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April, 2017
Menalto Advisors Thought Report:
The High-Profile Enterprise Software Acquirers
(an Overview of M&A by Oracle, Microsoft, IBM, Salesforce,
SAP, Cisco, VMware, HP Enterprise, Adobe, and CA)
Contents Include:
• Summaries of more than 260 acquisitions by Oracle, Microsoft, IBM,
Salesforce, SAP, Cisco, VMware, HP Enterprise, Adobe, and CA since 2013
• A discussion of the major M&A highlights and technology themes across these high-profile enterprise software acquirers
Mark Grossman
Managing Director
2 The High-Profile Enterprise Software Acquirers
About Menalto Advisors …………………………………….……………………....……. 4
About the Author …………………………………………......................………...….….. 5
Other Managing Director Bios …………….………………...……………………….....… 6
Previous Thought Reports …………….…….……………...……………………….....… 8
Introduction ……………………….………………..………..………………………….… 9
Why a Report on the High-Profile Software Acquirers? ………………………….... 9
Enterprise Software M&A Activity ………………………………………….……...... 13
General Highlights ………….………………………………..….............................. 15
Technology Theme Highlights ………………………………………………………..19
Some Comments on the Transaction Data ………………………….……………. 27
We Look Forward to Hearing from You ……………………………….…..……..…. 28
Chapter 1: Oracle ………………………………………..…………………………..….. 29
Introduction ………………………………………………………………….…..…..... 29
Select Oracle Acquisitions …………...…………………………………..………….. 30
Chapter 2: Microsoft ………………………………………..……..……...………...….. 41
Introduction ………………………………………………………….…..…………..... 41
Select Microsoft Acquisitions ………...………………………….....……………….. 42
Chapter 3: IBM ………………………………………………..…..……..………..…….. 57
Introduction ……………………………………………………………………..…….. 57
Select IBM Acquisitions ………………..………………………….…..…………….. 58
Chapter 4: Salesforce ………………………………………..…..………....………….. 73
Introduction …………………………………………………….…………...…..…….. 73
Select Salesforce Acquisitions ………...…………………..………………..…..….. 74
Chapter 5: SAP ………………………………………..…………………..…………….. 83
Introduction …………………………………………….……………………….....….. 83
Select SAP Acquisitions ………………………………………..………..………….. 84
Table of Contents
3 The High-Profile Enterprise Software Acquirers
Chapter 6: Cisco ……………………………..………..…………………...……..…….. 91
Introduction ……………………………………………………………………..…….. 91
Select Cisco Acquisitions ………..……..………………………………………...…. 92
Chapter 7: VMware ……………………………….……..…………………………….. 106
Introduction ………………………………………………………………..…..…….. 106
Select VMware Acquisitions ………………..………………………………..…….. 107
Chapter 8: HP Enterprise ………………………..……………..…………………….. 111
Introduction ………………………………………………………………………….. 111
Select HP Enterprise Acquisitions ………………………………………………… 112
Chapter 9: Adobe ………………………………..………………………………..…… 118
Introduction ………………………………………………………………………….. 118
Select Adobe Acquisitions ……………….……………………………………….... 119
Chapter 10: CA Technologies ………………………………..…………………….... 124
Introduction ………………………………………………………………………….. 124
Select CA Technologies Acquisitions …………………………..………..……….. 125
Chapter 11: Private Equity Firms / Vista Equity …………..……………….…….. 130
Introduction ………………………………………………………………………….. 130
Select Vista Equity Partners Acquisitions …………………………………..…….. 133
Appendix ……………………………..……..………………………………………….. 143
Select Acquisitions with Revenue Multiples ……………….……….………..….... 143
Select Acquisitions with Public Company Premiums …………....…………..….. 146
4 The High-Profile Enterprise Software Acquirers
Preeminent Technology M&A Boutique Investment Bank
Menalto Advisors LLC (“Menalto Advisors”) is a new and different type of
technology M&A advisory firm located in Silicon Valley. We are a close-knit,
diverse group of talented professionals who strongly believe that early
partnership and proactive guidance based on each of our client’s unique
circumstances are the best way to help them attain their strategic objectives
and exceed their M&A goals. We help our clients discover, strengthen, and
communicate their capabilities and the potential of their business to optimize
each M&A outcome.
Prior to founding Menalto Advisors, our investment banking team completed
over 160 transactions around the globe and has deep experience in M&A,
engineering, finance, law, management consulting, and entrepreneurship.
We understand the dedication, experience, pragmatism, foresight, tenacity,
creativity, and exceptional execution it takes to consistently achieve
transactional success. Importantly, our partnership approach to M&A works
because our team consists of bright, fun, motivated individuals who are
passionate about technology and entrepreneurship.
Please visit our website at www.menaltoadvisors.com to learn more.
About Menalto Advisors
5 The High-Profile Enterprise Software Acquirers
Mark Grossman, Managing Director
Originally from New York City (Brooklyn), Mark has
primarily lived and worked in Silicon Valley and
Boston. He has more than 20 years of experience
in technology and finance, including mergers &
acquisitions, technology industry equity research,
and engineering. When he isn’t traveling the world
advising clients, Mark enjoys spending time at
home with his son and wife, and playing guitar.
Prior to Menalto Advisors, Mark was a Managing
Director at Pagemill Partners and began his
investment banking career at SVB Alliant. As an
investment banker, he has successfully completed more than 40 transactions
(domestic M&A, international M&A, and strategic investments) across a broad
range of technology sectors and geographies. Mark has also written a variety of
thought pieces on emerging technologies and M&A topics.
Before becoming an investment banker, Mark was a Managing Director and
technology industry research analyst at several Wall Street firms. Mark performed
in-depth analysis of companies across the tech industry and wrote numerous
reports on industry trends and technologies. He received a number of industry
accolades, including the Wall Street Journal "Best on the Street" award, and was
a guest analyst on a variety of TV financial news programs. Mark began his
financial career as an Associate at Goldman Sachs.
Prior to graduate school, Mark worked at General Electric where he managed a
variety of complex electronics projects (including both software and hardware
technologies). Mark earned a Bachelor of Science in Electrical Engineering, with
a Computer Science minor, from Polytechnic University (now NYU Tandon School
of Engineering), and both a Master's degree (Electrical Engineering Department)
and an MBA (Sloan School of Management) from the Massachusetts Institute of
Technology, where he completed a two-year dual-degree program.
Mark’s contact information:
M: +1.650.521.1599/T: +1.650.453.5846
Author’s Bio
6 The High-Profile Enterprise Software Acquirers
Nels Nelsen, Managing Director and Co-CEO
Nels was born, raised, and educated in the Bay Area
and has spent over 25 years in Silicon Valley
advising and working with technology companies as
a Certified Public Accountant, lawyer, and
investment banker. Away from the office, Nels can
be found cheering on his three children and his
favorite Bay Area sports teams, at the beach on
Kauai, and occasionally on the golf course.
Prior to Menalto Advisors, Nels was a Managing
Director at Pagemill Partners, an M&A advisory firm,
which he and his partners sold to Duff & Phelps. Nels began his investment
banking career at Alliant Partners, which was sold to Silicon Valley Bank. As an
investment banker, Nels has closed nearly 100 transactions in a broad range of
technology sectors. Nels has represented clients all over the globe, and nearly half
of his completed transactions have been cross-border.
As a lawyer, Nels was a Partner at Gray Cary Ware & Freidenrich (now DLA Piper),
one of the largest law firms in California, and he was listed in "The Best Lawyers
of America." Prior to practicing law, Nels was a Senior Accountant at Price
Waterhouse.
Nels earned a Bachelor of Science in Commerce in Accounting from Santa Clara
University and a J.D. from Santa Clara University School of Law. He is a member
of the State Bar of California (inactive) and a Certified Public Accountant in
California (inactive).
Nels’ contact Information:
M: +1.650.996.6727/T: +1.650.453.5859
Other Managing Director Bios
7 The High-Profile Enterprise Software Acquirers
Charles Welch, Managing Director and Co-CEO
Originally from Michigan, Charles was educated
and has lived in both Northern and Southern
California and surprisingly has loyalty to sports
teams in both parts of the state. Charles is the proud
father of two daughters, is a self-proclaimed watch
nut, and has a black belt in Aikido.
Charles has extensive experience in mergers and
acquisitions, business and corporate development,
finance, capital raising, investor relations, human
resources, and law. He is a serial entrepreneur. He
has been a principal at three different businesses, all of which he sold. Over a 14
plus year investment banking career, Charles has successfully completed
numerous M&A, strategic capital raise, and licensing transactions in a variety of
sectors and geographies.
Prior to Menalto Advisors, Charles was a co-owner and Managing Director at
Pagemill Partners, an M&A advisory firm, where his closed transactions included
negotiating the sale of Pagemill Partners to Duff & Phelps. Prior to Pagemill
Partners, Charles co-headed several different practice groups at SVB Alliant, the
then investment banking arm of Silicon Valley Bank.
Before joining SVB Alliant as an investment banker, Charles was the Vice
President, Finance, Corporate Development & Strategy at NetScaler, an Internet
infrastructure company that was eventually acquired by Citrix. Prior to NetScaler,
Charles held the position of Vice President, Corporate Development at Solectron,
an EMS company, and he was the Vice President, Business Development and
General Counsel at SMART Modular Technologies, a memory module
manufacturer that was acquired by Solectron. Charles was also a corporate
securities attorney at Wilson, Sonsini, Goodrich & Rosati.
Charles has a Bachelor of Science in Civil Engineering from Virginia Tech, a
Masters in Real Estate Development from the University of Southern California,
and a J.D. from the University of California at Berkeley (Boalt Hall School of Law).
Charles’ contact information:
M: +1.408.242.1040/T: +1.650.453.5835
8 The High-Profile Enterprise Software Acquirers
Highlights of Previous Reports
In case you missed it, below are summaries of two previous Thought
Reports. If you would like a copy of one or both reports, please contact one
of the investment bankers at Menalto Advisors.
• The “High-Profile” Tech Acquirers (an Overview of M&A by Apple,
Google, Microsoft, Facebook, Intel, Samsung, and Amazon) – This
120+ page report was issued in January 2017. The
report covers M&A activity by the “high-profile”
technology acquirers. It includes summaries of more
than 325 acquisitions (since 2013) made by Apple,
Google, Facebook, Microsoft, Intel, Samsung, and
Amazon. These are the companies that we are most
often asked about by private tech company
executives and VCs. The report also discusses
some of the major M&A highlights, trends, and technology themes
across these companies.
• Artificial Intelligence and Machine Learning – This 130+ page
report was issued in November 2016. The first chapter provides a
comprehensive overview of the artificial intelligence
(AI) and machine learning landscape, including
some basic terminology, a history of AI, AI
applications, recent trends, strategic and VC
investments, concerns, and other related topics.
The second chapter contains a detailed primer on AI
and machine learning technologies. The third
chapter provides summaries of more than 70 AI-
related M&A transactions, and the fourth chapter highlights more than
70 private AI companies across a variety of sectors and applications.
Previous Thought Reports
9 The High-Profile Enterprise Software Acquirers
“In short, software is eating the world.”
- Marc Andreessen, Co-founder of Andreessen-
Horowitz, Co-founder of Netscape
Why a Report on the High-Profile Software Acquirers?
This report provides an overview of the acquisitions made by several of the
largest enterprise software acquirers (Oracle, Microsoft, IBM, Salesforce,
SAP, Cisco, VMware, HP Enterprise, Adobe, and CA Technologies). There
were two major reasons for writing this report:
• Companion to Our Previous Report – Our previous report (“The
High-Profile Tech Acquirers”) provided an overview of the acquisitions
made by Apple, Google, Microsoft, Facebook, Intel, Samsung, and
Amazon. Of course, these are not the only “high-profile” technology
buyers, as companies such as Oracle, IBM, Cisco, and Salesforce are
also active acquirers and receive a lot of attention. However, we felt
the companies highlighted in our previous report made a good set, in
that they are very eclectic buyers and often acquire early stage
companies (in some cases pre-revenue). In addition, many of their
acquisition targets developed solutions for consumer devices (e.g.,
technologies that could be integrated into smartphones, tablets,
notebooks, or other consumer electronics). In contrast, buyers such
as Oracle, IBM, SAP, and Salesforce have mostly acquired later-stage
companies focused on enterprise software. As such, we thought it
made sense to write a separate report on the “high-profile” enterprise
software companies. The combination of this report and our previous
one covers the acquirers that we are most often asked about by private
technology company executives and VC investors.
Introduction
10 The High-Profile Enterprise Software Acquirers
• Good Enterprise Software M&A Overview – Enterprise software is
one of the largest and most active segments of the technology M&A
market. According to a Gartner press release (January 2017),
enterprise software revenue is expected to reach $355 billion in 2017
(slightly more than 10% of total IT spending) and is projected to be the
fastest growing major IT segment. We have seen many presentations
and reports that analyze the enterprise software M&A market by
showing aggregate numbers across all transactions (e.g., total number
of deals by quarter, total value of deals by quarter). While this has
some value (and we briefly discuss these topics later in this chapter),
in our experience what most private enterprise software companies
really want to know about is the acquisition activities of the “premium”
buyers in the sector. These large companies are generally viewed as
the best acquirers, both because they can often rapidly accelerate a
target’s growth (due to their size, brand name, and large sales team)
and because they are often willing to pay higher valuations (for
technologies they really want) compared to other buyers. Rather than
focusing on average numbers across the entire sector, we thought it
would be more interesting to provide details on the specific acquisitions
that these premium enterprise software buyers have done.
Why We Selected the Companies that are Included
Given the large number of enterprise software vendors, there are dozens of
companies we could have highlighted. A few comments on the companies
that we selected:
• Oracle, Microsoft, IBM, SAP, Salesforce – These are all active
acquirers and very large diversified enterprise software companies
(Salesforce is the smallest of the five and its market cap is over $55
billion). As such, we thought these were all “no-brainers” to include.
We note that Microsoft had been included in our prior report, but since
it is one of the largest enterprise software companies we felt it made
sense to include Microsoft in this report as well (the deciding factor was
that it was an easy “copy and paste” for us!).
11 The High-Profile Enterprise Software Acquirers
• Cisco – Cisco has been a very active acquirer since the early 1990s
and much of the company was built through acquisitions. Despite this,
we likely would not have included Cisco a few years ago, as most of
its historical acquisitions were for hardware and/or networking-related
companies. However, during the past few years a large portion of
Cisco’s acquisitions have been enterprise software companies
including the recently announced acquisition of AppDynamics
(application performance management software) for about $3.6 billion.
Based on Cisco’s recent deal activity and that it is certainly viewed as
a “high-profile” buyer, we included Cisco in this report.
• VMware (but not Dell or EMC) – Despite its much publicized $60
billion acquisition of EMC, Dell has made very few acquisitions in
recent years (only a couple of other deals since 2013). In addition, last
year it divested a substantial portion of its enterprise software business
(Quest and SonicWall) to private equity firms. As such, we did not
include Dell. We would have included EMC prior to its acquisition by
Dell. Although EMC was mostly known for storage, it had become an
active enterprise software acquirer. However, as EMC is now part of
Dell, those deals are no longer reflective of what Dell/EMC might
acquire in the future, so we did not include EMC. On the other hand,
although Dell owns a majority of VMware, VMware seems to have its
own acquisition strategy so we included it in the report.
• HP Enterprise – From late 2009 through mid-2011, Hewlett Packard
was an active buyer and made a variety of high-profile acquisitions
including 3Com, Palm, 3Par, ArcSight, Vertica, and Autonomy.
However, several of those deals (most notably Autonomy) were not
successful. When Meg Whitman assumed the CEO role in late 2011,
HP all but ceased its M&A activity for several years (no deals in 2012
or 2013). Hewlett-Packard began making acquisitions again in 2014
and then split the business into two pieces (HP and HP Enterprise) in
late 2015. As HP Enterprise (HPE) has been an active buyer during
the past few months (four deals already announced in 2017) and given
its large size we decided to include it.
12 The High-Profile Enterprise Software Acquirers
• Adobe – Adobe is a large software company (over $60 billion market
cap). Although it isn’t as acquisitive as buyers such as Oracle and
IBM, Adobe generally acquires at least a couple of companies each
year and has made a number of interesting acquisitions during the past
few years including Neolane, TubeMogul, and Fotolia. As such, Adobe
is included in this report.
• CA Technologies – As with Adobe, CA isn’t the most acquisitive
company. However, it has acquired a dozen companies since early
2013, has a strong focus on enterprise software, and is usually a
prospect on most of our enterprise software deals. Therefore, we
included CA in the report.
• Vista Equity – The last chapter of this report briefly discusses private
equity (PE) firms. To provide some sense for the activity of these firms
we wanted to include an overview of the recent deals by one of the PE
firms that is specifically focused on enterprise software. While there
are many software-focused private equity firms, we chose Vista Equity
Partners since it has been very active during the past couple of years
and has made several high-profile acquisitions (e.g., Marketo, Cvent,
etc.). In addition, Vista has completed a variety of different types of
deals, such as acquiring two companies and merging them. We,
therefore, thought Vista was a good example of a PE firm to highlight.
As noted above, there are dozens of other enterprise software companies
we could have included (e.g., Symantec, Intuit, BMC Software, Software AG,
etc.) as well as other hardware companies that have made numerous
enterprise software acquisitions (e.g., Ericsson, Nokia, etc.). However, we
wanted to limit the report to a reasonable length. In a number of cases, we
excluded companies because they haven’t been very acquisitive. For
example, although Symantec has recently completed a couple of multi-billion
dollar acquisitions (LifeLock and Blue Coat), it has made very few other
acquisitions since mid-2012.
13 The High-Profile Enterprise Software Acquirers
Mostly Enterprise Software Deals, but All Deals Included
The vast majority of acquisitions by the buyers highlighted in this report have
been purchases of enterprise software companies. However, there have
been a variety of exceptions including a few hardware deals (e.g., Oracle
acquired Acme Packet and Sun Microsystems; Microsoft acquired Nokia’s
Mobile unit; Cisco acquired Leaba Semiconductor; HP/HPE acquired SGI,
Aruba Networks, and recently announced Nimble Storage). Although the
focus for this report is enterprise software, we included all the acquisitions
made by the highlighted companies, even though some of the targets are
not enterprise software companies.
Enterprise Software M&A Activity
Several Hundred Acquisitions Every Quarter
As noted above, most enterprise software M&A overviews focus on
aggregate numbers across the industry, while the primary focus for this
report is the acquisition activities of the “high-profile” buyers. However, this
section briefly discusses overall enterprise software activity.
• Number of Acquisitions – We have seen substantial differences in
reports, presentations, and M&A databases regarding the total number
of enterprise software M&A deals per quarter (some showing nearly
twice as many deals as others). One factor causing this discrepancy
is that there isn’t a rigorous definition of enterprise software. While
some deals obviously fit in the category, there are others where it isn’t
clear. This is increasingly the case as consumer software solutions
are more often being used in enterprises, and emerging markets such
as IoT often cross over both consumer and industrial applications.
Another factor is that while virtually every M&A database includes the
well-publicized multi-billion dollar acquisitions, the vast majority of
transactions are much smaller deals (well under $100 million) and
there is much less consistency in tracking these smaller transactions.
14 The High-Profile Enterprise Software Acquirers
While there are discrepancies in the absolute number of enterprise
software deals, the two common take-aways from all these sources
are: 1) there are a lot of deals (several hundred per quarter) and 2) the
number of deals has been relatively stable. For example, one M&A
database indicates that the total number of enterprise software
acquisitions has generally hovered at between 400 and 450 deals per
quarter for the past few years (large and relatively stable).
• Aggregate Value – In contrast to the number of enterprise software
deals per quarter which is relative stable, aggregate deal value is
highly volatile and can vary from under $5 billion to well over $50 billion
from one quarter to the next. However, in our view these numbers are
largely meaningless from the perspective of a start-up, as the vast
majority of the aggregate value is usually based on a few very large
deals. For example, in Q2:16 Microsoft announced the acquisition of
LinkedIn for over $26 billion and Symantec announced the acquisition
of Blue Coat for nearly $5 billion. The value of those two deals was
greater than the value of all other enterprise software acquisitions that
quarter or the previous quarter, resulting in a huge spike for Q2:16. If
the Microsoft/LinkedIn deal had been announced just a few weeks
later, Q3:16 would have shown the huge spike instead. As such, we
don’t think this provides much insight into the overall M&A market
dynamics from the perspective of a private software company.
• Multiples – With respect to valuation, most enterprise software M&A
databases and presentations we have come across generally indicate
a median revenue multiple of somewhere between 3X and 4X trailing
revenue. As noted later in this report, that is well below the median
multiple (more than 8X) for the deals listed in this report by the “high-
profile” companies. This is one of the reasons the companies
highlighted in this report are often viewed as the most desirable buyers.
15 The High-Profile Enterprise Software Acquirers
General Highlights
Enormous Buying Power
Combined, the ten strategic buyers highlighted in this report (Oracle,
Microsoft, IBM, Salesforce, SAP, Cisco, HP Enterprise, VMware, Adobe, and
CA) have a market capitalization of over $1.3 trillion (and total cash and
equivalents of over $275 billion, as of their most recent earnings reports). As
such, these companies clearly have the ability to make many acquisitions.
Active Acquirers (Some More than Others)
Each highlighted enterprise software company has been acquisitive, but
some more so than others. This report lists more than 260 acquisitions made
by the ten highlighted companies since the beginning of 2013. While none
of these companies are as active as Google (which completed about 100
deals from 2013 through 2016), each has announced more than ten
acquisitions since the beginning of 2013. There is, however, a large spread.
Microsoft and IBM, for example, have each made 50 or more acquisitions;
Cisco, Oracle, and Salesforce have each completed between 25 and 40
transactions; and the others have acquired between 10 and 20 companies.
Source: Menalto Advisors. Based on announced date and deals listed in this report.
0
10
20
30
40
50
60
Number of Acquisitions (2013-Q1:17)
2013 2014 2015 2016 Q1:2017
16 The High-Profile Enterprise Software Acquirers
SaaS/Cloud Software Makes Acquisitions Easier
A positive for enterprise software acquisitions has been the trend towards
cloud-based SaaS software models. One of the concerns that buyers
historically had with acquisitions is “version control.” That is, software
companies had many different versions of their software installed on a variety
of hardware around the world and supporting all the different versions
required substantial resources. However, with the SaaS model, companies
can ensure similar versions are used across customers. This makes
acquisitions easier to integrate and support.
Mostly Private Acquisitions
In our previous report, we noted that the highlighted companies (Apple,
Google, Facebook, Intel, Microsoft, Samsung, and Amazon) only rarely
acquired public companies (less than 2% of the deals since 2013). For the
companies highlighted in this report, the percentage isn’t quite that low.
Oracle in particular has acquired several public companies during the past
few years (e.g., NetSuite, Opower, Textura, Micros, Responsys, Acme
Packet). However, of the more than 260 acquisitions listed in this report
(from 2013 through Q1:17, and excluding PE acquisitions), less than 7%
were acquisitions of public companies. Thus, private companies represent
the vast majority of the targets for these buyers.
Public Company Premiums
The appendix includes a table showing the premiums for the acquisitions of
public companies listed in this report since 2013 (i.e., how much the buyer
paid relative to the market capitalization of the target just before the deal was
announced). According to the data in the appendix, the median premium
was 35%, with a range of 19% to 82% and an average of 41%.
Premium Buyers
One of the reasons the highlighted companies are viewed as desirable
acquirers by private technology companies is they are often willing to pay
relatively high valuations for companies that they believe have attractive
solutions and that they can leverage to further accelerate growth.
17 The High-Profile Enterprise Software Acquirers
A good example of this is the marketing automation software sector in which
there have been several relatively high multiple deals over the past few years
by the companies/firms listed in this report. For example, in terms of revenue
multiples, Oracle acquired Responsys at close to 8X and Eloqua at nearly
10X; Salesforce bought ExactTarget at close to 8X; Adobe acquired Neolane
at more than 8.5X; and Vista Equity bought Marketo at about 8X. In contrast,
there have been many deals in the sector by other buyers at much lower
valuations (e.g., in several cases less than 2X revenue).
While obviously not always the case, the acquisitions by these larger
companies tend to be at the higher end of valuation multiples compared to
other software buyers. Of course, the larger buyers tend to focus on
acquiring the better companies, which explains part of the gap. In general,
however, most of the enterprise software start-ups we meet tend to view the
companies listed in this report (and our last report) as their most desirable
acquirers when they look for an exit.
Valuation Information (High Revenue Multiples)
The appendix contains a table listing the transactions and revenue multiples
for the acquisitions in this report in which both the deal consideration and the
target’s revenue are either publicly available or estimated by a third-party
source. We would not read too deeply into these numbers as they represent
only a small portion of the deals and it is biased towards the larger public
company acquisitions in which the deal value and revenue numbers are
publicly available. With that said, the median revenue multiple (generally
enterprise value to trailing revenues) for the deals in this report in which both
revenue and valuation are available or estimated is over 8X (with more than
a dozen deals above 20X and an average revenue multiple above 12X). This
is considerably higher than the median across the industry (typically 3X to
4X), further supporting the view that the highlighted companies are
“premium” buyers. Additional details can be found in the appendix and in
the deal summaries throughout the report.
18 The High-Profile Enterprise Software Acquirers
Many International Deals
Of the more than 260 acquisitions listed in this report (by the ten highlighted
companies since the beginning of 2013), about 28% of the transactions were
for target companies (or business units) located outside the US. There is a
bit of subjectivity to this as some companies initially start in Europe or Israel,
for example, and then later move their headquarters to the US. In any case,
the following graph illustrates the location of the target companies. Note that
if the US were on the chart it would have about 190 deals. As shown, the
most common target countries include Israel, Germany, the United Kingdom,
Canada, and France.
Source: Menalto Advisors (based on the deals listed in this report since January, 2013 by
the ten highlighted companies).
The interest level in non-US acquisitions appears to significantly vary by
company. A substantial portion (30% or more) of the acquisitions by
Microsoft, IBM, Cisco, SAP, and CA Technologies have been non-US
targets. In contrast, very few of the acquisitions made by Oracle were of
non-US targets (less than 10%).
0
2
4
6
8
10
12
14
16
Acquisitions by Target's Location (2013 - Q1:17)
19 The High-Profile Enterprise Software Acquirers
Building a Relationship Early Can Have M&A Benefits Later
As we noted in our previous report, one important point for private technology
companies is that a meaningful number of the acquired companies already
had some type of relationship with the acquirer (e.g., the buyer was a
business partner, an investor, etc.). As such, getting to know the potential
buyers ahead of an M&A process can help “de-risk” deals for the buyer and
enhance the value for the target’s shareholders.
Technology Theme Highlights
Some of the Most Commonly Acquired Technologies
The 260+ deals listed in this report cover a broad range of different types of
technologies. This section discusses some of the common technology
themes across the transactions.
Cloud Computing
Not surprisingly, one of the major trends
across the acquisitions listed in this report is
cloud computing. Cloud computing initially
received a lot of hype with not a lot
happening, and many of the traditional
enterprise software players were at first
reluctant to embrace it. For example, Oracle
Chairman Larry Ellison, usually a visionary
within the industry, was initially negative
about cloud computing (see quote).
However, during the past few years
enterprises have increasingly embraced the
cloud. As just one data point, Amazon’s AWS cloud computing business
generated $12.2 billion of revenue in 2016, up from $4.6 billion in 2014 and
relatively minimal levels just a few years earlier. As such, many of the major
software companies have indicated that they were late and have made a
substantial number of cloud-related acquisitions to bulk up in that area.
“I don’t understand what we
would do differently in light of
cloud computing other than
change the wording of some of
our ads. That’s my view.”
- Larry Ellison, 2008
“We’re in the middle of a
generational change — from
on-premise computing to super
data centers called clouds.”
- Larry Ellison, 2016
20 The High-Profile Enterprise Software Acquirers
As the industry has rapidly shifted to cloud computing, many start-ups are
focused on providing cloud-based solutions, so a substantial portion of the
targets in this report are cloud-related companies. Just a few of the many
examples of cloud-focused acquisitions include:
• Oracle – Oracle acquired LogFire (cloud-based product inventory
management), Palerra (cloud-based security), NetSuite (broad cloud-
based ERP portfolio), Opower (cloud-based utility analytics), Revello
(tools for running workloads in the cloud), Textura (cloud services for
construction and engineering project management), Datalogix (cloud-
based target advertising), TOA (cloud-based field service
management), BlueKai (cloud-based consumer data aggregation
platform), BigMachines (cloud-based CPQ), Eloqua (marketing cloud
automation), and Taleo (cloud-based human capital management).
• Microsoft – Microsoft acquired LinkedIn (cloud-based professional
network platform), Talko (cloud-based VoIP conference calls),
Projectum Apps (two cloud-based apps for financials), Adallom (cloud
security solutions), InMage (cloud-based continuity solutions),
Parature (cloud-based customer engagement tools), MetricsHub
(active cloud monitoring solutions), and Pando Networks (cloud
distribution of software, games, and video).
