon Daly

by Brenon Daly

Old-line project and portfolio management (PPM) vendor Planview may be getting new owners soon. The 24-year-old company is rumored to be close to wrapping up a sale process, which has been led by Lazard. The buyer is likely to be a private equity (PE) shop, although one tech company is also apparently taking a long look. No final price has been struck, but Planview will likely trade in the neighborhood of $200m, according to our understanding.

The rumored price would value Planview at roughly 3x trailing sales. That’s exactly the valuation of the last significant transaction in the PPM market. In August 2012, Thoma Bravo paid $990m, or about 3x trailing sales, for Deltek, a government-focused PPM provider. PE firms have been fairly active in the PPM sector, with Parallax Capital Partners and Vista Equity Partners, among others, having inked acquisitions.

In terms of strategic acquirers, Planview probably has the closest relationship with SAP, primarily through a long-standing association with Business Objects. And don’t forget, too, that rival Oracle has already snapped up a large privately held PPM vendor, adding Primavera Software five years ago. Although terms weren’t disclosed in that deal, we estimate that Oracle handed over roughly $350m for PE-backed Primavera.

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PROS announces first acquisition in its 28-year history

Scott Denne

Contact: Scott Denne

PROS Holdings is paying $36m for configure, price and quote (CPQ) sales automation vendor Cameleon Software, adding fuel to an already steady growth rate. The deal, PROS’s first in its 28-year history, should boost the company’s top line by providing new cross-selling opportunities and expanding its presence in Europe.

Using an enterprise value of $33m, Cameleon is being valued at 2.2x trailing sales, a bargain compared with the 7.3x valuation PROS is currently sporting. Cameleon’s shares are being valued 45% higher than their 90-day average trading price.

PROS, which makes software that helps determine the optimal price to charge each customer for a given product, grew revenue 22% last year, to $118m. That follows a record-setting 36% growth rate in 2011. Cameleon is much smaller, but still saw sales rise 29% last year to $14m.

The purchase of Cameleon brings PROS technology that helps customers/vendors automate the process of getting the right products and right information to prospective clients. (It is similar to what Oracle obtains with its recent purchase of BigMachines .) Cameleon, based in France, also brings PROS a larger European operation. Though PROS is growing overall, its European revenue shrank slightly in its most recent quarter.

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Friends are friends, but business is business

Scott Denne

Contact: Ben Kolada Scott Denne

Oracle is either adding depth or distance to its partnership with salesforce.com by acquiring BigMachines, yet another salesforce.com-integrated startup. The two software giants have had a difficult relationship, most visibly with salesforce.com CEO Marc Benioff being ‘uninvited’ from Oracle OpenWorld two years ago. But the companies seemed to have worked out their differences this year, announcing a nine-year product integration partnership in June. Oracle’s recent dealmaking, however, could undermine some of that reconciliation.

Terms haven’t been disclosed in Oracle’s acquisition of configure, price and quote sales automation SaaS vendor BigMachines. We estimate that the company generated $60m in trailing sales, or about twice the revenue it recorded in the year before its recapitalization by Vista Equity Partners and JMI Equity.

BigMachines is the second salesforce.com partner Oracle has purchased in the past week. On October 17, Oracle bought content marketing SaaS provider Compendium, but the stakes and price are certainly much larger for this deal (subscribers to The 451 M&A KnowledgeBase can see our estimated price and revenue for the Compendium buy here).

BigMachines integrated its price and quoting optimization software into salesforce.com’s core CRM offering in 2010 (it was also an Oracle partner) and salesforce.com became an investor in the company in 2012. (As an investor, salesforce.com almost certainly had right of first refusal on Big Machines.) Compendium – which was founded by one of the founders of ExactTarget, the marketing software company that salesforce.com picked up for $2.5bn earlier this year – integrated its content marketing software into ExactTarget’s offering as well as a rival marketing automation offering from Eloqua, which Oracle acquired a year ago.

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Microsemi’s all about the margin

Scott Denne

Contact: Scott Denne

In picking up Symmetricom for $310m in cash ($230m in enterprise value), Microsemi is taking on a company whose margins are a far cry from its own goals. The semiconductor company has been fruitlessly chasing a self-imposed target of 60% profit margins and 30% operating margins.

Although adding a new element to an already challenging margin target, the deal will be accretive to its earnings per share.

Microsemi posted a 57% profit margin in its most recent quarter, although its operating margin of 10% is much farther away from its goal. Symmetricom reported a 45% profit margin and a negative operating margin. That makes this deal a bigger challenge than Zarlink, its last big purchase, whose margins were just a few points shy of Microsemi’s. Despite that, management claims Symmetricom will be running at its 60/30 target within 12 months of the deal’s close.

