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| Home - Software M&A Review - Jun 03 Issue |
Software M&A - All Hell Breaks Loose
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Battery Ventures to acquire Made2Manage Systems (Nasdaq:MTMS)
Category: Enterprise resource planning
Purchase Price: $13,516,000EV
Seller Revenue: $30,100,000
Revenue Multiple: 0.5x
Payment Terms: Cash
SEG’s Perspective:
Battery Ventures, a first tier VC firm, takes private Made2Manage, an ERP provider to small and midsize manufacturers. Here’s another example of a struggling, undervalued public company being acquired at a price which looks like a real bargain at a 1.0x multiple, but represents a healthy 40% premium to shareholders. Look for additional acquisitions by Made2Manage now that it has Battery’s financial backing and greater flexibility as a private company.
Saratoga Partners acquires Divine’s Managed Services Unit
Category: Managed services / hosting
Purchase Price: $28,000,000
Seller Revenue: $60,000,000
Revenue Multiple: 0.5x
Payment Terms: Cash
SEG’s Perspective:
Fallout from the Divine debacle continues with the U.S. Bankruptcy Court’s approved sale of Divine’s managed services unit to Saratoga Partners, a New York private equity firm. Saratoga is one of the few private equity firms that saw opportunity in the current market and jumped headlong into the fray. This is Saratoga’s third acquisition since February and follows on the heels of its recent sale of Datavantage to MICROS Systems. The managed services unit was built through Divine’s acquisition of Data Return, Intira and Host One.
NaviSite (Nasdaq:NAVI) acquires Interliant (Nasdaq:INIT)
Category: Managed services / hosting
Purchase Price: $7,000,000
Seller Revenue: $44,600,000
Revenue Multiple: 0.2x
Payment Terms: Cash
SEG’s Perspective:
Navisite, a provider of application management and hosting services, acquires Interliant, a bankrupt competitor focused on corporate messaging and e-mail outsourcing. It’s fourth acquisition of a hosting business in recent months, NaviSite is taking advantage of depressed valuations and others’ misfortunes. While the market reacted favorably to the acquisition, driving NaviSite’s stock price upward 67%, we’re a little less enthusiastic. NaviSite has significant debt, a dwindling cash balance and negative operating income.
Symantec Corp. (Nasdaq:SYMC) to acquire Nexland (OTC:XLND)
Category: Internet security
Purchase Price: $20,100,000EV
Seller Revenue: $7,740,000
Revenue Multiple: 2.6x
Payment Terms: Cash
SEG’s Perspective:
Symantec continues to reposition as a security software provider by acquiring Nexland, a small public company whose patent pending security applications and appliances enable secure virtual private networking between corporate and remote offices. Here’s another example of a strategic partnership evolving into an acquisition with a decent multiple. After backing out Nexland’s cash and adding debt, Symantec paid $20.1M. Nexland’s compound annual revenue growth rate exceeded 129% over the last two years.
SERENA Software (Nasdaq:SRNA) acquires TeamShare
Category: Collaboration and workflow
Purchase Price: $18,000,000
Seller Revenue: $12,500,000 estimate
Revenue Multiple: 1.4x
Payment Terms: Cash
SEG’s Perspective:
Serena, a provider of software solutions used to manage enterprise application code and Web content changes, picks-up TeamShare, a “SoftLetter 100” provider of developer-oriented collaboration and workflow management tools. TeamShare’s product, which is already integrated with Serena’s, provides a highly complementary product extension for Serena. Revenue is estimated to be $12.5M.
EV: Enterprise Value = equity purchase price, plus seller’s interest bearing debt, minus seller’s cash & cash equivalents
This report was prepared by Software Equity Group, L.L.C. (SEG), a mergers and acquisitions advisory firm serving the software, life science and technology sectors. 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 as to 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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