• IBM – IBM acquired Bluewolf (cloud consulting and implementation
services), Optevia (cloud-based SaaS systems integration for public
sector organizations), UStream (cloud-based video streaming and
conferencing service), Clearleap (cloud-based video services),
Gravitant (cloud-based software that helps organizations “broker”
computing services and software), AppCore’s Cloud assets (cloud
automation assets), Blue Box (managed OpenStack-based private
cloud provider), Explorsys (cloud-based healthcare intelligence
solutions), Lighthouse (cloud security service provider), Silverpop
(cloud-based marketing automation), Cloudant (cloud-based
database-as-a-service), Xtify (cloud-based mobile messaging tools),
and SoftLayer (cloud computing infrastructure provider).
21 The High-Profile Enterprise Software Acquirers
• Salesforce – As Salesforce is primarily a cloud-based solutions
provider most of its targets have been cloud-based software
companies. A few examples include: HeyWire (cloud-based mobile
messaging for enterprises), Quip (cloud-based word processing
solutions), Demandware (enterprise cloud commerce solutions),
Kerensen Consulting (cloud consulting firm, assists enterprises in
transitioning to the cloud), Cloudconnect (assists enterprises in
connecting their data to cloud services), and ExactTarget (cloud-based
marketing automation).
• SAP – SAP acquired Volume Integration (assists in developing
analytics cloud capabilities), Altiscale (cloud-based version of Hadoop
for storing, processing, and analyzing data), Mellmo (cloud-based
mobile business intelligence), Concur (cloud-based corporate travel
and expense management), OpTier (cloud-based application
performance monitoring), SeeWhy (cloud-based behavioral target
marketing solutions), Fieldglass (cloud-based vendor management),
Ariba (cloud-based Internet commerce), and SuccessFactors (cloud-
based employee management software).
• Cisco – Cisco acquired Cloudlock (cloud security using cloud security
broker technology), Synata (solution to search on-premise and cloud-
based applications simultaneously), CliQr (cloud orchestration
platform), Jasper (cloud-based IoT service platform), 1 Mainstream
(cloud-based video platform), MaintenanceNet (cloud-based analytics
for customer service contracts), Piston Cloud Computing
(orchestration of a private cloud environment on commodity servers),
Tropo (cloud-based APIs for embedding real-time communications in
apps), Metacloud (private clouds using an “OpenStack-as-a-Service”
model), and SolveDirect (cloud-based solutions for automating the
sharing of data and workflows with service partners).
• VMware – VMware acquired CloudVolumes (cloud-based application
delivery solutions), certain assets of Virtual Systems Solutions (cloud-
based migration assets), and Desktone (delivering Windows desktop-
as-a-service as a cloud service).
22 The High-Profile Enterprise Software Acquirers
• HP Enterprise – HPE acquired Cloud Cruiser (track and control use
of public and private cloud computing) and Eucalyptus (open source
software for building enterprise clouds).
Artificial Intelligence (AI) / Machine Learning
Our initial Menalto Advisors Thought Report provided an overview of the
AI/Machine Learning sector. Our second report pointed out that a significant
number of acquisitions made by companies such as Google and Apple were
in the AI sector. Not surprisingly, a meaningful number of the targets in this
report are also AI-related companies. Some examples include:
• Oracle – Oracle acquired Crosswise (machine learning for mapping
multiple devices to users for cross-device advertising).
• Microsoft – Microsoft acquired Maluuba (AI for natural language
processing), Genee (AI to help schedule meetings), SwiftKey (AI for
improving touch screen typing), Aorato (machine learning for cyber
security), and Equivio (machine learning for eDiscovery and
governance).
• IBM – IBM acquired Fluid XPS (product recommendation platform
utilizing Watson), Iris Analytics (machine learning real-time analytics to
detect payment fraud), Alchemy API (cognitive computing APIs for
computer vision and text analysis), and Cognea (AI/cognitive
computing platform for virtual assistants). IBM also acquired several
companies (Merge Healthcare, Truven Health, Weather Company,
etc.) with the intent of using the data that these companies had to train
its Watson cognitive computing platform.
• Salesforce – Salesforce acquired Twin Prime (machine learning to
analyze network data and find performance issues with mobile apps),
Krux (AI for audience tracking/targeting), MetaMind (deep learning
technology including image recognition), PredictionIO (machine
learning software), and Tempo AI (AI for smart calendar apps).
23 The High-Profile Enterprise Software Acquirers
• SAP – SAP acquired Hipmunk (travel assistance including an AI
personal travel assistant).
• Cisco – Cisco acquired Cognitive Security (AI for detecting cyber
threats through behavioral analysis).
• HP Enterprise – HPE acquired Niara (machine learning behavior
analytics for cybersecurity).
Cybersecurity
Given the growing number of IT security incidents, there have been a
meaningful number of cybersecurity acquisitions. Some examples include:
• Oracle – Oracle acquired Palerra (security for enterprise apps) and
Bitzer Mobile (authentication and data control for BYOD apps).
• Microsoft – Microsoft acquired Secure Islands (data security,
protection, and loss prevention), Adallom (software to find anomalies
that could represent security issues), and Aorato (machine learning to
detect suspicious activity and anomalies).
• IBM – IBM acquired Agile 3 (manages risks associated with sensitive
data protection), Resilient Systems (incident response platform for
cybersecurity incidents), Lighthouse Security (cloud security service
provider), CrossIdeas (manages user access to data and applications),
and Trusteer (cybersecurity and threat intelligence).
• Salesforce – Salesforce acquired Toopher (two-factor security
authentication solutions).
• Cisco – Cisco acquired CloudLock (cloud access security broker
technology), Lancope (network security including behavior analytics
and threat visibility), Portcullis (cybersecurity consulting firm),
OpenDNS (security-as-a-service using DNS servers), Neohapsis
(cybersecurity and risk management consulting), ThreatGrid
(sandboxing technology and malware analysis), Sourcefire (network
security and malware protection), and Cognitive Security (AI for
detecting cyber threats through behavioral analysis).
24 The High-Profile Enterprise Software Acquirers
• VMware – WMware acquired Arkin Net (software defined data center
security operations solutions) and AirWatch (broad range of mobile
device management including security).
• HP Enterprise – HPE acquired Niara (machine learning behavior
analytics for cyber security), Voltage Security (data-centric encryption
for protecting payment data), and ArcSight (enterprise cybersecurity
and compliance software).
• CA Technologies – CA acquired Veracode (software securing web,
mobile, and third party applications), Mobile System 7 (manages
deployed systems and secure data with a focus on mobile), Xceedium
(privileged identity management solutions), and IdMlogic (intelligent
identity management applications).
Other Technology Themes
Some other common technology themes include:
• Marketing Automation/Optimization Software – Several of the
highlighted companies have acquired marketing automation software
businesses. For example, Oracle acquired Responsys (B2C
marketing automation software) and Eloqua (marketing automation
software); Adobe acquired Neolane (marketing automation focused on
cross-channel campaign management); IBM acquired Silverpop
(omnichannel marketing automation); and Salesforce acquired
ExactTarget (marketing automation platform).
Additionally, there have been a variety of other marketing-related
acquisitions. For example, Oracle also acquired Webtrends’ Infinity
solution (marketing analytics), Maxymiser (helps marketing
organizations customize and test websites for better sell-through),
BlueKai (data platform to personalize marketing campaigns), Datalogix
(helps digital marketers track the effectiveness of ads), and
Compendium (content marketing solutions). SAP acquired Abakus
(marketing attribution) and SeeWhy (behavioral target marketing
solutions). IBM acquired Xtify (mobile messaging marketing tools).
25 The High-Profile Enterprise Software Acquirers
• Sales Optimization Software – A variety of targets had software to
help improve sales and the sales process. As a few examples,
Salesforce acquired RelateIQ (analyzes CRM and email data to make
recommendations to improve the sales process and enhance sales)
and Implisit (utilizes information stored in customer databases to help
salespeople make better decisions); Oracle acquired BigMachines
(configure, price, and quote software); and Salesforce acquired
Steelbrick (configure, price, and quote and subscription billing apps).
• Analytics – We previously noted a number of AI/machine learning
transactions. However, there have been a variety of acquisitions of
companies that provide analytics and business intelligence solutions
which don’t fit within the machine learning category. For example,
Microsoft acquired Metanautix (big data analytics across silos),
VoloMetrix (organizational analytics) and Capptain (analytics for app
developers); IBM acquired The Now Factory (analyzes network data to
provide insights to services providers) and Truven Health Analytics
(healthcare data, analytics, and intelligence); Salesforce bought
BeyondCore (enterprise data analytics), Coolan (analyzes data center
hardware to optimize operations), and EdgeSpring (enterprise
business intelligence); SAP acquired KXEN (data mining and
predictive analytics solutions); Cisco acquired MaintenanceNet (data
analytics to manage recurring customer contracts); HPE reportedly
acquired Rasa Networks (network performance and analytics); and
Adobe acquired ComScore’s Digital Analytix unit (enterprise analytics).
• E-commerce Solutions – There have been numerous acquisitions of
e-commerce software companies, although several occurred a few
years ago. For example, SAP acquired Hybris (enables businesses to
sell to customers across many channels) and Ariba (cloud-based
Internet commerce); Salesforce acquired Demandware (enterprise
cloud commerce solutions); Oracle acquired ATG (cross-channel e-
commerce software platform); and IBM acquired Sterling (e-commerce
fulfillment, order management, and B2B commerce).
26 The High-Profile Enterprise Software Acquirers
With the large number of deals listed in this report, there are dozens of other
technology themes that could be mentioned, each with a few examples
listed. However, as the report describes all the transactions, the reader can
easily search through to find deals in any specific target application.
A Note on SaaS Companies
One of the curious questions we often receive as M&A advisors that have
done many deals in the software sector is “do we have experience selling
SaaS software companies?” The question is asked as if SaaS was a vertical
of the software market, such as cybersecurity software or telecom
infrastructure software. In reality, SaaS is essentially a business model,
rather than a technology, and is now commonplace across the entire industry
(it would be difficult to do software M&A without doing SaaS deals).
With SaaS, software is licensed on a subscription basis and is generally
centrally hosted (including maintaining the software), rather than selling the
software to customers upfront. Thus, customers receive the benefits of the
software without owning and maintaining it. In addition, the SaaS model is
generally more palatable for customers since they can pay relatively small
amounts on an ongoing basis (operating expenses) rather than having to pay
a large amount upfront (which is sometimes categorized as a capital expense
and often requires a more rigorous and lengthy approval process at most
companies). The SaaS model results in a mostly recurring and more
predictable revenue stream for SaaS software companies since most of the
revenue comes from existing subscriptions, rather than new customer wins
which can be lumpy. All things being equal, valuations for companies with a
SaaS model tend to be much higher since the buyer has greater assurance
that the existing revenues will continue.
Not surprisingly, most of the software start-ups we come across these days
are either already SaaS companies or transitioning to a SaaS model. We,
therefore, didn’t highlight “SaaS” as a theme as it would apply to a large
portion of the target companies listed in the report.
27 The High-Profile Enterprise Software Acquirers
Some Comments on the Transaction Data
Broad Range of Sources
The M&A transactions listed in this report came from a variety of sources.
Some companies announce virtually all their M&A deals, while others report
only larger deals, and smaller deals are often later discovered by
newspapers and technology magazines. We tried to provide a
comprehensive list but obviously there may be some missing deals.
We included valuation data (price, revenue multiple) when available but in
many cases when the target is a private company that information is not
publicly disclosed. In some cases, the purchase price was not in the official
announcement but was later reported (or estimated) in newspapers or
magazines, in which case we generally provide the source. We also included
the target’s country if it was outside the United States. Only mergers and
acquisitions are included and not minority investments, divestitures, or joint
ventures. The report includes transactions announced through Q1:17 (March
31, 2017). Deals announced after that date are not included. The company
market capitalizations noted in this report are also as of the end of Q1:17.
Details on Each Transaction
While there are a variety of company M&A lists available, most provide only
a very brief description of the acquired targets (typically 2 or 3 words) which
doesn’t really explain what the acquired target did. So we tried to include at
least a couple of sentences describing each target’s solutions. For the date,
we generally included the announcement date rather than the closing date.
For private companies, these dates are usually close together but when the
target is a public company the closing is typically several months later.
We note that there are several deals listed in this report that the Menalto
Advisors’ bankers were involved with and, therefore, have all the financial
details. However, we included information only from public sources, even if
we have more accurate non-public data.
28 The High-Profile Enterprise Software Acquirers
We Look Forward to Hearing from You
Comments Welcome
We hope you find this report useful. We plan to update it from time to time
to reflect new M&A deals and trends. If you have any comments, catch any
errors, or have recommendations for the next edition, please let us know!
Happy to Chat!
Of course, if you know any technology companies that may be considering
M&A now or in the future, please feel free to have them contact us! We look
forward to hearing from you!
29 The High-Profile Enterprise Software Acquirers
“What is Oracle? A bunch of people. And all of our products
were just ideas in the heads of those people.”
- Larry Ellison, Oracle Founder and Chairman
Introduction
Oracle was founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates,
although its original name was Software Development Laboratories. The
company later changed its name to Relational Software, and then to Oracle
in 1982. Oracle was an early leader in providing relational database
management systems (RDBMS) and an early provider of SQL RDBMS
solutions. By implementing its solutions in C, the company was able to
quickly port its software to many computing platforms and became the
RDBMS leader. Over the past couple of decades, Oracle has diversified into
a variety of other enterprise and application software markets. It also
provides some hardware products due to its acquisitions of companies such
as Sun Microsystems and Acme Packet.
For its Q3:F17 quarter (ended February 2017), Oracle reported revenue of
just over $9.2 billion. Its revenue breakout was: Cloud Software/Platform as
a Service – 11%, Cloud Infrastructure as a Service – 2%, New Software
Licenses – 15%, Software License Updates (and Support) – 52%, Hardware
Products – 6%, Hardware Support – 6%, and Services – 9%.
Oracle has been a fairly active acquirer during the past two decades. Its
expansion into applications has been driven by a variety of acquisitions such
as BEA Systems, Hyperion, Siebel Systems, and PeopleSoft. More recently
it acquired Micros Systems. A major recent focus for Oracle has been
transitioning to cloud-based solutions and, not surprisingly, many of its
acquisitions have been for cloud-related companies.
Chapter 1: Oracle
30 The High-Profile Enterprise Software Acquirers
Although Oracle occasionally purchases early stage technology companies,
most of its acquisition targets have been either later stage private companies
with significant revenue or public companies. While Oracle has made a few
hardware acquisitions (Sun, Acme Packet, etc.), the vast majority of its
targets have been enterprise software companies. Most of its acquisitions
have been US-based companies.
Select Oracle Acquisitions
Acquisitions Since 2013
The following are acquisitions made by Oracle since the beginning of 2013:
• Webtrends’ Infinity Platform – In March 2017, Oracle announced
that it agreed to acquire Webtrends’ Infinity Platform solution. The
Infinity solution enables enterprises to view how customers interact
with their brand across any digital channel at any time. Oracle
indicated that it would add the Infinity analytics solution to its Oracle
Marketing Cloud. Webtrends was previously acquired by private equity
firm Francisco Partners. It is based in Portland, Oregon.
• Apiary – In January 2017, Oracle announced that it signed an
agreement to acquire Apiary. Apiary provided tools for creating APIs.
Its APIFlow solutions enable enterprises to design, manage, test, and
document APIs, and it supports OpenAPI standards. TechCrunch
indicated the company was founded in 2011 and had raised only about
$8.5 million. Flybridge and Credo were investors. The company was
founded in the Czech Republic but had a San Francisco headquarters.
• Dyn – In November 2016, Oracle announced an agreement to acquire
Dyn. Dyn is a major Domain Name System (DNS) vendor and assists
customers with optimizing Internet applications and cloud services.
Dyn indicates it had more than 3,500 enterprise customers (including
Netflix, Twitter, CNBC, and Pfizer). Its solution helps enable faster
access and shorter page load times. However, Dyn had been subject
31 The High-Profile Enterprise Software Acquirers
to a major DDoS cyber-attack in October 2016 which caused Internet
issues across the Eastern U.S. for a short period of time. The price
was not announced but TechCrunch stated that one source indicates
it was more than $600 million and PitchBook estimates it was
approximately $650 million.
• Palerra – In September 2016, Oracle announced that it acquired
Palerra. Palerra was focused on cloud-based security for enterprise
apps. An enormous amount of data is transferred and exchanged by
apps and APIs across enterprises, and Palerra’s Cloud Access
Security Broker solution (LORIC) provides several layers of protection
for this type of data. Customers for its solution included Pitney Bowes
and VMware. The company’s co-founders both previously worked at
Oracle. Palerra was founded in 2013 (as Apprity) and its investors
included Norwest and August Capital.
• LogFire – In September 2016, Oracle announced that it acquired
LogFire, which provided cloud-based solutions to help customers
manage their product inventory. Oracle indicated that the team would
join Oracle’s supply chain management cloud division and that the
LogFire technology would complement Oracle’s Supply Chain
Management Cloud solution by providing cloud-based warehouse
management capabilities. LogFire indicated that it had over 40
customers including Ryder, Sears, and Glad and that its solution was
used in more than 250 stores. It was founded in 2007 and had been
based in Atlanta. PitchBook estimated the price was $36 million.
• NetSuite – In July 2016, Oracle announced that it entered into an
agreement to acquire NetSuite for $109/share in cash (about a 19%
premium to where the stock had previously traded), approximately $9.5
billion or slightly less than $9.4 billion net of cash and debt. NetSuite
was one of the first major cloud companies, providing business
applications over the Internet. NetSuite provided a variety of cloud-
based ERP (enterprise resource planning), financial, and commerce
software solutions. It indicated that it had more than 30,000 customers
32 The High-Profile Enterprise Software Acquirers
in over 100 countries. Oracle noted the acquisition would help expand
its cloud strategy, especially in the small and medium business
segment where NetSuite had a lot of customers. Oracle used a tender
offer to complete the deal, but had to extend the offer deadline when it
initially didn’t receive enough shareholder acceptances. However, the
deal closed in November 2016. NetSuite had about $846 million of
trailing revenue (about an 11X multiple).
• Opower – In May 2016, Oracle announced that it entered into an
agreement to acquire Opower, a publicly traded company, for
approximately $532 million ($10.30/share) in cash, about a 30%
premium to where Opower had traded. Opower developed a variety of
cloud-based software analytics solutions for utilities for improving
energy efficiency and customer care. Its platform analyzes hundreds
of billions of meter readings from 60 utility customers (e.g., PG&E,
National Grid, Exelon, etc.) to help utilities improve efficiencies,
increase customer satisfaction, and meet regulatory requirements. Its
solution also enables utilities to provide end customers with
personalized energy usage information, as well as better billing data.
Opower had about $149 million of trailing revenue (deal was
approximately 3.6X revenue) but still had an operating loss. Its IPO
was in 2014 and it was founded in 2007.
• Textura – In April 2016, Textura announced that it was being acquired
by Oracle for approximately $663 million ($26/share) net of cash, about
a 31% premium to where Textura had traded prior to the
announcement. Textura developed cloud-based software solutions for
the construction industry. Textura indicated that its cloud services
processed over $3 billion in payments for over 6,000 construction
projects each month to help keep projects on time and reduce risk for
developers and contractors. Its solutions include various pre-
construction (estimating, invitation to bid, bid tracking) and construction
(invoicing, management, performance evaluation) applications.
Textura had about $92 million of trailing revenue (7.2X revenue
multiple) and had an operating loss, but was growing fast.
33 The High-Profile Enterprise Software Acquirers
• Crosswise – In April 2016, Oracle announced the acquisition of
Crosswise. Crosswise developed solutions for mapping multiple
devices to individual users to improve cross device advertising. It
indicated that its probabilistic matching machine learning technology
provided advantages over historical deterministic device matching
technologies. The price was not announced but a number of reports
(e.g., TechTime) indicated that sources provided an approximate value
of $50 million. The 451Group estimates revenue was only $1.5 million
(33X multiple). Crosswise was based in Israel.
• Ravello Systems – In February 2016, Revello announced that it
entered into an agreement to be acquired by Oracle. Ravello
developed tools for helping run any type of workload in the cloud,
without time consuming application rewrites. Customers included Red
Hat, Brocade, and Symantec. Investors included Qualcomm, SanDisk.
Sequoia, Bessemer, Norwest, and Vintage Investment Partners. The
company was based in Silicon Valley and was founded in 2011. The
price was not announced but VentureBeat reported that sources
indicated it was approximately $500 million.
• AddThis – In January 2016, Oracle announced it signed an agreement
to acquire AddThis, which provided publisher personalization,
audience insight, and activation tools. Its solutions allow users to
share stories and it provides audience tracking technology. The
company indicated that it tracks activity for 1.9 billion monthly visitors.
The price was not announced but TechCrunch reported it was likely
between $100 and $200 million, and the 451Group estimates it was
$175 million with an 8.8X revenue multiple.
• StackEngine – In December 2015, StackEngine announced on its
website that it had been acquired by Oracle. StackEngine was focused
on Docker containerization. Docker is an open source standard for
wrapping software with a complete filesystem (tools, libraries, etc.) so
the software runs the same regardless of the environment.
StackEngine had developed administrative tools to help manage these
containers. The company was based in Austin.
34 The High-Profile Enterprise Software Acquirers
• Maxymiser – In August 2015, Oracle announced it signed an
agreement to acquire Maxymiser, which had developed cloud-based
software which enables companies and marketing organizations to
personalize and test what a customer sees on a website or mobile app,
to increase sell-through. Maxymiser had many major customers
including Allianz, HSBC, Lufthansa, and Wyndham and indicated that
it helps optimize 20 billion customer experiences per month. The price
was not announced but the 451Group estimates that it was
approximately $170 million with a 4.3X revenue multiple.
• CloudMonkey (IP) – In June 2015, Oracle announced that it signed
an agreement to acquire the intellectual property of CloudMonkey,
including MonkeyTalk Community, Pro, and LabManager.
CloudMonkey created automated testing tools for mobile apps. It was
based in Boulder, Colorado.
• Datalogix – In December 2014, Oracle announced that it signed an
agreement to acquire Datalogix, which provides information on offline
consumer spending to help digital marketers track the effectiveness of
their ads. Oracle indicated that Datalogix aggregates and provides
insight on over $2 trillion in consumer spending across 110 million
households and that its 650 customers include 82 of the top 100 US
advertisers (Ford, Kraft, etc.). The price was not announced but the
Wall Street Journal reported that Oracle spent about $1.2 billion on the
deal and that the multiple was approximately 9.6X. Reports indicated
that other interested parties included Facebook, Adobe, and Nielsen.
• Front Porch – In September 2014, Oracle announced that it signed an
agreement to acquire Front Porch Digital. Front Porch provided
content storage management solutions that help enterprises manage
and monetize digital media content (e.g., movies, medical images,
security feeds, etc.). Its 550 customers included A&E Television, BBC,
Discovery, NASCAR, and the Library of Congress.
35 The High-Profile Enterprise Software Acquirers
• TOA Technologies – In July 2014, Oracle announced it signed an
agreement to acquire TOA Technologies. TOA provided cloud-based
field service management solutions that help improve coordination and
customer service. The SaaS offering enables better coordination
among mobile employees, dispatchers, customers, and field service
management. It monitors real time customer requests and helps
schedule the right field service employees. Customers included DISH,
Home Depot, Ricoh, and Vodafone. It had about 500 employees, was
based near Cleveland, and was founded in 2003. The price was not
announced but the 451Group estimates that it was approximately $550
million with a revenue multiple of 12.2X.
• Micros Systems – In June 2014, Oracle announced it entered into an
agreement to acquire Micros Systems, a publicly traded company, for
approximately $5.3 billion ($68/share) or about $4.6 billion net of cash.
Micros provided a broad range of enterprise applications and services
for the hospitality and retail industries (e.g., hotels, casinos,
restaurants, cruises, etc.). Its applications included point of sales,
property management, loyalty programs, loss prevention, inventory
management, and analytics. It also provided tablet-based PoS
solutions. Micros was already an Oracle partner. Customers included
Marriott, Starbucks, Ikea, and Burger King. The valuation was about
3.5X revenue and 17X EBITDA. The company was founded in 1977
and was based in Maryland. The deal was only about a 3% premium
to where the stock had previously traded, but there had been reports
about a possible M&A deal during the weeks prior to the
announcement which resulted in a significant run up in the stock.
• LiveLook – In June 2014, Oracle announced an agreement to acquire
LiveLook, which provided a real-time collaboration tool for screen
sharing and co-browsing. The solution can enable sales agents and
customer service personnel to guide consumers through various
screens to resolve issues and improve service. Oracle indicated it
already had 100 customers using LiveLook. The company was based
in New Jersey and was founded in 2008.
36 The High-Profile Enterprise Software Acquirers
• GreenBytes – In May 2014, Oracle announced it acquired
GreenBytes, which provided ZFS file system technology and had
expertise in deduplication, replication, and virtualization. ZFS was
originally developed by Sun, and Oracle indicated it would use the
GreenBytes technology in a line of storage appliances. The company
was based in Rhode Island.
• BlueKai – In February 2014, Oracle announced it signed an
agreement to acquire BlueKai. BlueKai developed a cloud-based big
data platform that allows enterprises to personalize marketing
campaigns with actionable data about targeted audiences. Its Data
Management Platform organizes customer data in the cloud to better
implement personalized marketing campaigns. It also had a large third
party data marketplace. The price was not announced but Business
Insider indicated sources estimated the deal was close to $400 million
and 451Group estimates it was $408 million with a 6.5X sales multiple.
• Corente – In January 2014, Oracle announced it agreed to acquire
Corente. Corente provided software defined networking (SDN)
solutions for wide area networks. Its WAN virtualization platform
allows customers to provision and manage global private networks
connecting to any site over any IP network, accelerating deployment
of cloud-based applications and services. The technology can be
used, for example, to quickly connect data centers. It was founded in
2007 and based in New Jersey.
• Responsys – In December 2013, Oracle announced it entered into an
agreement to acquire Responsys for $27/share or approximately $1.6
billion (or $1.5 billion net of cash). This was a 38% premium to where
the stock had previously traded. Responsys was a supplier of cloud-
based B2C marketing automation software. Its software helps
orchestrate marketing interactions across email, mobile, web, and
social channels. Oracle indicated that it planned to bring Responsys,
along with Eloqua, into the Oracle Cloud. Responsys had slightly
under $200 million of trailing revenue (7.7X revenue multiple).
37 The High-Profile Enterprise Software Acquirers
• Nirvanix (select assets) – In December 2013, Oracle announced that
it had acquired select IP assets and engineering resources from
Nirvanix. Nirvanix was a cloud storage services provider based in San
Diego. It offered public, hybrid, and private cloud storage services.
The company had filed for Chapter 11 bankruptcy in October 2013.
• Bitzer Mobile – In November 2013, Oracle announced the acquisition
of Bitzer Mobile, a provider of mobile applications management
solutions. Its solutions address the security issues related to
employees using their own mobile devices to access corporate data.
The Bitzer Mobile software includes authentication and data control,
and it works across most major smartphones.
• BigMachines – In October 2013, Oracle announced it entered into an
agreement to buy BigMachines. BigMachines provided a variety of
cloud-based Configure, Price, and Quote (CPQ) software solutions. Its
products help automate the sales process by providing dynamic
pricing, workflow approval, upsell recommendations, and other tools to
improve sell-through. The software worked on a variety of platforms
but its Express solution was specifically built on Salesforce’s software
cloud. Its customers included GE, HP, and Symantec. The price was
not announced but Business Insider reported that its sources had
indicated a valuation around $400-500 million or about 5X revenue and
the 451Group indicated the deal value was approximately $450 million
with a 7.5X revenue multiple (approximately $60 million of revenue).
The company was founded in 2000 and based in Illinois, and had
previously been acquired by Vista Equity Partners.
• Compendium – In October 2013, Oracle announced that it had
acquired Compendium, a provider of cloud-based content marketing
solutions which helps enterprises produce and deliver content across
multiple channels. Its solution aligns content with customer profiles to
more effectively engage buyers and drive sales. Oracle indicated that
it would complement its Eloqua Marketing Cloud. Its customers
included Trane and Cvent. It was based in Indianapolis. The
451Group estimated the price was $15 million, with a 7.5X multiple.
38 The High-Profile Enterprise Software Acquirers
• Tekelec – In March 2013, Oracle announced it entered into an
agreement to acquire Tekelec, a major supplier of network signaling
(Diameter, SS7), policy control, and data management solutions for
communications networks. Tekelec’s solutions allow service providers
to better control and monetize their networks. It indicated that its
solutions were used by more than 300 service providers across the
world. Tekelec was founded as an aviation electronics company in the
early 1960s in Europe but later incorporated in the US and focused on
telecommunications, and had been owned by Siris Capital prior to the
Oracle acquisition. Tekelec also had a large portfolio of
communications related patents.
