Menalto Advisors Thought Report - Constant Contactfiles.constantcontact.com/3cfe0f61601/3e5a7224-a7bc-4… · · 2017-04-04Menalto Advisors Thought Report: ... Select Microsoft

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April, 2017

Menalto Advisors Thought Report:

The High-Profile Enterprise Software Acquirers

(an Overview of M&A by Oracle, Microsoft, IBM, Salesforce,

SAP, Cisco, VMware, HP Enterprise, Adobe, and CA)

Contents Include:

• Summaries of more than 260 acquisitions by Oracle, Microsoft, IBM,

Salesforce, SAP, Cisco, VMware, HP Enterprise, Adobe, and CA since 2013

• A discussion of the major M&A highlights and technology themes across these high-profile enterprise software acquirers

Mark Grossman

Managing Director

2 The High-Profile Enterprise Software Acquirers

About Menalto Advisors …………………………………….……………………....……. 4

About the Author …………………………………………......................………...….….. 5

Other Managing Director Bios …………….………………...……………………….....… 6

Previous Thought Reports …………….…….……………...……………………….....… 8

Introduction ……………………….………………..………..………………………….… 9

Why a Report on the High-Profile Software Acquirers? ………………………….... 9

Enterprise Software M&A Activity ………………………………………….……...... 13

General Highlights ………….………………………………..….............................. 15

Technology Theme Highlights ………………………………………………………..19

Some Comments on the Transaction Data ………………………….……………. 27

We Look Forward to Hearing from You ……………………………….…..……..…. 28

Chapter 1: Oracle ………………………………………..…………………………..….. 29

Introduction ………………………………………………………………….…..…..... 29

Select Oracle Acquisitions …………...…………………………………..………….. 30

Chapter 2: Microsoft ………………………………………..……..……...………...….. 41

Introduction ………………………………………………………….…..…………..... 41

Select Microsoft Acquisitions ………...………………………….....……………….. 42

Chapter 3: IBM ………………………………………………..…..……..………..…….. 57

Introduction ……………………………………………………………………..…….. 57

Select IBM Acquisitions ………………..………………………….…..…………….. 58

Chapter 4: Salesforce ………………………………………..…..………....………….. 73

Introduction …………………………………………………….…………...…..…….. 73

Select Salesforce Acquisitions ………...…………………..………………..…..….. 74

Chapter 5: SAP ………………………………………..…………………..…………….. 83

Introduction …………………………………………….……………………….....….. 83

Select SAP Acquisitions ………………………………………..………..………….. 84

Table of Contents


Chapter 6: Cisco ……………………………..………..…………………...……..…….. 91

Introduction ……………………………………………………………………..…….. 91

Select Cisco Acquisitions ………..……..………………………………………...…. 92

Chapter 7: VMware ……………………………….……..…………………………….. 106

Introduction ………………………………………………………………..…..…….. 106

Select VMware Acquisitions ………………..………………………………..…….. 107

Chapter 8: HP Enterprise ………………………..……………..…………………….. 111

Introduction ………………………………………………………………………….. 111

Select HP Enterprise Acquisitions ………………………………………………… 112

Chapter 9: Adobe ………………………………..………………………………..…… 118

Introduction ………………………………………………………………………….. 118

Select Adobe Acquisitions ……………….……………………………………….... 119

Chapter 10: CA Technologies ………………………………..…………………….... 124

Introduction ………………………………………………………………………….. 124

Select CA Technologies Acquisitions …………………………..………..……….. 125

Chapter 11: Private Equity Firms / Vista Equity …………..……………….…….. 130

Introduction ………………………………………………………………………….. 130

Select Vista Equity Partners Acquisitions …………………………………..…….. 133

Appendix ……………………………..……..………………………………………….. 143

Select Acquisitions with Revenue Multiples ……………….……….………..….... 143

Select Acquisitions with Public Company Premiums …………....…………..….. 146


Preeminent Technology M&A Boutique Investment Bank

Menalto Advisors LLC (“Menalto Advisors”) is a new and different type of

technology M&A advisory firm located in Silicon Valley. We are a close-knit,

diverse group of talented professionals who strongly believe that early

partnership and proactive guidance based on each of our client’s unique

circumstances are the best way to help them attain their strategic objectives

and exceed their M&A goals. We help our clients discover, strengthen, and

communicate their capabilities and the potential of their business to optimize

each M&A outcome.

Prior to founding Menalto Advisors, our investment banking team completed

over 160 transactions around the globe and has deep experience in M&A,

engineering, finance, law, management consulting, and entrepreneurship.

We understand the dedication, experience, pragmatism, foresight, tenacity,

creativity, and exceptional execution it takes to consistently achieve

transactional success. Importantly, our partnership approach to M&A works

because our team consists of bright, fun, motivated individuals who are

passionate about technology and entrepreneurship.

Please visit our website at www.menaltoadvisors.com to learn more.

About Menalto Advisors

http://www.menaltoadvisors.com/


Mark Grossman, Managing Director

Originally from New York City (Brooklyn), Mark has

primarily lived and worked in Silicon Valley and

Boston. He has more than 20 years of experience

in technology and finance, including mergers &

acquisitions, technology industry equity research,

and engineering. When he isn’t traveling the world

advising clients, Mark enjoys spending time at

home with his son and wife, and playing guitar.

Prior to Menalto Advisors, Mark was a Managing

Director at Pagemill Partners and began his

investment banking career at SVB Alliant. As an

investment banker, he has successfully completed more than 40 transactions

(domestic M&A, international M&A, and strategic investments) across a broad

range of technology sectors and geographies. Mark has also written a variety of

thought pieces on emerging technologies and M&A topics.

Before becoming an investment banker, Mark was a Managing Director and

technology industry research analyst at several Wall Street firms. Mark performed

in-depth analysis of companies across the tech industry and wrote numerous

reports on industry trends and technologies. He received a number of industry

accolades, including the Wall Street Journal "Best on the Street" award, and was

a guest analyst on a variety of TV financial news programs. Mark began his

financial career as an Associate at Goldman Sachs.

Prior to graduate school, Mark worked at General Electric where he managed a

variety of complex electronics projects (including both software and hardware

technologies). Mark earned a Bachelor of Science in Electrical Engineering, with

a Computer Science minor, from Polytechnic University (now NYU Tandon School

of Engineering), and both a Master's degree (Electrical Engineering Department)

and an MBA (Sloan School of Management) from the Massachusetts Institute of

Technology, where he completed a two-year dual-degree program.

Mark’s contact information:

M: +1.650.521.1599/T: +1.650.453.5846

[email protected]

Author’s Bio

mailto:[email protected]


Nels Nelsen, Managing Director and Co-CEO

Nels was born, raised, and educated in the Bay Area

and has spent over 25 years in Silicon Valley

advising and working with technology companies as

a Certified Public Accountant, lawyer, and

investment banker. Away from the office, Nels can

be found cheering on his three children and his

favorite Bay Area sports teams, at the beach on

Kauai, and occasionally on the golf course.

Prior to Menalto Advisors, Nels was a Managing

Director at Pagemill Partners, an M&A advisory firm,

which he and his partners sold to Duff & Phelps. Nels began his investment

banking career at Alliant Partners, which was sold to Silicon Valley Bank. As an

investment banker, Nels has closed nearly 100 transactions in a broad range of

technology sectors. Nels has represented clients all over the globe, and nearly half

of his completed transactions have been cross-border.

As a lawyer, Nels was a Partner at Gray Cary Ware & Freidenrich (now DLA Piper),

one of the largest law firms in California, and he was listed in "The Best Lawyers

of America." Prior to practicing law, Nels was a Senior Accountant at Price

Waterhouse.

Nels earned a Bachelor of Science in Commerce in Accounting from Santa Clara

University and a J.D. from Santa Clara University School of Law. He is a member

of the State Bar of California (inactive) and a Certified Public Accountant in

California (inactive).

Nels’ contact Information:

M: +1.650.996.6727/T: +1.650.453.5859

[email protected]

Other Managing Director Bios


Charles Welch, Managing Director and Co-CEO

Originally from Michigan, Charles was educated

and has lived in both Northern and Southern

California and surprisingly has loyalty to sports

teams in both parts of the state. Charles is the proud

father of two daughters, is a self-proclaimed watch

nut, and has a black belt in Aikido.

Charles has extensive experience in mergers and

acquisitions, business and corporate development,

finance, capital raising, investor relations, human

resources, and law. He is a serial entrepreneur. He

has been a principal at three different businesses, all of which he sold. Over a 14

plus year investment banking career, Charles has successfully completed

numerous M&A, strategic capital raise, and licensing transactions in a variety of

sectors and geographies.

Prior to Menalto Advisors, Charles was a co-owner and Managing Director at

Pagemill Partners, an M&A advisory firm, where his closed transactions included

negotiating the sale of Pagemill Partners to Duff & Phelps. Prior to Pagemill

Partners, Charles co-headed several different practice groups at SVB Alliant, the

then investment banking arm of Silicon Valley Bank.

