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| Home - Software M&A Review - Nov 04 Issue |
Software M&A - Insights
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MERGERS AND ACQUISITIONS: MOST ACTIVE BUYERS
Multi-transaction buyers proliferated in the first quarter but decreased markedly in both the second quarter and third quarter of 2004. Some of this quarter's most active buyers:
Agilisys
- Aperum
- IncoDev Software
Bentley
- AXSYS
- Haestad Methods
Cisco
- Parc
- P-Cube
- dynamicsoft
Concerto Software
- Positive Software Systems
- Rockwell FirstPoint Contact
IBM
- Alphablox
- Cyanea
- Venetica
Kintera
- BNW Software
- KindMark
- GivingCapital
Open Text
- Artesia
- Vista Plus
Tekelec
- Steleus Group
- VocalData
Veritas
- KVault Software
- Invio Softwar
MERGERS AND ACQUISITIONS: SELECT 2004 SOFTWARE M&A TRANSACTIONS
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| Art Technology Group(NASDAQ: ARTG) |
Primus(NASDAQ: PKSI) |
$20,060,000EV |
$25,700,000 |
0.8x |
Stock |
| Category: Customer Relationship Management, Marketing & Sales |
SEG's Insight:
Art Technology Group (ATG), provider of ecommerce software, acquires Primus Knowledge Solutions, a developer of customer relationship management, marketing and knowledge management software for managing customer queries, emails, and chat sessions. ATG saw ample cross-sell opportunities into Primus" installed base and was also attracted by Primus" 29% year-over-year revenue growth. The street didn't seem to recognize the synergies, as news of the deal had virtually no impact on Primus" share price and pushed ATG's down 12.2%. Both companies have suffered similar fates since going public in July 1999. At one time, each enjoyed a share price north of $120, but were trading below $1 on deal day. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| Cognos(NASDAQ: COGN) |
Frango(Stockholm: FRAN B) |
$52,200,000 |
$34,300,000 |
1.5x |
Cash |
| Category: Enterprise Performance Management |
SEG's Insight:
Business intelligence powerhouse Cognos acquires Swedish business performance management (BPM) provider Frango, which specializes in consolidation and financial reporting products. With 60% of its sales coming from North America, Cognos sees Frango as an opportunity to quickly expand its European presence and compete with arch rival Business Objects on its home court. The purchase price represents a 63% premium over Frango's closing price1 on the Stockholm Exchange. In December 2002 Cognos acquired Adaytum ($160 million), which is another BPM tool for budgeting and planning. |
1: Averaged over 10 days prior to deal day
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| CyberGuard(NASDAQ: CGFW) |
Secure Computing(NASDAQ: SCUR) |
$256,120,000EV |
$81,250,000 |
3.2x |
Stock |
| Category: Security Software |
SEG's Insight:
Network security provider CyberGuard makes an audacious offer for larger rival Secure Computing by proposing an all stock deal originally worth $297 million. CyberGuard's offer came shortly after Secure's share price dropped 36%, following its negative second quarter guidance. Secure promptly rejected the offer, which represented only a 22% premium for Secure shareholders. In response, CyberGuard offered to "sweeten the deal" by raising cash through a private placement, but provided few details. Under terms of the original deal, Secure's shareholders would have owned 56% of the combined company, while contributing almost three-quarters of total income. CyberGuard has completed three acquisitions since early 2003, seeking to compete more effectively against larger rivals Cisco and CheckPoint. |
* Secure Computing rejected deal
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| JDA Software(NASDAQ: JDAS) |
QRS(NASDAQ: QRSI) |
$67,320,000EV |
$123,050,000 |
0.6x |
Stock |
| Category: Supply Chain Management/Logisitcs, eCommerce Software |
SEG's Insight:
JDA Software, a leading producer of software for the retail industry, incites a bidding war for QRS, publisher of the leading electronic retail catalogue in North America and a provider of collaborative commerce solutions to the general merchandise and apparel industry. Shortly after making its all stock offer, JDA released negative second quarter results which drove the deal value down from $100 million to $85 million. After news of the deal caused QRS" share price to rise 12%, three private buyout firms entered the fray, offering cash. The most notable bidder is Avling Partners, headed by QRS founder (Peter Johnson) who owns a 10.6% stake in QRS. Contrary to the predictions of some, we expect JDA to up its offer. The addition of QRS would make JDA 50% larger with 50% of revenues recurring, thanks to QRS" lucrative revenue model. QRS is obligated to pay a $3.75 million breakup fee to JDA if it breaks the engagement. |
* QRS rejected JDA deal and instead was acquired by Inovis
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| Macrovision(NASDAQ: MVSN) |
InstallShield Software |
$76,000,000 |
$35,000,000 |
2.2x |
Cash |
| Category: Desktop Software |
SEG's Insight:
Macrovision, a provider of electronic licensing, copy protection and digital rights management solutions, acquires InstallShield, the leading developer of software installation tools. With InstallShield, Macrovision gains access to 69,000 software developers and countless enterprise system administrators. For InstallShield, the time was right, with revenue declining from an estimated $50 million in 2000 to $35 million in 2003. In addition to the $76 million all cash purchase price, the transaction includes a potential $20 million earnout. InstallShield's main competitor, Wise Solutions (which InstallShield sued for stealing proprietary information), was acquired in December 2003 by Altiris for 2.3x. |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| MCAFEE(NYSE: MFE) |
Foundstone |
$86,000,000 |
$15,000,000 |
5.7x |
Cash |
| Category: Vulnerability Management Software |
SEG's Insight:
Returning to its roots as a security software company after a major restructuring, McAfee buys Foundstone, a network-vulnerability management company. Foundstone's revenue growth has reportedly exceeded 100% per year. Foundstone will allow McAfee to fill a gap in its intrusion prevention offering and should yield abundant cross-sell opportunities to Foundstone's 400 enterprise customers. Part of McAfee's makeover, including a change in name from Network Associates, involved selling its Sniffer product line ($235 million) as well as its help desk software ($47 million), while acquiring intrusion detection companies Entercept ($120 million) and IntruVert ($100 million). |
| Buyer |
Seller |
Price |
Revenue |
Mult. |
Currency |
| Open Solutions(NASDAQ: OPEN) |
Datawest Solutions(TSX: DS) |
$38,000,000 |
$34,300,000 |
1.1x |
Cash |
| Category: Banking, Financial Services Software |
SEG's Insight:
Open Solutions, primarily a provider of software systems for small banks and credit unions, acquires Datawest Solutions, a provider of outsourced internet and telephone banking systems, CRM applications and web-based loan origination software to Canadian credit unions. Open Solutions, a small public company which competes against billion dollar giants like Fiserv and Jack Henry, acquired Datawest to extend its presence in Canada. Seeking to rapidly grow its installed base and add an array of products capable of quickly generating incremental revenue, Open has spent $76.1 million on 5 acquisitions since its November 2003 IPO. |
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