• Nimbula – In March 2013, Oracle announced it agreed to acquire
Nimbula, which provided private cloud management software. The
company’s Director software enabled users (generally enterprises and
service providers) to quickly implement private, public, and hybrid
clouds. Investors included Accel and Sequoia. It had been founded
in 2009 and was based in Silicon Valley.
• Acme Packet – In February 2013, Oracle announced it entered into
an agreement to acquire Acme Packet for $29.25/share which was
more than $2 billion, or approximately $1.7 billion net of Acme’s cash.
This represented about a 22% premium to where the stock had traded
before the deal was announced. Acme was a major supplier of
networking hardware and software solutions, including session border
controllers and multiservice security gateways. Its Session Border
Controllers help deliver voice and video over IP network borders. Its
multiservice gateways help deliver voice and data services over
Internet and WiFi networks. It also had a variety of software solutions
(Net-Net OS). Acme had nearly 2,000 customers around the world.
The valuation was approximately 6X trailing revenue.
39 The High-Profile Enterprise Software Acquirers
Select Earlier Acquisitions
The following are a few larger deals that Oracle announced prior to 2013:
• Eloqua – In December 2012, Oracle announced it entered into an
agreement to acquire Eloqua for about $871 million, net of cash
($22.50/share, about a 31% premium to where the stock traded).
Eloqua was a major supplier of marketing automation software. Its
solutions help companies analyze website and social media
interactions, and improve marketing to enhance sales, including
measuring the effectiveness of email campaigns. Customers included
Adobe, VMware, and American Express. The deal was about 9.7X
trailing revenue and Eloqua was not yet profitable. The company had
been based in Virginia and had its IPO just a few months earlier.
• RightNow Technologies – In October 2011, Oracle announced it
entered into an agreement to acquire RightNow Technologies for
approximately $1.5 billion, net of cash and debt ($43/share, about a
20% premium to where the stock had traded). RightNow had a cloud-
based customer service solution that helps enterprises provide
improved customer experiences through call centers, websites, and
social networks. The deal was done at approximately 9X revenue.
• Endeca – In October 2011, Oracle announced it entered into an
agreement to acquire Endeca Technologies. Endeca’s solution
(including its MDEX engine) helps companies analyze unstructured
data to obtain better business insights. Its InFront application is a
management platform that enables businesses to provide highly
targeted web commerce solutions, and its Latitude solution enables
businesses to more quickly develop analytic applications. The
company was based in Cambridge, MA. The price was not announced
but the Boston Business Journal reported that the deal consideration
was nearly $1.1 billion.
40 The High-Profile Enterprise Software Acquirers
• ATG (Art Technology Group) – In November 2010, Oracle
announced that it agreed to acquire Art Technology Group for
approximately $1 billion ($6/share, about a 46% premium to where the
stock had traded). ATG provided a cross-channel eCommerce
software platform and on demand commerce optimization applications.
Its software allows enterprises to provide content personalization,
automated recommendations, and live help services. It had more than
1,000 customers. Revenue for the trailing four quarters was about
$194 million (making the deal about 5.1X revenue). ATG had a variety
of customers including Dell, Best Buy, OfficeMax, and T-Mobile. It
went public in 1999.
• Sun Microsystems – In April 2009, Oracle announced that it entered
into an agreement to acquire Sun Microsystems for approximately $5.6
billion net of cash and debt ($9.50 share, a 42% premium to where the
stock had traded). There had been reported stories that Sun might be
acquired by IBM during the months that preceded the Oracle
announcement. Sun was a major supplier of computer servers and
workstations. In addition, it had developed a variety of software
platforms including the Java programming language, Solaris Unix, and
the Network File System. Sun had approximately $12 billion of
revenue in 2008 but only about $9 billion in 2009. The transaction
closed at the beginning of 2010.
Some large acquisitions that Oracle completed prior to 2009 include: BEA
Systems (2008, application and middleware software, $8.5 billion),
Hyperion (2007, performance management software, $3.3 billion), Siebel
Systems (2006, CRM applications, $5.9 billion), and PeopleSoft (2005,
HR/financial/supply chain/CRM software, $10.3 billion).
41 The High-Profile Enterprise Software Acquirers
“We always overestimate the change that will occur in the next
two years and underestimate the change that will occur in the
next ten. Don't let yourself be lulled into inaction.”
- Bill Gates, Founder and former Microsoft CEO
Introduction
Microsoft was founded in 1975 by Bill Gates and Paul Allen. The company
initially focused on computer language (BASIC) interpreter software. Its big
break came when IBM decided it didn’t have the time to develop its own
operating system for its upcoming personal computer product (the original
IBM PC). IBM had initially tried to license software from a company named
Digital Research, but a deal couldn’t be reached (there are a variety of
folklore stories about why this was the case, including the Digital Research
CEO flying his plane around or going on vacation instead of meeting with
IBM). As a result, Microsoft proposed that it supply the operating system to
IBM, although Microsoft didn’t actually have an operating system. When IBM
expressed interest, Microsoft quickly licensed an operating system from a
company named Seattle Computer Products, and after some modifications
it became DOS. DOS became the standard operating system not just for
IBM’s personal computers but for most of the industry for many years, and
established Microsoft as the leader in PC operating systems and software.
To IBM’s chagrin, PCs were largely commoditized and most of the profits
from personal computers went to the operating system supplier (Microsoft)
and microprocessor provider (Intel) that IBM had selected.
Microsoft remains the dominant supplier of PC operating systems but has
diversified into a variety of other markets including applications (Office),
enterprise software, cloud-based services, gaming (X-box), accessories, and
search (Bing). More recently, it began selling its own computer solutions.
Chapter 2: Microsoft
42 The High-Profile Enterprise Software Acquirers
In the December 2016 quarter (Q2:F2017), Microsoft had revenue of $24.1
billion on a GAAP basis and $26.1 billion on an adjusted basis (including
Windows 10 deferral revenue). Its revenue breakout using GAAP revenue
was: Productivity and Business Processes (Office, Dynamics) – 30.6% of
revenue, Intelligent Cloud (enterprise software and services, Azure) –
28.5%, More Personal Computing (Windows, gaming, Bing, other hardware)
– 49.1%, and Corporate – negative 8.2%. Microsoft also breaks out overall
revenue based on products (nearly 69%) and services/other (about 31%).
Microsoft has been an active buyer over time having made several major
acquisitions (Skype, Nokia’s handset unit, aQuantive, Yammer) as well as a
variety of smaller deals. It recently made its largest acquisition when it
acquired LinkedIn last year for $26.2 billion.
Select Microsoft Acquisitions
Acquisitions Since 2013
The following is a list of Microsoft acquisitions since the beginning of 2013:
• Agile “Wiki” Extension – In February 2017, Microsoft announced that
it had acquired the Marketplace extension “Wiki” from Agile
Extensions. The extension is now published in Microsoft’s Visual
Studio Marketplace. The extension allows developers to add wikis to
projects. Microsoft indicated the deal would allow it to offer a built-in
Wiki experience for Team Services instead of requiring people to install
an extension from the Marketplace.
• Simplygon – In January 2017, Simplygon announced that it was
acquired by Microsoft. Simplygon developed 3D data optimization
solutions. Microsoft indicated that Simplygon was a leader in 3D game
optimization and that its tools help users of 3D data across industries
optimize content pipelines and streamline workflows. Simplygon was
developed by Donya Labs, a privately held company based in Sweden.
43 The High-Profile Enterprise Software Acquirers
• Maluuba – In January 2017, IBM announced that it agreed to acquire
Maluuba, an artificial intelligence technology company. Maluuba had
a deep learning research lab for natural language understanding and
a focus on applications such as understanding text and spoken
language, as well as general reasoning. Investors included Emerillion
Capital, Samsung Ventures, and Nautilus Ventures. It was based in
Montreal and founded in 2010.
• Genee – In August 2016, Microsoft announced on its blog that it had
reached an agreement to acquire Genee, which uses AI for helping to
schedule meetings. A user can, for example, copy “Genee” on an
email about scheduling a meeting with others and, using natural
language processing and AI algorithms, Genee will analyze the email
and provide potential meeting times and then later send out a calendar
invitation as if it were a human administrative assistant. The product
had been in beta testing. Genee indicated that it would shut its service
down to work on Microsoft projects including developing new Office
365 productivity capabilities and services. The company was founded
in 2014 and based in Silicon Valley.
• Beam – In August 2016, Microsoft announced that it signed an
agreement to acquire Beam Interactive. Beam’s interactive
livestreaming service gives viewers the ability to watch and play along
with their favorite “game streamers” in real-time. With Beam, players
can help direct the actions of the person streaming (e.g., selecting the
weapons they take into battle). Microsoft indicated it would bring the
technology into its Xbox family, enabling greater interactivity. The
company was based in Seattle.
• LinkedIn – In June 2016, Microsoft announced that it signed an
agreement to acquire LinkedIn for approximately $26.2 billion
($196/share, just under a 50% premium to where it had traded) in cash.
LinkedIn is the largest professional networking and social media
solution with (at the time of the announcement) over 433 million users
and about 105 million unique visitors per month. It more recently also
44 The High-Profile Enterprise Software Acquirers
focused on recruiting and had more than 7 million job listings, up over
100% from the previous year. The acquisition closed in December
2016. This was Microsoft’s largest acquisition. LinkedIn had about
$3.2 billion of trailing revenue, resulting in a multiple of about 8.2X.
Reports by CNBC indicated that Salesforce also had serious interest
but that LinkedIn decided to go with Microsoft because it offered an all-
cash deal.
• Wand Labs – In June 2016, Microsoft announced on its blog that it
had acquired Wand Labs. Wand was a messaging app developer that
incorporated natural language processing. Microsoft indicated the
acquisition was part of its conversational intelligence focus and that the
team would work within the Bing platform team to develop intelligent
agents and chat bots. Wand had reportedly raised less than $3 million.
• Code Connect – In June 2016, Code Connect announced that it was
joining Microsoft. The company built tools to improve developer
productivity. The Code Connect software helps programmers better
understand software (e.g., visualize code in the order it is executed,
navigate callstacks). Its Source Browser solution transforms a C#
GitHub repository into a set of static HTML files, and its Alive solution
helps developers better understand what their code does.
• Solair – In May 2016, Microsoft announced that it acquired Solair.
Solair provides Internet of Things (IoT) services solutions to customers
across several industries, including manufacturing, retail, food &
beverage, and transportation. For example, its solutions were used by
the Rancilio Group’s expresso machines, allowing the company to
remotely monitor the machines. Its technology is also used by several
factories in Japan. Solair was already using Microsoft’s Azure cloud
platform and was based in Italy. It was founded in 2011.
45 The High-Profile Enterprise Software Acquirers
• Xamarin – In February 2016, Microsoft announced that it signed an
agreement to acquire Xamarin, which created a platform for mobile app
development. Its solution (in conjunction with Microsoft’s Visual
Studio) enables programmers to create mobile apps using C# for all
major smartphone/tablet operating systems (iOS, Windows, Android).
Xamarin had about 15,000 customers and already had a partnership
with Microsoft. The price was not disclosed but the Wall Street Journal
reported that sources indicated it was between $400 and $500 million.
The 451Group estimated the deal size at $400 million and the revenue
multiple at 10.7X. Xamarin had raised at least $82 million. Investors
included Lead Edge Capital, Charles River, Floodgate, and Ignition.
The company was based in San Francisco.
• Groove App – In February 2016, Microsoft confirmed that it acquired
the Groove app from privately-held Zikera, although it is believed that
the acquisition may have occurred in 2015 when the name of the Xbox
Music app was changed to Groove. The Groove app analyzes users’
listening habits and then creates playlists based on individual tastes.
However, it appears from reports that Microsoft acquired only the
Groove app and not the entire company (Montreal-based Zikera). Note
that this Groove is unrelated to Groove Networks, another company
that Microsoft acquired more than 10 years ago.
• TouchType – In February 2016, Microsoft indicated in a blog post that
it was buying TouchType Ltd which had created the SwiftKey
developer kit for mobile device screen keyboards. The software uses
artificial intelligence to predict and correct keystrokes to make it easier
for users to type. Microsoft indicated that SwiftKey is used on more
than 300 million iOS and Android devices. The Financial Times
reported that Microsoft paid approximately $250 million and that the
company had more than 150 employees. Investors included Accel,
Index, and Octopus. The company was based in London.
46 The High-Profile Enterprise Software Acquirers
• MinecraftEdu – In January 2016, Microsoft indicated that it was
acquiring MinecraftEdu from Teacher Gaming. MinecraftEdu provides
a version of Minecraft that is specifically targeted for education and
was used in over 7,000 classrooms. As noted later, Microsoft
previously acquired Mojang, the company that made Minecraft itself.
Microsoft also announced that it would release an expanded version of
Minecraft called Minecraft: Education Edition.
• Event Zero UC Commander Suite – In January 2016, Microsoft
announced on its blog that it acquired technology assets underlying
the UC Commander product suite from Event Zero, which provides
management and reporting software for Skype for Business Online.
Microsoft indicated that the deal will help improve the Skype for
Business management tools. Event Zero is based in Australia.
• Talko – In December 2015, Microsoft announced that it acquired
Talko, which developed a mobile app for business communications
and that Talko employees would join Microsoft’s Skype team. Talko
provided cloud-based VoIP conference calls and other related
services. The founder of Talko had been Microsoft’s Chief Software
Architect at one point and was part of Groove Networks, another
company Microsoft acquired.
• Metanautix – In December 2015, Microsoft announced it acquired
Metanautix, a “big data” analytics company focused on bringing
together data from all the various silos within an organization. Its
solution works across a variety of data warehouses (SQL, NoSQL,
Oracle, Salesforce, etc.). Microsoft noted that Shutterfly was a
customer. Sequoia had been an investor and reportedly about $7
million had been raised by the company.
47 The High-Profile Enterprise Software Acquirers
• Secure Islands – In November 2015, Microsoft announced in its blog
that it signed an agreement to acquire Secure Islands, an Israeli-based
data security company. Its focus was on providing data classification,
protection, and loss prevention technologies for a broad range of
different file types. Its customers included Vodafone, Osram, UBS,
and Credit Suisse. Microsoft indicated it would integrate the
technology into its Azure Rights Management Service. The price
wasn’t announced but TechCrunch indicated that reports provide a
range of between $77 and $150 million. The 451Group estimated the
price at $85 million and the revenue multiple at 10.6X.
• Mobile Data Labs – In November 2015, Microsoft announced that it
acquired Mobile Data Labs, which had created the MileIQ app. The
app utilizes mobile device sensors to track and log business miles for
travel reimbursement and tax deductions. Microsoft indicated the
company had over a million users. TechCrunch reported the company
had raised about $15 million and investors included Trinity, Marc
Benioff (Salesforce founder), Charles River, and SV Angel.
• Havok – In October 2015, Microsoft announced that it acquired Havok
from Intel. Havok is a major provider of 3D physics software for
graphics applications (physics refers to the portion of graphics
processing that determines where objects should be and move to
based on game play and object collisions, after which the objects are
drawn and rendered by the graphics processor). Havok’s technology
is used in more than 600 games and by many major game software
companies. Prior to the Intel acquisition, Havok was the “doing
business as” name of Telekinesys Research in Dublin, Ireland.
• Adxstudio – In September 2015, Microsoft announced an agreement
to acquire Adxstudio, which provided Web portals, online engagement
solutions, and application lifecycle management solutions for Microsoft
Dynamics CRM. The company had already been a Microsoft partner
and helped extend Dynamics to the Web. It was founded in 1998 and
had offices in Canada and Redmond, WA.
48 The High-Profile Enterprise Software Acquirers
• Double Labs – In September 2015, VentureBeat reported that
Microsoft acquired Double Labs, which had developed a lock-screen
app (Echo Notification Lockscreen) for Android. The app had received
several million downloads. The price was not announced but it was
reportedly a small deal.
• Projectum Apps – In September 2015, Denmark-based Projectum
indicated that Microsoft acquired two of its cloud-based apps.
Specifically, Microsoft acquired Projectum’s Project Financials add-in
and Project Snapshot add-in. They were developed for Project Online
in Office 365 and provide users with overviews of forecasts, budgets,
costs, and other critical data.
• VoloMetrix – In September 2015, Microsoft announced that it entered
into an agreement to acquire VoloMetrix, which was focused on
organizational analytics. Specifically, the software gathers data from
a variety of data sources within a company’s communications systems
and uses it to help analyze performance. Microsoft had been
developing its own solution (Delve) for organization analytics and
indicated it would integrate the VoloMetrix technology into Delve.
VoloMetrix had reportedly raised approximately $17 million. The
consideration was not announced but PitchBook indicated that the
price was approximately $125 million.
• Sensei Project’s Apps – In September 2015, Sensei Project
Solutions announced that Microsoft acquired the rights to its app
catalog for portfolio reporting, dashboards, and time tracking. Sensei
had already been a Microsoft partner. The acquired apps included the
Sensei Task Master app for smartphones, the Sensei Project
Dashboard app for iPad, and the Sensei Portfolio Dashboard app for
iPad and add-in for Project Online.
49 The High-Profile Enterprise Software Acquirers
• Adallom – In September 2015, Microsoft announced it had acquired
Adallom, a cloud security solutions company. Adallom’s solution can
monitor cloud-based offerings such as Salesforce, Box, Dropbox,
Amazon Web Services, and others and tries to find anomalies that
could represent security issues. The price was not announced but
TechCrunch reported that according to sources familiar with the deal it
was close to $250 million. The company had reportedly raised just
under $50 million.
• Incent Games – In August 2015, Microsoft announced it had acquired
Incent Games, which developed the FantasySalesTeam platform to
help companies increase sales productivity. The platform uses team-
based competition (e.g., sales people are “drafted” onto teams as with
fantasy sports) in a gaming type environment to encourage
cooperation and collaboration and to achieve sales targets. Microsoft
indicated that initial customers saw rapid growth in sales after using
the platform. Customers included HP, Siemens, Comcast, and many
others. The company had reportedly raised less than $1.5 million.
• FieldOne Systems – In July 2015, Microsoft announced that it
reached an agreement to acquire FieldOne Systems LLC. FieldOne
provided field service management solutions that enable users to
better provide services to their customers. The solution provides a
broad range of field service related functions such as work order
management, scheduling, and mobile collaboration. The price was not
announced but was reportedly $39 million according to an article in the
VAR Guy. The company was based in New Jersey.
• BlueStripe Software – In June 2015. Microsoft announced the
acquisition of BlueStripe Software, which sold application
management solutions. Its products help monitor and troubleshoot
applications across a variety of heterogeneous operating systems and
cloud environments. According to Crunchbase, it had raised $13.5
million and investors included Trinity and Valhalla.
50 The High-Profile Enterprise Software Acquirers
• 6Wunderkinder – In June 2015, Microsoft announced it had acquired
6Wunderkinder, which created the app Wunderlist. Wunderlist is a “to-
do list” app that had over 13 million customers at the time of the
acquisition. The acquisition price wasn’t disclosed but The Verge
indicated that it was possibly between $100 and $200 million. It had
been based in Germany.
• N-trig – In May 2015, Microsoft confirmed the acquisition of N-trig’s
pen technology, although it may have occurred a few months earlier.
N-trig was an Israeli company that developed the digital stylus
technology which was used in the Surface 3 and Surface Pro 3 tablets.
Microsoft had advertised some of the features of the stylus in ads for
those products. Some initial reports indicated the price was as high as
$200 million, but the Wall Street Journal later indicated it was about
$30 million. C|net reported that N-trig’s revenue was about $20.6
million in the first half of 2014 with a loss of about $5 million. Some
reports indicated that Microsoft acquired the whole company while
others stated it had acquired only the stylus pen technology.
• Datazen Software – In April 2015, Microsoft announced it acquired
Datazen Software. Datazen provided mobile business intelligence and
data visualization solutions for mobile platforms (iOS, Android,
Windows). The solution was optimized for SQL Server Analysis
Services and interactive data visualization.
• Fusion Software’s Mojo Surveys Solution – In March 2015, Fusion
Software indicated that it had sold assets and IP to Microsoft including
its Mojo Surveys solutions. The Mojo Surveys product was a customer
feedback solution developed specifically for Microsoft Dynamics. It
enabled building questionnaire forms inside Dynamics CRM and
automated the data-collection processes.
51 The High-Profile Enterprise Software Acquirers
• LiveLoop – In March 2015, the Wall Street Journal reported that
Microsoft acquired LiveLoop, which developed a service that allows
users to collaborate on PowerPoint presentation documents.
However, after the acquisition, LiveLoop indicated that it would shut
down its existing business after a month, and that the team would help
Microsoft develop collaboration tools across Office products. Investors
included NEA and Webb Investment Network.
• Sunrise Atelier – In February 2015, Microsoft announced it acquired
Sunrise, which sold a calendar app for iOS and Android systems. The
app connects a user’s calendar with a variety of services and
automatically pulls in different types of data, and provided cross-
device/cross-platform access. Microsoft indicated that it had already
been downloaded by millions of users. The price was not disclosed
but TechCrunch reported that sources indicated it was over $100
million. The company was founded in 2012 and had raised only about
$8 million.
• Revolution Analytics – In January 2015, Microsoft announced it
agreed to acquire Revolution. Revolution was a leading supplier of
open source software and services for the programming language R,
which is very popular for statistical analysis and for use with big data.
One of its original investors was Intel. Reportedly, it had raised about
$38 million. According to 451Group, the deal size was $115 million
and the revenue multiple was 28.8X.
• Equivio – In January 2015, Microsoft announced it acquired Equivio,
which developed machine learning solutions for eDiscovery and
governance applications. The solution enables enterprises to sift
through large unstructured sets of data and determine what is relevant
from a compliance or legal perspective. It allows users to sort through
documents using text-analytics to determine which documents they
need. The price was not disclosed but TechCrunch reported that some
sources indicated it was about $200 million.
52 The High-Profile Enterprise Software Acquirers
• HockeyApp – In December 2014, Microsoft announced the acquisition
of HockeyApp (a/k/a Bit Stadium), a Germany based provider of mobile
development services that help developers create and test mobile
applications. Its solution provided crash analytics and app distribution
for iOS, Android, and Windows phone apps.
• Acompli – In December 2014, Microsoft confirmed that it had acquired
Acompli. The price was not announced but ReCode reported that
sources indicated it was approximately $200 million. Acompli
developed a mobile email application. The tool targeted professionals
who needed better email, calendar, and file sharing features on mobile
devices. Redpoint was an investor.
• Aorato – In November 2014, Microsoft announced it acquired Aorato,
which developed enterprise security solutions. Aorato uses machine
learning to detect suspicious activity on a network and can find
anomalies and take actions to protect the system. The price was not
disclosed but there were reports that it was just under $200 million and
that the company had only minimal revenue ($400K per the
451Group). Aorato had raised $11 million from investors that included
Accel, Innovation Endeavors, and Gilot Capital. It was founded in 2011
and based in Israel.
• Mojang – In September 2014, Microsoft announced that it would
acquire Mojang AB for approximately $2.5 billion. Mojang was
primarily known for its Minecraft videogame. Minecraft enables users
to use basic building blocks to create a broad range of buildings and
entire cities. Minecraft had sold more than 50 million copies.
Reportedly, the catalyst for the deal was the creator of Minecraft was
growing tired of dealing with negative comments from the user
community and put out a tweet “Anyone want to buy my share of
Mojang so I can move on with my life?” Soon after, a Microsoft
executive reached out to him. The company was based in Sweden.
53 The High-Profile Enterprise Software Acquirers
• Inception Mobile – Several articles (e.g., OS News) in 2015 stated
that Microsoft acquired Inception Mobile, although the reports also
indicated the deal likely occurred in mid-2014. Inception Mobile
developed solutions to enable porting of apps to different platforms
with a focus on porting from iOS to other platforms.
• InMage – In July 2014, Microsoft announced that it acquired InMage
Systems, which was focused on Cloud-based continuity solutions. Its
solutions help ensure data is backed up and replicated and can be
quickly recovered if there is some type of disaster. Its technology was
used by companies such as HP and SunGard for their disaster
recovery as a service businesses. The company reportedly had raised
about $36 million from several investors including Intel.
• SyntaxTree – In July 2014, Microsoft announced it was acquiring
SyntaxTree, which had created the UnityVS plugin for Microsoft’s
Visual Studio. Unity is a popular game engine and development tool
for game developers. UnityVS enables Unity developers to use Visual
Studio to create and debug code for Unity applications. The company
was based in France.
• Capptain – In May 2014, Microsoft indicated it had acquired Capptain,
a start-up that provides analytics for app developers. Its solution can
send push notifications based on usage patterns. Microsoft noted it
would integrate the technology with Azure’s suite of services. Capptain
(formerly known as Ubikod) had been based in France and had
reportedly raised only $2 million.
• GreenButton – In May 2014, Microsoft announced the acquisition of
GreenButton. Its solution enables customers to manage compute-
intensive workloads in the cloud. Applications can be cloud-enabled
without recoding software. The company was originally based in New
Zealand and already had a close relationship with Microsoft.
54 The High-Profile Enterprise Software Acquirers
• Junction’s JunctionMCR Suite – In March 2014, Microsoft acquired
the JunctionMCR software from Junction Solutions. JunctionMCR is a
suite of multichannel software solutions for the Microsoft Dynamics AX
platform. It provides retailers with visibility across channels (stores,
websites, catalogs, etc.) and assists with managing pricing, inventory,
delivery, and promotions.
• Gears of War Franchise – In January 2014, Microsoft announced that
it acquired the Gears of War franchise (including the rights to existing
and future games) from Epic Games. At the time of the announcement,
it was noted that over 22 million Gears of War games had been sold
for over $1 billion.
• Parature – In January 2014, Microsoft announced that it reached an
agreement to acquire Parature, a supplier of cloud-based customer
engagement tools. Its solutions enable organizations to utilize a
knowledge base available through self-service portals on the Web and
Facebook. It had 70 million users and its customers included IBM,
Ask.com, the US EPA, and others. The price was not announced but
TechCrunch reported that according to sources it was about $100
million. The 451Group estimated the revenue multiple at about 6.7X.
• Apiphany – In October 2013, Microsoft announced that it acquired
Apiphany, an API management delivery platform. Its solutions
provided a portal for companies to manage their APIs. The company
was based in Washington DC.
• HLW Software – In October 2013, Microsoft released a statement that
it acquired specific IP assets from HLW Software Development GmbH.
• Nokia Mobile Phone Unit – In September 2013, Microsoft announced
that it was acquiring Nokia’s handset business for 5.44 billion euros
($7.2 billion at the time) in an all-cash deal. Approximately $5 billion
was for the phone business itself and another $2.2 billion was for
licensing relevant patents. Nokia had been the clear leader in mobile
55 The High-Profile Enterprise Software Acquirers
handset sales for many years but lost significant share when the
industry shifted to smartphones. Nokia had begun using Microsoft
Windows in its phones to try to win back share. Nokia had about $19.7
billion of revenue in 2012 (less than 0.4X multiple using the $7.2 billion
deal value). The acquisition closed in August 2014.
• Blue Horseshoe’s WAX/TRAX Solutions – In July 2013, Blue
Horseshoe announced a collaboration agreement with Microsoft that
included the divestiture of its Warehousing for AX (WAX) and
Transportation for AX (TRAX) solutions to Microsoft. It indicated that
the technology would will help Microsoft accelerate its Microsoft
Dynamics AX supply chain management roadmap. The solutions help
streamline distribution and warehouse operations.
• InRelease Unit – In June 2013, Microsoft announced an agreement to
acquire the InRelease business unit from Quebec-based InCycle
Software. The acquired business provides release management
software on the .NET platform. It was designed to build upon the
features in Microsoft Visual Studio.
• NetBreeze – In March 2013, Microsoft announced that it acquired
NetBreeze, which developed social monitoring and language analytics
tools. Its solution combines natural language processing and data
mining and text analysis.
• MetricsHub – In March 2013, Microsoft announced that it acquired
MetricsHub. The company developed active cloud monitoring
solutions to help customers more efficiently manage their cloud
services at reduced cost. Microsoft noted that it would provide the
solution for free to Azure customers.
• Pando Networks – In March 2013, Microsoft announced the
acquisition of Pando Networks. Pando was a peer-to-peer distribution
company focused on cloud distribution of software, games, and video.
Its biggest market segment was the gaming industry. Pando was
based in New York. Calcalist indicated the price was about $11 million.
56 The High-Profile Enterprise Software Acquirers
• Id8 Group R2 Studios – In January 2013, the Wall Street Journal
reported that Microsoft acquired Id8 Group R2 Studios. The company
had developed technology for distributing and displaying digital media
on TVs. The technology was reportedly going to be used within
Microsoft’s Xbox business unit.