Before joining SVB Alliant as an investment banker, Charles was the Vice

President, Finance, Corporate Development & Strategy at NetScaler, an Internet

infrastructure company that was eventually acquired by Citrix. Prior to NetScaler,

Charles held the position of Vice President, Corporate Development at Solectron,

an EMS company, and he was the Vice President, Business Development and

General Counsel at SMART Modular Technologies, a memory module

manufacturer that was acquired by Solectron. Charles was also a corporate

securities attorney at Wilson, Sonsini, Goodrich & Rosati.

Charles has a Bachelor of Science in Civil Engineering from Virginia Tech, a

Masters in Real Estate Development from the University of Southern California,

and a J.D. from the University of California at Berkeley (Boalt Hall School of Law).

Charles’ contact information:

M: +1.408.242.1040/T: +1.650.453.5835

[email protected]


Highlights of Previous Reports

In case you missed it, below are summaries of two previous Thought

Reports. If you would like a copy of one or both reports, please contact one

of the investment bankers at Menalto Advisors.

• The “High-Profile” Tech Acquirers (an Overview of M&A by Apple,

Google, Microsoft, Facebook, Intel, Samsung, and Amazon) – This

120+ page report was issued in January 2017. The

report covers M&A activity by the “high-profile”

technology acquirers. It includes summaries of more

than 325 acquisitions (since 2013) made by Apple,

Google, Facebook, Microsoft, Intel, Samsung, and

Amazon. These are the companies that we are most

often asked about by private tech company

executives and VCs. The report also discusses

some of the major M&A highlights, trends, and technology themes

across these companies.

• Artificial Intelligence and Machine Learning – This 130+ page

report was issued in November 2016. The first chapter provides a

comprehensive overview of the artificial intelligence

(AI) and machine learning landscape, including

some basic terminology, a history of AI, AI

applications, recent trends, strategic and VC

investments, concerns, and other related topics.

The second chapter contains a detailed primer on AI

and machine learning technologies. The third

chapter provides summaries of more than 70 AI-

related M&A transactions, and the fourth chapter highlights more than

70 private AI companies across a variety of sectors and applications.

Previous Thought Reports


“In short, software is eating the world.”

- Marc Andreessen, Co-founder of Andreessen-

Horowitz, Co-founder of Netscape

Why a Report on the High-Profile Software Acquirers?

This report provides an overview of the acquisitions made by several of the

largest enterprise software acquirers (Oracle, Microsoft, IBM, Salesforce,

SAP, Cisco, VMware, HP Enterprise, Adobe, and CA Technologies). There

were two major reasons for writing this report:

• Companion to Our Previous Report – Our previous report (“The

High-Profile Tech Acquirers”) provided an overview of the acquisitions

made by Apple, Google, Microsoft, Facebook, Intel, Samsung, and

Amazon. Of course, these are not the only “high-profile” technology

buyers, as companies such as Oracle, IBM, Cisco, and Salesforce are

also active acquirers and receive a lot of attention. However, we felt

the companies highlighted in our previous report made a good set, in

that they are very eclectic buyers and often acquire early stage

companies (in some cases pre-revenue). In addition, many of their

acquisition targets developed solutions for consumer devices (e.g.,

technologies that could be integrated into smartphones, tablets,

notebooks, or other consumer electronics). In contrast, buyers such

as Oracle, IBM, SAP, and Salesforce have mostly acquired later-stage

companies focused on enterprise software. As such, we thought it

made sense to write a separate report on the “high-profile” enterprise

software companies. The combination of this report and our previous

one covers the acquirers that we are most often asked about by private

technology company executives and VC investors.

Introduction


• Good Enterprise Software M&A Overview – Enterprise software is

one of the largest and most active segments of the technology M&A

market. According to a Gartner press release (January 2017),

enterprise software revenue is expected to reach $355 billion in 2017

(slightly more than 10% of total IT spending) and is projected to be the

fastest growing major IT segment. We have seen many presentations

and reports that analyze the enterprise software M&A market by

showing aggregate numbers across all transactions (e.g., total number

of deals by quarter, total value of deals by quarter). While this has

some value (and we briefly discuss these topics later in this chapter),

in our experience what most private enterprise software companies

really want to know about is the acquisition activities of the “premium”

buyers in the sector. These large companies are generally viewed as

the best acquirers, both because they can often rapidly accelerate a

target’s growth (due to their size, brand name, and large sales team)

and because they are often willing to pay higher valuations (for

technologies they really want) compared to other buyers. Rather than

focusing on average numbers across the entire sector, we thought it

would be more interesting to provide details on the specific acquisitions

that these premium enterprise software buyers have done.

Why We Selected the Companies that are Included

Given the large number of enterprise software vendors, there are dozens of

companies we could have highlighted. A few comments on the companies

that we selected:

• Oracle, Microsoft, IBM, SAP, Salesforce – These are all active

acquirers and very large diversified enterprise software companies

(Salesforce is the smallest of the five and its market cap is over $55

billion). As such, we thought these were all “no-brainers” to include.

We note that Microsoft had been included in our prior report, but since

it is one of the largest enterprise software companies we felt it made

sense to include Microsoft in this report as well (the deciding factor was

that it was an easy “copy and paste” for us!).


• Cisco – Cisco has been a very active acquirer since the early 1990s

and much of the company was built through acquisitions. Despite this,

we likely would not have included Cisco a few years ago, as most of

its historical acquisitions were for hardware and/or networking-related

companies. However, during the past few years a large portion of

Cisco’s acquisitions have been enterprise software companies

including the recently announced acquisition of AppDynamics

(application performance management software) for about $3.6 billion.

Based on Cisco’s recent deal activity and that it is certainly viewed as

a “high-profile” buyer, we included Cisco in this report.

• VMware (but not Dell or EMC) – Despite its much publicized $60

billion acquisition of EMC, Dell has made very few acquisitions in

recent years (only a couple of other deals since 2013). In addition, last

year it divested a substantial portion of its enterprise software business

(Quest and SonicWall) to private equity firms. As such, we did not

include Dell. We would have included EMC prior to its acquisition by

Dell. Although EMC was mostly known for storage, it had become an

active enterprise software acquirer. However, as EMC is now part of

Dell, those deals are no longer reflective of what Dell/EMC might

acquire in the future, so we did not include EMC. On the other hand,

although Dell owns a majority of VMware, VMware seems to have its

own acquisition strategy so we included it in the report.

• HP Enterprise – From late 2009 through mid-2011, Hewlett Packard

was an active buyer and made a variety of high-profile acquisitions

including 3Com, Palm, 3Par, ArcSight, Vertica, and Autonomy.

However, several of those deals (most notably Autonomy) were not

successful. When Meg Whitman assumed the CEO role in late 2011,

HP all but ceased its M&A activity for several years (no deals in 2012

or 2013). Hewlett-Packard began making acquisitions again in 2014

and then split the business into two pieces (HP and HP Enterprise) in

late 2015. As HP Enterprise (HPE) has been an active buyer during

the past few months (four deals already announced in 2017) and given

its large size we decided to include it.


• Adobe – Adobe is a large software company (over $60 billion market

cap). Although it isn’t as acquisitive as buyers such as Oracle and

IBM, Adobe generally acquires at least a couple of companies each

year and has made a number of interesting acquisitions during the past

few years including Neolane, TubeMogul, and Fotolia. As such, Adobe

is included in this report.

• CA Technologies – As with Adobe, CA isn’t the most acquisitive

company. However, it has acquired a dozen companies since early

2013, has a strong focus on enterprise software, and is usually a

prospect on most of our enterprise software deals. Therefore, we

included CA in the report.

• Vista Equity – The last chapter of this report briefly discusses private

equity (PE) firms. To provide some sense for the activity of these firms

we wanted to include an overview of the recent deals by one of the PE

firms that is specifically focused on enterprise software. While there

are many software-focused private equity firms, we chose Vista Equity

Partners since it has been very active during the past couple of years

and has made several high-profile acquisitions (e.g., Marketo, Cvent,

etc.). In addition, Vista has completed a variety of different types of

deals, such as acquiring two companies and merging them. We,

therefore, thought Vista was a good example of a PE firm to highlight.

As noted above, there are dozens of other enterprise software companies

we could have included (e.g., Symantec, Intuit, BMC Software, Software AG,

etc.) as well as other hardware companies that have made numerous

enterprise software acquisitions (e.g., Ericsson, Nokia, etc.). However, we

wanted to limit the report to a reasonable length. In a number of cases, we

excluded companies because they haven’t been very acquisitive. For

example, although Symantec has recently completed a couple of multi-billion

dollar acquisitions (LifeLock and Blue Coat), it has made very few other

acquisitions since mid-2012.


Mostly Enterprise Software Deals, but All Deals Included

The vast majority of acquisitions by the buyers highlighted in this report have

been purchases of enterprise software companies. However, there have

been a variety of exceptions including a few hardware deals (e.g., Oracle

acquired Acme Packet and Sun Microsystems; Microsoft acquired Nokia’s

Mobile unit; Cisco acquired Leaba Semiconductor; HP/HPE acquired SGI,

Aruba Networks, and recently announced Nimble Storage). Although the

focus for this report is enterprise software, we included all the acquisitions

made by the highlighted companies, even though some of the targets are

not enterprise software companies.