As it has in past acquisitions, Microsemi will prune legacy Symmetricom assets worth $10-15m in sales in order to give the target more favorable operating and profit margins. With this deal, Microsemi looks to add to its communications and defense businesses by picking up an asset that will, eventually, have a similar margin profile to itself.

Microsemi employed the same strategy in its acquisition of Zarlink in late 2011. With that deal, Microsemi planned to immediately chop 20% of Zarlink’s revenue-generating assets.

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PE shops taking home tech companies that are old and in the way on Wall Street

Brenon Daly

Contact: Brenon Daly

More and more, the portfolios of private equity (PE) firms are looking like retirement homes for the ever-maturing tech industry. Consider Marlin Equity Partners’ proposed $891m take-private of Tellabs, announced this morning. The company has been hawking its networking equipment gear since 1975, and has seen its share of ups and down over the past four decades in business. Tellabs currently finds itself in one of those protracted ‘downs,’ having shrunk for three straight years. The leveraged buyout (LBO) reflects that, with Marlin valuing Tellabs, net of its substantial cash holding, at just 0.4x trailing sales.

By our count, the Tellabs take-private is the ninth tech LBO valued at more than $300m announced so far this year. (To be clear, that’s equity value for a full business, and excludes any pickups of businesses divested by public companies.) On average, the companies that have been erased recently from the public market by PE firms were founded in 1990. The ‘youngest’ company was founded in 1998, exactly the same year Google incorporated itself.

Looking more closely at the list of this year’s 10 take-privates, we would note that only one company actually managed to get an above-market valuation. (That would be Vista Equity Partners’ $644m acquisition of Greenway Medical Technologies, which went off at 4.7x trailing sales.) Four other companies said goodbye to Wall Street at 1x sales or lower. On average, the significant LBOs of 2013 have gotten done at a median valuation of 2.1x trailing sales, a full turn lower than the broad market multiple for the 50-largest transactions of 3x trailing sales.

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Oracle deal shows hoosiers own marketing software

Scott Denne

Contact: Scott Denne

Oracle’s purchase of Compendium cements Indianapolis’ transformation into the go-to spot for marketing software deals. This makes six acquisitions of marketing tech companies in that city, which have collectively been valued at more than $3bn.

Earlier this year, salesforce.com spent $2.5bn to acquire ExactTarget, and two years ago Teradata paid $525m for Aprimo. Both those companies were founded more than 10 years ago and helped bring – and train – marketing software talent to the area. Given the shift in marketing software from a niche to a strategic pillar at many major software companies – such as Oracle, which has bought five such companies in the last 18 months – there’s room for more local marketing companies to benefit.

ExactTarget birthed many of these businesses. Chris Baggott, one of the founders of ExactTarget, was a founder of Compendium. Other marketing tech startups in the region, such as Right On Interactive, Marketpath and Smarter Remarketer, also have founders that spent time at ExactTarget.

Recent marketing tech deals with Indy targets

Date Target Acquirer Deal Value
October 17, 2013 Compendium Oracle not disclosed
June 04, 2013 ExactTarget salesforce.com $2.5bn
October 11, 2012 iGoDigital ExactTarget $21m
June 07, 2011 Vontoo One Call Now not disclosed
December 22, 2010 Aprimo Teradata $525m

Source: The 451 M&A KnowledgeBase

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In one acquisition, out the other

Scott Denne

Contact: Ben Kolada

The acquisition and reacquisition of MarketTools and its assets continued last week in what has been the most labyrinthine dealmaking we can recall. Since 2008, the survey creation SaaS vendor and its core assets have been through more than a half-dozen acquisitions, and there’s likely one more to go.

Founded in 1997, MarketTools made its first acquisition on record (we’ve been recording M&A since 2002) in 2008, when it bought customer and employee feedback management SaaS provider CustomerSat.

After that, however, the company began a long unwind. In December 2011, MarketTools was acquired by TPG Growth and simultaneously sold its Zoomerang, ZoomPanel and TrueSample assets to SurveyMonkey. Shortly thereafter, TPG unloaded MarketTools in July 2012 to MetrixLab, which then sold MarketTools’ CustomerSat assets to Confirmit. MetrixLab kept MarketTools alive, using the business to purchase RawData in July 2013.

The MarketTools assets sold to SurveyMonkey didn’t stay in one place for too long. Last month, SurveyMonkey sold ZoomPanel to Critical Mix, and last week it sold TrueSample to Five Peaks Capital Management.