Select Earlier Acquisitions
A few major acquisitions made by Microsoft prior to 2013 include:
• Yammer – Social networking company for $1.2 billion in 2012.
• Skype – Major VoIP communications company for $8.5 billion in 2011.
• Greenfield Online – Shopping and price comparison site for $486
million in 2008.
• Fast Search and Transfer – Enterprise search technology for $1.2
billion in 2008.
• Danger – Mobile Internet solutions for $500 million in 2008.
• aQuantive – Digital marketing firm for $6.3 billion in 2007.
• Navision – A Denmark-based software programming company for
$1.45 billion in 2002.
• Great Plains Software – A mid-market business software company
(accounting and ERP) for approximately $1.1 billion in stock in late
2000 (closed in 2001). The solution is now called Dynamics GP.
• Visio – A business graphics software technology company (enables
creation of flowcharts, process charts, timelines, and other business
charts) for approximately $1.4 billion in stock in 2000.
• Hotmail – Web-based email service for over $400 million in 1997.
57 The High-Profile Enterprise Software Acquirers
“Every time we've moved ahead in IBM, it was
because someone was willing to take a chance, put his
head on the block, and try something new.
- Thomas J. Watson, Former IBM CEO
Introduction
IBM originated as the Computing-Tabulating-Recording Company (CTR) in
1911 and was renamed "International Business Machines" in 1924. The
company was the dominant supplier of computing equipment in the
mainframe era and invented many of the core technologies that are still used
today in computing environments. However, IBM has increasingly shifted its
focus to software and services over the past couple of decades.
In the December quarter (Q4:F16), IBM had about $21.8 billion of revenue
and its revenue breakout was Cognitive Solutions (solutions software and
transaction processing software) – 24.3%, Global Business Services
(consulting, global process services, and application management) – 18.9%,
Technology Services and Cloud Platform (infrastructure services, technical
support services, and integration software) – 42.8%, Systems (systems
hardware and operating systems software) – 11.6%, Global Financing
(financing and used equipment sales) – 2.1%, and Other – 0.3%. Although
Cognitive Solutions accounted for about 24% of revenue, it represented
almost 40% of gross profit.
While IBM has historically made some hardware acquisitions, the bulk of its
recent acquisitions have been for enterprise software companies with a
focus on analytics, cloud, and security. A major focus for IBM has been
cognitive computing and enhancing its Watson platform.
Chapter 3: IBM
58 The High-Profile Enterprise Software Acquirers
Select IBM Acquisitions
Acquisitions Since 2013
The following are acquisitions made by IBM since the beginning of 2013:
• Agile 3 Solutions – In January 2017, IBM announced its intent to
acquire Agile 3 Solutions. Agile 3 helps senior executives visualize
and manage risks associated with sensitive data protection. IBM
indicated that adding Agile 3 Solutions to the IBM Security immune
system of capabilities gives it the ability to not only protect critical data,
but demonstrate why it is at risk, and how to remediate that risk. Agile
3 had been an IBM business partner. It was based in San Francisco.
• Ravy Technologies – In January 2017, IBM announced its intent to
acquire Ravy Technologies, which was a sub-contractor to Agile 3
Solutions (noted above). Ravy indicated that it builds agile business
performance management dashboard product suites that help
executive teams efficiently govern and manage enterprise operations.
It was based in Bangalore, India.
• Fluid’s XPS Unit – In November 2016, IBM announced that it had
acquired the Expert Personal Shopper (XPS) unit from Fluid. The XPS
solution is a dialogue-based product recommendation platform that
utilizes IBM’s Watson platform and natural language interaction to
personalize customers’ shopping experiences. The solution could, for
example, provide tailored recommendations to customers on websites.
Its customers included The North Face and 1-800-Flowers. IBM
indicated that the XPS team would become part of IBM’s Interactive
Experience (iX) group.
• Sanovi Technologies – In October 2016, IBM announced that it
signed an agreement to acquire Sanovi Technologies, which provided
disaster recovery software solutions. The company's Application
Defined Continuity (ADC) technology is used for protection across
workloads on both in-house and cloud infrastructure. This includes its
59 The High-Profile Enterprise Software Acquirers
Disaster Recovery Management (DRM) technology. IBM indicated
that Sanovi's software will enhance IBM’s DRM offering and help
automate the disaster recovery process and reduce recovery time and
cost. IBM also indicated it would leverage the technology to help
customers more proactively anticipate potential failures before they
happen. The company was based in Bangalore, India.
• Promontory Financial – In September 2016, IBM announced plans to
acquire Promontory Financial Group, a risk management and
regulatory compliance consulting firm. The firm had 600 professionals
around the world and expertise in addressing compliance standards.
IBM indicated the firm would work closely with Watson. Specifically,
Promontory’s professionals will train Watson, which will learn by
continuously ingesting regulatory information. The firm was based in
Washington DC, with 19 offices around the world.
• G4S Cash Machine Unit – In July 2016, the Financial Times reported
that IBM agreed to acquire the cash machine engineering business
from G4S. The deal included about 380 people including cash
machine (ATM) engineers. It reportedly generated about 23 million
British Pounds of revenue per year. IBM indicated that it could help
reduce costs by using remote diagnostics. It was based in the UK.
• EZ Legacy – In June 2016, IBM announced that it planned to acquire
EZ Legacy, which provides a suite of software (EZSource) that helps
reduce application management costs and improves application
development and maintenance. Its solution assists developers in
quickly understanding and changing mainframe code based on data
displayed on a dashboard and other visual aids. Its visual dashboard
shows developers information to ease the process of modernizing
applications, exposing APIs, and more efficiently leveraging
development resources. EZ had more than 40 customers including 7-
Eleven, ING, and Maybank. It was founded in 2003 and based in Israel
with several offices around the world.
60 The High-Profile Enterprise Software Acquirers
• Bluewolf Group – In March 2016, IBM announced plans to acquire
Bluewolf Group LLC, a provider of cloud consulting and
implementation services, with a strong focus on Salesforce-related
consulting. Bluewolf had been a long-time Salesforce consultant (it
was actually Salesforce’s first consulting service partner) with 12 global
offices and more than 500 employees. IBM indicated Bluewolf would
become part of its Interactive Experience unit within IBM Global
Business Services. The price was not announced but Re/Code
reported that it was slightly over $200 million. The 451Group estimated
that it was approximately $240 million, with a 2.7X revenue multiple.
The company was based in New York.
• Optevia – In March 2016, IBM announced that it acquired Optevia, a
SaaS systems integrator with a focus on Microsoft Dynamics CRM
solutions for public sector organizations. Optevia’s customers included
a variety of ministries, counsels, transportation authorities, and
regulators, including UK Emergency Services and various Government
agencies. The company was founded in 2001 and became part of
IBM’s Global Business Services to focus on cloud-based CRM SaaS
solutions. Optevia was based in the UK.
• Resilient Systems – In February 2016, IBM announced it planned to
acquire Resilient Systems. Resilient developed an incident response
platform which automated the processes required when dealing with
cyber-security incidents. This enables clients (including security/IT as
well as HR, finance, etc.) to respond much faster to cyber incidents,
better mitigate potential security issues, and deal with regulatory
requirements. At the announcement, IBM also introduced its X-Force
Incident Response Service which incorporates Resilient’s technology.
The company was based in Cambridge, MA and had more than 100
customers including 30 of the Fortune 500. The price was not
announced but the 451Group estimates it was $145 million and that
Resilient had approximately $10 million of revenue (14.5X multiple).
61 The High-Profile Enterprise Software Acquirers
• Truven Health Analytics – In February 2016, IBM announced plans
to acquire Truven Health Analytics for approximately $2.6 billion.
Truven provided cloud-based healthcare data, analytics, and
intelligence and had more than 8,500 clients including health plans,
hospitals, life science companies, and government agencies. IBM
indicated that it would incorporate the Truven data into the Watson
Health unit to help improve patient outcomes and reduce costs through
analytics. Truven was based in Ann Arbor, Michigan and had been
around for more than 40 years. The 451Group estimates that the
revenue multiple was 4.3X (just under $600 million of revenue).
• Ecx.io AG – In February 2016, IBM announced plans to acquire ecx.io,
a digital marketing agency. The agency had about 200 marketing
design employees. Its clients included Austrian Airlines, Axalta, and
OPEC and was a specialist in digital technologies including Adobe and
SAP Hybris. IBM indicated that the team would become part of IBM’s
Interactive Experience unit. It was based in Germany.
• Aperto AG – In February 2016, IBM announced an agreement to
acquire Aperto, a digital marketing agency, and that Aperto would
become part of IBM’s Interactive Experience (iX) unit. Aperto had over
300 employees and its customers included Airbus, Siemens, and
Volkswagen. It was based in Germany.
• Iris Analytics – In January 2016, IBM announced that it acquired Iris
Analytics, a machine learning company focused on real-time analytics
solutions to combat payment fraud. Acting as a “virtual analyst” to help
identify new fraud patterns, Iris leverages machine learning models to
help detect fraud and quickly act to help reduce fraudulent events. Its
solution was used by a variety of banks and payment processing
companies around the world. Iris was based in Germany.
62 The High-Profile Enterprise Software Acquirers
• Resource/Ammirati – In January 2016, IBM announced plans to
acquire Resource/Ammirati, a digital marketing and creative agency.
The firm had over 300 employees and was based in Ohio. Its clients
included Nationwide, DSW, Nestle, Rubbermaid, Sherwin Williams,
and Toys R Us. It was founded in 1981 and Apple was its first client.
• UStream – In January 2016, IBM announced that it acquired UStream,
which provided a cloud-based video conferencing service. UStream
provided cloud-based video streaming to enterprises and broadcasters
for applications ranging from corporate keynotes to live music
concerts. It streamed video to about 80 million viewers per month for
customers such as NASA, Samsung, Facebook, Nike, and The
Discovery Channel. IBM subsequently bundled UStream along with
three other previously acquired video acquisitions (Clearleap,
Cleversafe, Aspera) to form a new cloud-based video unit. The price
was not announced but Fortune indicated that sources pegged the
price at about $130 million. The 451Group estimates that this
represented a revenue multiple of approximately 5.2X.
• AT&T’s Managed Hosting Unit – In December 2015, IBM announced
that it was taking over AT&T’s Managed Hosting business, including
acquiring the equipment to support the services. IBM indicated it would
integrate AT&T’s managed services into its cloud services offerings.
• Clearleap – In December 2015, IBM announced it acquired Clearleap,
which provided cloud-based video services. The Clearleap video
platform is optimized for massive scalability and enables clients to
support millions of concurrent users within seconds. Clearleap's open
API framework enables organizations to easily build video into
applications. Customers included HBO, A+E Networks, the NFL, BBC
America, Sony Movie Channel, Time Warner Cable, and Verizon. It
was founded in 2008 and based in Georgia. PitchBook estimates the
price was $210 million and the 451Group estimates it was
approximately $200 million with an 8X revenue multiple.
63 The High-Profile Enterprise Software Acquirers
• Gravitant – In November 2015, IBM announced it had acquired
Gravitant, which developed cloud-based software solutions that help
organizations “broker” computing services and software from a variety
of different suppliers across hybrid clouds. The solution enables IT
managers and users to compare pricing and capabilities and purchase
compute services and software from various suppliers. The company
was based in Austin with significant operations in India, and had been
founded in 2004. According to the 451Group, the price was
approximately $95 million and it indicated that Gravitant likely had only
a couple million dollars of revenue (47.5X multiple).
• Cleversafe – In October 2015, IBM announced that it agreed to
acquire Cleversafe, which developed object-based storage software
and appliances. Its object-based storage technologies enable
customers to more efficiently store and manage massive amounts
(exabytes) of unstructured data. The company had over 200 people
and more than 350 patents, many related to object storage. Company
filings indicated the price was just over $1.3 billion. The 451Group
estimates it had revenue of $25 million (52X revenue multiple).
• The Weather Company (Digital Assets) – In October 2015, IBM
announced that it was acquiring many of the digital assets of the
Weather Company including its website and weather data and
business applications. It did not include the cable TV portion of the
company. IBM indicated it would leverage the data with its Watson
platform to better analyze weather information which is critical to many
different types of enterprises. The price was just under $2.3 billion.
• Advanced Application Corporation – In September 2015, IBM
announced it had entered into a definitive agreement to acquire the
remaining shares of Advanced Application Corporation (AAC) that it
didn’t already own. AAC was an affiliate of Japan-based JBCC
Holdings Inc. and IBM Japan Ltd. It engaged in system integration,
application development, software support, and services. PitchBook
estimates the price was $13.3 million.
64 The High-Profile Enterprise Software Acquirers
• Meteorix – In September 2015, IBM announced plans to acquire
Meteorix, a consulting and integrations firm with a strong focus on
Workday-related services. Workday is a major provider of cloud-based
finance and HR applications and Meteorix had more than 200 certified
Workday consultants and assisted a variety of companies in
implementing Workday-related finance and HR solutions. The
company had been founded in 2011. The price was not announced
but the 451Group estimates that it was approximately $120 million with
a 3X revenue multiple.
• StrongLoop – In September 2015, IBM announced that it acquired
StrongLoop, a provider of Node.js, an application development solution
that allows developers to more easily create applications using APIs.
The Node.js development framework makes it easy to create scalable
APIs. IBM indicated that it planned to integrate the technology into its
software portfolio. Investors included Shasta and Ignition. The
company was founded in 2013 and based in Silicon Valley.
• Merge Healthcare – In August 2015, IBM indicated that it agreed to
acquire Merge Healthcare for $7.13/share, about a 32% premium to
where the stock had traded. The deal size was just over $700 million,
but Merge had approximately $200 million of net debt, bringing the
enterprise value to over $900 million. Merge was a provider of medical
imaging management platforms that enable better handling and
processing of healthcare imaging data. Its solution provides access to
important medical images and analytics anywhere around the world. It
had access to an anonymized research pool of about 30 billion images
(CAT scans, X-rays, etc.). IBM indicated that it planned to combine
the Merge imaging data with its Watson cognitive computing engine to
enable advanced analysis of medical images to help improve
healthcare. The company was over 25 years old when acquired.
Trailing revenue was about $228 million, resulting in an enterprise
value to revenue multiple of approximately 4X.
65 The High-Profile Enterprise Software Acquirers
• AppCore (Cloud Assets) – In August 2015, IBM announced that it
had acquired the Cloud Automation assets, and hired the related
development team, from Iowa-based AppCore. AppCore manages
private cloud storage systems for enterprises.
• Compose – In July 2015, IBM announced it had acquired Compose, a
private company that focuses on the database-as-a-service (DBaaS)
market. It offers MongoBD, Redis, PostgreSQL, and other database-
related solutions for mobile and web-based applications. Compose
enables rapid deployment and provisioning of open source database
services and provides a variety of add-ons that can, for example, move
data among different databases. The company had more than 3,600
customers and was based in Silicon Valley.
• Blue Box – In June 2015, IBM announced it had acquired Blue Box
Group. Blue Box was a managed private cloud provider and its
platforms were based on OpenStack. It offered businesses private
cloud-as-a-service platforms enabling customers to deploy workloads
across hybrid cloud environments. Blue Box was based in Seattle.
• Phytel – In April 2015, IBM announced plans to acquire Phytel, which
developed healthcare management software. Phytel's SaaS-based
registry uses evidence-based chronic and preventive care protocols to
identify and notify patients due for health/care services, while tracking
engagement and measuring quality and financial results. Its population
health management solutions utilize health records to reduce
readmissions, improve patient outreach, and allow physicians to
determine what actions work best. It was based in Dallas. The price
was not announced but the 451Group estimates that it was
approximately $232 million.
• Explorys – In April 2015, IBM announced it had acquired Explorys,
which had been focused on cloud-based healthcare intelligence
solutions and had a large database of clinical data sets. It was spun
off from the Cleveland Clinic and its medical database had over 300
66 The High-Profile Enterprise Software Acquirers
billion data points. Its customers included more than 360 hospitals and
its solution were used, for example, to identify patterns of diseases,
treatments, and outcomes to help analyze and optimize treatment.
IBM noted that it planned to leverage this data with its Watson Health
Cloud platform to improve health care analysis.
• Blekko (select assets) – In March 2015, IBM announced in a blog
post that it acquired “certain assets” from Blekko. Blekko had
developed a web search engine and a social news solution. The
company was based in Silicon Valley and investors included Marc
Andreessen, CMEA Capital, and USVP.
• Alchemy API – In March 2015, IBM announced it acquired Alchemy
API. Alchemy developed cognitive computing APIs and deep learning
solutions. Over 40,000 developers used its platform and some of its
target sectors included computer vision and text analysis. It stated that
it processed over 3 billion documents a month. IBM indicated that it
planned to integrate the deep learning technology into Watson.
• Tgestiona – In March 2015, IBM announced a 10-year deal to help
modernize Telefonica’s HR and finance management systems and
processes. As part of the deal, IBM indicated it would also acquire
three companies of Tgestiona, which had been Telefonica’s historical
business process outsourcing partner. The companies were in Spain,
Argentina, and Peru. Tgestiona was founded in 2001. PitchBook
estimates the price at $24 million. [Although technically 3 Tgestiona
companies were acquired, we view this as one deal based in Spain.]
• Lufthansa IT Business – In November 2014, IBM announced that it
entered into a 7 year outsourcing contract with Lufthansa. As part of
the arrangement, IBM agreed to acquire and manage Lufthansa
Systems’ entire data center operations and indicated that around 1,400
Lufthansa Systems employees would transfer to IBM. Lufthansa is
based in Germany. While this isn’t a typical acquisition (partially an
outsourcing deal), we included it in the list.
67 The High-Profile Enterprise Software Acquirers
• Lighthouse Security – In August 2014, IBM announced that it
acquired the business operations of Lighthouse Security Group, a
cloud security service provider. Its Gateway platform helps protect
identity information and data. It was a subsidiary of Lighthouse
Computer Services and founded in 2007.
• CrossIdeas – In July 2014, IBM announced it had acquired
CrossIdeas, which provided security software that manages user
access to data and applications in both cloud and in-house
environments. CrossIdeas’ Identity and Access solutions help
customers reduce potential risks and meet compliance and audit
requirements. It was based in Rome, Italy and was founded in 2011.
• Cognea Group – In May 2014, IBM announced via a blog that it
acquired Cognea, which had developed an AI/cognitive computing
platform for virtual assistants. Cognea indicated that its virtual
assistants can learn about and understand users’ personalities, which
helps provide more customized interaction with each user. Cognea
noted that it had a variety of customers including HP, NASA, and State
Farm. IBM stated that the technology would be integrated with Watson,
enabling real conversations with users, and that Watson
conversational services would be available to customers. It was
founded in Australia.
• Silverpop Systems – In May 2014, IBM announced at its Smarter
Commerce Global Summit that it acquired Silverpop, a marketing
automation company. Its automated cloud-based platform enables
easier omnichannel marketing and helps marketers to personalize
customer interactions in real time. Silverpop automates the customer
experience based on insights drawn from permission-based data
streams such as social, web, email, and mobile activity. Its customers
included Mazda, AMD, and Stonyfield Farm.
68 The High-Profile Enterprise Software Acquirers
• Cloudant – In February 2014, IBM announced that it entered into an
agreement to acquire Cloudant, which provided a cloud-based
database-as-a-service (DBaaS) solution. Cloudant's JSON cloud-
based data service allows mobile and web developers to store and
access data using a simple API, enabling faster development. Its
platform helped developers quickly implement database solutions for
mobile and web applications. Cloudant had already been an IBM
partner and its solution ran on IBM’s SoftLayer platform. Investors had
included Samsung, In-Q-Tel, Y Combinator, and Avalon Ventures.
According to the PitchBook, the price was about $117 million while the
451Group estimated it was approximately $150 million and that the
company had only about $7 million of revenue (21X multiple).
• Aspera – In January 2014, IBM announced that it completed the
acquisition of Aspera. Aspera’s technology helps securely transmit
extremely large data files over long distances. It indicated that its
solution could accelerate the secure transfer of large files by up to 99.9
percent (potentially reducing a 26 hour transmission of a 24 gigabyte
file down to just 30 seconds). Its fasp protocol avoids the bottlenecks
associated with most networking technology which isn’t optimized for
huge data transfers. Aspera had many corporate customers, including
Apple which used Aspera to upload videos to the iTunes store.
• Associated Dexia Technology Services – In December 2013, IBM
announced that it had signed an agreement with Dexia and several
major financial institutions in Europe to build and manage their IT
infrastructure that was previously managed by Associated Dexia
Technology Services (ADTS). As a result of the transaction, IBM took
a controlling interest in ADTS and renamed it Innovative Solutions for
Finance (ISFF). ISFF had $1.3 billion of sourcing contracts. IBM
indicated that it would implement cloud infrastructure to expand ISFF
services into new markets and optimize the efficiency of its existing
information technology management. ADTS had been founded in
2006, primarily to deliver IT services to Dexia-related financial
institutions. It was based in Brussels, Belgium.
69 The High-Profile Enterprise Software Acquirers
• Fiberlink Communications – In November 2013, IBM announced that
it agreed to acquire Fiberlink Communications, a mobile device
management and security company. Fiberlink’s cloud-based MaaS360
is an enterprise mobility management solution that helps ensure
security and management for documents, applications, and emails.
IBM indicated that MaaS360 would enable it to offer either cloud-based
or on-premise mobile device management (MDM), mobile content
management (MCM), and mobile application management (MAM).
Fiberlink was based in Pennsylvania. The 451Group estimates that the
price was approximately $300 million and that Fiberlink had about $50
million of revenue (6X multiple).
• Xtify – In October 2013, IBM announced the acquisition of Xtify, a
provider of cloud-based mobile messaging tools that help
organizations improve mobile sales and drive in-store traffic. Xtify’s
solutions leverage CRM tools and provide digital marketers with the
ability to create content-rich in-app mobile messaging and push
notifications. IBM indicated that it plans to run Xtify on its SoftLayer
cloud infrastructure. Xtify was founded in 2009. The 451Group
estimates that the price was approximately $40 million and that Xtify
had approximately $5 million of revenue (about an 8X multiple).
• The Now Factory – In October 2013, IBM announced an agreement
to acquire The Now Factory, which provided analytics software for
communications service providers. The Now Factory’s software
analyzes large amounts of network and business data and provides
insights that enable service providers to improve service and reduce
networking issues and outages. In addition to detecting and resolving
issues, the software helps provide insight into how subscribers interact
with mobile applications. PitchBook estimates the deal at just under
$125 million. The company was based in Dublin, Ireland.
70 The High-Profile Enterprise Software Acquirers
• Daeja Image Systems – In September 2013, IBM announced that it
had acquired Daeja Image Systems. Daeja’s software helps
employees get faster access to business information and documents.
Users can open and view hundreds of document and image file
formats, even if the native application is not on their devices, which
saves time and enables social collaboration and document sharing
across an organization. IBM indicated that it would incorporate Daeja
into its Software Group and its Enterprise Content Management
business. It had more than 4,000 customers and was based in the UK.
• Trusteer – In August 2013, IBM announced that it signed an
agreement to acquire Trusteer, a cybersecurity solutions company
focused on combating fraud and malware. Trusteer’s SaaS solution
delivers threat intelligence to tens of millions of endpoints around the
world. It had a particularly strong presence in banks (7 of the 10 top
US banks), many of which use Trusteer to help ensure customer
devices do not have malware. The company had offices in Israel and
Boston, and with the announcement IBM also announced it was
opening a cybersecurity lab in Israel. Investors included USVP.
PitchBook estimates the value at $850 million and the 451Group
estimates it was $900 million and that Trusteer had revenue of about
$35 million (25.7X).
• CSL International – In July 2013, IBM announced it signed an
agreement to acquire CSL International, which provided virtualization
management technology for IBM’s zEnterprise system. Its CSL-WAVE
software enables companies to easily monitor and manage their z/VM
and Linux on System z environments. The software provides an easy
drag and drop interface to enable users to create, visualize, and
connect virtual servers to resources. CSL was based in Israel.
71 The High-Profile Enterprise Software Acquirers
• SoftLayer – In June 2013, IBM announced it signed an agreement to
acquire SoftLayer Technologies, a major cloud computing
infrastructure provider. SoftLayer had about 21,000 customers and 13
data centers. SoftLayer’s solutions enable clients to buy enterprise-
class cloud services on dedicated or shared servers. Its majority
shareholder was GI Partners, which had previously merged SoftLayer
with another one of its portfolio companies called The Planet. Forbes
reported that its sources had indicated the price was about $2 billion
and that SoftLayer had revenue in the $800 million to $1 billion range
(2X to 2.5X). The 451Group also reported a price of $2 billion but
estimated a higher revenue multiple of 4.7X.
• UrbanCode – In April 2013, IBM announced that it acquired
UrbanCode, which automates software delivery, assisting businesses
in releasing and updating applications. Its solution helps resolve
development bottlenecks. The company was based in Cleveland.
• Star Analytics – In February 2013, IBM announced that it entered into
an agreement to acquire the software portfolio of Star Analytics. The
Star Analytics software helps automatically integrate information,
reporting applications, and business intelligence tools across
enterprises (including on-premises or cloud computing environments),
without custom coding or manual effort. Its Star Command Center was
certified to run on Amazon Web Services, Oracle on Demand, and
Microsoft Azure infrastructure.
Select Earlier Acquisitions
A few select IBM acquisitions made prior to 2013 include:
• Kenexa – In August 2012, IBM announced the acquisition of Kenexa,
a publicly traded company focused on talent management, for
approximately $1.3 billion ($46/share, a 42% premium to where the
stock had previously traded). Kenexa had been a major provider of
recruitment process outsourcing (recruiting and branding), talent
72 The High-Profile Enterprise Software Acquirers
management, and learning content management solutions. It offered
both cloud-based technology and consulting services. Its clients
included more than 9,000 customers including companies such as
Wal-Mart and Ford. The acquisition occurred soon after Oracle
acquired Taleo, a competitor of Kenexa. Revenue in 2012 was about
$318 million (making the deal about 4X revenue) in the fiscal year
ending June 2012 with about $39 million of EBITDA.
• Netezza – In September 2010, IBM announced it entered into an
agreement to acquire Netezza for about $1.7 billion ($27/share).
Netezza was a provider of high performance analytics in a data
warehousing appliance, enabling rapid implementation and the ability
to quickly perform analytic analysis. The two companies had been
strategic partners. Netezza’s customers included Time Warner, Blue
Cross, Nationwide Insurance, Estee Lauder, and many others. The
deal was approximately 6X Netezza’s projected revenue for 2010.
Netezza was based in Massachusetts.
• Sterling Commerce – In May 2010, IBM announced that it agreed to
acquire Sterling Commerce from AT&T for approximately $1.4 billion
in cash. Sterling provided a variety of software solutions to help
improve e-commerce fulfillment, order management, and B2B
commerce including selling and payments. It had more than 18,000
customers. AT&T (SBC Communications) originally acquired Sterling
during the 2000 technology bubble for $3.9 billion.
Some large historical IBM acquisitions included SPSS (business analytics,
2009, $1.2 billion), Cognos (business intelligence, 2008, $5 billion), Internet
Security Systems (IT security, 2006, $1.3 billion), FileNet (content
management software, 2006, $1.6 billion), Ascential Software (enterprise
data integration software, 2005, $1.1 billion), Rational Software (DevOps
and software development, 2003, $2.1 billion), PWC Consulting (business
and technology consulting, 2002, $3.5 billion), and Informix (database
software, 2001, $1 billion).
73 The High-Profile Enterprise Software Acquirers
“If someone asks me what cloud computing is, I try not to
get bogged down with definitions. I tell them that, simply
put, cloud computing is a better way to run your business.”
- Marc Benioff, Salesforce CEO
Introduction
Salesforce was founded in 1999 and is the leader in customer relationship
management (CRM) platforms. It was an early pioneer in providing cloud-
based pay-as-you-go platforms to enterprises, rather than the traditional
approach of selling software packages. In fact, for many years it often wasn’t
categorized as an enterprise software company since it didn’t actually sell its
software to companies. More recently, the company has focused on
expanding beyond basic CRM into a variety of other cloud-based market
segments (sales automation, analytics, marketing, etc.) through acquisitions
and internal developments, and has expressed strong interest in AI and
machine learning technologies (e.g., its Einstein AI platform).
In its recent Q4:F17 quarter (ending January 2017), Salesforce reported
revenue of $2.29 billion. Its revenue breakout was: Sales Cloud (CRM) –
35%, Service Cloud (Live Agent chat software, Lightning customer service
management console, Communities self-service portals, etc.) – 27%,
Salesforce Platform/Other (platform for building apps) – 17%, Marketing
Cloud (personalized email marketing and mobile messaging) – 13%, and
Services – 8%.
Salesforce has made several significant acquisitions including Demandware
(e-commerce) and ExactTarget (marketing automation). In several cases,
the companies that Salesforce acquired were already Salesforce partners
and had solutions that utilized CRM data.