Enterprise Software M&A Activity

Several Hundred Acquisitions Every Quarter

As noted above, most enterprise software M&A overviews focus on

aggregate numbers across the industry, while the primary focus for this

report is the acquisition activities of the “high-profile” buyers. However, this

section briefly discusses overall enterprise software activity.

• Number of Acquisitions – We have seen substantial differences in

reports, presentations, and M&A databases regarding the total number

of enterprise software M&A deals per quarter (some showing nearly

twice as many deals as others). One factor causing this discrepancy

is that there isn’t a rigorous definition of enterprise software. While

some deals obviously fit in the category, there are others where it isn’t

clear. This is increasingly the case as consumer software solutions

are more often being used in enterprises, and emerging markets such

as IoT often cross over both consumer and industrial applications.

Another factor is that while virtually every M&A database includes the

well-publicized multi-billion dollar acquisitions, the vast majority of

transactions are much smaller deals (well under $100 million) and

there is much less consistency in tracking these smaller transactions.


While there are discrepancies in the absolute number of enterprise

software deals, the two common take-aways from all these sources

are: 1) there are a lot of deals (several hundred per quarter) and 2) the

number of deals has been relatively stable. For example, one M&A

database indicates that the total number of enterprise software

acquisitions has generally hovered at between 400 and 450 deals per

quarter for the past few years (large and relatively stable).

• Aggregate Value – In contrast to the number of enterprise software

deals per quarter which is relative stable, aggregate deal value is

highly volatile and can vary from under $5 billion to well over $50 billion

from one quarter to the next. However, in our view these numbers are

largely meaningless from the perspective of a start-up, as the vast

majority of the aggregate value is usually based on a few very large

deals. For example, in Q2:16 Microsoft announced the acquisition of

LinkedIn for over $26 billion and Symantec announced the acquisition

of Blue Coat for nearly $5 billion. The value of those two deals was

greater than the value of all other enterprise software acquisitions that

quarter or the previous quarter, resulting in a huge spike for Q2:16. If

the Microsoft/LinkedIn deal had been announced just a few weeks

later, Q3:16 would have shown the huge spike instead. As such, we

don’t think this provides much insight into the overall M&A market

dynamics from the perspective of a private software company.

• Multiples – With respect to valuation, most enterprise software M&A

databases and presentations we have come across generally indicate

a median revenue multiple of somewhere between 3X and 4X trailing

revenue. As noted later in this report, that is well below the median

multiple (more than 8X) for the deals listed in this report by the “high-

profile” companies. This is one of the reasons the companies

highlighted in this report are often viewed as the most desirable buyers.


General Highlights

Enormous Buying Power

Combined, the ten strategic buyers highlighted in this report (Oracle,

Microsoft, IBM, Salesforce, SAP, Cisco, HP Enterprise, VMware, Adobe, and

CA) have a market capitalization of over $1.3 trillion (and total cash and

equivalents of over $275 billion, as of their most recent earnings reports). As

such, these companies clearly have the ability to make many acquisitions.

Active Acquirers (Some More than Others)

Each highlighted enterprise software company has been acquisitive, but

some more so than others. This report lists more than 260 acquisitions made

by the ten highlighted companies since the beginning of 2013. While none

of these companies are as active as Google (which completed about 100

deals from 2013 through 2016), each has announced more than ten

acquisitions since the beginning of 2013. There is, however, a large spread.

Microsoft and IBM, for example, have each made 50 or more acquisitions;

Cisco, Oracle, and Salesforce have each completed between 25 and 40

transactions; and the others have acquired between 10 and 20 companies.

Source: Menalto Advisors. Based on announced date and deals listed in this report.

0

10

20

30

40

50

60

Number of Acquisitions (2013-Q1:17)

2013 2014 2015 2016 Q1:2017


SaaS/Cloud Software Makes Acquisitions Easier

A positive for enterprise software acquisitions has been the trend towards

cloud-based SaaS software models. One of the concerns that buyers

historically had with acquisitions is “version control.” That is, software

companies had many different versions of their software installed on a variety

of hardware around the world and supporting all the different versions

required substantial resources. However, with the SaaS model, companies

can ensure similar versions are used across customers. This makes

acquisitions easier to integrate and support.

Mostly Private Acquisitions

In our previous report, we noted that the highlighted companies (Apple,

Google, Facebook, Intel, Microsoft, Samsung, and Amazon) only rarely

acquired public companies (less than 2% of the deals since 2013). For the

companies highlighted in this report, the percentage isn’t quite that low.

Oracle in particular has acquired several public companies during the past

few years (e.g., NetSuite, Opower, Textura, Micros, Responsys, Acme

Packet). However, of the more than 260 acquisitions listed in this report

(from 2013 through Q1:17, and excluding PE acquisitions), less than 7%

were acquisitions of public companies. Thus, private companies represent

the vast majority of the targets for these buyers.

Public Company Premiums

The appendix includes a table showing the premiums for the acquisitions of

public companies listed in this report since 2013 (i.e., how much the buyer

paid relative to the market capitalization of the target just before the deal was

announced). According to the data in the appendix, the median premium

was 35%, with a range of 19% to 82% and an average of 41%.

Premium Buyers

One of the reasons the highlighted companies are viewed as desirable

acquirers by private technology companies is they are often willing to pay

relatively high valuations for companies that they believe have attractive

solutions and that they can leverage to further accelerate growth.


A good example of this is the marketing automation software sector in which

there have been several relatively high multiple deals over the past few years

by the companies/firms listed in this report. For example, in terms of revenue

multiples, Oracle acquired Responsys at close to 8X and Eloqua at nearly

10X; Salesforce bought ExactTarget at close to 8X; Adobe acquired Neolane

at more than 8.5X; and Vista Equity bought Marketo at about 8X. In contrast,

there have been many deals in the sector by other buyers at much lower

valuations (e.g., in several cases less than 2X revenue).

While obviously not always the case, the acquisitions by these larger

companies tend to be at the higher end of valuation multiples compared to

other software buyers. Of course, the larger buyers tend to focus on

acquiring the better companies, which explains part of the gap. In general,

however, most of the enterprise software start-ups we meet tend to view the

companies listed in this report (and our last report) as their most desirable

acquirers when they look for an exit.

Valuation Information (High Revenue Multiples)

The appendix contains a table listing the transactions and revenue multiples

for the acquisitions in this report in which both the deal consideration and the

target’s revenue are either publicly available or estimated by a third-party

source. We would not read too deeply into these numbers as they represent

only a small portion of the deals and it is biased towards the larger public

company acquisitions in which the deal value and revenue numbers are

publicly available. With that said, the median revenue multiple (generally

enterprise value to trailing revenues) for the deals in this report in which both

revenue and valuation are available or estimated is over 8X (with more than

a dozen deals above 20X and an average revenue multiple above 12X). This

is considerably higher than the median across the industry (typically 3X to

4X), further supporting the view that the highlighted companies are

“premium” buyers. Additional details can be found in the appendix and in

the deal summaries throughout the report.


Many International Deals

Of the more than 260 acquisitions listed in this report (by the ten highlighted

companies since the beginning of 2013), about 28% of the transactions were

for target companies (or business units) located outside the US. There is a

bit of subjectivity to this as some companies initially start in Europe or Israel,

for example, and then later move their headquarters to the US. In any case,

the following graph illustrates the location of the target companies. Note that

if the US were on the chart it would have about 190 deals. As shown, the

most common target countries include Israel, Germany, the United Kingdom,

Canada, and France.

Source: Menalto Advisors (based on the deals listed in this report since January, 2013 by

the ten highlighted companies).

The interest level in non-US acquisitions appears to significantly vary by

company. A substantial portion (30% or more) of the acquisitions by

Microsoft, IBM, Cisco, SAP, and CA Technologies have been non-US

targets. In contrast, very few of the acquisitions made by Oracle were of

non-US targets (less than 10%).

0

2

4

6

8

10

12

14

16

Acquisitions by Target's Location (2013 - Q1:17)


Building a Relationship Early Can Have M&A Benefits Later

As we noted in our previous report, one important point for private technology

companies is that a meaningful number of the acquired companies already

had some type of relationship with the acquirer (e.g., the buyer was a

business partner, an investor, etc.). As such, getting to know the potential

buyers ahead of an M&A process can help “de-risk” deals for the buyer and

enhance the value for the target’s shareholders.

Technology Theme Highlights

Some of the Most Commonly Acquired Technologies

The 260+ deals listed in this report cover a broad range of different types of

technologies. This section discusses some of the common technology

themes across the transactions.

Cloud Computing

Not surprisingly, one of the major trends

across the acquisitions listed in this report is

cloud computing. Cloud computing initially

received a lot of hype with not a lot

happening, and many of the traditional

enterprise software players were at first

reluctant to embrace it. For example, Oracle

Chairman Larry Ellison, usually a visionary

within the industry, was initially negative

about cloud computing (see quote).

However, during the past few years

enterprises have increasingly embraced the

cloud. As just one data point, Amazon’s AWS cloud computing business

generated $12.2 billion of revenue in 2016, up from $4.6 billion in 2014 and

relatively minimal levels just a few years earlier. As such, many of the major

software companies have indicated that they were late and have made a

substantial number of cloud-related acquisitions to bulk up in that area.

