March 26, 2012
A WSJ Deal Journal article recently noted that buyouts by PE firms have dipped so far in 2012 they are on pace to make up barely 40% of the deal values witnessed in 2011 and 2010. For the information technology sector, however, Signal Hill’s data shows that private equity buyers have contributed the highest total enterprise value for a Q1 period since before the recession. And that’s with one week of the quarter left to go.
Year-to-date in 2012, PE buyers closed 15 transactions – flat compared to 2011 and well above the seven deals announced in Q1 2009. These 15 most recent transactions account for nearly $4.4 billion in enterprise value, the highest level since 2007. A handful of large deals this year account for the increase, such as CPA Global’s $1.4 billion acquisition by Cinven; Transunion’s $1 billion acquisition by Advent International and GS Capital Partners; as well as Quest Software’s $1.9 billion acquisition by Insight Venture Partners earlier this month. These stats do not include add-on acquisitions by PE-owned companies, a sector of the market which remains highly active.
The Deal Journal article notes that the slowdown in overall buyouts is a surprise because “private-equity investors have a multitude of reasons to whip out their checkbooks for new purchases.” That is indeed the case within the IT sector. With public equity markets on a tear (the NASDAQ Composite is up over 19% already for the year), PE firms have been more willing to spend heartily to acquire healthy, growing companies. We recently wrote about Quest Software’s acquisition, where Insight offered a 14.4% premium over the 30-day trading price and, according to recent SEC filings, a valuation of 2.2x trailing revenues and 13.1x EBITDA. Cinven noted that its acquisition of CPA Global (a global provider of intellectual property (IP) management services and software) was driven by defensive qualities and attractive growth prospects, not to mention exceptional financial performance and cash flow.
As Q1 winds to a close and the overall markets continue to rebound, we expect to see financial buyers plow even more money into the IT sector. As the Deal Journal says, there usually is a lagging correlation between firming financial markets and Monday morning deal announcements.
IT Transactions with PE Buyers, 2007-2012
*Q1 2012 as of March 23.
February 21, 2012
Signal Hill is has published Q4 2011 M&A Reviews for the following sectors:
Click the links above to access a PDF of the Q4 2011 M&A Review for each sector or view them all in PDF form here. A list of all published Signal Hill M&A Sector Insights are available here.
January 20, 2012
Apple confirmed this week that it acquired flash-memory and storage provider Anobit for a rumored $390 million. Israeli-based Anobit uses proprietary signal-processing algorithms to improve the performance of flash-memory chips. In addition to flash memory, the company also sells enterprise storage solutions. The company had raised $76 million from investors, including Battery Ventures and Pitango Venture Capital.
The acquisition, Apple’s first in Israel, is a prime example of the company vertically integrating. Apple now owns a supplier of a key component for its top-selling devices, as Anobit’s flash memory technology is used in iPhones and iPads. Apple is the largest buyer of flash memory in the world and Anobit will now provide in-house chip procurement for the company, significantly reducing costs going forward. It also throws a wrench into the procurement process of one of Apple’s fastest growing competitors in the smartphone market – Samsung. Anobit has been a main supplier to Samsung and as a result of the acquisition may stop supplying chips to the company, which would strengthen Apple’s position in the smartphone market.
The rumored acquisition price of Anobit makes it Apple’s second largest acquisition to date – behind only its 1996 $404 million acquisition of NeXT, a computer company that developed and manufactured a series of computer workstations intended for the higher education and business markets. More recently, Apple paid big for its acquisition of PA Semi in 2008 ($278 million) and Quattro Wireless in 2010 ($275 million). Anobit is also only Apple’s third hardware acquisition in its history (P.A. Semi in 2008 and Intrinsity in 2010 for $278 million and $121 million, respectively).
Apple’s acquisition of Anobit is not a big surprise to industry analysts, who noted that flash controller acquisitions have been a trend recently. Last year, solid-state-drive-maker OCZ Technology Group agreed to acquire privately-held Indilinx, a maker of popular NAND flash controllers for $32 million, while fabless semiconductor maker LSI Corp. announced it would acquire flash controller maker SandForce. Apple isn’t necessarily one to follow trends, however. With Apple’s new CEO Tim Cook serious about not hoarding cash, and with $8 billion already on the books, we may start to see a number of bigger, trend-setting acquisitions by the company over the next year.
— Jane Santini, Associate