Chapter 4: Salesforce
74 The High-Profile Enterprise Software Acquirers
Select Salesforce Acquisitions
Acquisitions Since 2013
The following are acquisitions by Salesforce since the beginning of 2013:
• Sequence – In January 2017, Sequence announced that it was being
acquired by Salesforce. Sequence was a digital services company. It
assists with customer experience, brand, and content strategies. It also
provides UI/UX design services including prototyping and usability
testing. Some example engagements included developing a website
for Chevron, creating an iPhone restaurant ordering app, and
customizing several solutions for Best Buy. Sequence also had a
relationship with Apple. The firm was based in San Francisco.
• Unity&Variety – In January 2017, Salesforce’s word processing
business Quip announced that it was acquiring Unity&Variety. The firm
reportedly consisted of just three people and had developed a mobile
game (Pinchworm) and was developing new productivity tools. The
team previously helped design products at Facebook including
Slingshot and a redesign of Messenger.
• Twin Prime – In December 2016, Twin Prime announced that it was
acquired by Salesforce. Its solution utilizes machine learning
techniques to analyze real-time network data, and identify and
prioritize performance gaps in mobile apps. It can then help optimize
mobile performance so companies can deliver content faster,
regardless of location, device, or network. According to the New York
Business Journal, it had raised about $11.5 million since it was
founded in 2011. Its investors included Draper Fisher Jurvetson and
True Ventures.
75 The High-Profile Enterprise Software Acquirers
• Krux – In October 2016, Salesforce confirmed that it agreed to acquire
Krux. Krux developed a data management platform that tracks data
across multiple devices to increase engagement with users. The CEO
indicated that Krux uses AI to analyze trillions of signals to better
identify audience segments for targeted marketing. It reportedly had
over 200 customers, including Ticketmaster and L’Oreal. According to
Salesforce 10-Q documents, the consideration was about $742 million
($368 million in cash, 4.2 million shares of stock worth $317 million at
the time, and $56 million in options and restricted stock) and Krux had
about $18 million in cash. The 451Group estimates revenue was about
$50 million, which would result in a multiple of more than 14X.
• Gravitytank – In September 2016, Gravitytank announced that it was
acquired by Salesforce. Gravitytank was an innovation consulting firm
focused on design, research, and strategy. It assists clients in
developing products, packaging, branding, and product strategies.
Clients have included OfficeMax, United Way, Goodyear, and Frito-
Lay. The firm indicated that as part of Salesforce it would help
customers identify new business opportunities and disrupt their
industries. PitchBook estimates the consideration at just under $30
million, although a Salesforce 10-Q indicates it acquired three
companies in the quarter with a total value of about $38 million, so this
estimate may be high. It was based in Chicago.
• HeyWire – In September 2016, HeyWire announced that it was being
acquired by Salesforce. HeyWire was focused on cloud-based mobile
messaging for enterprises. HeyWire had already been working with
Salesforce and indicated that after the acquisition it would bring its
mobile messaging technology to the Salesforce Service Cloud,
providing fully integrated mobile messaging capabilities that enable
companies to connect with their customers. PitchBook estimates the
price at $34 million, although as noted above (in Gravitytank) this
estimate may be high. HeyWire was based in Massachusetts.
76 The High-Profile Enterprise Software Acquirers
• BeyondCore – In August 2016, Salesforce announced that it signed
an agreement to acquire BeyondCore, an enterprise data analytics
company. Its solution automatically analyzes data from databases,
Hadoop, or other sources and uses a variety of analytics (diagnostic,
predictive, prescriptive, etc.) to develop significant insights for
enterprises. It allows managers to continuously monitor their business,
with automated analysis and a Dynamic Dashboard. According to
Salesforce’s 10-Q, the consideration was approximately $107 million
($21 million in cash, nearly 1.1 million shares of stock worth about
$81.5 million at the time, and $4 million of stock options and restricted
stock) and BeyondCore had about $2 million of cash. The 451Group
estimates its revenue was only about $5 million (21X multiple). Menlo
Ventures was an investor.
• Quip – In August 2016, Salesforce announced that it agreed to acquire
Quip, which had developed cloud-based word processing solutions
(somewhat similar to Google Docs). It was especially focused on
mobile applications. A co-founder of Quip was previously the CTO of
Facebook. A Salesforce 8-K issued at the time of the announcement
indicated it would provide $582 million in stock for the portion of the
company that Salesforce did not already own, as Salesforce had been
an investor in Quip. However, a Salesforce 10-Q indicated the
consideration was $412 million consisting mostly of stock (4.8 million
shares), and that Quip had $28 million of cash. There were also
reports of additional earn-outs (TechCrunch reported that its sources
indicate that including earn-outs it may have been approximately $750
million, but that was unconfirmed). The company was founded in 2012.
• Coolan – In July 2016, Coolan announced that it had been acquired
by Salesforce. Coolan had developed software that analyzes data
center hardware to help optimize operations. The company reportedly
had 10 employees. The founder of Coolan previously helped direct
Facebook’s and Google’s hardware initiatives and contributed to the
launch of the Open Compute Project. Investors included North Bridge
and Social Capital. It was based in Silicon Valley.
77 The High-Profile Enterprise Software Acquirers
• Demandware – In June 2016, Salesforce announced that it signed an
agreement to acquire Demandware, a publicly traded supplier of
enterprise cloud commerce solutions. The transaction was for
approximately $2.9 billion ($75/share), or $2.8 billion net of acquired
cash, about a 56% premium to where Demandware’s stock previously
traded. Trailing revenue was about $254 million (so the deal was
about 11X revenue). Demandware’s solutions enable companies to
provide personalized eCommerce experiences for customers to
enhance sales. Its platform accelerates how quickly companies can
launch new sites or promotions, and it includes order management,
customer engagement, fulfillment, post-sales service, and intelligence
across all channels (mobile, web, stores, etc.). Customers included
L’Oreal, Lands’ End, Adidas, Nine West, Panasonic, Samsonite, and
Brooks Brothers. It was founded in 2004 and had an IPO in 2012.
• Implisit – In May 2016, Dow Jones Business News reported that
Salesforce acquired a data automation startup named Implisit Insights
for reportedly “tens of millions of dollars.” Implisit was an Israeli
company that developed solutions that utilize information stored in
customer databases to help salespeople make better decisions. It
could, for example, make recommendations to improve the chances of
winning new business and alert management to deals at risk. It
reportedly had raised only $3.3 million. A Salesforce 10-Q implies it
paid about $17 million, without specifically mentioning Implisit.
• MetaMind – In April 2016, Salesforce indicated that it acquired
MetaMind, which had developed advanced deep learning
technologies, including image recognition capabilities. However,
Salesforce stated that it would phase out MetaMind’s existing offerings
after a month and the team would focus on enhancing Salesforce’s
machine learning capabilities. Salesforce’s CEO Marc Benioff was an
investor in MetaMind, along with Khosla Ventures. The reported price
was $32.8 million, net of cash acquired.
78 The High-Profile Enterprise Software Acquirers
• PredictionIO (TappingStone) – In February 2016, Salesforce
announced it agreed to acquire PredictionIO (originally known as
TappingStone). The company had developed machine learning
software and had shifted to an open-source model. Its software makes
it easier for developers to create machine learning prediction engines
and solutions. The company indicated that it had 8,000 developers
using its technology and powered 400 apps. It was founded in 2012
and originally based in London and called TappingStone, but moved to
Silicon Valley. It raised a $2.5 million seed round in 2014. PredictionIO
indicated that the team would work on SalesforceIQ’s machine learning
capabilities. The price was not announced but Salesforce noted that it
spent a total of $41.6 million on TappingStone and Your SL (listed next)
without disclosing how much was paid for each.
• Your SL – In February 2016, Salesforce acquired Your SL, a German
consulting and implementation firm. Its focus areas were Salesforce
integration, strategy consulting, cloud technologies, and product
development. It had more than 100 employees and was based in
Berlin, Germany.
• Steelbrick – In December 2015, it was announced that Salesforce
signed an agreement to acquire Steelbrick. Steelbrick developed a
variety of configure, price, quote (CPQ) solutions and subscription
billing apps, optimized for the Salesforce cloud platform. The platform
helps automate a variety of “quote to cash” steps such as the pricing
of the various features and options that go into a proposal. Salesforce
had previously relied on partners (e.g., Apttus) for these types of
features. Reports indicated that the deal was about $360 million in
stock minus the $60 million in cash that Steelbrick had. However,
Salesforce was already an investor in the company (owned about 6%).
The 451Group estimated that Steelbrick had revenue of $11 million
(implying about a 27X multiple).
79 The High-Profile Enterprise Software Acquirers
• MinHash – In December 2015, MinHash announced on its website that
it was acquired by Salesforce. MinHash was a small company
(reportedly only 4 people from eBay and Oracle) that developed a
virtual assistant for marketing that allowed users to search media
sources for trends and create appropriate marketing campaigns based
on that analysis.
• AKTA – In September 2015, AKTA announced that it was being
acquired by Salesforce. AKTA was a digital experience and design
consultancy that helped companies improve the customer experience
through better design. Customers included Starbucks, Motorola, and
Verizon. The company was based in Chicago.
• Kerensen Consulting – In June 2015, Salesforce announced that it
signed an agreement to acquire Kerensen Consulting. Kerensen was
a cloud consulting firm which assisted hundreds of European
companies in transitioning to the cloud. It provides business consulting
services with a focus on CRM and front office. The price was
reportedly $24.2 million. It was based in France.
• Tempo AI – In May 2015, Tempo AI announced that it had been
acquired by Salesforce. Tempo AI developed a smart calendar app
that could help organize a user’s day. The company indicated it would
phase out its app after a month and focus on Salesforce solutions. It
had been founded at SRI International in 2011 and was based in
Silicon Valley. The price was not announced but a Salesforce filing
indicated that it spent $33.1 million for both Tempo AI and Toopher
(listed next), without specifying how much was spent for each.
• Toopher – In April 2015, Toopher announced that it had been acquired
by Salesforce. Toopher was a security software start-up that
developed a two-factor authentication solution (including the user’s
location). It could enhance the security options for enterprises for
employees with mobile devices. Toopher’s service was phased out
after the deal so the team could focus on Salesforce projects.
80 The High-Profile Enterprise Software Acquirers
• RelateIQ – In July 2014, RelateIQ announced it was being acquired by
Salesforce for approximately $390 million, mostly in stock. RelateIQ
had close to $40 million of cash so the enterprise value was
approximately $350 million (a Salesforce 10-Q indicates that the final
valuation was $340.2 million). RelateIQ developed data analysis
software that could analyze information from a company’s CRM
system and emails and make recommendations to improve the sales
process and enhance sales (e.g., who salespeople should be calling
more, who they are not paying enough attention to, etc.). Investors
included KPCB, Redpoint, and Jerry Yang’s AME Ventures.
• Cloudconnect – In November 2013, Cloudconnect announced that it
was part of Heroku, a Salesforce company. Cloudconnect focused on
assisting enterprises in connecting their data and cloud services. It
indicated that as part of Heroku, the team will help companies create
great apps and experiences by connecting their customer data. The
founder had been a Vice President at Salesforce in the past.
• ExactTarget – In June 2013, Salesforce announced that it signed an
agreement to acquire ExactTarget for approximately $2.5 billion in
cash ($33.75/share, about a 53% premium to where the stock had
traded), or about $2.4 billion, net of ExactTarget’s cash. ExactTarget
had developed a cloud-based marketing automation platform that
enables companies to leverage customer data from across the
enterprise to develop better optimized marketing campaigns and take
advantage of a variety of marketing automation tools to improve sales.
The company had more than 6,000 customers including Coke, Nike,
and Gap. Trailing revenue was about $317 million (7.6X revenue
multiple). It was not yet profitable. It was based in Indianapolis.
81 The High-Profile Enterprise Software Acquirers
• EdgeSpring – In June 2013, EdgeSpring announced that it was being
acquired by Salesforce. EdgeSpring developed enterprise business
intelligence solutions. Its solutions included EdgeMart and Lens
Framework (dynamic visualization). The company had just come out
of stealth mode after raising $11 million from KPCB and Lightspeed,
and the CEO previously worked at Salesforce. Its customers included
DocuSign, Equinix, EllieMae, and Pandora. The price, according to a
Salesforce 10-Q, was $133.7 million.
• Clipboard.com – In May 2013, Clipboard announced that it had been
acquired by Salesforce. Clipboard developed a “web-clipping” solution
that allowed users to select items on the web and save them into
storage to view them later. The clipped content could be marked and
shared. The company had about 100,000 users. However, it indicated
its solution would be phased out as it would use its technology for
Salesforce-related solutions. The price was not announced but
TechCrunch reported that sources indicate it was a $12 million deal.
However, Salesforce 10-Q documents imply it was about $7 million.
• EntropySoft – In February 2013, VentureBeat reported that
Salesforce acquired EntropySoft, which developed software tools for
enterprise content integration. EntropySoft’s tools help extract data for
improved marketing, and its Connector Hub solution enables
customers to access documents stored in many different types of
repositories. The price was not announced but Salesforce later
reported in its 10-Q that it acquired a French company for $22.2 million
in cash, net of $2.1 million of cash acquired. The company was based
in France.
82 The High-Profile Enterprise Software Acquirers
Select Earlier Acquisitions
A few major deals that Salesforce announced prior to 2013 include:
• Buddy Media – In June 2012, Salesforce announced it entered into
an agreement to acquire Buddy Media for approximately $689 million
in cash and stock ($467 million in cash, $184 million in stock, $38
million in vested stock and options) plus an earnout that could increase
the value up to $745 million. Buddy Media’s social marketing suite
helps companies gain customer insights, from initial contact to
purchase, to help improve customer relationships and improve sales.
It was a Facebook Preferred Marketing Developer, a LinkedIn Certified
Developer, and a Google Engagement Solutions partner. It was
founded in 2007 and its focus had been to provide marketers with the
ability to place content on social media and measure its effectiveness.
• Radian6 – In March 2011, Salesforce announced that it agreed to
acquire Radian6 for approximately $276 million in cash and $50 million
in stock, net of acquired cash. Radian6 had developed a social media
monitoring tool that helps companies track and monitor their social
media efforts. It also provides an engagement platform that helps
companies connect with individuals online. By better monitoring social
media sites (Facebook, Twitter, blogs, etc.) for customer feedback and
data, companies can improve marketing and increase sales. Its
customers included GE, Dell, Molson Coors, PepsiCo, and UPS.
• Heroku – In December 2010, Salesforce announced that it agreed to
acquire Heroku for $212 million, net of acquired cash. Heroku provided
cloud-based platform-as-a-service solutions for writing Ruby-based
applications. It was used by over 100K Ruby developers.
• Jigsaw – In April 2010, Salesforce announced it agreed to acquire
Jigsaw for $142 million in cash plus a $14.2 million earn-out. Jigsaw
provided a cloud-based crowd-sourced database of business contacts.
It had over 1.2 million members and 21 million contacts.
83 The High-Profile Enterprise Software Acquirers
“We have always tried to buy assets that were the best-in-class
or assets that were ascending in value and actually bringing
new and innovative solutions to market.”
- Bill McDermott, SAP CEO
Introduction
SAP was founded in 1972 by five former IBM employees. Its focus was real-
time enterprise applications (as opposed to overnight batch solutions that
had previously been commonplace). The company’s initial application suites
were generally successful, but SAP received a significant boost when it
introduced a client-server version of its application software (R/3) in the early
1990s, which became extremely popular. Since then, SAP has diversified
into a variety of enterprise software markets.
SAP reported revenue (per IFRS) of about €6.7 billion in the December 2016
quarter (Q4:F16), with the following revenue breakout: Cloud Subscriptions
and Support – 12.3%, Software Licenses – 32.4%, Software Support – 41%,
and Services – 14.3%.
SAP has had periods during which it has been an active acquirer. From 2005
to 2007, for example, it completed nearly 20 transactions. During 2015,
however, it announced only one acquisition. The company became active
again in 2016 with seven acquisitions. Some of its largest (multi-billion
dollar) acquisitions included Hybris (e-commerce), Ariba (e-commerce),
SuccessFactors (HR/employee management software), Sybase (relational
database), and Business Objects (business intelligence software).
Chapter 5: SAP
84 The High-Profile Enterprise Software Acquirers
Select SAP Acquisitions
Acquisitions Since 2013
The following are acquisitions that SAP made since the beginning of 2013:
• Abakus – In December 2016, SAP indicated that its Hybris unit agreed
to acquire Abakus. Abakus was a marketing attribution company that
measures customer data across all channels to help marketers
optimize spending and budgets. The Abakus attribution system utilizes
game theory to optimize marketing recommendations. SAP indicated
that it would integrate Abakus’ marketing analytics with SAP Hybris
Marketing. The 451Group estimates the price as $22.5 million. It was
founded in 2013 and based in California.
• Volume Integration – In December 2016, Volume Integration
indicated that it was acquired by SAP’s National Security Services
(SAP NS2). The company assists its customers in designing and
developing analytical cloud capabilities. It also developed Volume
Analytics, an analytics framework designed for continuous risk
evaluation. It was based in Reston, Virginia.
• Plat.One – In September 2016, Plat.One announced that it was
acquired by SAP. Plat.One developed an enterprise-grade IoT
solutions platform. Its platform enables enterprises to manage devices
across a wide number of industry standard machine and messaging
protocols. Its solutions include an adaptive architecture and pre-built
solutions accelerators for several different IoT use cases. The platform
helps devices talk to one another. Plat.One indicated that its solutions
managed over 200,000 devices for 25 enterprise customers, including
BT and Telecom Italia. It was founded in Italy.
• Hipmunk – In September 2016, SAP’s business unit Concur
announced that it entered into an agreement to acquire Hipmunk.
Hipmunk developed a website and mobile apps to assist users with
travel. Its solutions compare data from several top travel sites to
85 The High-Profile Enterprise Software Acquirers
provide the best flights, hotels, and/or Airbnb rentals. Its AI personal
travel assistant (Hello Hipmunk) helps users with booking
recommendations. The company had reportedly raised $55 million
from investors that included Y Combinator, Ignition Partners, IVP,
Nokia Growth Partners, Oak Investment Partners, and SV Angel.
• Altiscale – In August 2016, there were several reports that SAP
agreed to acquire Altiscale, and SAP confirmed it acquired Altiscale
the following month. Altiscale provided a cloud-based version of
Hadoop for storing, processing, and analyzing data. The Altiscale Data
Cloud provides servers, networking, and software configured for
performance, reliability, and security. The price was not announced
but VentureBeat indicated that it may have been over $125 million.
Investors included Accel Partners, AME Cloud Ventures, Northgate,
General Catalyst, Sequoia Capital, and Wildcat Venture Partners.
• Fedem Technology – In June 2016, SAP announced the acquisition
of Fedem Technology. Fedem developed engineering software to
improve mechanical designs using product modeling and static and
dynamic structural analysis. Its focus application areas included oil
and gas, renewable energy (e.g., optimizing wind turbine designs),
marine applications, and mechanical industries. SAP indicated that it
would incorporate the technology into its next-generation IoT solutions
for applications such as predictive maintenance and structural integrity
monitoring. The company was based in Norway.
• Mellmo (Roambi) – In February 2016, SAP announced the acquisition
of “key assets” of Mellmo, also known as Roambi. Roambi was a
mobile business intelligence company that created a broad range of
data presentation and visualization solutions to help customers more
easily visualize data, including creating mobile dashboards and
dynamically updating charts. Roambi had a cloud-based back end
which enabled easy connections to a variety of data sources.
86 The High-Profile Enterprise Software Acquirers
• Multiposting – In October 2015, Multiposting SAS announced that it
was acquired by SAP. Multiposting provided a variety of e-recruitment
solutions. The company indicated that it provided the first job and
posting tool available online. Multiposting stated that it had 1,200
clients, including many of the largest companies in France. SAP
integrated it into its SuccessFactors portfolio. Multiposting had been
founded in 2008 and based in Paris.
• Concur – In September 2014, SAP announced it agreed to acquire
Concur Technologies for $8.3 billion in cash ($129/share), about a 20%
premium to where the stock had previously traded. Concur was a
major supplier of cloud-based corporate travel and expense
management solutions and had over 20,000 clients (25 million users)
in 150 countries. SAP indicated that there would be synergies with its
Ariba procurement software. SAP noted that the majority of its
customers don’t use Concur and that only 30% of Concur’s customers
use SAP, providing significant potential cross-selling synergies.
Concur’s trailing revenue was about $668 million (over 12X revenue
multiple). The transaction closed in late 2014. Concur had been
founded in 1993 and was based in Bellevue, Washington.
• OpTier – In August and September 2014, a number of tech articles
(451 Group, TechCrunch) indicated that OpTier may have shut down
and sold some of its assets to SAP. OpTier was initially focused on
business transaction monitoring and had been shifting to code-level
application performance monitoring (APM). Its cloud-based APM
solution helped businesses (Deutsche Bank, Aflac, etc.) proactively
manage, monitor, and optimize their production applications. A deal
price was not announced but the 451Group indicated that it believed
SAP paid $10 to $20 million for the IP and assets it obtained. The
company had raised more than $100 million and was based in Israel.
87 The High-Profile Enterprise Software Acquirers
• SeeWhy – In May 2014, SAP announced the acquisition of SeeWhy.
SeeWhy provided cloud-based behavioral target marketing solutions
to help businesses increase customer engagement. SeeWhy’s
behavioral marketing solutions trigger real-time 1-to-1 marketing
campaigns using email advertising across desktop, mobile, and social
channels, based on individual customer behaviors. SAP noted that
SeeWhy would complement its Hybris platform with personalized
marketing based on real-time customer behavior that converts
customer interactions into sales. The company was based in Boston.
• Fieldglass – In March 2014, SAP announced that it agreed to acquire
Fieldglass. Fieldglass provided cloud-based vendor management
system services. Its tools help customers procure and manage
contractors and suppliers including contracts and statement of work
services. The company was based in Chicago and had more than 250
corporate customers (e.g., Verizon, AIG, American Airlines, VMware).
Madison Dearborn Partners invested $150 million for a majority stake
in 2010. Several technology articles (e.g., Crain’s Chicago Business)
reported that the deal exceeded $1 billion and PitchBook indicated it
was just under $975 million. The 451Group estimated a revenue
multiple of 11.8X.
• KXEN – In September 2013, SAP announced that it agreed to acquire
KXEN. KXEN had developed automated data mining and predictive
analytics solutions that enable business users to implement analytics,
without requiring expertise in programming or advanced math, to
improve decision making. Its InfiniteInsight software and Cloud
Prediction platform provided fast insights for customer acquisition,
cross-selling, and other related activities. Customers included Lowe’s,
CBS, Barclays, Vodafone, and Sears. The company had been
founded in 1998 and was based in San Francisco. The price was not
announced but PitchBook estimated it was $30.5 million and the
451Group indicated it was approximately $40 million with a 3.3X
revenue multiple.
88 The High-Profile Enterprise Software Acquirers
• Hybris – In June 2013, SAP announced that it agreed to acquire
Hybris, a major supplier of e-commerce software solutions. The Hybris
platform enables businesses to sell products and services to
customers across many channels (Web, mobile, call center, etc.). Its
data management technology provides a single view of customers,
products, and orders across many different channels. Customers
included GE, 3M, P&G, and Levi’s. The company was founded in 1997
and was based in Switzerland. Its majority investor was HGGC. The
price was not announced but the Wall Street Journal reported that one
source indicated it was about $1 billion. The 451Group indicated
(based on SAP’s 6-K) it was $1.34 billion, and estimated that the
revenue multiple was 10.7X.
• KMS Software (Select Assets) – In April 2013, SAP acquired certain
assets from KMS Software, which provided Web-based human capital
management software and solutions for electronic onboarding, off-
boarding, forms management, and new-hire engagement. Its
XpressHR software platform assists in on-boarding new employees,
verifying employment eligibility, and processing government and
corporate forms. Customers included Bank of America, Citigroup, GE,
Kodak, and KPMG.
• Camilion – In March 2013, SAP announced the acquisition of
Camilion. Camilion developed solutions for the insurance industry for
product development, underwriting, and product life-cycle
management. Its solutions help insurance companies bring new
products to market faster and speed up transactions. SAP indicated it
would combine Camilion with its own SAP for Insurance solution to
create an “All-in-One” solution for insurance. Camilion was founded in
2001 and had been collaborating with SAP since 2008. It had offices
in Canada and the US.
89 The High-Profile Enterprise Software Acquirers
• SmartOps – In February 2013, SAP announced plans to acquire
SmartOps, a provider of inventory and supply chain management
optimization solutions. The SmartOps solution helps track and analyze
inventory, capacity, demand, and lead times to help optimize inventory
and service levels. Its predictive analytics help manage global
distribution networks and supply chains. SmartOps had already had a
working relationship with SAP and had been founded in 2000.
• Ticket-Web – In February 2013, SAP announced plans to acquire
Ticket-Web, GmbH. Ticket-Web provided ticketing solutions and CRM
software for sports and entertainment promoters. It had an online
ticketing service (Entrée-tickets) and solutions for customer financial
process management and CRM. Its solutions enable venues and
promoters to market and issue tickets for a variety of events on the
web. The company was based in Germany.
Select Earlier Acquisitions
A few select SAP acquisitions that occurred prior to 2013 include:
• Ariba – In May 2012, SAP announced that it agreed to acquire Ariba
for approximately $4.3 billion ($45/share), about a 20 percent premium
to Ariba’s closing price and about 8.6X trailing revenue. Ariba was a
major supplier of cloud-based Internet commerce and ePurchase
applications and was an early provider of cloud-based solutions. The
company was based in Palo Alto and had an IPO in 1999 as one of the
first successful B2B software companies.
• SuccessFactors – In December 2011, SAP announced that it entered
into an agreement to acquire SuccessFactors for approximately $3.4
billion in cash ($40/share in cash, a 52% premium to the previous
closing price). The company provided cloud-based employee
management software that helped customers in assessing employee
performance, ensure effective recruitment, and efficiently managing
other human resource related tasks. It has over 3,500 customers
90 The High-Profile Enterprise Software Acquirers
around the world and generated about $91 million of revenue in the
quarter prior to the deal announcement. SuccessFactors went public
in 2007 and was based in South San Francisco.
• Sybase – In May 2010, SAP announced that it agreed to acquire
Sybase for approximately $5.8 billion ($65/share in cash, a 56%
premium). Sybase provided relational database software and allowed
SAP to provide its own database product making it less dependent on
reselling Oracle database solutions. Sybase had its IPO in 1991.
• Business Objects SA – In October 2007, SAP agreed to acquire
Business Objects for about $6.8 billion (4.8 billion euros). Business
Objects was an early leader in business intelligence software. It
reportedly had over 43,000 customers including 80 percent of the
Fortune 500. It sold a variety of products for combining and analyzing
data from various sources and displaying relevant data (reporting, data
visualization, performance management, etc.). It had major offices in
Silicon Valley, Paris, and Vancouver and had been founded in 1990.
91 The High-Profile Enterprise Software Acquirers
“If you agree with everything I have said, then I have failed.”
- John Chambers, former Cisco CEO
Introduction
Cisco was founded in 1984 by Leonard Bosack (Stanford University
computer science department) and Sandy Lerner (managed computers at
Stanford’s Graduate School of Business), who were married at the time. The
company originally modified and commercialized multi-protocol routing
software that had been developed at Stanford (which became the basis for
Cisco’s original iOS software). Stanford initially viewed this as IP theft and
forced Bosack to resign and contemplated filing charges, but it subsequently
licensed the routing software to Cisco. Cisco became the leader in multi-
protocol routers and later diversified into switches and other networking
equipment. When Internet usage became pervasive in the late 1990s, Cisco
was well positioned to capitalize on the opportunity and became the world’s
most valuable company in 2000, with a market cap that exceeded $500
billion. While routers and switches still account for more than 40% of its
revenue, Cisco has diversified into a variety of other market segments (e.g.,
IP phones, WebEx, wireless, security, enterprise software).
In the quarter ending January 2017 (Q2:F17), Cisco reported revenue of
$11.58 billion. Its revenue breakout was: Switching (Catalyst and other
switches) – 28.5%, NGN Routing (routers) – 15.7%, Collaboration (IP
phones, WebEx, TelePresence, etc.) – 9.2%, Data Center (Unified
Computing System) – 6.8%, Wireless (WiFi access points and solutions
including Aironet and Meraki) – 5.5%, Security (various security software
solutions) – 4.6%, Service Provider Video (cable infrastructure and video
software) – 2.1%, Services – 26.7%, and Other – 1%.
Chapter 6: Cisco
92 The High-Profile Enterprise Software Acquirers
Cisco had its IPO in 1990 and has been an acquisitive company since 1993.
In fact, the general view is that the reason Cisco became the leader in
networking was because it out-acquired many of its original competitors
(3Com, Cabletron, etc.) and bought up many of the differentiated start-ups.