“I don’t understand what we

would do differently in light of

cloud computing other than

change the wording of some of

our ads. That’s my view.”

- Larry Ellison, 2008

“We’re in the middle of a

generational change — from

on-premise computing to super

data centers called clouds.”

- Larry Ellison, 2016


As the industry has rapidly shifted to cloud computing, many start-ups are

focused on providing cloud-based solutions, so a substantial portion of the

targets in this report are cloud-related companies. Just a few of the many

examples of cloud-focused acquisitions include:

• Oracle – Oracle acquired LogFire (cloud-based product inventory

management), Palerra (cloud-based security), NetSuite (broad cloud-

based ERP portfolio), Opower (cloud-based utility analytics), Revello

(tools for running workloads in the cloud), Textura (cloud services for

construction and engineering project management), Datalogix (cloud-

based target advertising), TOA (cloud-based field service

management), BlueKai (cloud-based consumer data aggregation

platform), BigMachines (cloud-based CPQ), Eloqua (marketing cloud

automation), and Taleo (cloud-based human capital management).

• Microsoft – Microsoft acquired LinkedIn (cloud-based professional

network platform), Talko (cloud-based VoIP conference calls),

Projectum Apps (two cloud-based apps for financials), Adallom (cloud

security solutions), InMage (cloud-based continuity solutions),

Parature (cloud-based customer engagement tools), MetricsHub

(active cloud monitoring solutions), and Pando Networks (cloud

distribution of software, games, and video).

• IBM – IBM acquired Bluewolf (cloud consulting and implementation

services), Optevia (cloud-based SaaS systems integration for public

sector organizations), UStream (cloud-based video streaming and

conferencing service), Clearleap (cloud-based video services),

Gravitant (cloud-based software that helps organizations “broker”

computing services and software), AppCore’s Cloud assets (cloud

automation assets), Blue Box (managed OpenStack-based private

cloud provider), Explorsys (cloud-based healthcare intelligence

solutions), Lighthouse (cloud security service provider), Silverpop

(cloud-based marketing automation), Cloudant (cloud-based

database-as-a-service), Xtify (cloud-based mobile messaging tools),

and SoftLayer (cloud computing infrastructure provider).


• Salesforce – As Salesforce is primarily a cloud-based solutions

provider most of its targets have been cloud-based software

companies. A few examples include: HeyWire (cloud-based mobile

messaging for enterprises), Quip (cloud-based word processing

solutions), Demandware (enterprise cloud commerce solutions),

Kerensen Consulting (cloud consulting firm, assists enterprises in

transitioning to the cloud), Cloudconnect (assists enterprises in

connecting their data to cloud services), and ExactTarget (cloud-based

marketing automation).

• SAP – SAP acquired Volume Integration (assists in developing

analytics cloud capabilities), Altiscale (cloud-based version of Hadoop

for storing, processing, and analyzing data), Mellmo (cloud-based

mobile business intelligence), Concur (cloud-based corporate travel

and expense management), OpTier (cloud-based application

performance monitoring), SeeWhy (cloud-based behavioral target

marketing solutions), Fieldglass (cloud-based vendor management),

Ariba (cloud-based Internet commerce), and SuccessFactors (cloud-

based employee management software).

• Cisco – Cisco acquired Cloudlock (cloud security using cloud security

broker technology), Synata (solution to search on-premise and cloud-

based applications simultaneously), CliQr (cloud orchestration

platform), Jasper (cloud-based IoT service platform), 1 Mainstream

(cloud-based video platform), MaintenanceNet (cloud-based analytics

for customer service contracts), Piston Cloud Computing

(orchestration of a private cloud environment on commodity servers),

Tropo (cloud-based APIs for embedding real-time communications in

apps), Metacloud (private clouds using an “OpenStack-as-a-Service”

model), and SolveDirect (cloud-based solutions for automating the

sharing of data and workflows with service partners).

• VMware – VMware acquired CloudVolumes (cloud-based application

delivery solutions), certain assets of Virtual Systems Solutions (cloud-

based migration assets), and Desktone (delivering Windows desktop-

as-a-service as a cloud service).


• HP Enterprise – HPE acquired Cloud Cruiser (track and control use

of public and private cloud computing) and Eucalyptus (open source

software for building enterprise clouds).

Artificial Intelligence (AI) / Machine Learning

Our initial Menalto Advisors Thought Report provided an overview of the

AI/Machine Learning sector. Our second report pointed out that a significant

number of acquisitions made by companies such as Google and Apple were

in the AI sector. Not surprisingly, a meaningful number of the targets in this

report are also AI-related companies. Some examples include:

• Oracle – Oracle acquired Crosswise (machine learning for mapping

multiple devices to users for cross-device advertising).

• Microsoft – Microsoft acquired Maluuba (AI for natural language

processing), Genee (AI to help schedule meetings), SwiftKey (AI for

improving touch screen typing), Aorato (machine learning for cyber

security), and Equivio (machine learning for eDiscovery and

governance).

• IBM – IBM acquired Fluid XPS (product recommendation platform

utilizing Watson), Iris Analytics (machine learning real-time analytics to

detect payment fraud), Alchemy API (cognitive computing APIs for

computer vision and text analysis), and Cognea (AI/cognitive

computing platform for virtual assistants). IBM also acquired several

companies (Merge Healthcare, Truven Health, Weather Company,

etc.) with the intent of using the data that these companies had to train

its Watson cognitive computing platform.

• Salesforce – Salesforce acquired Twin Prime (machine learning to

analyze network data and find performance issues with mobile apps),

Krux (AI for audience tracking/targeting), MetaMind (deep learning

technology including image recognition), PredictionIO (machine

learning software), and Tempo AI (AI for smart calendar apps).


• SAP – SAP acquired Hipmunk (travel assistance including an AI

personal travel assistant).

• Cisco – Cisco acquired Cognitive Security (AI for detecting cyber

threats through behavioral analysis).

• HP Enterprise – HPE acquired Niara (machine learning behavior

analytics for cybersecurity).

Cybersecurity

Given the growing number of IT security incidents, there have been a

meaningful number of cybersecurity acquisitions. Some examples include:

• Oracle – Oracle acquired Palerra (security for enterprise apps) and

Bitzer Mobile (authentication and data control for BYOD apps).

• Microsoft – Microsoft acquired Secure Islands (data security,

protection, and loss prevention), Adallom (software to find anomalies

that could represent security issues), and Aorato (machine learning to

detect suspicious activity and anomalies).

• IBM – IBM acquired Agile 3 (manages risks associated with sensitive

data protection), Resilient Systems (incident response platform for

cybersecurity incidents), Lighthouse Security (cloud security service

provider), CrossIdeas (manages user access to data and applications),

and Trusteer (cybersecurity and threat intelligence).

• Salesforce – Salesforce acquired Toopher (two-factor security

authentication solutions).

• Cisco – Cisco acquired CloudLock (cloud access security broker

technology), Lancope (network security including behavior analytics

and threat visibility), Portcullis (cybersecurity consulting firm),

OpenDNS (security-as-a-service using DNS servers), Neohapsis

(cybersecurity and risk management consulting), ThreatGrid

(sandboxing technology and malware analysis), Sourcefire (network

security and malware protection), and Cognitive Security (AI for

detecting cyber threats through behavioral analysis).


• VMware – WMware acquired Arkin Net (software defined data center

security operations solutions) and AirWatch (broad range of mobile

device management including security).

• HP Enterprise – HPE acquired Niara (machine learning behavior

analytics for cyber security), Voltage Security (data-centric encryption

for protecting payment data), and ArcSight (enterprise cybersecurity

and compliance software).

• CA Technologies – CA acquired Veracode (software securing web,

mobile, and third party applications), Mobile System 7 (manages

deployed systems and secure data with a focus on mobile), Xceedium

(privileged identity management solutions), and IdMlogic (intelligent

identity management applications).

Other Technology Themes

Some other common technology themes include:

• Marketing Automation/Optimization Software – Several of the

highlighted companies have acquired marketing automation software

businesses. For example, Oracle acquired Responsys (B2C

marketing automation software) and Eloqua (marketing automation

software); Adobe acquired Neolane (marketing automation focused on

cross-channel campaign management); IBM acquired Silverpop

(omnichannel marketing automation); and Salesforce acquired

ExactTarget (marketing automation platform).

Additionally, there have been a variety of other marketing-related

acquisitions. For example, Oracle also acquired Webtrends’ Infinity

solution (marketing analytics), Maxymiser (helps marketing

organizations customize and test websites for better sell-through),

BlueKai (data platform to personalize marketing campaigns), Datalogix

(helps digital marketers track the effectiveness of ads), and

Compendium (content marketing solutions). SAP acquired Abakus

(marketing attribution) and SeeWhy (behavioral target marketing

solutions). IBM acquired Xtify (mobile messaging marketing tools).


• Sales Optimization Software – A variety of targets had software to

help improve sales and the sales process. As a few examples,

Salesforce acquired RelateIQ (analyzes CRM and email data to make

recommendations to improve the sales process and enhance sales)

and Implisit (utilizes information stored in customer databases to help

salespeople make better decisions); Oracle acquired BigMachines

(configure, price, and quote software); and Salesforce acquired

Steelbrick (configure, price, and quote and subscription billing apps).

