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| Home - Industry Article - Apr 08 Issue |
Software M&A Insights: Deals Continue to Impress |
By Ken Bender, Managing Director, and Kris Beible, Analyst – Software Equity Group, LLC
Amid deepened recessionary fears, M&A deal activity within the software sector continues to impress. Deals highlighted this month include BMC’s acquisition of BladeLogic, a provider of data center automation solutions; Microsoft’s acquisition of struggling enterprise search provider Fast Search & Transfer; Oracle’s acquisition of BEA Systems, the largest remaining pure-play middleware player; SolarSoft’s acquisition of manufacturing ERP vendor Chelford Group; Synopsys’ acquisition of Synplicity, a developer of semiconductor design and verification software and Thoma Cressey Bravo’s purchase of Macrovision’s digital rights management software division.
BMC Software (NYSE: BMC) Acquires BladeLogic (NASDAQ: BLOG)
Category: Data Center Automation Technology
Purchase Price: $810,070,000EV
Seller Revenue: $71,350,000
TTM Revenue Growth: 80.6%
EBITDA: ($1,150,000)
Revenue Multiple: 11.4xEV
Payment Terms: Cash
SEG’s Perspective:
BMC Software, a provider of enterprise systems and services
management software, acquires high-flying BladeLogic, a
best-of-breed provider of data center automation technologies.
The addition of BladeLogic’s applications allows BMC to marry IT
service management with robust process automation technologies.
The deal enables BMC to compete against IT management behemoths
Hewlett-Packard and IBM in the growing IT management arena and
gives the BMC a new high-growth revenue stream. BladeLogic,
which went public in July, saw its stock price rise to above $30
per share in late December before declining 48% as the market
turned sour. The $28 per share tender offer represents a 42.1%
premium over BladeLogic’s average last 30 days closing stock
price, and an 11.7% premium over its initial day closing price
of $25.07 in July. BMC is rumored to have beaten out VMWare for
the deal – making BladeLogic the second company in the past year
that VMWare has supposedly competed for and lost (VMWare is
rumored to have bid on Opsware). BladeLogic joins Emprisa
Networks ($21.9 million1), RealOps ($52.5 million2) and
ProactiveNet as BMC’s fourth acquisition in the past 12 months.
1 Purchase Price
2 Purchase Price
Microsoft (NASDAQ: MSFT) Acquires Fast Search & Transfer (OSE:
FAST)
Category: Enterprise Search
Purchase Price: $1,062,000,000EV
Seller Revenue: $167,800,000
EBITDA: ($64,600,000)
Revenue Multiple: 6.3xEV
Payment Terms: Cash
SEG’s Perspective:
Microsoft acquires Fast Search & Transfer (FAST), a best of
breed developer of real-time enterprise search and business
intelligence solutions. Microsoft adds sophisticated
unstructured data search capabilities for the high-end
enterprise, complementary to its recent release of SharePoint
Server 2007, targeting the lower end of the market, and becomes
the only vendor serving both segments. The acquisition will
likely spur further search-related acquisitions by Google, Yahoo
and others. Additionally, FAST’s recent focus on online
advertising and search monetization complements Microsoft’s 2007
acquisition of aQuantive and better positions Microsoft to
compete with Google and Yahoo for lucrative internet advertising
revenues. The 42% premium1 offered to shareholders appears to be
fair given FAST’s recent accounting debacle. In July 2007, the
company announced it would restate 2007 and 2006 financials,
booking substantial decreases in revenue and negative EBITDA.
Its share price quickly dropped approximately 50%, to its lowest
point in three years, and had remained submerged.
Tender offer/pre-announcement last day closing stock price
Oracle (NASDAQ: ORCL) Acquires BEA Systems (NASDAQ: BEAS)
Category: Middleware
Purchase Price: $7,109,050,000EV
Seller Revenue: $1,486,710,000
TTM Revenue Growth:
EBITDA: $254,900,000
Revenue Multiple: 4.8xEV
EBITDA Multiple: 27.9xEV
Payment Terms: Cash
SEG’s Perspective:
Oracle continues its acquisition spree with the purchase of BEA
Systems, the largest remaining pure-play middleware provider.
