|
|
| Home - Software M&A Review - Jan 04 Issue |
Software M&A - Fall Deals
continued... page 2 |
Progress Software Corporation (Nasdaq: PRGS) acquires DataDirect Technologies Ltd.
Category: Enterprise application integration
Purchase Price: $88,000,000
Seller Revenue: $35,500,000**
Revenue Multiple: 2.48x
Payment Terms: Cash
SEG’s Perspective:
Progress Software acquires privately held Data Direct Technologies, the leading developer of data access and connectivity components for software developers, in a $88MM, all-cash deal. Data Direct’s products are embedded in the apps of more than 250 software companies and most of the Fortune 100. Progress, which grew 13 percent in its fiscal year ending 11/30/03, has now moved well beyond its 4th GL development platform days and is considered a major software infrastructure player. Plans are for DataDirect to operate as a separate business unit to maintain an appearance of impartiality, similar to another highly successful Progress subsidiary, Sonic Software, its fully owned Internet middleware company. The transaction should be cash-flow-positive and slightly dilutive in year one and accretive thereafter.
Red Hat, Inc. (Nasdaq:RHAT) acquires Sistina Software
Category: Storage management
Purchase Price: $31,000,000
Seller Revenue: $2,250,000**
Revenue Multiple: 13.8x
Payment Terms: Stock
SEG’s Perspective:
Open Source Linux powerhouse Red Hat will acquire storage infrastructure software maker Sistina Software in an all-stock deal valued at $31MM. As evidenced by the 13.8x multiple, this is a highly strategic buy for Red Hat as it battles to replace proprietary systems in large corporation with open source Linux applications. Red Hat will retain Sistina's development team and plans to bring an open source version of Sistina's software out by mid-year. With this acquisition, Red Hat expands its applications offering beyond Web portals and content management. An application server is slated to join Red Hat’s line-up later this year. Sistina’s revenue is a D&B estimate.
Sungard Data Systems Inc. (NYSE: SDS) acquires Systems & Computer Technology Corp.
Category: Educational software
Purchase Price: $491,200,000
Seller Revenue: $269,700,000
Revenue Multiple: 1.8x
Payment Terms: Cash
SEG’s Perspective:
Highly acquisitive Sungard Data Systems continues to expand its market focus beyond the financial services sector. Following its 2003 acquisitions of Caminus, HTE and Sherwood International, which leverage Sungard in the energy and public sectors, Sungard beefs up its education sector business with Systems & Computer Technology (SCT), a leading provider of technology solutions to higher education. SCT adds 8 million users and 1,300 customers to Sungard’s installed base, but for SCT’s shareholders, the deal doesn’t quite add up. We wonder why they would settle for a mere 10 percent premium after SCT successfully divested non-core assets and expanded its higher education business through a string of savvy acquisitions. The strategy was working. In the last twelve months, SCT’s revenue grew 15.2% and EBITDA grew 18.0% to $45.8MM. SCT also boasted a strong balance sheet, which saw its current ratio remain near 3.5 and long term debt fall from $74.7MM to $32.0MM over the same period.
EV: Enterprise Value = equity purchase price, plus seller’s interest bearing debt, minus seller’s cash & cash equivalents
**: Estimate.
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.
 
|
|
|