• Analytics – We previously noted a number of AI/machine learning

transactions. However, there have been a variety of acquisitions of

companies that provide analytics and business intelligence solutions

which don’t fit within the machine learning category. For example,

Microsoft acquired Metanautix (big data analytics across silos),

VoloMetrix (organizational analytics) and Capptain (analytics for app

developers); IBM acquired The Now Factory (analyzes network data to

provide insights to services providers) and Truven Health Analytics

(healthcare data, analytics, and intelligence); Salesforce bought

BeyondCore (enterprise data analytics), Coolan (analyzes data center

hardware to optimize operations), and EdgeSpring (enterprise

business intelligence); SAP acquired KXEN (data mining and

predictive analytics solutions); Cisco acquired MaintenanceNet (data

analytics to manage recurring customer contracts); HPE reportedly

acquired Rasa Networks (network performance and analytics); and

Adobe acquired ComScore’s Digital Analytix unit (enterprise analytics).

• E-commerce Solutions – There have been numerous acquisitions of

e-commerce software companies, although several occurred a few

years ago. For example, SAP acquired Hybris (enables businesses to

sell to customers across many channels) and Ariba (cloud-based

Internet commerce); Salesforce acquired Demandware (enterprise

cloud commerce solutions); Oracle acquired ATG (cross-channel e-

commerce software platform); and IBM acquired Sterling (e-commerce

fulfillment, order management, and B2B commerce).


With the large number of deals listed in this report, there are dozens of other

technology themes that could be mentioned, each with a few examples

listed. However, as the report describes all the transactions, the reader can

easily search through to find deals in any specific target application.

A Note on SaaS Companies

One of the curious questions we often receive as M&A advisors that have

done many deals in the software sector is “do we have experience selling

SaaS software companies?” The question is asked as if SaaS was a vertical

of the software market, such as cybersecurity software or telecom

infrastructure software. In reality, SaaS is essentially a business model,

rather than a technology, and is now commonplace across the entire industry

(it would be difficult to do software M&A without doing SaaS deals).

With SaaS, software is licensed on a subscription basis and is generally

centrally hosted (including maintaining the software), rather than selling the

software to customers upfront. Thus, customers receive the benefits of the

software without owning and maintaining it. In addition, the SaaS model is

generally more palatable for customers since they can pay relatively small

amounts on an ongoing basis (operating expenses) rather than having to pay

a large amount upfront (which is sometimes categorized as a capital expense

and often requires a more rigorous and lengthy approval process at most

companies). The SaaS model results in a mostly recurring and more

predictable revenue stream for SaaS software companies since most of the

revenue comes from existing subscriptions, rather than new customer wins

which can be lumpy. All things being equal, valuations for companies with a

SaaS model tend to be much higher since the buyer has greater assurance

that the existing revenues will continue.

Not surprisingly, most of the software start-ups we come across these days

are either already SaaS companies or transitioning to a SaaS model. We,

therefore, didn’t highlight “SaaS” as a theme as it would apply to a large

portion of the target companies listed in the report.


Some Comments on the Transaction Data

Broad Range of Sources

The M&A transactions listed in this report came from a variety of sources.

Some companies announce virtually all their M&A deals, while others report

only larger deals, and smaller deals are often later discovered by

newspapers and technology magazines. We tried to provide a

comprehensive list but obviously there may be some missing deals.

We included valuation data (price, revenue multiple) when available but in

many cases when the target is a private company that information is not

publicly disclosed. In some cases, the purchase price was not in the official

announcement but was later reported (or estimated) in newspapers or

magazines, in which case we generally provide the source. We also included

the target’s country if it was outside the United States. Only mergers and

acquisitions are included and not minority investments, divestitures, or joint

ventures. The report includes transactions announced through Q1:17 (March

31, 2017). Deals announced after that date are not included. The company

market capitalizations noted in this report are also as of the end of Q1:17.

Details on Each Transaction

While there are a variety of company M&A lists available, most provide only

a very brief description of the acquired targets (typically 2 or 3 words) which

doesn’t really explain what the acquired target did. So we tried to include at

least a couple of sentences describing each target’s solutions. For the date,

we generally included the announcement date rather than the closing date.

For private companies, these dates are usually close together but when the

target is a public company the closing is typically several months later.

We note that there are several deals listed in this report that the Menalto

Advisors’ bankers were involved with and, therefore, have all the financial

details. However, we included information only from public sources, even if

we have more accurate non-public data.


We Look Forward to Hearing from You

Comments Welcome

We hope you find this report useful. We plan to update it from time to time

to reflect new M&A deals and trends. If you have any comments, catch any

errors, or have recommendations for the next edition, please let us know!

Happy to Chat!

Of course, if you know any technology companies that may be considering

M&A now or in the future, please feel free to have them contact us! We look

forward to hearing from you!


“What is Oracle? A bunch of people. And all of our products

were just ideas in the heads of those people.”

- Larry Ellison, Oracle Founder and Chairman

Introduction

Oracle was founded in 1977 by Larry Ellison, Bob Miner, and Ed Oates,

although its original name was Software Development Laboratories. The

company later changed its name to Relational Software, and then to Oracle

in 1982. Oracle was an early leader in providing relational database

management systems (RDBMS) and an early provider of SQL RDBMS

solutions. By implementing its solutions in C, the company was able to

quickly port its software to many computing platforms and became the

RDBMS leader. Over the past couple of decades, Oracle has diversified into

a variety of other enterprise and application software markets. It also

provides some hardware products due to its acquisitions of companies such

as Sun Microsystems and Acme Packet.

For its Q3:F17 quarter (ended February 2017), Oracle reported revenue of

just over $9.2 billion. Its revenue breakout was: Cloud Software/Platform as

a Service – 11%, Cloud Infrastructure as a Service – 2%, New Software

Licenses – 15%, Software License Updates (and Support) – 52%, Hardware

Products – 6%, Hardware Support – 6%, and Services – 9%.

Oracle has been a fairly active acquirer during the past two decades. Its

expansion into applications has been driven by a variety of acquisitions such

as BEA Systems, Hyperion, Siebel Systems, and PeopleSoft. More recently

it acquired Micros Systems. A major recent focus for Oracle has been

transitioning to cloud-based solutions and, not surprisingly, many of its

acquisitions have been for cloud-related companies.

Chapter 1: Oracle


Although Oracle occasionally purchases early stage technology companies,

most of its acquisition targets have been either later stage private companies

with significant revenue or public companies. While Oracle has made a few

hardware acquisitions (Sun, Acme Packet, etc.), the vast majority of its

targets have been enterprise software companies. Most of its acquisitions

have been US-based companies.

Select Oracle Acquisitions

Acquisitions Since 2013

The following are acquisitions made by Oracle since the beginning of 2013:

• Webtrends’ Infinity Platform – In March 2017, Oracle announced

that it agreed to acquire Webtrends’ Infinity Platform solution. The

Infinity solution enables enterprises to view how customers interact

with their brand across any digital channel at any time. Oracle

indicated that it would add the Infinity analytics solution to its Oracle

Marketing Cloud. Webtrends was previously acquired by private equity

firm Francisco Partners. It is based in Portland, Oregon.

• Apiary – In January 2017, Oracle announced that it signed an

agreement to acquire Apiary. Apiary provided tools for creating APIs.

Its APIFlow solutions enable enterprises to design, manage, test, and

document APIs, and it supports OpenAPI standards. TechCrunch

indicated the company was founded in 2011 and had raised only about

$8.5 million. Flybridge and Credo were investors. The company was

founded in the Czech Republic but had a San Francisco headquarters.

• Dyn – In November 2016, Oracle announced an agreement to acquire

Dyn. Dyn is a major Domain Name System (DNS) vendor and assists

customers with optimizing Internet applications and cloud services.

Dyn indicates it had more than 3,500 enterprise customers (including

Netflix, Twitter, CNBC, and Pfizer). Its solution helps enable faster

access and shorter page load times. However, Dyn had been subject


to a major DDoS cyber-attack in October 2016 which caused Internet

issues across the Eastern U.S. for a short period of time. The price

was not announced but TechCrunch stated that one source indicates

it was more than $600 million and PitchBook estimates it was

approximately $650 million.

• Palerra – In September 2016, Oracle announced that it acquired

Palerra. Palerra was focused on cloud-based security for enterprise

apps. An enormous amount of data is transferred and exchanged by

apps and APIs across enterprises, and Palerra’s Cloud Access

Security Broker solution (LORIC) provides several layers of protection

for this type of data. Customers for its solution included Pitney Bowes

and VMware. The company’s co-founders both previously worked at

Oracle. Palerra was founded in 2013 (as Apprity) and its investors

included Norwest and August Capital.

• LogFire – In September 2016, Oracle announced that it acquired

LogFire, which provided cloud-based solutions to help customers

manage their product inventory. Oracle indicated that the team would

join Oracle’s supply chain management cloud division and that the

LogFire technology would complement Oracle’s Supply Chain

Management Cloud solution by providing cloud-based warehouse

management capabilities. LogFire indicated that it had over 40

customers including Ryder, Sears, and Glad and that its solution was

used in more than 250 stores. It was founded in 2007 and had been

based in Atlanta. PitchBook estimated the price was $36 million.