For example, while Cisco was original focused on routers, it acquired
Cresendo Communications, Kalpana, and Grand Junction in the 1993-1995
timeframe. Leveraging the LAN switching technologies from these acquired
companies, Cisco developed its Catalyst family of switches, which allowed it
to become the leader in LAN switching.
Cisco has used acquisitions to diversify into a variety of other market
segments including cable infrastructure (Scientific Atlanta), optical
networking equipment (Pirelli and Cerent), home networking (Linksys),
web/video conferencing (WebEx, Tandberg), and security (Sourcefire).
During the past few years, it has focused primarily on enterprise software
acquisitions, including the recent AppDynamics deal (applications
performance management).
Select Cisco Acquisitions
Acquisitions Since 2013
The following are Cisco acquisitions since the beginning of 2013:
• AppDynamics – In January 2017, Cisco announced its intent to
acquire AppDynamics. AppDynamics was a private company, but had
already filed for an IPO (including an S-1 and two amendments) and
was expected to go public within days or weeks of when Cisco agreed
to acquire the company. AppDynamics had developed tools for
monitoring the performance of applications across delivery platforms.
By monitoring and gathering information about applications, it could
help identify potential issues and resolve slow-downs and other issues.
Cisco indicated that AppDynamics helps transform complex siloed
data into insights across an enterprise. The consideration was $3.7
93 The High-Profile Enterprise Software Acquirers
billion in cash and assumed equity awards (just under $3.6 billion net
of cash). According to its latest filings, trailing revenue was
approximately $206 million (making the deal more than 17X revenue)
and trailing operating income was a loss of more than $125 million.
The company was founded in 2008 (as Singularity Technologies, and
changed its name in 2009). AppDynamics has offices in 13 countries
and about 1,200 employees and is based in San Francisco.
• Heroik Labs (Worklife) – In October 2016, Cisco announced the
acquisition of Heroik Labs (a/k/a Worklife). The company developed
software to help increase meeting productivity. It provides a variety of
meeting-related functions such making it easy to share agendas before
a meeting, take notes during a meeting, and share notes and action
items after a meeting. It was based in San Francisco.
• ContainerX – In August 2016, Cisco announced its intent to acquire
ContainerX. ContainerX was focused on the container market. It
developed technology to help enterprises manage and integrate
containers across data centers. Its solutions enable users to view their
entire infrastructure and all containers in one management console. It
also provides APIs for enterprises interested in integrating the
platform’s capabilities into custom management portals. ContainerX
had been around for less than 2 years when Cisco announced the
acquisition. It had 8 people and was based in Silicon Valley.
• CloudLock – In June 2016, Cisco announced its intent to acquire
CloudLock. CloudLock was focused on cloud security. It developed
cloud access security broker (CASB) technology that provides
enterprises with visibility and analytics around user behavior and
sensitive data in cloud services. The company used APIs to help
enterprises monitor security of documents and content that is shared
or stored in the cloud. It worked with a broad range of applications
(Office365, Salesforce, and many others). Cisco indicated the
acquisition would enhance its security portfolio and build on Cisco’s
Security Everywhere strategy. Cisco agreed to pay $293 million in
94 The High-Profile Enterprise Software Acquirers
cash and assumed equity awards, plus additional retention-based
incentives. CloudLock reportedly had raised approximately $35 million
from investors such as Cedar Fund, Salesforce, and Bessemer. It was
based in the Boston area.
• Synata – In March 2016, Cisco announced the acquisition of Synata.
Synata enables users to search on-premise and cloud-based
applications simultaneously. Synata had expertise in encrypted search
and Cisco indicated Synata’s technology could work on top of Cisco
Sparks end-to-end encryption without negatively impacting speed.
Cisco noted that the technology would be used to enhance its Cisco
Spark business collaboration service. According to Crunchbase,
Synata had raised $1.5 million. Synata was based in San Francisco.
• Leaba Semiconductor – In March 2016, Cisco announced its intent
to acquire Leaba Semiconductor. Leaba was only about two years old
and had not yet introduced its first product, but was reportedly
developing a highly-integrated networking chip solution. The founding
team previously founded Dune, which had been acquired by
Broadcom. Investors included Pitango and Bessemer. Cisco agreed
to pay $320 million in cash and assumed equity awards, plus additional
retention based incentives. Leaba was based in Israel.
• CliQr Technologies – In March 2016, Cisco announced its intent to
acquire CliQr Technologies. CliQr provided an application-defined
cloud orchestration platform to model, deploy, and manage
applications, across a variety of different environments. CliQr's
CloudCenter platform helps IT organizations move applications to the
cloud, deploy self-service IT environments, or gain visibility and control
across clouds and applications. Cisco indicated the acquisition would
help customers accelerate their private, public, and hybrid cloud
deployments. Cisco had already been utilizing CliQr’s technology.
Cisco agreed to pay $260 million in cash and assumed equity awards,
plus retention based incentives. It was based in Silicon Valley.
95 The High-Profile Enterprise Software Acquirers
• Jasper Technologies – In February 2016, Cisco announced it was
acquiring Jasper Technologies. Jasper developed an IoT service
platform. The platform enables companies to connect any device over
the cellular network. Jasper’s software also manages the connectivity
of IoT devices and focuses on managing and automating the lifecycle
of IoT services and solutions. The company had over 3,500 enterprise
customers and 27 service providers. Cisco indicated that Jasper would
become its IoT Cloud Business Unit. Jasper had raised approximately
$200 million, per Crunchbase. The price was approximately $1.4
billion. The 451Group estimates revenue was about $120 million
(11.7X revenue multiple). It was based in Silicon Valley.
• Acano – In November 2015, Cisco announced its intent to acquire
Acano. Acano provided collaboration infrastructure hardware and
conferencing software. Its products include gateways and video and
audio bridging technology that allows customers to connect video
systems from multiple vendors across both cloud and hybrid
environments. Cisco agreed to pay $700 million in cash and assumed
equity awards, plus additional retention based incentives. It had been
founded in 2012 and several of the key employees came from Cisco
and Tandberg. The 451Group estimates revenue was only $10 million
(70X revenue multiple). It was based in London.
• 1 Mainstream – In October 2015, Cisco announced its intent to
acquire 1 Mainstream, which provided a cloud-based video platform to
help quickly launch live and on-demand OTT video services to a variety
of connected devices. Its technology enables service providers,
broadcasters, media companies, and digital content companies to
deliver media content to almost any connected media device. Its
customers included Sky and CBS News. TV company Sky had been
an investor. PitchBook estimates the price was $125 million. It had
been founded in 2012 and was based in Silicon Valley.
96 The High-Profile Enterprise Software Acquirers
• Lancope – In October 2015, Cisco announced its intent to acquire
Lancope, a network security company. Lancope provides a variety of
network behavior analytics, threat visibility, and security intelligence.
Its “NetFlow” and “StealthWatch” solutions track activity in networks in
real-time to look for erratic activity. Cisco had been a customer. Other
customers included HP and Gannett. Cisco indicated the price was
$452.5 million in cash and assumed equity awards, plus retention
incentives. Investors included Canaan Partners, HIG Partners, and
GMG Capital. The 451Group estimates it had about $75 million of
revenue (6X). The company was based in Alpharetta, Georgia.
• ParStream – In October 2015, Cisco announced its intent to acquire
ParStream. ParStream provided an analytics database that allows
companies to analyze large amounts of data and store the data in near
real-time anywhere in the network. ParStream’s database was built
specifically for IoT environments as it allows customers to analyze
large amounts of data with minimal infrastructure. Its solution included
advanced compression and indexing capabilities. ParStream was
based in Germany.
• Portcullis – In September 2015, Cisco announced its intent to acquire
Portcullis, a cybersecurity consulting firm. Portcullis’ consulting
services include vulnerability assessments, forensic testing, security
training, and security audits. Most of its clients were based in Europe,
and it was located in the UK.
• Pawaa – In August 2015, Cisco announced that it acquired Pawaa.
Pawaa was a policy-based document sharing company and provided
secure on-premise and cloud-based file sharing software. Pawaa had
been part of Cisco’s Entrepreneurs in Residence program. It was
based in Bangalore, India. PitchBook estimates the price was only
about $5 million.
97 The High-Profile Enterprise Software Acquirers
• MaintenanceNet – In July 2015, Cisco announced its intent to acquire
MaintenanceNet. MaintenanceNet provided a cloud-based software
platform that uses data analytics and automation to manage renewals
of recurring customer contracts and related activities. Its software
identifies customers with service contracts that are coming up for
renewal or with products that are not yet covered, and provides
automated quoting and notifications. Cisco had already been working
with MaintenanceNet since 2009. Cisco indicated it would pay $139
million in cash and retention incentives. It was based in California.
• OpenDNS – In June 2015, Cisco announced it was acquiring
OpenDNS, a security-as-a-service company. OpenDNS funnels
customer traffic through its own DNS servers which incorporate a
variety of web filtering technologies to avoid malware and other
security issues. OpenDNS had many data centers around the world
and indicated that it had more than 65 million customers and managed
about 70 billion DNS requests per day (and each provides it with data
to learn from and help avoid security issues). The announced price
was $635 million in cash. The 451Group estimates a revenue multiple
of about 25X. The company was based in San Francisco.
• Piston Cloud Computing – In June 2015, Cisco announced its intent
to acquire Piston Cloud Computing. Piston OpenStack was a software
product that automated the orchestration of a private cloud
environment on commodity servers. Cisco implied the acquisition was
more of an acqui-hire as it indicated that Piston’s distributed systems
engineering and OpenStack talent would enhance Cisco’s capabilities
in cloud automation and bring operational experience on the
infrastructure that powers Cisco’s OpenStack Private Cloud. Cisco
noted that the company had expertise in distributed systems and
automated deployment. Piston was based in San Francisco.
98 The High-Profile Enterprise Software Acquirers
• Tropo – In May 2015, Cisco announced its intent to acquire Tropo.
Tropo provided cloud-based APIs that enables developers to more
easily embed real-time communications in their applications. Tropo’s
APIs were used by over 200K developers. Cisco indicated the
technology would be used in a collaboration platform-as-a-service.
Tropo was based in Silicon Valley.
• Embrane – In April 2015, Cisco announced its intent to acquire
Embrane. Embrane provided a lifecycle management platform for
application-centric network services. Embrane’s Heleos platform
allows network operators to create and shut down instantiations of
network services, helping service providers automatically manage and
configure networks. Cisco indicated the acquisition would enhance the
capabilities of its Application Centric Infrastructure (ACI). The founders
were previously Cisco executives. The 451Group estimates the
consideration was about $55 million and that the company had only
about $1.5 million of revenue. It was based in Silicon Valley.
• Neohapsis – In December 2014, Cisco announced its intent to acquire
Neohapsis. The company provided consulting and services related to
information security, risk management, and compliance. Many of its
clients were large enterprises, including Fortune 500 companies. It
specialized in penetration testing, risk assessment, and networking
infrastructure evaluations. Cisco indicated the team would become
part of Cisco Security Services. PitchBook estimates the deal size at
$35 million. It was based in Chicago.
• Metacloud – In September 2014, Cisco announced its intent to acquire
Metacloud. Metacloud developed and operated private clouds using
an “OpenStack-as-a-Service” model. Metacloud allows service
providers to combine public cloud deployments with remotely managed
OpenStack private clouds, and to deliver Intercloud offerings to their
customers. Cisco indicated that Metacloud would help accelerate its
strategy to build a global Intercloud. The 451Group estimates the deal
size was $149 million. It was based in Pasadena, California.
99 The High-Profile Enterprise Software Acquirers
• Memoir Systems – In September 2014, Cisco announced its intent to
acquire Memoir Systems. Memoir developed semiconductor memory
IP and tools that enabled ASIC and SoC developers to create high
speed programmable chips for networking applications. Specifically,
Memoir had soft-logic IP that it indicated could speed up memory
access by as much as 10X, while reducing memory footprint. Memoir
achieves this by having 10 ports that can simultaneously access
independent addresses in the same memory bank in the same clock
cycle at full speed (rather a single operation per clock cycle which is
typical). Cisco indicated the technology was important for 100G
networking and it was already using the technology in its Nexus 9000
switches. Memoir was based in Silicon Valley.
• Assemblage – In June 2014, Cisco announced the acquisition of
Assemblage. Assemblage provided collaboration apps for real-time
shared whiteboarding, presentation broadcasting, and screen sharing.
The technology enables users to collaborate via browsers by
accessing collaboration apps from the cloud. It supports 40 different
file types to enable quick and efficient collaboration. As it listed its
headquarters as San Francisco, we classified it as a US company,
although it had an office in (and its founders were from) Denmark.
PitchBook estimates the deal was just over $2 million.
• Tail-f Systems – In June 2014, Cisco announced its intent to acquire
Tail-f, which provided multi-vendor network service orchestration
solutions. Tail-f’s products help service providers and enterprise IT
organizations implement applications, network services, and solutions
across networking devices. It provides a single view of infrastructure
(layer 2 to 7) across all hardware devices and enables easier
provisioning across a variety of environments. Its customers included
AT&T and Deutsche Telekcom. Cisco indicated it paid $175 million
including retention. Reports significantly vary on how much revenue
Tail-f had (from $10 million to over $30 million). The company was
based in Stockholm, Sweden.
100 The High-Profile Enterprise Software Acquirers
• ThreatGrid – In May 2014, Cisco announced its intent to acquire
ThreatGrid. ThreatGrid provided cybersecurity solutions that included
sandboxing technology and malware analysis. ThreatGrid reportedly
had close ties to Sourcefire, which Cisco had previously acquired and
Cisco indicated that the technology would be integrated into the
FireAmp malware detection solution that it obtained from Sourcefire.
The 451Group estimates that the price was about $55 million. It had
approximately 25 employees and was based in New York.
• Collaborate – In December 2013, Cisco announced the acquisition of
Collaborate.com (also known as Kibits). Collaborate created a mobile
collaboration application that provides unified document sharing, task
management, and team communication capabilities. The solution
helps the mobile workforce to collaborate with team members on
projects. Users can create virtual collaboration rooms where they can
chat and share documents, notes, photos, and videos. PitchBook
estimates the deal size was $26 million. It was based in Boston.
• Insieme Networks – In November 2013, Cisco officially disclosed a
stealth start-up named Insieme Networks and also announced that it
was acquiring the company. Insieme was a “spin-in.” Reportedly,
Cisco previously funded the company with $135 million and had an
option to acquire it for $700 million, which it exercised. The founders
of Insieme had been long-time Cisco executives. Insieme was focused
on developing software defined networking (SDN) solutions for the
switching/routing market. It was based in Silicon Valley.
• Whiptail – In September 2013, Cisco announced its intent to acquire
Whiptail. Whiptail provided scalable solid state memory systems.
Cisco indicated the price was approximately $415 million in cash and
retention. Whiptail’s solutions included the Accela all-flash storage
array and INVICTA, which supported scaling, high-availability, modular
and multi-protocol technology. Whiptail had already been a Cisco
partner. Investors included Ignition Partners, RRE Ventures, Spring
Mountain, and SanDisk. The 451Group estimates it had about $20
million of revenue (over 20X multiple). It was based in New Jersey.
101 The High-Profile Enterprise Software Acquirers
• Sourcefire – In July 2013, Cisco announced that it agreed to acquire
Sourcefire for $76/share in cash or $2.7 billion (about a 29% premium
to where the stock had traded), or just under $2.5 billion net of cash.
Sourcefire was a supplier of intelligent cybersecurity solutions. Its
solutions focused on network security and malware protection. Its
products included the Firepower family of security appliances (intrusion
prevention systems, firewalls, etc.) and its Advanced Malware
Protection solution which uses analytics to protect networks and
endpoints. Most of its solutions are based on Snort, an open-source
intrusion detection system (IDS). Sourcefire indicated that its threat-
centric approach provides customers with protection before, during,
and after an attack. It had about $233 million of trailing revenue (10.7X
revenue multiple). It was based in Maryland.
• Composite Software – In June 2013, Cisco announced it was
acquiring Composite Software. Composite provided data virtualization
software and services. The Composite Data Virtualization Platform is
data virtualization middleware that virtualizes data from across the
network and makes it appear as if the data is in one location. It
provides users with a consolidated view of data to assist in making
better decisions. Cisco indicated that it would pay approximately $180
million in cash and retention-based incentives. Composite was based
in Silicon Valley.
• JouleX – In May 2013, Cisco announced its intent to acquire JouleX,
which developed software for enterprise IT energy management. Its
solutions gain visibility into networked devices for energy
management, analytics, and compliance. This can help reduce the
energy costs associate with enterprise IT, without the need for meters
or device-side agents. Cisco indicated that it would pay $107 million
in cash and retention. The 451Group estimates the revenue multiple
at just under 12X. The company was based in Atlanta, but was
originally based in Munich, Germany and still had R&D there.
102 The High-Profile Enterprise Software Acquirers
• Ubiquisys – In April 2013, Cisco announced its intent to acquire
Ubiquisys. Ubiquisys was a supplier of 3G and LTE small-cell
technologies for heterogeneous networks. Cisco indicated that the
acquisition would enable a comprehensive small-cell solution for
service providers that supports the transition to next-generation radio
access networks. It had approximately 70 carrier customers including
T-Mobile, Google, and Softbank. Cisco indicated that it was paying
$310 million in cash and retention incentives. It was based in the UK.
• SolveDirect – In March 2013, Cisco announced its intent to acquire
SolveDirect. SolveDirect provided cloud-based solutions that enable
enterprises to automate the sharing of data and workflows with service
partners to drive operational efficiencies. Historically, sharing data in
a secure manner required significant manual effort, which SolveDirect
helps eliminate. SolveDirect's primary solution was ServiceGrid, a
platform that can monitor service level agreements and implement a
variety of workflows. The reported implied value was about $21.2
million with trailing revenue of $8.2 million (2.6X). SolveDirect was
located in Vienna, Austria.
• Cognitive Security – In January 2013, Cisco announced it agreed to
acquire Cognitive Security. Cognitive focused on using artificial
intelligence to detect cyber threats through behavioral analysis of real-
time data. Cisco indicated the team would join its Security Technology
Group. The company reportedly had 28 employees. Cognitive was
based in Prague, Czech Republic.
• Intucell – In January 2013, Cisco announced it was acquiring Intucell
for $475 million in cash. Intucell provided self-optimizing network
software which helps carriers manage and configure their networks
automatically based on network demands. This helps towers
communicate and reduce dropped calls and improves mobile network
speeds. The company had raised about $6 million from Bessemer.
The 451Group estimates the revenue multiple was nearly 16X. It was
based in Israel.
103 The High-Profile Enterprise Software Acquirers
Select Earlier Acquisitions
Some major Cisco acquisitions made prior to 2013 include:
• Meraki – In November 2012, Cisco announced that it was acquiring
Meraki for approximately $1.2 billion. Meraki provided solutions to
enable on-premise mesh Wi-Fi networking, as well related security and
management solutions. It grew out of a project at MIT. Investors
included Google, Felicis Ventures, and Sequoia. Meraki had
reportedly reached the $100 million revenue run rate. Cisco indicated
the deal would help customers empower mobile workforces and
generate new revenue opportunities for its partners.
• NDS – In March 2012, Cisco announced its intent to acquire NDS
Group for approximately $5 billion, including the assumption of debt
and retention-based incentives. NDS provided software to assist
media companies and service providers with securely delivering video
and entertainment offerings. Its customers included Cox and DirecTV.
Cisco indicated the deal would expand its Videoscape platform. NDS
was owned by Permira and News Corp and was founded in Israel.
• Tandberg – In October 2009, Cisco announced that it agreed to
acquire Tandberg for approximately $3 billion. Tandberg was based in
Norway and provided a variety of teleconferencing systems including
network infrastructure and video conferencing equipment. Cisco noted
that the products would be integrated into its TelePresence portfolio.
• Starent – In October 2009, Cisco announced that it agreed to acquire
Starent Networks for approximately $2.9 billion. Starent was a public
company and a provider of IP-based mobile infrastructure networking
equipment. Its solutions enabled mobile operators to provide
multimedia services (e.g., video, Internet access, VoIP, etc.) to
subscribers.
104 The High-Profile Enterprise Software Acquirers
• Pure Digital (Flip Video) – In May 2009, Cisco acquired Pure Digital
for $590 million in stock. Pure Digital was primarily known for its Flip
consumer video cameras. Cisco indicated the acquisition would
enable it to more quickly penetrate the consumer markets. However,
Cisco announced a restructuring a couple of years later in which it shut
the Flip business unit down.
• Nuova – In April 2008, Cisco agreed to acquire Nuova Systems.
Nuova developed data center networking equipment and its first
product was a 10 gigabit Ethernet switch that supported virtualization.
Several of the executives were former Cisco executives and it was
referred to as a “spin-in” transaction.
• WebEx – In March 2007, Cisco agreed to acquire WebEx for
approximately $3.2 billion in cash ($2.9 billion net of its $300 million of
cash). WebEx provides online video conferencing solutions. In 2006,
WebEx had reportedly generated $380 million of revenue and almost
$50 million of operating income.
• IronPort – In January 2007, Cisco announced it was acquiring IronPort
Systems for $830 million. IronPort was a security company focused
on enterprise applications such as spam and spyware protection.
• Scientific Atlanta – In November 2005, Cisco agreed to acquire
Scientific Atlanta for approximately $6.9 billion in cash. Scientific
Atlanta was a major supplier of video set-top boxes and video
distribution infrastructure for the cable TV market.
Some older notable transactions included Linksys (2003, home networking
equipment, $500 million), Andiamo (2002, data storage products, $2.5
billion), Arrowpoint (2000, LAN switching equipment, $5.7 billion), Pirelli
(1999, fiber optic communications, over $2.1 billion), IBM’s Networking unit
(1999, networking hardware equipment unit divested by IBM, $2 billion),
Cerent (1999, optical/SONET communications equipment, $6.9 billion),
Geotel Communications (1999, Voice-over-IP communications solutions,
$2 billion), and Stratacom (1996, ATM switching equipment, $4 billion).
105 The High-Profile Enterprise Software Acquirers
Although not large in terms of deal size, several of Cisco’s early LAN
switching acquisitions, including Crescendo (1993, $94.5 million), Kalpana
(1994, $204 million), and Grand Junction (1995), were critical to
establishing Cisco’s networking switch business, which remains its largest
business unit.
106 The High-Profile Enterprise Software Acquirers
“Data is the new science. Big Data holds the answers.
Are you asking the right questions?”
- Patrick P. Gelsinger, former CEO of VMware
Introduction
VMware was founded in 1998 and has been a pioneer in virtualization
technology. The company was acquired by EMC in 2003 for $625 million
and EMC later sold 15% of its VMware equity to public investors through a
VMware IPO in 2007. In 2013, VMware announced its Infrastructure-as-a-
Service vCloud Hybrid Service (vCloud Air). With Dell’s acquisition of EMC,
VMware is now a subsidiary of Dell Technologies (per VMware’s 10-K, Dell
controlled approximately 82.8% of VMware’s outstanding common stock as
of the end of 2016, although VMware announced in March 2017 that it was
buying $300 million of its stock from Dell as part of a stock buyback program).
Despite the Dell ownership, VMware remains a publicly traded company.
In the December 2016 quarter (Q4:F16), VMware had revenue of just over
$2 billion, with 44% from licensing and 56% from services.
VMware has been a leader in enterprise virtualization technologies, but has
expanded into other markets and technologies including mobile device
management, security, and applications delivery. Its largest acquisition was
AirWatch (mobile device management) in 2014 for about $1.5 billion.
Chapter 7: VMware
107 The High-Profile Enterprise Software Acquirers
Select VMware Acquisitions
Acquisitions Since 2013
The following are VMware acquisitions since the beginning of 2013:
• PlumGrid (IP and assets) – In December 2016, there were several
reports that VMware acquired IP assets and hired several employees
from PlumGrid. PlumGrid developed software defined networking
(SDN) technology solutions. Its IO Visor solution is an I/O processor
that sits in the Linux kernel and controls virtual domains for network
virtualization, monitoring, and security. According to Crunchbase,
PlumGrid has raised approximately $46 million.
• Arkin Net – In June 2016, VMware announced its intent to acquire
Arkin Net, which provided software defined data center security and
operations solutions. Its solutions enable customers to obtain deep
operational visibility into security, applications availability, and the data
center. Arkin was already a VMware partner and VMware indicated
Arkin would help accelerate adoption of its NSX and software defined
data centers. Arkin also integrates with networking systems from
Cisco, Juniper, Brocade, and others.
• Boxer – In October 2015, VMware announced plans to acquire Boxer
and indicated that it would be integrated into its AirWatch unit. Boxer
developed a personal information/email management solution for
enterprises that utilizes a container approach to security and
applications management. Its email management solution integrates
with other applications such as Facebook, Salesforce, Yahoo, Box,
Dropbox, and Twitter. Boxer initially focused on iOS applications but
previously made a small acquisition of its own (Enhanced Email) to
expand to Android devices.
108 The High-Profile Enterprise Software Acquirers
• Immidio – In February 2015, VMware announced that it had acquired
Immidio, which provided a user environment management system
solution. Immidio’s solution enables enterprises to provision
applications and settings to users regardless of the device or operating
system. Immidio was founded in 2008 and based in Amsterdam.
• Continuent – In October 2014, VMware announced it acquired the
assets of Continuent. Continuent developed database clustering and
replication technologies. Continuent helps enterprises run business-
critical applications on cost-effective open source software. VMware
indicated that it planned to incorporate the technology into its vCloud
Air public cloud, and will initially continue to provide Continuent’s
Tungsten solution as an infrastructure agnostic hybrid solution.
Continuent was founded in 2004.
• CloudVolumes – In August 2014, VMware announced the acquisition
of CloudVolumes, which provided real-time application delivery
solutions that help enterprises deliver applications to virtualized
environments. It solutions help virtualize everything above the
operating system and can deliver server or desktop workloads to any
virtual machine. PitchBook estimates the deal size as $45 million. The
company was based in Silicon Valley.
• Virtual Systems (Certain Assets) – In April 2014, PitchBook
indicated that VMware acquired certain cloud-based migration assets
from Virtual Systems Solutions. It was based in Singapore.
• Third Sky (certain assets) – In March 2014, VMware acquired most
of Third Sky, a provider of IT service management consulting,
education, and technology, although it indicated that some
assets/customers were not part of the deal and that Third Sky would
remain a separate entity. VMware stated that the biggest issue for
many customers is not the technology itself but how to best optimize
and manage it and, therefore, comprehensive services were important.
Third Sky was based in San Francisco.
109 The High-Profile Enterprise Software Acquirers
• AirWatch – In January 2014, VMware announced the acquisition of
AirWatch, a major supplier of mobile device management software, for
approximately $1.54 billion ($1.18 billion in cash and $364 million in
installment payments and assumed unvested equity). AirWatch had a
broad range of software supporting BYOD, container management,
mobile security, email management, and other solutions that help
enterprises manage mobile access. Forbes reported that its sources
indicated that AirWatch had revenue in the $85-100 million range,
putting the valuation at more than 15X revenue. The company was
founded in 2003 as Wandering WiFi and received a $200 million
funding in 2013 from Insight Ventures and Accel.
• Desktone – In October 2013, VMware announced that it acquired
Desktone, which provided a desktop virtualization platform for
delivering Windows desktops and applications as a cloud service. Its
desktop-as-a-service solution helps accelerate the move of desktops
to the cloud, with each user obtaining a separate virtual environment.
Its customers included Dell, NEC, Fujitsu, and Time Warner Cable. Its
investors included Softbank and Highland Capital. The company was
founded in 2007 and was based in Boston.
• Virsto – In February 2013, VMware announced it signed an agreement
to acquire Virsto Software, which provided software that optimizes
storage performance in virtual environments. Virsto was based in
Silicon Valley. Its solution improves utilization, increases performance,
and accelerates VM storage provisioning, while also reducing the cost
and complexity for cloud computing and applications virtualization. It
was founded in 2007 and based in Silicon Valley. Investors included
August Capital, Canaan, Interwest, Southern Cross, and Correlation
Ventures. The price was not announced but the 451Group estimates
that it was $184.5 million and that the company had only a couple
million of revenue (92X).
110 The High-Profile Enterprise Software Acquirers
Select Earlier Acquisitions
A couple of major VMware acquisitions made prior to 2013 include:
• Nicira – In July 2012, VMware announced it agreed to acquire Nicira
for approximately $1.26 billion (a little over $1 billion in cash, with the
rest in stock). Nicira was focused on software defined networking
(SDN) and virtualizing the network. Nicira created proprietary versions
of the OpenFlow, Open vSwitch, and OpenStack networking projects.
It had been in stealth mode for five years. It reportedly had raised
approximately $50 million from investors that included Andreessen
Horowitz, Lightspeed Venture Partners, and New Enterprise
Associates. Reports indicated that the acquisition led to a rift between
Cisco and EMC, as Nicira was viewed as competitive with Cisco.