The combination of Oracle Fusion Middleware and BEA Systems
significantly bolsters Oracle’s market presence domestically and
abroad (notably in China where BEA is the leading Middleware
vendor), blocks competitors such as SAP from entering the space,
and solidifies Oracle’s position as the number two middleware
provider, second only to infrastructure behemoth IBM. The
acquisition also provides Oracle entree into the SOA governance
technologies space, a market for which Oracle had no competitive
offering. BEA rejected Oracle’s initial $17 per share bid made
in October, countering at $21, a price BEA believed could be
achieved through a competitive bidding process. SAP and others
have since remained silent, however, and Oracle raised its bid
14% to $19.38 per share, a price BEA’s management deemed
acceptable. BEA faced considerable pressure from activist
shareholder Carl Icahn (13% shareholder) who filed lawsuit
against BEA following its rejection of Oracle’s initial bid. The
deal spares both companies an ordeal similar to Oracle’s hostile
take-over of PeopleSoft in 2003.
Solarsoft Business Systems Acquires Chelford Group Plc (AIM:
CHR)
Category: Manufacturing Enterprise Resource Planning Software
Purchase Price: $27,260,000EV
Seller Revenue: $37,715,000
EBITDA: $2,752,000
Revenue Multiple: 0.7xEV
EBITDA Multiple: 9.9xEV
Payment Terms: Cash
SEG’s Perspective:
Solarsoft Business Systems, a provider of manufacturing
enterprise resource planning (ERP) software, acquires Chelford
Group Plc, a developer of process manufacturing ERP and supply
chain management (SCM) solutions. Solarsoft, a private company
controlled by Marlin Equity Partners, adds complemetary process
manufacturing software to its discrete manufacturing expertise,
and significantly expands Solarsoft’s geographic reach in the
U.K. and Europe. The 2.15 British pounds per share bid
represents a 25% premium to Chelford’s pre-announcement last-day
trading stock price. The 0.7x TTM revenue valuation Chelford
received was due to flat TTM revenue growth and a less than
stellar TTM EBITDA margin of only 7.3%. Chelford is the latest
in a string of acquisitions made by Marlin Equity to roll-up
small and medium size manufacturing ERP vendors domestically and
abroad – VantagePoint Systems ($10.2 millionEV1 – 0.8x TTM
revenue), CMS Software, and XKO Software ($27.8 million2).
1 Purchase Price
2 Purchase Price
Synopsys (NASDAQ: SNSP) Acquires Synplicity (NASDAQ: SYNP)
Category: Semiconductor Design and Verification Software
Purchase Price: $188,000,000EV
Seller Revenue: $71,200,000
TTM Revenue Growth: 13.8%
EBITDA: $7,200,000
Revenue Multiple: 2.6xEV
EBITDA Multiple: 26.1xEV
Payment Terms: Cash
SEG’s Perspective:
Synopsys, a provider of semiconductor electronic design
automation (EDA) software, acquires Synplicity, a developer of
semiconductor design and verification software. Synopsys picks
up the field programmable gate arrays (FPGA) market leading
software provider, while also eliminating a competitor. The
acquisition also helps Synopsis’ CAGR – Synplicity posted 13.8%
TTM revenue growth vs. Synopsys’ 8.1% growth, which is due in
part to 2007 acquisitions of Sandwork Design ($23.7 million1),
MOSAID’s Semiconductor IP Product Development Business ($15.3
million2) and ArchPro Design Automation. The 60% premium3
offered to shareholders was announced amidst rumors of
competitor Mentor Graphics’ interest in acquiring the company.
1 Purchase Price
2 Purchase Price
3 Tender offer/pre-announcement average last 30 days closing
stock price
Thoma Cressey Bravo Acquires Macrovision’s Software
Business Unit
Category: Digital Rights Management Software
Purchase Price: $200,000,000
Seller Revenue: $112,900,000
Revenue Multiple: 1.8x
Payment Terms: Cash
SEG’s Perspective:
Thoma Cressey Bravo, a mid-market private equity firm,
acquires Macrovision’s digital rights management software
division. Macrovision spins out the division to focus resources
on its pending acquisition of Gemstar – TV Guide International
(NASDAQ: GMST) for $2.3 billion (3.7xEV TTM Revenue) and intends
to use the proceeds from the transaction to lessen debt-funding
requirements. Macrovision also announced the sale of its PC
games digital distribution technologies business, Trymedia
Systems, to RealNetworks in late March. In November Thoma
Cressey took Manatron, a provider of property tax systems for
state a local governments, private for $69.9 millionEV (1.6xEV
TTM revenue).
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
 
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