• NetSuite – In July 2016, Oracle announced that it entered into an

agreement to acquire NetSuite for $109/share in cash (about a 19%

premium to where the stock had previously traded), approximately $9.5

billion or slightly less than $9.4 billion net of cash and debt. NetSuite

was one of the first major cloud companies, providing business

applications over the Internet. NetSuite provided a variety of cloud-

based ERP (enterprise resource planning), financial, and commerce

software solutions. It indicated that it had more than 30,000 customers


in over 100 countries. Oracle noted the acquisition would help expand

its cloud strategy, especially in the small and medium business

segment where NetSuite had a lot of customers. Oracle used a tender

offer to complete the deal, but had to extend the offer deadline when it

initially didn’t receive enough shareholder acceptances. However, the

deal closed in November 2016. NetSuite had about $846 million of

trailing revenue (about an 11X multiple).

• Opower – In May 2016, Oracle announced that it entered into an

agreement to acquire Opower, a publicly traded company, for

approximately $532 million ($10.30/share) in cash, about a 30%

premium to where Opower had traded. Opower developed a variety of

cloud-based software analytics solutions for utilities for improving

energy efficiency and customer care. Its platform analyzes hundreds

of billions of meter readings from 60 utility customers (e.g., PG&E,

National Grid, Exelon, etc.) to help utilities improve efficiencies,

increase customer satisfaction, and meet regulatory requirements. Its

solution also enables utilities to provide end customers with

personalized energy usage information, as well as better billing data.

Opower had about $149 million of trailing revenue (deal was

approximately 3.6X revenue) but still had an operating loss. Its IPO

was in 2014 and it was founded in 2007.

• Textura – In April 2016, Textura announced that it was being acquired

by Oracle for approximately $663 million ($26/share) net of cash, about

a 31% premium to where Textura had traded prior to the

announcement. Textura developed cloud-based software solutions for

the construction industry. Textura indicated that its cloud services

processed over $3 billion in payments for over 6,000 construction

projects each month to help keep projects on time and reduce risk for

developers and contractors. Its solutions include various pre-

construction (estimating, invitation to bid, bid tracking) and construction

(invoicing, management, performance evaluation) applications.

Textura had about $92 million of trailing revenue (7.2X revenue

multiple) and had an operating loss, but was growing fast.


• Crosswise – In April 2016, Oracle announced the acquisition of

Crosswise. Crosswise developed solutions for mapping multiple

devices to individual users to improve cross device advertising. It

indicated that its probabilistic matching machine learning technology

provided advantages over historical deterministic device matching

technologies. The price was not announced but a number of reports

(e.g., TechTime) indicated that sources provided an approximate value

of $50 million. The 451Group estimates revenue was only $1.5 million

(33X multiple). Crosswise was based in Israel.

• Ravello Systems – In February 2016, Revello announced that it

entered into an agreement to be acquired by Oracle. Ravello

developed tools for helping run any type of workload in the cloud,

without time consuming application rewrites. Customers included Red

Hat, Brocade, and Symantec. Investors included Qualcomm, SanDisk.

Sequoia, Bessemer, Norwest, and Vintage Investment Partners. The

company was based in Silicon Valley and was founded in 2011. The

price was not announced but VentureBeat reported that sources

indicated it was approximately $500 million.

• AddThis – In January 2016, Oracle announced it signed an agreement

to acquire AddThis, which provided publisher personalization,

audience insight, and activation tools. Its solutions allow users to

share stories and it provides audience tracking technology. The

company indicated that it tracks activity for 1.9 billion monthly visitors.

The price was not announced but TechCrunch reported it was likely

between $100 and $200 million, and the 451Group estimates it was

$175 million with an 8.8X revenue multiple.

• StackEngine – In December 2015, StackEngine announced on its

website that it had been acquired by Oracle. StackEngine was focused

on Docker containerization. Docker is an open source standard for

wrapping software with a complete filesystem (tools, libraries, etc.) so

the software runs the same regardless of the environment.

StackEngine had developed administrative tools to help manage these

containers. The company was based in Austin.


• Maxymiser – In August 2015, Oracle announced it signed an

agreement to acquire Maxymiser, which had developed cloud-based

software which enables companies and marketing organizations to

personalize and test what a customer sees on a website or mobile app,

to increase sell-through. Maxymiser had many major customers

including Allianz, HSBC, Lufthansa, and Wyndham and indicated that

it helps optimize 20 billion customer experiences per month. The price

was not announced but the 451Group estimates that it was

approximately $170 million with a 4.3X revenue multiple.

• CloudMonkey (IP) – In June 2015, Oracle announced that it signed

an agreement to acquire the intellectual property of CloudMonkey,

including MonkeyTalk Community, Pro, and LabManager.

CloudMonkey created automated testing tools for mobile apps. It was

based in Boulder, Colorado.

• Datalogix – In December 2014, Oracle announced that it signed an

agreement to acquire Datalogix, which provides information on offline

consumer spending to help digital marketers track the effectiveness of

their ads. Oracle indicated that Datalogix aggregates and provides

insight on over $2 trillion in consumer spending across 110 million

households and that its 650 customers include 82 of the top 100 US

advertisers (Ford, Kraft, etc.). The price was not announced but the

Wall Street Journal reported that Oracle spent about $1.2 billion on the

deal and that the multiple was approximately 9.6X. Reports indicated

that other interested parties included Facebook, Adobe, and Nielsen.

• Front Porch – In September 2014, Oracle announced that it signed an

agreement to acquire Front Porch Digital. Front Porch provided

content storage management solutions that help enterprises manage

and monetize digital media content (e.g., movies, medical images,

security feeds, etc.). Its 550 customers included A&E Television, BBC,

Discovery, NASCAR, and the Library of Congress.


• TOA Technologies – In July 2014, Oracle announced it signed an

agreement to acquire TOA Technologies. TOA provided cloud-based

field service management solutions that help improve coordination and

customer service. The SaaS offering enables better coordination

among mobile employees, dispatchers, customers, and field service

management. It monitors real time customer requests and helps

schedule the right field service employees. Customers included DISH,

Home Depot, Ricoh, and Vodafone. It had about 500 employees, was

based near Cleveland, and was founded in 2003. The price was not

announced but the 451Group estimates that it was approximately $550

million with a revenue multiple of 12.2X.

• Micros Systems – In June 2014, Oracle announced it entered into an

agreement to acquire Micros Systems, a publicly traded company, for

approximately $5.3 billion ($68/share) or about $4.6 billion net of cash.

Micros provided a broad range of enterprise applications and services

for the hospitality and retail industries (e.g., hotels, casinos,

restaurants, cruises, etc.). Its applications included point of sales,

property management, loyalty programs, loss prevention, inventory

management, and analytics. It also provided tablet-based PoS

solutions. Micros was already an Oracle partner. Customers included

Marriott, Starbucks, Ikea, and Burger King. The valuation was about

3.5X revenue and 17X EBITDA. The company was founded in 1977

and was based in Maryland. The deal was only about a 3% premium

to where the stock had previously traded, but there had been reports

about a possible M&A deal during the weeks prior to the

announcement which resulted in a significant run up in the stock.

• LiveLook – In June 2014, Oracle announced an agreement to acquire

LiveLook, which provided a real-time collaboration tool for screen

sharing and co-browsing. The solution can enable sales agents and

customer service personnel to guide consumers through various

screens to resolve issues and improve service. Oracle indicated it

already had 100 customers using LiveLook. The company was based

in New Jersey and was founded in 2008.


• GreenBytes – In May 2014, Oracle announced it acquired

GreenBytes, which provided ZFS file system technology and had

expertise in deduplication, replication, and virtualization. ZFS was

originally developed by Sun, and Oracle indicated it would use the

GreenBytes technology in a line of storage appliances. The company

was based in Rhode Island.

• BlueKai – In February 2014, Oracle announced it signed an

agreement to acquire BlueKai. BlueKai developed a cloud-based big

data platform that allows enterprises to personalize marketing

campaigns with actionable data about targeted audiences. Its Data

Management Platform organizes customer data in the cloud to better

implement personalized marketing campaigns. It also had a large third

party data marketplace. The price was not announced but Business

Insider indicated sources estimated the deal was close to $400 million

and 451Group estimates it was $408 million with a 6.5X sales multiple.

• Corente – In January 2014, Oracle announced it agreed to acquire

Corente. Corente provided software defined networking (SDN)

solutions for wide area networks. Its WAN virtualization platform

allows customers to provision and manage global private networks

connecting to any site over any IP network, accelerating deployment

of cloud-based applications and services. The technology can be

used, for example, to quickly connect data centers. It was founded in

2007 and based in New Jersey.

• Responsys – In December 2013, Oracle announced it entered into an

agreement to acquire Responsys for $27/share or approximately $1.6

billion (or $1.5 billion net of cash). This was a 38% premium to where

the stock had previously traded. Responsys was a supplier of cloud-

based B2C marketing automation software. Its software helps

orchestrate marketing interactions across email, mobile, web, and

social channels. Oracle indicated that it planned to bring Responsys,

along with Eloqua, into the Oracle Cloud. Responsys had slightly

under $200 million of trailing revenue (7.7X revenue multiple).