Still with us? If you are, you’ll notice there is one legacy MarketTools asset that hasn’t yet found a third home: Zoomerang. If history is any precedent for the future, Zoomerang will likely be sold again soon enough.

Which way did they go?

Date announced Event
October 9, 2013 TrueSample, now owned by SurveyMonkey, is sold to Five Peaks Capital
September 12, 2013 ZoomPanel, now owned by SurveyMonkey, is sold to Critical Mix
July 25, 2013 MarketTools, now owned by MetrixLab, acquires RawData
August 22, 2012 MarketTools, now owned by MetrixLab, sells CustomerSat to Confirmit
July 9, 2012 TPG Growth sells MarketTools to MetrixLab
December 14, 2011 MarketTools acquired by TPG Growth, simultaneously sells Zoomerang, ZoomPanel and TrueSample assets to SurveyMonkey
April 3, 2008 MarketTools acquires CustomerSat

Source: The 451 M&A KnowledgeBase

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VMware dials up Desktone

Scott Denne

Contact: Scott Denne

VMware picks up desktops-as-a-service company Desktone as the virtualization pioneer faces a slowdown in its core business. As we noted earlier, VMware’s software licenses grew by only $20m through the first half of the year, well below the $200m pace it set for itself for 2013, and this deal indicates that it’s looking toward services to partially offset that lost growth.

While VMware’s last few deals have been aimed at extending its core infrastructure technologies into related areas such as networking, storage and systems management, the acquisition of Desktone, along with the release of vCloud Hybrid Service earlier this year, show VMware emphasizing its ambitions to be a cloud services vendor, not just a cloud tools provider.

Desktone was funded with $29m in venture capital across two rounds, with the most recent coming it 2010. That same year the company brought in a new CEO, Peter McKay, and changed its business model to offering the virtual desktop service directly to customers – going from a business with almost zero sales to one that now has about 150 direct and service-provider customers and anticipates hitting profitability this year. (We’ll have a more detailed report on this transaction in our next 451 Market Insight.)

Our own estimates of the virtual desktop market put it at $3.8bn this year and growing at 21.9% annually. By our own back-of-the-envelope calculations, Desktone will likely account for roughly $10-$14m of that market this year.

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Vonage dials up a discount in $130m purchase of Vocalocity

Scott Denne

Contact: Scott Denne

Vonage picks up Vocalocity for $130m in a sizeable and relatively safe bet to turn around a declining business. It’s a big bite for Vonage, which will be borrowing heavily to fund the deal. But at least Vonage is getting a discount on its purchase of the business VoIP provider: Vocalocity is valued at less than half the level of its competitors on the public markets.

Vocalocity posted $28m in revenue for the first half of the year, up 39% from the same period a year ago. While that growth is faster (due partially to starting at a smaller base) than its larger public rivals 8×8 and RingCentral, its valuation is lower. According to our quick math, Vonage is valuing Vocalocity at just about 2.5x trailing 12-month sales. Meanwhile, RingCentral currently boasts a 7.7x trailing sales valuation, while 8×8 pencils in at 6.7x.

To cover its largest acquisition, Vonage is paying $105m in cash ($30m from its treasury and drawing $75m from its revolver), along with $25m in stock. Even though the new paper dilutes existing shareholders, Wall Street backed the purchase. Vonage’s long-suffering shares jumped 15% on the deal, hitting their highest level in more than two years.

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Amid federal shutdown, CACI spends $820m on defense consulting firm Six3

Scott Denne

Contact: Scott Denne

The federal shutdown and looming debt-ceiling battle isn’t slowing down CACI International’s appetite for M&A. The government contractor and frequent acquirer is paying $820m, its largest purchase, for tech-enabled security and signal intelligence services vendor Six3 Systems.

A major selling point for Six3 was its expertise in cybersecurity, which currently accounts for about one-fifth of its $437m trailing sales. Its top-line growth certainly helped as well. The company, which was backed by private equity firm GTCR, experienced a 19% compound annual growth rate over the past five years.

The transaction brings CACI new technology capabilities that significantly expand its addressable market. That, and the fact that Six3 will tack on at least 5% to its earnings next year, made CACI willing to dig deep for this one. The deal value is almost twice the $415m that CACI paid for its second-largest acquisition, the purchase of American Management Systems’ defense group in 2004, and nearly 20x the size of its median acquisition price over the past decade-plus.

Further emphasizing Six3’s value, CACI is paying more than double the valuation that the typical IT services shop receives. The deal values Six3 at 1.9x trailing sales. CACI itself currently sports an enterprise valuation of just under half-times sales. Bank of America Merrill Lynch advised CACI, while Goldman Sachs and J.P. Morgan Securities teamed up on the sell side.

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