• SpringSource – In August 2009, WMware announced the acquisition
of SpringSource, which provided Web application development and
management tools and services. It was a strong supporter of “lean
software.” VMware indicated that the acquisition would help its clients
more efficiently build and manage applications, both internal and in the
cloud. The consideration was approximately $420 million, including
$362 million in cash and equity and an assumption of $58 million of
unvested stock and options.
111 The High-Profile Enterprise Software Acquirers
“Set out to build a company and make a contribution,
not an empire and a fortune.”
- Bill Hewlett and David Packard, HP Cofounders
Introduction
Bill Hewlett and David Packard started their company Hewlett-Packard (HP)
in Packard's garage in 1939, with an initial capital investment of $538. Their
first successful product was an audio oscillator. The company expanded into
a variety of laboratory instrumentation and later became a major supplier of
calculators, computers, printers, servers, network equipment, storage,
software, and other electronics.
In 1999, the company spun off its electronic test and instrumentation and
semiconductor businesses (which became Agilent; later Agilent spun off the
semiconductor piece as Avago, which later acquired Broadcom and is now
Broadcom Limited). HP acquired Compaq in 2001 to help consolidate the
PC market.
In November 2015, Hewlett-Packard split into two publicly traded companies:
Hewlett Packard Enterprise (servers, storage, software, networking
equipment, services) and HP (desktop PCs, notebook PCs, printers,
displays, and other related products).
In May 2016, HP Enterprise (HPE) announced it would spin-off its Enterprise
Services unit (much of which came from its acquisition of EDS in 2008) and
merge it with CSC to form DXC Technology. The spin-off was completed at
the beginning of April, 2017. However, HPE retained its Pointnext
technology services unit.
Chapter 8: HP Enterprise
112 The High-Profile Enterprise Software Acquirers
In the January 2017 quarter (Q1:F17), HPE had revenue of $11.4 billion, with
the following breakout: Enterprise Group (servers, storage, networking,
technology services) – 55.4%, Enterprise Services – 35.4%, Software –
6.3%, Financial Services – 7.2%, and Corporate (intersegment eliminations)
– negative 4.4%. This was prior to the spin-off of Enterprise Services.
HP had been a fairly active acquirer through 2011, making several high-
profile acquisitions in 2010 and 2011 (e.g., 3Com, Palm, 3Par, ArcSight,
Vertica, and Autonomy). However, with Meg Whitman taking over the CEO
position in September 2011 and the general view that HP had significantly
overpaid for many of its acquisitions (especially Autonomy), HP all but
stopped its M&A activity for a couple of years (2012, 2013), before making a
few acquisitions in 2014 and 2015. HPE has recently become very active
with several acquisitions during the past few months.
Select HP Enterprise Acquisitions
Acquisitions Since 2013
The following is a list of acquisitions made by Hewlett-Packard or Hewlett-
Packard Enterprise (since the company was split in 2015) since the
beginning of 2013. It excludes acquisitions made by HP after the split (e.g.,
Samsung’s printer unit). It also excludes the spin-out of the HPE services
unit and its merger with CSC to form DXC since it will not be part of HPE.
• Nimble Storage – In March 2017, Hewlett-Packard Enterprise
announced it agreed to acquire Nimble Storage, a public supplier of
Flash-based storage arrays, for $12.50/share in cash (about a 45%
premium to where the stock previously traded) or approximately $1.1
billion ($917 million net of cash). HPE indicated that Nimble’s
predictive flash offerings for the entry to midrange segments would
complement its midrange to high-end 3Par solutions, allowing it to
provide a full range of flash storage solutions. HPE also indicated it
would incorporate Nimble’s InfoSight Predictive Analytics platform
113 The High-Profile Enterprise Software Acquirers
across its storage portfolio. Nimble had revenue of $402.6 million in
its previous fiscal year (ending January 2017), resulting in a revenue
multiple of about 2.3X. Nimble had a GAAP operating loss of $156.6
million and a non-GAAP reported loss of $61.1 million in its previous
fiscal year. It was based in Silicon Valley.
• Niara – In February 2017, Hewlett-Packard Enterprise announced it
agreed to acquire Niara. Niara developed behavior analytics solutions
to help its customers detect and protect themselves against advanced
cyber-attacks that have penetrated perimeter defenses. Its solution
utilizes machine learning technologies. The Niara solution establishes
baseline characteristics for all users and devices across the enterprise.
Subsequently, the software looks for anomalous, inconsistent activities
that may indicate a security threat. HPE indicated it planned to
incorporate the technology into its Aruba ClearPass solution.
PitchBook estimates the deal size as $40 million. The 451Group
estimates it was $55 million with $2 million of trailing revenue. Niara
was based in Silicon Valley.
• Cloud Cruiser – In January 2017, HPE announced that it agreed to
acquire Cloud Cruiser, which helps enterprises track and control the
use of public and private cloud computing. Cloud Cruiser's analytics
enable companies to measure, analyze, and control their usage and
spend in private, public, and hybrid cloud environments. Customers
included Accenture, KPN, and TD Bank. It was founded in 2010 and
based in Silicon Valley.
• SimpliVity – In January 2017, HPE announced it agreed to acquire
SimpliVity, which provided software-defined, hyper-converged
infrastructure. HPE indicated that it intends to offer the SimpliVity
Omni Stack software qualified for its ProLiant DL380 servers, and then
offer a range of integrated HPE SimpliVity hyper-converged systems
based on HPE ProLiant Servers. The price was $650 million. The
451Group estimates revenue was about $100 million (6.5X multiple).
The company was founded in 2009 and was based in Massachusetts.
114 The High-Profile Enterprise Software Acquirers
• SGI – In August 2016, Hewlett-Packard Enterprise announced it
agreed to acquire SGI for $7.75/share in cash (about a 30% premium
to where SGI’s stock had traded) or approximately $275 million, net of
cash and debt. SGI was founded in 2009 when Rackable Systems
acquired Silicon Graphics, after Silicon Graphics filed for bankruptcy,
and changed the name of the combined company to SGI. Silicon
Graphics was founded in 1981 and was considered one of the hottest
tech companies during the 1980s and early 1990s. Its initial focus was
advanced 3D graphics workstations and it developed a variety of
graphics innovations, but ran into a variety of issues as the
performance of conventional PCs improved. SGI focused on high
performance computing and supercomputers, and provided high-end
servers, storage, and software. It had 1,100 customers including many
in the scientific, government, and technical community. Revenue in
F2016 was $533 million (about 0.5X revenue). The acquisition was
completed in early November, 2016.
• Rasa Networks – In May 2016, a number of tech magazines (e.g.,
Network World) reported that HPE signed an agreement to acquire
Rasa Networks. Rasa developed network performance and analytics
solutions, and reports indicated that its solutions would be used by
HPE’s Aruba unit for creating a unified wired/wireless networking
management framework. The founder had previously worked at Cisco.
• Trilead – In February 2016, Trilead announced that it became part of
HP Enterprise. The company offered low cost data protection software
for VMware vSphere and Microsoft Hyper-V environments. It offered
a free edition that could do a simple back up of a virtual machine, but
also provided Pro and Enterprise versions that offered many more
back-up features and support for a variety of products. The company
was based in Switzerland.
• NetCam – In July 2015, PitchBook reported that Japan Systems, a
subsidiary of Hewlett-Packard, acquired Japanese-based NetCam
Systems (camera control software for CCTV) for $8.6 million.
115 The High-Profile Enterprise Software Acquirers
• ActiveState's Stackato Unit – In July 2015, Hewlett-Packard
announced that it was acquiring ActiveState Software’s Stackato
business. The Stackato unit provided an enterprise-ready Platform as
a Service (PaaS) solution based on the Cloud Foundry open standard.
ActiveState was based in Vancouver, Canada.
• ConteXtream – In May 2015, HP indicated that it acquired
ConteXtream, which had developed software defined networking
(SDN) and network function virtualization (NFV) solutions. It generally
targeted service providers and indicated it had a major US wireless
carrier as a customer. Investors included Benamou, Comcast,
Norwest, Gemini, Sofinnova, and Verizon. It was founded in 2007.
• Aruba Networks – In March 2015, HP announced that it reached an
agreement to acquire Aruba Networks for approximately $3 billion, or
$2.7 billion net of cash and debt ($24.67/share, about a 34% premium
to where the stock had traded when preliminary reports of the deal first
emerged in February 2015, but about 9% from when the deal was
officially announced). Aruba provided a variety of mobile network
access devices and related solutions for enterprises. Aruba’s products
included WiFi access points, controllers, and analytics products, as
well as security and networking management solutions for mobility
networks. Aruba had revenue of about $729 million in F2014 (deal
multiple of about 3.7X). It was based in Silicon Valley.
• Voltage Security – In February 2015, Voltage Security announced it
signed an agreement to be acquired by HP. Voltage provided data-
centric encryption and tokenization technology, with a focus on
protecting payment data. HP indicated that it would fold it into its Atalla
security unit. The company was founded in 2002 by a Stanford
professor and three of his students. The 451Group estimates the value
at $175 million, with a revenue multiple of 5X. Investors included
Hummer Winbald, Jafco, Menlo Ventures, Morgenthaler, and Siemens
Capital. It was based in Silicon Valley.
116 The High-Profile Enterprise Software Acquirers
• Mind Pirate’s Callisto Platform – In December 2014, Mind Pirate
announced that its Callisto Platform was acquired by Hewlett
Packard's IoT & Wearables Group. The company developed a
platform for wearable computing applications to make it easier for
developers and OEMs to deploy apps across IoT and wearable
applications. It was based in Silicon Valley.
• Eucalyptus – In September 2014, HP announced it signed an
agreement to acquire Eucalyptus, which provided open source
software for building enterprise clouds, including both private and
hybrid clouds. It was particularly known for its Amazon Web Services-
compliant private cloud solutions. The price was not announced but
Forbes indicated its sources indicated it was below $100 million but
above the $55 million the company had raised.
• Shunra – In April 2014, HP indicated that it signed an agreement to
acquire the network virtualization business and technology of Shunra.
Shunra’s solutions enable testing of mobile software applications prior
to deployment, enabling developers to find problems across many
environments and fix potential issues before the software is released.
It had already been an HP partner. The price was not announced but
reports indicated that it was between $25 million and $50 million.
Select Earlier Acquisitions
Some HP acquisitions made prior to 2013 include:
• Autonomy – In August 2011, HP announced it reached an agreement
to acquire UK-based Autonomy for approximately $11.7 billion (about
a 64% premium to where the stock had traded). Autonomy’s solutions
were focused on analysis of large scale unstructured big data. In
November 2012, HP indicated it was taking an $8.8 billion accounting
charge after claiming "serious accounting improprieties" and "outright
misrepresentations” associated with the deal.
117 The High-Profile Enterprise Software Acquirers
• ArcSight – In September 2010, HP announced an agreement to
acquire ArcSight for $1.5 billion. ArcSight provided a variety of
enterprise cybersecurity and compliance software solutions.
• 3Par – In September 2010, HP announced an agreement to acquire
3Par for $2.35 billion. 3Par was a supplier of utility storage (highly
virtualized multi-tenant storage arrays built for public and private cloud
computing).
• Palm – In April 2010, HP agreed to acquire Palm for approximately
$1.2 billion (about a 23% premium to where the stock had traded). At
one point, Palm had been a leader in mobile devices with its Palm Pilot
solutions.
• 3Com – In November 2009, HP agreed to acquire 3Com for
approximately $2.7 billion. 3Com was a major supplier of Ethernet
switches and other networking equipment.
Some large older acquisitions include EDS (IT services and consulting) in
2008 for $13.3 billion, Opsware (data center automation software) in 2007
for $1.6 billion, Mercury Interactive (IT management software and services)
in 2006 for $4.5 billion, and Compaq Computer (PCs) in 2002 for $25 billion.
118 The High-Profile Enterprise Software Acquirers
“I always worry about the start-ups. The people who are in the
garage right now inventing new products and not having a
business model to preserve.”
- Shantanu Narayen, Adobe CEO
Introduction
Adobe Systems was founded in 1982. The co-founders (John Warnock and
Charles Geschke) had been working at Xerox PARC but formed Adobe to
sell the PostScript language. The solution was released in 1984 and Apple
decided to use the technology in its LaserWriter printers, which provided
Apple with advantages for desktop publishing and was a catalyst for Adobe’s
business. Adobe subsequently introduced a variety of consumer software
solutions including Photoshop (1989), Acrobat (1993), and Media Player
(2008). Its acquisition of Macromedia in 2005 also greatly expanded its
product offerings (e.g., Flash animation software, Dreamweaver, etc.). In
2011, Adobe announced its Creative Cloud solution which is a software-as-
a-service offering that includes a suite of software for graphic design, video
editing, web development, photography, and cloud services.
In its Q1:F17 quarter (ended March 3, 2017), Adobe reported revenue of
$1.68 billion. Its revenue breakout was: Subscription – 82%, Products –
11%, and Support/Services – 7%. Its breakout by business unit was: Digital
Media (including Creative Cloud, Document Cloud, Photoshop, Illustrator,
Premier Pro, etc.) – 68%; Marketing Cloud (Analytics, Target, Social, Media
Optimizer, Audience Manager, TubeMogul, etc.) – 28%, and Other – 4%.
Within Digital Media (68% of revenue), Creative Cloud represented 56% of
total revenue, with other Digital Media accounting for 12%.
Chapter 9: Adobe
119 The High-Profile Enterprise Software Acquirers
With respect to acquisitions, Adobe isn’t as active as some of the other
companies mentioned in this report, but it generally acquires at least a couple
of companies each year and occasionally has years in which it is very active
(e.g., 2006, 2011). Its most significant deal was Macromedia in 2005 which,
as previously noted, greatly expanded its product line. Its acquisition of
Neolane provided it with a presence in marketing automation solutions.
Select Adobe Acquisitions
Acquisitions Since 2013
The following is a list of Adobe acquisitions since the beginning of 2013:
• TubeMogul – In November 2016, Adobe announced that it entered
into an agreement to acquire TubeMogul for $14 per share (about an
82.5% premium to where the stock had previously traded), or
approximately $540 million net of debt and cash. TubeMogul provided
a video advertising platform that enabled brands and agencies to plan
and buy video ads across a variety of channels (PCs, mobile, TVs,
etc.). TubeMogul’s video demand-side platform was utilized by many
customers, including several that were also Adobe Marketing Cloud
customers (e.g., Allstate, Johnson & Johnson, Kraft, Liberty Mutual
L’Oreal, Southwest Airlines). TubeMogul had approximately $212
million of trailing revenue (about a 2.5X multiple). The company was
based in California.
• Livefyre – In May 2016, Adobe announced it agreed to acquire
Livefyre. Livefyre’s solutions provide an online commenting system as
well as tools to assist enterprises in engaging with their audiences.
Adobe noted that Livefyre enables brands to integrate real-time social
experiences into their content strategy. Adobe indicated it would
include the Livefyre technology in its content management service
(Experience Manager) but continue to offer it as a stand-alone solution.
120 The High-Profile Enterprise Software Acquirers
• ComScore’s Digital Analytix Unit – In November 2015, Adobe
announced it agreed to acquire the Digital Analytix business (including
products and customer accounts) from ComScore. The unit focused
on enterprise analytics. Adobe indicated that the acquisition would
expand the Adobe Analytics footprint in the enterprise media and
entertainment vertical. ComScore indicated the price was $45 million.
• Mixamo – In June 2015, Adobe indicated that it had acquired Mixamo.
Mixamo was a 3D graphics technology company. Adobe had
previously partnered with Mixamo to develop 3D workflows and noted
that it would integrate Mixamo’s technology into Photoshop (to enable
designers to better create and customize 3D content) and Creative
Cloud. Mixamo had reportedly raised about $11 million from investors,
which included AMD, Granite, and Keynote.
• Collective’s DCO Technology – In April 2015, Adobe announced the
acquisition of the Dynamic Creative Optimization (DCO) technology
(Ensemble) from Collective. Adobe indicated that the acquired
platform would provide advertisers with tools to build and deploy ads
through Adobe Media Optimizer in real-time. The technology was
originally developed by Tumri, which Collective acquired in 2011.
• Fotolia – In December 2014, Adobe announced that it agreed to
acquire Fotolia. Fotolia was a stock photo and video website that
contained over 34 million images and videos. Adobe indicated that
Fotolia would continue to operate as a stand-alone business, but that
it would be integrated into Adobe’s Creative Cloud Service. Fotolia
was based in New York and was owned by KKR, TA Associates, and
management. The price wasn’t announced but was reportedly
approximately $800 million. PitchBook estimates it was $860 million.
• Aviary – In September 2014, Aviary announced that it had been
acquired by Adobe. Aviary provided a software development kit that
enables developers to incorporate photo-editing into their apps. In
addition, Aviary had created a variety of its own apps. Aviary indicated
121 The High-Profile Enterprise Software Acquirers
that its technology had been used to edit more than 10 billion photos.
Some of its clients included Walgreens and Yahoo. Aviary stated that
its tools would continue to be available, but that the team would work
with Adobe to provide solutions combining technology from both
companies. It had reportedly raised nearly $20 million from investors
that included Spark Capital, Vision Ventures, and Bezos Expeditions.
• Search Discovery’s Satellite Unit – In July 2013, Satellite indicated
that it had been acquired by Adobe. Satellite was focused on tag
management technology to help marketing agencies with media
tracking across websites. It was part of a larger marketing agency
named Search Discovery. The 451Group estimates the deal size was
only $6 million. It was based in Atlanta.
• Neolane – In June 2013, Adobe announced it agreed to acquire
Neolane for approximately $600 million in cash. Neolane was a digital
marketing automation solutions company focused on cross-channel
campaign management. Its solution integrated marketing data from
across an enterprise to provide automation and execution of marketing
campaigns across the Web, email, social media, direct mail, and point
of sale. Customers included Samsung, Sony, Dior, Ikea, and Alcatel-
Lucent. Adobe indicated that Neolane would become a solution in its
Marketing Cloud. TechCrunch estimated that revenue was just under
$60 million (10X) while the 451Group estimates it was $70 million
(8.6X). Neolane was founded in 2001 and based in Paris. Investors
included Battery Ventures, Auriga Partners, and XAnge Private Equity
• Ideacodes – In May 2013, Adobe announced that the Ideacodes team
was joining Adobe. Ideacodes was a design and creativity consulting
firm focused on enhancing the user experience for applications and
digital products. It had worked on a number of product user interfaces
and websites. The co-founders of Ideacodes were appointed Creative
Directors of Adobe’s Creative Cloud. It was based in San Francisco.
122 The High-Profile Enterprise Software Acquirers
• Thumb Labs – In May 2013, Thumb Labs announced that it was
acquired by Adobe. Thumb Labs was a mobile apps design agency.
The transaction was apparently an “acqui-hire” as Thumb Labs
indicated that while it would support its existing customers for a period,
its primary focus would be developing mobile apps for Adobe’s
Behance unit (which Adobe acquired in late 2012). Thumb had already
been working closely with Behance. Thumb was based in New York.
Select Earlier Acquisitions
Some Adobe acquisitions made prior to 2013 include:
• Behance – In December 2012, Adobe announced it agreed to acquire
Behance. Behance provided a platform for artists to showcase and
distribute their work, and had more than one million members. The
price was $130 million in cash. It was based in New York.
• Omniture – In September 2009, Adobe announced it agreed to
acquire Omniture for $21.50 per share (about a 24% premium to where
the stock had traded), or about $1.8 billion in cash. It was implemented
through a tender offer. Omniture was a provider of online business
optimization software. Its solutions enabled customers to capture and
analyze data generated by their websites and other sources to gain
business insights into the effectiveness of marketing and sales
initiatives. It had over 5,000 customers including AOL, eBay, Wal-
Mart, Microsoft, Neiman Marcus, Sony, and HP. Omniture had revenue
of about $300 million in 2008 (revenue multiple of about 6X).
• Macromedia – In April 2005, Adobe announced it agreed to acquire
Macromedia and that each share of Macromedia would be exchanged
for 0.69 shares of Adobe. At the time of the announcement this was
$41.86/share (about a 25% premium) or about $3.4 billion in stock.
Macromedia was a major supplier of web design and Flash animation
software. Its Dreamweaver platform was a major software solution for
designing websites and its Flash animation software was also popular.
123 The High-Profile Enterprise Software Acquirers
Macromedia had 2004 revenue of about $370 million (about a 9.2X
multiple). It was based in San Francisco.
• Frame – In June 1995, Adobe agreed to acquire publicly-traded Frame
Technology for $500 million in stock (0.52 shares of Adobe for each
share of Frame). Frame developed software for creating technical
documents on Unix systems for large enterprises.
• Aldus – In March 1994, Adobe announced that it agreed to acquire
Aldus. The original agreement was for 1.15 shares of Adobe for each
share of Aldus (about $513 million in stock), but the price was later
reduced to 1 share of Adobe stock ($446 million) after Aldus had a
lawsuit and settlement with Altsys regarding a software solution
(Freehand). Aldus was a software company focused on desktop
publishing solutions. Its best-known product was PageMaker. It was
based in Seattle.
124 The High-Profile Enterprise Software Acquirers
“No app is free. You’re trading your privacy for data.”
- Mike Gregoire, CEO of CA Technologies
Introduction
CA Technologies (formerly known as Computer Associates International)
was started in 1976. The company’s initial focus was providing enterprise
software for IBM mainframe computers. Its first major product was a sorting
solution (CA-Sort) but it quickly expanded to providing a broad range of
mainframe software solutions. It had rapid growth during the 1980s and
1990s due, in part, to acquisitions. Specifically, it acquired many other IBM
mainframe applications software companies. It was the second pure
software company to exceed $1 billion in revenue (after Microsoft).
However, the company ran into a number of issues in the early 2000s,
including an SEC investigation into accounting practices and fraud charges,
which led to a complete management overhaul. After several years of
turmoil, the company subsequently recovered and has more recently
focused on cloud-based solutions.
In the December 2016 quarter (Q3:F17), CA had revenue of just over $1
billion, with the following revenue breakout: Mainframe Solutions – 54%,
Enterprise Solutions – 39%, and Services – 7%.
CA was a very active buyer during the 1980s and 1990s and made several
acquisitions that exceeded a billion dollars in the late 1990s/2000 period
(e.g., Platinum Technologies, Legent, Cheyenne, Sterling Software). In
2010, it acquired several cloud-based solutions companies to provide a
greater cloud-based presence. During the past few years, it has been less
active but has made a dozen acquisitions since early 2013, including several
in the applications testing/delivery and identity management sectors.
Chapter 10: CA Technologies
125 The High-Profile Enterprise Software Acquirers
Select CA Technologies Acquisitions
Acquisitions Since 2013
The following are CA acquisitions since the beginning of 2013:
• Veracode – In March 2017, CA announced that it agreed to acquire
Veracode for approximately $614 million in cash. Veracode provided
application security testing. Its solutions enable automated on-
demand application security testing early in a product’s lifecycle to
address security issues and reduce risk. The solution also performs
static testing to detect issues in custom code and third party
applications. Veracode was founded in 2006 and had over 500
employees. The 451Group estimates that trailing revenue was about
$110 million (5.6X multiple). The company had offices in Burlington,
MA and London.
• Mobile System 7 – In December 2016, Mobile System 7 indicated that
it had been acquired by CA Technologies. Mobile System 7’s Sentry
platform enables customers to intelligently manage deployed systems
and secure data, and helps enterprises deal with changes in mobile. It
also offered custom engineering services for mobile solutions. The
company was founded in 2012 and based in McLean, Virginia.
• Automic Software – In December 2016, CA Technologies announced
it agreed to acquire Automic Software. Automic developed business
automation software, including Continuous Everything which allows
enterprises to automate business functions and workflows, without
engineers. It includes modules for service, developers, and operations.
CA indicated that the transaction was valued at approximately 600
million euros (about $636 million) net of cash and equivalents acquired.
Automic had about 600 employees and was based in Vienna, Austria.
It was founded in 1985. According to the 451Group the revenue
multiple was about 5.1X.
126 The High-Profile Enterprise Software Acquirers
• BlazeMeter – In September 2016, CA Technologies announced it
agreed to acquire BlazeMeter. BlazeMeter provides open source
continuous applications performance testing solutions. CA indicated
the solution would further expand its DevOps offerings. The
BlazeMeter solution allows developers to test earlier and often in the
application lifecycle to improve test coverage and catch and resolve
issues prior to production. Another advantage was that the platform
worked with other open-source tools such as Apache JMeter and
Selenium. The company was founded in 2011 and based in Israel.
The price was not announced, but Geektime indicated that the deal
may have been as much as $100 million. However, the 451Group
estimates that it was $60 million and that BlazeMeter had about $5
million of revenue (12X multiple).
• Espresso Logic – In September 2015, PitchBook indicates that
Espresso Logic was acquired by CA. Espresso provided database
back-end services for mobile and Web developers. Its solution helped
developers connect applications to various external databases. It was
based in Silicon Valley.
• Xceedium – In August 2015, CA announced that it signed an
agreement to acquire Xceedium. Xceedium was a provider of
privileged identity management solutions for protecting on-premises,
cloud, and hybrid IT environments. The company’s Xsuite platform
protects privileged account credentials, implements role-based access
controls, and monitors privileged user sessions. Its solutions also help
enterprises comply with a variety of security and privacy mandates. It
was founded in 2000 and based in Virginia. Investors included
ArrowPath Venture Partners and Nationwide Mutual Capital. The price
was not announced, but the 451Group estimates that the consideration
was approximately $100 million with a revenue multiple of 6.7X.
127 The High-Profile Enterprise Software Acquirers
• IdMlogic – In June 2015, CA Technologies announced it acquired
IdMlogic, which developed intelligent identity management
applications. Its Sigma solution provided analytical decision making
tools for identity management and security. IdMlogic was already a
CA partner and provided the front end application for CA’s Identity
Suite solution. It was based in Israel. The price was not announced
but Globes reported that their sources indicated it was for
approximately $20 million. The 451Group estimates the price was $25
million with a 6.3X revenue multiple.
• Grid Tools – In June 2015, CA announced it acquired Grid Tools,
which provided a variety of tools for automated software testing to
improve development and time-to-market. Its solutions supported
synthetic data creation, test data management, test design, and
optimization. Grid Tools was founded in 2004 with offices in Oxford
and New York.
• Rally Software – In May 2015, CA announced it agreed to acquire
Rally Software Development, a public company focused on Agile
software and services for about $480 million net of cash ($19.50/share,
about a 44% premium to where the stock had traded). Rally had a
SaaS platform to manage software development by aligning
development and business objectives and facilitating collaboration.
Rally had FY2015 revenue of nearly $88 million (making the deal about
5.5X revenue) and its customers included more than 35 of the Fortune
100 companies. It was based in Boulder, Colorado.
• Identropy (SCUID assets) – In October 2014, Identropy announced
that its SCUID platform was acquired by CA. SCUID was a cloud-
based identity management solution targeting the Identity-as-a-
Service market. Identropy was based in New York.
128 The High-Profile Enterprise Software Acquirers
• Layer 7 Technologies – In April 2013, CA announced the acquisition
of Layer 7, a major provider of API management tools. APIs are
increasingly used by developers to more quickly develop applications.
CA indicated the acquisition would help API development by providing
the tools to test and publish APIs and also help manage APIs and verify
them through authentication and authorization. During the previous
week, Intel acquired Mashery which also provided API management
tools. Reports indicated Layer 7 had about $30 million of revenue in
2012 and was projecting over $50 million in 2013. The 451Group
estimated trailing revenue at $35 million. The price was initially not
announced but later reported to be $155 million (about a 4.4X multiple).
Layer 7 was based in Vancouver, Canada.
• Nolio – In April 2013, CA announced it had acquired Nolio, which
provided automated application delivery solutions that help customers
reduce release time, standardize application releases, and enable
faster release automation for cloud-based and traditional applications.
The price was not announced but TechCrunch reported that its sources
indicated the price was between $40 and $42 million. The 451Group
estimated the price as $42 million with a 14X revenue multiple. Nolio’s
investors included Cedar Fund, Blumberg, and Iris Capital. The
company was based in Israel.
Select Earlier Acquisitions
A couple of major earlier CA acquisitions included:
• Interactive TKO – In June 2011, CA announced an agreement to
acquire Interactive TKO (ITKO) for $330 million. ITKO was a provider
of service simulation solutions for developing applications in composite
and cloud environments. ITKO's LISA solution enables organizations
to "mock up" a service at enterprise speed and enterprise scale – even
if the application is unfinished or unstable or the physical resource is
unavailable.
129 The High-Profile Enterprise Software Acquirers
• Nimsoft – In May 2010, CA announced an agreement to acquire
Nimsoft for $350 million. Nimsoft was a provider of IT performance
and availability monitoring solutions for emerging enterprises and
Managed Service Providers. The Nimsoft Unified Monitoring solution
is designed to allow MSPs complete visibility into the performance and
availability of their customers' business applications across both
internal and external IT infrastructures.