• Nirvanix (select assets) – In December 2013, Oracle announced that

it had acquired select IP assets and engineering resources from

Nirvanix. Nirvanix was a cloud storage services provider based in San

Diego. It offered public, hybrid, and private cloud storage services.

The company had filed for Chapter 11 bankruptcy in October 2013.

• Bitzer Mobile – In November 2013, Oracle announced the acquisition

of Bitzer Mobile, a provider of mobile applications management

solutions. Its solutions address the security issues related to

employees using their own mobile devices to access corporate data.

The Bitzer Mobile software includes authentication and data control,

and it works across most major smartphones.

• BigMachines – In October 2013, Oracle announced it entered into an

agreement to buy BigMachines. BigMachines provided a variety of

cloud-based Configure, Price, and Quote (CPQ) software solutions. Its

products help automate the sales process by providing dynamic

pricing, workflow approval, upsell recommendations, and other tools to

improve sell-through. The software worked on a variety of platforms

but its Express solution was specifically built on Salesforce’s software

cloud. Its customers included GE, HP, and Symantec. The price was

not announced but Business Insider reported that its sources had

indicated a valuation around $400-500 million or about 5X revenue and

the 451Group indicated the deal value was approximately $450 million

with a 7.5X revenue multiple (approximately $60 million of revenue).

The company was founded in 2000 and based in Illinois, and had

previously been acquired by Vista Equity Partners.

• Compendium – In October 2013, Oracle announced that it had

acquired Compendium, a provider of cloud-based content marketing

solutions which helps enterprises produce and deliver content across

multiple channels. Its solution aligns content with customer profiles to

more effectively engage buyers and drive sales. Oracle indicated that

it would complement its Eloqua Marketing Cloud. Its customers

included Trane and Cvent. It was based in Indianapolis. The

451Group estimated the price was $15 million, with a 7.5X multiple.


• Tekelec – In March 2013, Oracle announced it entered into an

agreement to acquire Tekelec, a major supplier of network signaling

(Diameter, SS7), policy control, and data management solutions for

communications networks. Tekelec’s solutions allow service providers

to better control and monetize their networks. It indicated that its

solutions were used by more than 300 service providers across the

world. Tekelec was founded as an aviation electronics company in the

early 1960s in Europe but later incorporated in the US and focused on

telecommunications, and had been owned by Siris Capital prior to the

Oracle acquisition. Tekelec also had a large portfolio of

communications related patents.

• Nimbula – In March 2013, Oracle announced it agreed to acquire

Nimbula, which provided private cloud management software. The

company’s Director software enabled users (generally enterprises and

service providers) to quickly implement private, public, and hybrid

clouds. Investors included Accel and Sequoia. It had been founded

in 2009 and was based in Silicon Valley.

• Acme Packet – In February 2013, Oracle announced it entered into

an agreement to acquire Acme Packet for $29.25/share which was

more than $2 billion, or approximately $1.7 billion net of Acme’s cash.

This represented about a 22% premium to where the stock had traded

before the deal was announced. Acme was a major supplier of

networking hardware and software solutions, including session border

controllers and multiservice security gateways. Its Session Border

Controllers help deliver voice and video over IP network borders. Its

multiservice gateways help deliver voice and data services over

Internet and WiFi networks. It also had a variety of software solutions

(Net-Net OS). Acme had nearly 2,000 customers around the world.

The valuation was approximately 6X trailing revenue.


Select Earlier Acquisitions

The following are a few larger deals that Oracle announced prior to 2013:

• Eloqua – In December 2012, Oracle announced it entered into an

agreement to acquire Eloqua for about $871 million, net of cash

($22.50/share, about a 31% premium to where the stock traded).

Eloqua was a major supplier of marketing automation software. Its

solutions help companies analyze website and social media

interactions, and improve marketing to enhance sales, including

measuring the effectiveness of email campaigns. Customers included

Adobe, VMware, and American Express. The deal was about 9.7X

trailing revenue and Eloqua was not yet profitable. The company had

been based in Virginia and had its IPO just a few months earlier.

• RightNow Technologies – In October 2011, Oracle announced it

entered into an agreement to acquire RightNow Technologies for

approximately $1.5 billion, net of cash and debt ($43/share, about a

20% premium to where the stock had traded). RightNow had a cloud-

based customer service solution that helps enterprises provide

improved customer experiences through call centers, websites, and

social networks. The deal was done at approximately 9X revenue.

• Endeca – In October 2011, Oracle announced it entered into an

agreement to acquire Endeca Technologies. Endeca’s solution

(including its MDEX engine) helps companies analyze unstructured

data to obtain better business insights. Its InFront application is a

management platform that enables businesses to provide highly

targeted web commerce solutions, and its Latitude solution enables

businesses to more quickly develop analytic applications. The

company was based in Cambridge, MA. The price was not announced

but the Boston Business Journal reported that the deal consideration

was nearly $1.1 billion.


• ATG (Art Technology Group) – In November 2010, Oracle

announced that it agreed to acquire Art Technology Group for

approximately $1 billion ($6/share, about a 46% premium to where the

stock had traded). ATG provided a cross-channel eCommerce

software platform and on demand commerce optimization applications.

Its software allows enterprises to provide content personalization,

automated recommendations, and live help services. It had more than

1,000 customers. Revenue for the trailing four quarters was about

$194 million (making the deal about 5.1X revenue). ATG had a variety

of customers including Dell, Best Buy, OfficeMax, and T-Mobile. It

went public in 1999.

• Sun Microsystems – In April 2009, Oracle announced that it entered

into an agreement to acquire Sun Microsystems for approximately $5.6

billion net of cash and debt ($9.50 share, a 42% premium to where the

stock had traded). There had been reported stories that Sun might be

acquired by IBM during the months that preceded the Oracle

announcement. Sun was a major supplier of computer servers and

workstations. In addition, it had developed a variety of software

platforms including the Java programming language, Solaris Unix, and

the Network File System. Sun had approximately $12 billion of

revenue in 2008 but only about $9 billion in 2009. The transaction

closed at the beginning of 2010.

Some large acquisitions that Oracle completed prior to 2009 include: BEA

Systems (2008, application and middleware software, $8.5 billion),

Hyperion (2007, performance management software, $3.3 billion), Siebel

Systems (2006, CRM applications, $5.9 billion), and PeopleSoft (2005,

HR/financial/supply chain/CRM software, $10.3 billion).


“We always overestimate the change that will occur in the next

two years and underestimate the change that will occur in the

next ten. Don't let yourself be lulled into inaction.”

- Bill Gates, Founder and former Microsoft CEO

Introduction

Microsoft was founded in 1975 by Bill Gates and Paul Allen. The company

initially focused on computer language (BASIC) interpreter software. Its big

break came when IBM decided it didn’t have the time to develop its own

operating system for its upcoming personal computer product (the original

IBM PC). IBM had initially tried to license software from a company named

Digital Research, but a deal couldn’t be reached (there are a variety of

folklore stories about why this was the case, including the Digital Research

CEO flying his plane around or going on vacation instead of meeting with

IBM). As a result, Microsoft proposed that it supply the operating system to

IBM, although Microsoft didn’t actually have an operating system. When IBM

expressed interest, Microsoft quickly licensed an operating system from a

company named Seattle Computer Products, and after some modifications

it became DOS. DOS became the standard operating system not just for

IBM’s personal computers but for most of the industry for many years, and

established Microsoft as the leader in PC operating systems and software.

To IBM’s chagrin, PCs were largely commoditized and most of the profits

from personal computers went to the operating system supplier (Microsoft)

and microprocessor provider (Intel) that IBM had selected.

Microsoft remains the dominant supplier of PC operating systems but has

diversified into a variety of other markets including applications (Office),

enterprise software, cloud-based services, gaming (X-box), accessories, and

search (Bing). More recently, it began selling its own computer solutions.

Chapter 2: Microsoft


In the December 2016 quarter (Q2:F2017), Microsoft had revenue of $24.1

billion on a GAAP basis and $26.1 billion on an adjusted basis (including

Windows 10 deferral revenue). Its revenue breakout using GAAP revenue

was: Productivity and Business Processes (Office, Dynamics) – 30.6% of

revenue, Intelligent Cloud (enterprise software and services, Azure) –

28.5%, More Personal Computing (Windows, gaming, Bing, other hardware)

– 49.1%, and Corporate – negative 8.2%. Microsoft also breaks out overall

revenue based on products (nearly 69%) and services/other (about 31%).

Microsoft has been an active buyer over time having made several major

acquisitions (Skype, Nokia’s handset unit, aQuantive, Yammer) as well as a

variety of smaller deals. It recently made its largest acquisition when it

acquired LinkedIn last year for $26.2 billion.

Select Microsoft Acquisitions


The following is a list of Microsoft acquisitions since the beginning of 2013:

• Agile “Wiki” Extension – In February 2017, Microsoft announced that

it had acquired the Marketplace extension “Wiki” from Agile

Extensions. The extension is now published in Microsoft’s Visual

Studio Marketplace. The extension allows developers to add wikis to

projects. Microsoft indicated the deal would allow it to offer a built-in

Wiki experience for Team Services instead of requiring people to install

an extension from the Marketplace.

