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Software M&A Insights: Profitable Deals
By Ken Bender, Managing Director, and Kris Beible, Analyst – Software Equity Group, LLC
Deals highlighted this month include IBM’s acquisition of Cognos, the largest remaining pure-play business intelligence vendor; Nokia’s acquisition of NAVTEQ, a developer of mobile and internet mapping technologies; and Omniture’s merger with Visual Sciences, both SaaS providers of web analytics.
IBM (NYSE: IBM) to acquire Cognos (NASDAQ: COGN)
Category: Business Intelligence
Purchase Price: $4,900,000,000EV
Seller Revenue: $1,020,000,000
Revenue Multiple: 4.8xEV
EBITDA Multiple: 26.4xEV
Payment Terms: Cash
IBM will further consolidate its business intelligence (BI) sector through the acquisition of Cognos, the largest remaining BI vendor. Cognos is the latest in a string of acquisitions IBM has made to build out its “Information on Demand” software portfolio, a business which yields significantly higher profits than its well known hardware and technology services group. Cognos’ technology is embedded within IBM’s BI and analytics offerings and IBM could not chance losing the company to a competitor, after Business Objects ($6.5EV billion, 4.7xEV TTM revenue) and Hyperion ($2.8EV billion, 3.4xEV TTM revenue) were recently acquired by SAP and ORACLE, respectively. The proposed 9% share premium is lower than rivals Business Objects (31% premium1) and Hyperion (21% premium) received, and for good reason – Cognos’ stock price jumped 14% on SAP’s announced acquisition of Business Objects, and had appreciated 25% year-to-date (pre-announcement). The acquisition will represent IBM’s 23rd “Information on Demand” purchase and 11th deal year-to-date.
1. Tender offer/pre-announcement average last 30 days closing stock price
Nokia (NYSE: NOK) acquires NAVTEQ (NYSE: NVT)
Category: Mobile and Internet Mapping Software
Purchase Price: $7,708,000,000EV
Seller Revenue (TTM): $757,720,000
EBITDA (TTM): $244,400,000
Revenue Multiple (TTM): 10.2xEV
EBITDA Multiple (TTM): 31.5xEV
Payment Terms: Cash
In its largest acquisition to date, Nokia, the world’s number one handset manufacturer, acquires NAVTEQ, a developer of mapping technologies for internet and mobile service providers. Nokia picks up best-of-breed mapping technology, which counts AOL, Yahoo, Google and Microsoft as users, and gains further penetration into the market for location-based services (i.e. global positioning systems, geographic information systems, and automatic vehicle location systems), a space rapidly converging with mobile communications devices and deemed highly strategic to Nokia’s long-term growth. NAVTEQ, which has been profitable each quarter since its August of 2004 IPO, posted TTM revenue growth and EBITDA margin of 30.4% and 32.3%, respectively. In June, NAVTEQ competitor TeleAtlas announced its intention to merge with TomTom NV for $2.8 billion. TomTom rival Garmin followed with an unsolicited bid of $3.3 billion, which TomTom has since trumped, coming in at $4.2 billion (12.1x TTM revenue estimate) – a 50% increase over its original bid.
Omniture (NASDAQ: OMTR) acquires Visual Sciences (NASDAQ: VSCN)
Category: On-Demand Business and Web Analytics Software
Purchase Price: $383,720,000EV
Seller Revenue (TTM): $76,040,000
EBITDA (TTM): $3,630,000
Revenue Multiple (TTM): 5.1xEV
EBITDA Multiple (TTM): 105.7xEV
Payment Terms: Cash
Omniture, the largest pure-play web analytics company, acquires Visual Sciences, formerly WebSideStory, and the second largest pure-play provider. The consolidation play nearly doubles Omniture’s revenue and customer base, and strengthens its position against market entrants such as Google, Yahoo, and Microsoft, which entered the space following heavy investments in internet advertising and marketing. The $18.04 per share bid represents a 14% premium to Visual Sciences’ pre-announcement 30 day average closing stock price and a 5.1xEV TTM revenue multiple. The valuation is justified by the Company’s recurring SaaS revenue, 46% TTM revenue growth (17.5% industry median), and ever expanding addressable market. Visual Sciences is Omniture’s fourth SaaS acquisition in 2007.
Software Equity Group, L.L.C. (SEG), a mergers and acquisitions advisory firm serving the software, life science and technology sectors, prepared this report. SEG is solely responsible for its content. This material is based on data obtained from sources we deem to be reliable; it is not guaranteed for its accuracy and does not purport to be complete. This information is not to be used as the primary basis of investment decisions. For more, please visit www.softwareequity.com or phone (858) 509-2800.