Prior to 2001, CA made several relatively large acquisitions including
Sterling Software (diversified software provider) in 2000 for $3.9 billion,
Platinum Technology (initially database management software, but
diversified into many software markets) in 1999 for $3.5 billion, Cheyenne
Software (backup software) in 1996 for $1.2 billion, Legent (management
of distributed computing) in 1995 for nearly $1.8 billion, and Uccel (tape
management and job scheduling) in 1987 for $870 million. Sterling Software
and Platinum had each previously been very acquisitive.
130 The High-Profile Enterprise Software Acquirers
“Look, don't congratulate us when we buy a company,
congratulate us when we sell it. Because any fool can
overpay and buy a company.”
- Henry Kravis, KKR Co-founder
Introduction
PE Firms Increasingly Active in Enterprise Software
An increasingly significant group of buyers in the enterprise software sector
has been private equity firms. PE firms have a strong preference for
recurring revenue businesses and with the software industry increasingly
shifting towards SaaS-type recurring revenue models, software companies
have become more attractive for financial buyers, and PE firms now account
for a significant portion of the enterprise software M&A activity.
Private equity firms generally make two different types of acquisitions:
platform acquisitions (in which they directly acquire a generally large
company) and add-on acquisitions (in which they acquire companies to help
grow one of their portfolio companies, and often the acquisition is made
through the portfolio company). In general, platform acquisitions tend to be
larger deals and many PE firms have a strategy of buying a platform
company with the intent of rolling up several smaller related companies to
increase the size and enhance the value of the platform company.
Private equity firms are also generally active when large companies want to
divest businesses as corporations may not want to sell their business units
to their competitors. Dell, for example, sold its software business (Quest and
SonicWall) to Francisco Partners and Elliott Management, and Intel divested
a majority stake in McAfee to TPG.
Chapter 11: Private Equity Firms / Vista Equity
131 The High-Profile Enterprise Software Acquirers
There have been a number of very large acquisitions of public enterprise
software company by private equity firms during the past few years. For
example, in 2013 BMC Software was acquired and taken private by a group
that included Bain Capital, Golden Gate Capital, and Insight Venture
Partners for $6.9 billion. In early 2016, SolarWinds was acquired by Thoma
Bravo and Silver Lake Partners for approximately $4.5 billion.
Some of the active PE firms with a focus on the enterprise software sector
include Vista Equity Partners, Thoma Bravo, Francisco Partners, Marlin
Equity, Insight Venture Partners, TA Associates, Summit Partners, Accel-
KKR, Silver Lake, Golden Gate Capital, Vector Capital, TPG, Warburg
Pincus, Symphony Technology Group, Sumeru Equity Partners, North
Bridge, Battery Ventures, JMI Equity, TCV, Spectrum Equity, Volition
Capital, Norwest Venture Partners, Genstar Capital, Polaris, K1 investment
Management, Level Equity, Great Hill, Bregal Sagemount, HGGC, Riverside
and Westview Capital, although there are many others. Some of these firms
focus on larger acquisitions, while others tend to acquire smaller middle-
market companies. In addition, there are a number of generalist private
equity firms (KKR, Bain, etc.) that will occasionally make acquisitions in the
technology/software sector.
Just to give some sense for how active these firms are, we included a section
later in this chapter listing the acquisitions made by just one of these PE
firms, Vista Equity Partners, since the beginning of 2016 (a 15-month period).
This includes direct acquisitions, acquisitions made by its portfolio
companies, and mergers between portfolio companies. As noted later in
the chapter, Vista Equity alone has been involved in about 45 acquisitions or
mergers since the beginning of 2016 (mostly software companies), which is
significantly more than any of the strategic buyers listed in this report, and
Vista is just one of many software-focused private equity firms.
132 The High-Profile Enterprise Software Acquirers
Some PE Firms Offering “Strategic Valuations”
Historically, private equity firms were interested only in highly profitable
companies and would traditionally offer valuations based primarily on single
digit multiples of trailing EBITDA (e.g., 7X or 8X trailing EBITDA was typical
for an attractive company). As a result, these firms were generally not
competitive when there was strong interest from the major strategic buyers,
given some of the valuations noted in previous chapters.
Of course, not every software company is of interest to buyers such as
Oracle, IBM, and Microsoft, so there has been a lot of PE activity in the
enterprise software sector during the past decade. In addition, PE firms are
very well-suited for situations in which the current owners want to retain a
meaningful portion of the equity and potentially get a “second bite at the
apple” in the future (i.e., sell a portion of their stock now, grow the business,
and then sell the rest later when the business is hopefully even larger and
more valuable).
However, PE firms have raised substantial amounts of capital in recent years
and in order to successfully add to their portfolios, many have been open to
offering valuations that are above “traditional PE firm valuations” for
attractive enterprise software companies. In some cases, we have seen
private equity firms outbid strategic buyers.
Additionally, there is a small group of software focused PE firms that have
begun offering valuations for attractive software companies that are
substantially above traditional EBITDA multiples. These firms have become
more competitive even with some of the premium strategic buyers. A few
examples of high-profile deals in which PE firms have offered “strategic”
valuations include:
• Vista Equity/Marketo – In 2016, Vista Equity Partners acquired
publicly traded marketing automation software company Marketo for
nearly 8 times revenue and Marketo was not yet even profitable.
133 The High-Profile Enterprise Software Acquirers
• Vista Equity/Cvent – In 2016, Vista Equity acquired Cvent (event
management platforms and software) for about 8X revenue and more
than 50X EBITDA.
• Thoma Bravo/Qlik – In 2016, Thoma Bravo acquired Qlik for about
4.2X revenue and Qlik had negative trailing EBIT.
While these examples are exceptions to the rule (most PE firms still value
companies based on EBITDA multiples), we have generally seen PE firms
become more competitive on valuation during the past few years.
Select Vista Equity Partners Acquisitions
Vista Equity M&A Since the Beginning of 2016
Given the large number of enterprise software acquisitions done by private
equity firms and their portfolio companies over the past few years, we will
not attempt to list or summarize them in this report. However, just to give a
sense for the level of activity, below is a list of some of the recent acquisitions
made by one specific firm, Vista Equity Partners.
Vista Equity Partners is a major private equity firm focused on investing in
software and technology-enabled businesses. It has over $28 billion in
cumulative capital commitments, with offices in Austin, San Francisco, and
Chicago. It was founded in 2000.
The following are select acquisitions it has made since the beginning of 2016
including platform acquisitions (e.g., Marketo, Ping Identity, Cvent, etc.),
add-on acquisitions (generally made by its portfolio companies), and
mergers between its portfolio companies.
• D+H – In March 2017, Bloomberg reported that Vista Equity agreed to
acquire D+H (DH), a public Canadian financial services provider, for
C$25.50 per share, or about C$4.8 billion (US$3.55 billion) including
the assumption of debt obligations. News surfaced about the deal
134 The High-Profile Enterprise Software Acquirers
back in December 2016, so the premium was about 36% from that
point, but only 11% relative to just before the announcement. D+H’s
traditional business had been check printing, but it had diversified into
other financial services, and acquired Fundtech (payment-technology)
for $1.25 billion in 2015. Vista indicated it would combine D+H with
UK-based Misys, another one of its portfolio companies in financial
services. The deal was reportedly done at about 16X EBITDA and 2.8
revenue. It was based in Toronto.
• Upp Technology’s irms Unit – In February 2017, Vista’s portfolio
company Aptean reportedly acquired the irms/360 Enterprise
Solutions business unit from Upp Technology. The irms unit provides
warehousing management, asset management, and emergency
management systems, all built on a cloud platform.
• Skyfence – In January 2017, Vista’s portfolio company ForcePoint
announced that it acquired the Skyfence business from cybersecurity
firm Imperva (public cybersecurity company). The Skyfence unit
provided cloud access security broker (CASB) solutions. Skyfence
helps companies to determine which cloud applications are in use by
employees, analyzes content in real-time to prevent malicious or
unauthorized leakage, and helps identify and block cyber-attacks.
• Digidentity – In January 2017, Vista’s portfolio company Solera
Holdings announced that it acquired Digidentity. Digidentity provides
technologies to authenticate online identities. Solera had been an
investor in the company. It was based in the Netherlands.
• Maximum Solutions – In January 2017, Vista’s portfolio company
Active Network announced it acquired Maximum Solutions. Maximum
provided recreation industry software. Its MaxGalaxy software
supports applications such as facility reservation, league scheduling,
membership management, and PoS. It had over 1,000 customers.
135 The High-Profile Enterprise Software Acquirers
• Autodata – In January 2017, Vista’s portfolio company Solera
announced that it agreed to acquire Autodata, a provider of technical
information and knowledge solutions for the automotive service,
maintenance, and repair industries. It originally focused on do-it-
yourself manuals, but evolved to providing digital cloud-based
diagnostics and repair intelligence for professional mechanics
(including information on more than 40,000 car models). Autodata had
been owned by Bowmark Capital and Rothschild’s Five Arrows prior to
Vista’s acquisition. The 451Group estimated that the consideration
was just under $420 million. It was based in the UK.
• SunGard Public Sector and Educational Businesses – In
December 2016, FIS announced that it signed an agreement to sell its
SunGard Public Sector and Educational businesses to Vista Equity for
$850 million. The unit provides technology solutions to address public
safety and public administration needs of government entities and K-
12 school districts. Vista indicated that the Public Sector business
would become a new Vista-owned independent company and the
Education business would become part of Vista-owned PowerSchool.
• Cvent/Lanyon – In November 2016, Vista announced the merger of
Lanyon (which it previously acquired) and Cvent (which it more
recently acquired, as noted in more detail below). The announcement
indicated that the combined company would operate under the Cvent
name. Cvent is a cloud-based enterprise event management company
and Lanyon developed cloud-based software for managing corporate
meetings, events, and travel programs.
• Mozu – In October 2016, Vista’s portfolio company Kibo announced it
acquired Mozu, the retail e-commerce SaaS solution from Volusion.
Mozu is a cloud commerce platform that helps enterprises manage
their online presence, including commerce, branding, engagement,
and publishing. It increases marketing agility and reduces the time for
site changes and marketing updates.
136 The High-Profile Enterprise Software Acquirers
• GovDelivery/Grancius – In October 2016, Vista merged two of its
Government-related software companies. Specifically, Grancius and
GovDelivery, both Vista portfolio companies as noted below,
announced they were merging.
• GQ Life Sciences – In October 2016, Vista’s portfolio company
Aptean announced the acquisition of GQ Life Sciences, which provided
life science patent search solutions. Its GenomeQuest product
provides researchers with the ability to search for biological sequences
across more than 800K patents.
• Chalkable – In October 2016, Vista’s portfolio company PowerSchool
announced it acquired Chalkable. Chalkable provided educational
data management, student achievement, and professional learning
solutions to the K-12 school markets. Its Positive Reinforcement
System and incentive-based rewards helps improve student success
rates. More than 5,000 schools used Chalkable’s solutions.
• Baynote – In September 2016, Vista’s portfolio company Kibo
announced that it acquired Baynote. Baynote was a provider of
machine learning solutions for digital commerce. Its BaynoteOne
solution combined real-time intent with historical preferences to
provide compelling offers and products to consumers. It had over 300
customers including Jockey and Hayneedle.
• GovDelivery – In September 2016, GovDelivery announced that it
signed an agreement to be acquired by an investor group led by Vista.
GovDelivery is a digital marketing platform built exclusively for public
sector organizations to promote usage of services and enhance public
awareness. GovDelivery indicated that its platform was used by over
1,800 customers to reach over 120 million people. Vista acquired it
from Actua which had owned GovDelivery since 2009. The reported
price was $153 million.
137 The High-Profile Enterprise Software Acquirers
• Infoblox – In September 2016, Infoblox announced that it entered into
an agreement to be acquired by Vista, and the transaction was
completed in November. Infoblox was a major provider of DNS,
DHCP, and IP (DDI) address management. The transaction was at a
price of $26.50 per share (about a 16% premium to where the stock
traded the day before, but news of a potential deal had been reported
well before that) or approximately $1.6 billion ($1.34 billion net of cash).
The revenue multiple was about 3.7X.
• RDC – In September 2016, RDC (Regulatory DataCorp) announced it
had been acquired by Vista Equity. It had previously been owned by
Bain Capital Ventures and others. RDC provided counterparty risk and
financial regulatory compliance data and software solutions to financial
institutions and technology companies. RDC works as an extension to
its customers’ compliance teams, providing precise risk alerts and
ongoing monitoring for enhanced protection and performance.
• Grancius – In August 2016, Vista announced that it agreed to acquire
a majority stake in Grancius. Grancius provides software/tools for
Government-related activities. It helps government agencies and
school districts use web-based tools to encourage citizen engagement.
As one example, it provided software for Fort Lauderdale to help
manage citizen advisory boards. It had been owned by K1 Investment
Management and was based in Denver.
• SRB Educational Solutions – In August 2016, Vista portfolio
company PowerSchool announced the acquisition of SRB Educational
Solutions. SRB provided administrative and ERP solutions for K-12
school boards and districts, and had a variety of customers in Ontario
and throughout the Canadian provinces. It was based in Canada.
138 The High-Profile Enterprise Software Acquirers
• Stardyne’s GEMS Division – In August 2016, Vista’s portfolio
company Aptean announced that it acquired Stardyne’s Government
and Enterprise Management Solutions (GEMS) Division. Its offerings
included revenue management, financial ERPs, citizen portals, tax and
utility billing systems, and enterprise asset management solutions. It
was primarily focused on the public sector, but also addressed private
sector applications. It was based in Canada.
• UnboundID – In August 2016, Vista’s portfolio company Ping Identity
announced that it acquired UnboundID, a provider of customer identity
and access management solutions.
• Enservio – In July 2016, Vista’s portfolio company Solera announced
that it acquired Enservio, a provider of property contents software and
services for the insurance and homeowner marketplaces. Its
ContentsExpress solution helps claims professionals work smarter and
faster. It also provides a solution for claim payments.
• Invision – In July 2016, Vista’s portfolio company Mediaocean
announced that it acquired Invision, a major supplier of cross-device
sell-side workflow solutions for media companies.
• DoApp – In June 2016, Vista’s portfolio company Newscycle acquired
DoApp, which developed a platform for media companies to deliver
content on mobile devices as well as a mobile advertising solution and
a mobile news content sharing app.
• Advanced Public Safety – In June 2016, Vista’s portfolio company
Aptean announced the acquisition of Advanced Public Safety from
Trimble. APS provides software solutions for law enforcement
agencies and public safety organizations.
• Invoiceware International – In June 2016, Vista’s portfolio company
Sovos Compliance announced that it planned to acquire Invoiceware,
which provides e-invoicing and tax reporting solutions in multiple
countries from a single platform.
139 The High-Profile Enterprise Software Acquirers
• Ping Identity – In June 2016, Vista announced that it acquired Ping
Identity. Ping is a major supplier of identity defined security solutions
enabling employees to securely access enterprise data. Its Identity-
as-a-Service (IDaaS) solution was used by customers such as GE,
Disney, Cisco, Kraft, and Walgreens. Its recurring revenue was
reportedly expected to reach more than $100 million in 2016 when the
deal was first announced. The 451Group estimates the price was
approximately $600 million. It was based in Denver.
• Haiku Learning – In June 2016, Vista’s portfolio company
PowerSchool acquired Haiku Learning, which provided cloud-based
learning management and classroom collaboration tools.
• JumpForward – In May 2016, Vista’s portfolio company Active
Network acquired JumpForward, which provided technology platforms
for college sports programs such as solutions for NCAA recruiting,
compliance, and office management. Its solutions were used by more
than half of the Division 1 collegiate sports programs.
• Marketo – In May 2016, Marketo announced that it entered into an
agreement to be acquired by Vista in a go-private transaction for
approximately $1.79 billion in cash ($35.25/share, about a 64%
premium to where the stock had traded prior to news reports that it was
exploring a sale, and a 9% premium to its previous closing price).
Marketo is a major supplier of engagement marketing and marketing
automation software. Its solutions address marketing automation,
email, mobile, and analytics. It had more than 4,600 customers at the
time of the announcement and is based in Silicon Valley. The
transaction was at nearly 8X revenue and Marketo was not yet
profitable. The transaction closed in August 2016.
• ColSpace – In May 2016, Vista’s portfolio company MediaOcean
announced that it acquired ColSpace, a provider of cloud-based
collaborative media planning software that helps improve global
marketing campaigns. It was founded in 2000.
140 The High-Profile Enterprise Software Acquirers
• Tienet – In May 2016, Vista’s portfolio company PowerSchool
announced that it acquired Tienet, a software solution developed by
Maximus that helps educators manage instruction and special
education. The software can help identify students who are struggling
and meet their needs. It was used in more than 900 districts and 3,000
schools across North America.
• Vertafore – In May 2016, Vista announced that it, along with Bain
Capital, agreed to acquire Vertafore from TPG Capital. Vertafore
provides a variety of different software solutions for the insurance
industry including management systems, agency solutions, and carrier
solutions. The reported price was $2.7 billion including assumed debt.
• Cheaspeake System Solutions – In May 2016, Vista’s portfolio
company Trintech announced that it acquired Cheaspeake, a provider
of financial transaction account reconciliation and treasury software
solutions. Its products include account reconciliation software,
unclaimed property compliance software, and financial risk
management software.
• TeacherMatch – In May 2016, Vista’s portfolio company PeopleAdmin
announced that it acquired TeacherMatch, a provider of cloud-based
talent management solutions for the education and government
markets. Its solution helps in hiring and onboarding new employees.
• Cvent – In April 2016, Cvent announced that it entered into an
agreement to be acquired by Vista Equity for approximately $1.65
billion ($36/share in cash, about a 69% premium to where the stock
had traded) or about $1.5 billion net of cash. Cvent is a cloud-based
enterprise event management company. Its software helps event
planners with online event registration, event management, mobile
apps for events, surveys, and other event related activities. The price
was approximately 8X trailing revenue.
141 The High-Profile Enterprise Software Acquirers
• Mainspring – In April 2016, Vista’s portfolio company Accruent
acquired Mainspring Healthcare Solutions, which provided software to
support service departments in hospitals. Vista subsequently sold
Accruent to Genstar Capital.
• Focus Technology Group – In April 2016, Vista’s portfolio company
Agdata acquired Focus Technology Group, which provided data
collection and management solutions for the animal health industry. Its
solutions included supply chain data, marketing/sales automation, and
analytics for animal health and agriculture markets.
• Interactive Achievement – In February 2016, Vista’s portfolio
company PowerSchool acquired Interactive Achievement which
provided standards based instructional assessment and analytical
solutions for school districts. It assists with data driven curriculum
decisions to improve student performance. It was founded in 2006.
• Fiverun – In January 2016, Vista announced the acquisition of
Fiverun, which provides mobile point of sale solutions. Its cloud-based
solutions are sold to retailers around the world. Vista integrated
Fiverun with two other acquisitions it made (MarketLive and
Shopatron) to form a new company named Kibo.
• Telarix – In January 2016, Telarix announced that it had been acquired
by Vista Equity. Telarix is a supplier of billing, trading, routing, and
price list management tools for communications service providers,
including many of the largest carriers. It has become a standard for
electronic information exchange within the telecom industry.
• AssetPoint – In January 2016, Vista’s portfolio company Aptean
announced the acquisition of AssetPoint, a provider of computerized
maintenance management and enterprise asset management
software. Its TabWare solution is used across a variety of industries.
It had been a portfolio company of Triton Pacific.
142 The High-Profile Enterprise Software Acquirers
• BCC AdSystems – In January 2016, Vista’s portfolio company
MediaOcean announced the acquisition of BCC AdSystems, a provider
of software for the Asian Pacific advertising and marketing industries.
It was based in Australia.
• Vivid Seats – In January 2016, Vivid Seats announced an investment
from Vista Equity, which the 451Group reports as a majority
acquisition. Vivid Seats is a large independent marketplace for tickets
for sporting events, concerts, and other ticketed events. It was
founded in 2001 and based in Chicago.
• Sidewinder – In January 2016, Vista’s portfolio company Forcepoint
announced the acquisition of Sidewinder, a provider of proxy-based
firewall software and hardware solutions for federal customers.
• Stonesoft – Vista Equity had previously partnered with Raytheon to
acquire Websense for $1.9 billion, with Raytheon owning just over 80%
and Vista owning the rest. In January 2016, Websense acquired
Stonesoft from Intel. Stonesoft had been a public security company
that Intel previously acquired. Stonesoft provided advanced firewall
software and hardware solutions. The combined Websense/Stonesoft
company was rebranded as Forcepoint.
143 The High-Profile Enterprise Software Acquirers
Select Acquisitions with Revenue Multiples
This section includes a list of M&A transactions highlighted in this report
(from 2013 through Q1:17) in which both the transaction consideration and
the revenue of the target were either known or estimated in articles or by
M&A data providers (e.g., 451Group, PitchBook). A few caveats:
• The transactions represent only a small percentage of the total number
of acquisitions.
• The data is biased in that the transactions in which the multiples are
known tend to be the larger public deals since private company
financial data generally isn’t available.
• In many cases, the deal size and/or multiple was estimated by 3rd party
sources (e.g., 451Group, PitchBook, news articles). In some cases,
these reports are accurate, but in others they may be significantly off.
For a few transactions, there were conflicting estimates from sources
(in which case, we subjectively picked one).
• For valuation analysis, enterprise value should be used rather than
deal value. However, the data presented is a mix of deal values and
enterprise values. Enterprise value is usually available for public
companies but generally is not for private company acquisitions.
• Revenue generally refers to trailing revenue (last four quarters), but in
some cases may refer to past fiscal year or current year forecast.
• There were a few transactions in which it is believed that the target
company was essentially pre-revenue or minimal revenue. We
generally excluded these as they would result in extremely high
multiples which would skew the averages.
• For the “average” we used a ceiling of 40X (any multiple above that is
set to 40 when calculating the average).
• Additional details about each deal and data source can be found in the
acquisition summaries in the report.
Appendix
144 The High-Profile Enterprise Software Acquirers
Date Buyer Target Deal Value ($M) Revenue ($M) Multiple
Mar-17 HP Enterprise Nimble Storage $917 $403 2.3
Mar-17 CA Veracode $614 $110 5.6
Mar-17 Vista Equity D+H $3,550 $1,247 2.8
Mar-17 HP Enterprise Niara $55 $2 27.5
Dec-16 CA Automic Software $636 $125 5.1
Nov-16 Adobe TubeMogul $540 $212 2.5
Oct-16 Salesforce Krux $724 $50 14.5
Oct-16 Cisco AppDynamics $3,593 $206 17.4
Sep-16 CA BlazeMeter $60 $5 12.0
Sep-16 Vista Equity Infoblox $1,341 $358 3.7
Aug-16 HP Enterprise SGI $275 $533 0.5
Aug-16 Salesforce BeyondCore $105 $5 21.0
Jul-16 Oracle NetSuite $9,374 $846 11.1
Jun-16 Microsoft LinkedIn $26,200 $3,214 8.2
Jun-16 Salesforce Demandware $2,791 $254 11.0
May-16 Oracle Opower $532 $149 3.6
May-16 Vista Equity Marketo $1,790 $226 7.9
Apr-16 Vista Equity Cvent $1,504 $188 8.0
Apr-16 Oracle Crosswise $50 $1.5 33.3
Apr-16 Oracle Textura $663 $92 7.2
Mar-16 IBM Bluewolf Group $240 $90 2.7
Feb-16 Microsoft Xamarin $400 $38 10.7
Feb-16 IBM Resilient Systems $145 $10 14.5
Feb-16 Cisco Jasper Technologies $1,400 $120 11.7
Feb-16 IBM Truven Health $2,600 $599 4.3
Jan-16 Oracle AddThis $175 $20 8.8
Jan-16 IBM Ustream $130 $25 5.2
Dec-15 IBM Clearleap $200 $25 8.0
Dec-15 Salesforce Steelbrick $300 $11 27.3
Nov-15 Microsoft Secure Islands $85 $8 10.6
Nov-15 IBM Gravitant $95 $2 47.5
Nov-15 Cisco Acano $700 $10 70.0
Oct-15 IBM Cleversafe $1,309 $25 52.4
Oct-15 Cisco Lancope $453 $75 6.0
Sep-15 IBM Meteorix $120 $40 3.0
Aug-15 IBM Merge Healthcare $904 $228 4.0
Aug-15 Oracle Maxymiser $170 $40 4.3
Aug-15 CA Xceedium $100 $15 6.7
Jun-15 Cisco OpenDNS $635 $25 25.4
Jun-15 CA IdMlogic $25 $4 6.3
145 The High-Profile Enterprise Software Acquirers
Source: Data from company press releases, 451Group, PitchBook, and various technology news reports.
Details on each can be found in the report. * - The “Average” uses 40X for any multiple above that.
Date Buyer Target Deal Value ($M) Revenue ($M) Multiple
May-15 CA Rally Software $480 $88 5.5
May-15 Microsoft Revolution Anlytics $115 $4 28.8
Apr-15 Cisco Embrane $55 $1.5 36.7
Mar-15 HP Aruba $2,684 $729 3.7
Feb-15 HP Voltage Security $175 $35 5.0
Dec-14 Oracle Datalogix $1,200 $125 9.6
Nov-14 Microsoft Aorato $200 $0.4 500.0
Sep-14 SAP Concur $8,300 $668 12.4
Jul-14 Oracle TOA Technologies $550 $45 12.2
Jun-14 Oracle Micros Systems $4,641 $1,338 3.5
Mar-14 SAP FieldGlass $1,000 $85 11.8
Feb-14 Oracle BlueKai $408 $63 6.5
Feb-14 IBM Cloudant $150 $7 21.4
Jan-14 Microsoft Parature $100 $15 6.7
Jan-14 VMware AirWatch $1,540 $93 16.6
Dec-13 Oracle Responsys $1,501 $194 7.7
Nov-13 IBM Fiberlink $300 $50 6.0
Oct-13 Oracle BigMachines $450 $60 7.5
Oct-13 Oracle Compendium $15 $2 7.5
Oct-13 IBM Xtify $40 $5 8.0
Sep-13 Microsoft Nokia Mobile Unit $7,200 $19,690 0.4
Sep-13 Cisco Whiptail $415 $20 20.8
Sep-13 SAP KXEN $40 $12 3.3
Aug-13 IBM Trusteer $900 $35 25.7
Jul-13 Cisco Sourcefire $2,494 $233 10.7
Jun-13 Salesforce ExactTarget $2,398 $317 7.6
Jun-13 IBM SoftLayer $2,000 $425 4.7
Jun-13 SAP Hybris $1,341 $125 10.7
Jun-13 Adobe Neolane $600 $70 8.6
May-13 Cisco JouleX $107 $9 11.9
Apr-13 CA Layer 7 Tech $155 $35 4.4
Apr-13 CA Nolio $42 $3 14.0
Mar-13 Cisco SolveDirect $21 $8 2.6
Feb-13 Oracle Acme Packet $1,700 $287 5.9
Feb-13 VMware Virsto $185 $2 92.3
Jan-13 Cisco Intucell $475 $30 15.8
Average*: 12.4
Median: 8.1
146 The High-Profile Enterprise Software Acquirers
Select Acquisitions with Public Company Premiums
This section includes a list of the acquisitions in this report (since 2013) in
which the target was a public company, with a focus on the premium the
buyer paid with respect to the stock price of the target company just prior to
when the deal was announced. We excluded a few acquisitions (e.g.,
Oracle/Micros, HPE/Aruba, Vista/Marketo, etc.) in which news of a potential
deal was reported well in advance of the official deal announcement resulting
in a run up in the target’s stock price ahead of the announcement. Deal value
generally refers to enterprise value.
Source: Company announcements, 451Group, PitchBook and various news reports.
Date Buyer Target Deal Value ($B) Premium
Mar-17 HP Enterprise Nimble Storage $917 45%
Nov-16 Adobe TubeMogul $540 82%
Aug-16 HP Enterprise SGI $275 30%
Jul-16 Oracle NetSuite $9,374 19%
Jun-16 Microsoft LinkedIn $26,200 50%
Jun-16 Salesforce Demandware $2,791 56%
May-16 Oracle Opower $532 30%
May-16 Vista Equity Cvent $1,504 69%
Apr-16 Oracle Textura $663 31%
Aug-15 IBM Merge Healthcare $904 32%
May-15 CA Rally Software $480 44%
Sep-14 SAP Concur $8,300 20%
Dec-13 Oracle Responsys $1,501 38%
Jul-13 Cisco Sourcefire $2,494 29%
Jun-13 Salesforce ExactTarget $2,398 53%
Feb-13 Oracle Acme Packet $1,700 22%
Average 41%
Median 35%
147 The High-Profile Enterprise Software Acquirers
Notes
148 The High-Profile Enterprise Software Acquirers
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