• Simplygon – In January 2017, Simplygon announced that it was

acquired by Microsoft. Simplygon developed 3D data optimization

solutions. Microsoft indicated that Simplygon was a leader in 3D game

optimization and that its tools help users of 3D data across industries

optimize content pipelines and streamline workflows. Simplygon was

developed by Donya Labs, a privately held company based in Sweden.


• Maluuba – In January 2017, IBM announced that it agreed to acquire

Maluuba, an artificial intelligence technology company. Maluuba had

a deep learning research lab for natural language understanding and

a focus on applications such as understanding text and spoken

language, as well as general reasoning. Investors included Emerillion

Capital, Samsung Ventures, and Nautilus Ventures. It was based in

Montreal and founded in 2010.

• Genee – In August 2016, Microsoft announced on its blog that it had

reached an agreement to acquire Genee, which uses AI for helping to

schedule meetings. A user can, for example, copy “Genee” on an

email about scheduling a meeting with others and, using natural

language processing and AI algorithms, Genee will analyze the email

and provide potential meeting times and then later send out a calendar

invitation as if it were a human administrative assistant. The product

had been in beta testing. Genee indicated that it would shut its service

down to work on Microsoft projects including developing new Office

365 productivity capabilities and services. The company was founded

in 2014 and based in Silicon Valley.

• Beam – In August 2016, Microsoft announced that it signed an

agreement to acquire Beam Interactive. Beam’s interactive

livestreaming service gives viewers the ability to watch and play along

with their favorite “game streamers” in real-time. With Beam, players

can help direct the actions of the person streaming (e.g., selecting the

weapons they take into battle). Microsoft indicated it would bring the

technology into its Xbox family, enabling greater interactivity. The

company was based in Seattle.

• LinkedIn – In June 2016, Microsoft announced that it signed an

agreement to acquire LinkedIn for approximately $26.2 billion

($196/share, just under a 50% premium to where it had traded) in cash.

LinkedIn is the largest professional networking and social media

solution with (at the time of the announcement) over 433 million users

and about 105 million unique visitors per month. It more recently also


focused on recruiting and had more than 7 million job listings, up over

100% from the previous year. The acquisition closed in December

2016. This was Microsoft’s largest acquisition. LinkedIn had about

$3.2 billion of trailing revenue, resulting in a multiple of about 8.2X.

Reports by CNBC indicated that Salesforce also had serious interest

but that LinkedIn decided to go with Microsoft because it offered an all-

cash deal.

• Wand Labs – In June 2016, Microsoft announced on its blog that it

had acquired Wand Labs. Wand was a messaging app developer that

incorporated natural language processing. Microsoft indicated the

acquisition was part of its conversational intelligence focus and that the

team would work within the Bing platform team to develop intelligent

agents and chat bots. Wand had reportedly raised less than $3 million.

• Code Connect – In June 2016, Code Connect announced that it was

joining Microsoft. The company built tools to improve developer

productivity. The Code Connect software helps programmers better

understand software (e.g., visualize code in the order it is executed,

navigate callstacks). Its Source Browser solution transforms a C#

GitHub repository into a set of static HTML files, and its Alive solution

helps developers better understand what their code does.

• Solair – In May 2016, Microsoft announced that it acquired Solair.

Solair provides Internet of Things (IoT) services solutions to customers

across several industries, including manufacturing, retail, food &

beverage, and transportation. For example, its solutions were used by

the Rancilio Group’s expresso machines, allowing the company to

remotely monitor the machines. Its technology is also used by several

factories in Japan. Solair was already using Microsoft’s Azure cloud

platform and was based in Italy. It was founded in 2011.


• Xamarin – In February 2016, Microsoft announced that it signed an

agreement to acquire Xamarin, which created a platform for mobile app

development. Its solution (in conjunction with Microsoft’s Visual

Studio) enables programmers to create mobile apps using C# for all

major smartphone/tablet operating systems (iOS, Windows, Android).

Xamarin had about 15,000 customers and already had a partnership

with Microsoft. The price was not disclosed but the Wall Street Journal

reported that sources indicated it was between $400 and $500 million.

The 451Group estimated the deal size at $400 million and the revenue

multiple at 10.7X. Xamarin had raised at least $82 million. Investors

included Lead Edge Capital, Charles River, Floodgate, and Ignition.

The company was based in San Francisco.

• Groove App – In February 2016, Microsoft confirmed that it acquired

the Groove app from privately-held Zikera, although it is believed that

the acquisition may have occurred in 2015 when the name of the Xbox

Music app was changed to Groove. The Groove app analyzes users’

listening habits and then creates playlists based on individual tastes.

However, it appears from reports that Microsoft acquired only the

Groove app and not the entire company (Montreal-based Zikera). Note

that this Groove is unrelated to Groove Networks, another company

that Microsoft acquired more than 10 years ago.

• TouchType – In February 2016, Microsoft indicated in a blog post that

it was buying TouchType Ltd which had created the SwiftKey

developer kit for mobile device screen keyboards. The software uses

artificial intelligence to predict and correct keystrokes to make it easier

for users to type. Microsoft indicated that SwiftKey is used on more

than 300 million iOS and Android devices. The Financial Times

reported that Microsoft paid approximately $250 million and that the

company had more than 150 employees. Investors included Accel,

Index, and Octopus. The company was based in London.


• MinecraftEdu – In January 2016, Microsoft indicated that it was

acquiring MinecraftEdu from Teacher Gaming. MinecraftEdu provides

a version of Minecraft that is specifically targeted for education and

was used in over 7,000 classrooms. As noted later, Microsoft

previously acquired Mojang, the company that made Minecraft itself.

Microsoft also announced that it would release an expanded version of

Minecraft called Minecraft: Education Edition.

• Event Zero UC Commander Suite – In January 2016, Microsoft

announced on its blog that it acquired technology assets underlying

the UC Commander product suite from Event Zero, which provides

management and reporting software for Skype for Business Online.

Microsoft indicated that the deal will help improve the Skype for

Business management tools. Event Zero is based in Australia.

• Talko – In December 2015, Microsoft announced that it acquired

Talko, which developed a mobile app for business communications

and that Talko employees would join Microsoft’s Skype team. Talko

provided cloud-based VoIP conference calls and other related

services. The founder of Talko had been Microsoft’s Chief Software

Architect at one point and was part of Groove Networks, another

company Microsoft acquired.

• Metanautix – In December 2015, Microsoft announced it acquired

Metanautix, a “big data” analytics company focused on bringing

together data from all the various silos within an organization. Its

solution works across a variety of data warehouses (SQL, NoSQL,

Oracle, Salesforce, etc.). Microsoft noted that Shutterfly was a

customer. Sequoia had been an investor and reportedly about $7

million had been raised by the company.


• Secure Islands – In November 2015, Microsoft announced in its blog

that it signed an agreement to acquire Secure Islands, an Israeli-based

data security company. Its focus was on providing data classification,

protection, and loss prevention technologies for a broad range of

different file types. Its customers included Vodafone, Osram, UBS,

and Credit Suisse. Microsoft indicated it would integrate the

technology into its Azure Rights Management Service. The price

wasn’t announced but TechCrunch indicated that reports provide a

range of between $77 and $150 million. The 451Group estimated the

price at $85 million and the revenue multiple at 10.6X.

• Mobile Data Labs – In November 2015, Microsoft announced that it

acquired Mobile Data Labs, which had created the MileIQ app. The

app utilizes mobile device sensors to track and log business miles for

travel reimbursement and tax deductions. Microsoft indicated the

company had over a million users. TechCrunch reported the company

had raised about $15 million and investors included Trinity, Marc

Benioff (Salesforce founder), Charles River, and SV Angel.

• Havok – In October 2015, Microsoft announced that it acquired Havok

from Intel. Havok is a major provider of 3D physics software for

graphics applications (physics refers to the portion of graphics

processing that determines where objects should be and move to

based on game play and object collisions, after which the objects are

drawn and rendered by the graphics processor). Havok’s technology

is used in more than 600 games and by many major game software

companies. Prior to the Intel acquisition, Havok was the “doing

business as” name of Telekinesys Research in Dublin, Ireland.

• Adxstudio – In September 2015, Microsoft announced an agreement

to acquire Adxstudio, which provided Web portals, online engagement

solutions, and application lifecycle management solutions for Microsoft

Dynamics CRM. The company had already been a Microsoft partner

and helped extend Dynamics to the Web. It was founded in 1998 and

had offices in Canada and Redmond, WA.


• Double Labs – In September 2015, VentureBeat reported that

Microsoft acquired Double Labs, which had developed a lock-screen

app (Echo Notification Lockscreen) for Android. The app had received

several million downloads. The price was not announced but it was

reportedly a small deal.

• Projectum Apps – In September 2015, Denmark-based Projectum

indicated that Microsoft acquired two of its cloud-based apps.

Specifically, Microsoft acquired Projectum’s Project Financials add-in

and Project Snapshot add-in. They were developed for Project Online

in Office 365 and provide users with overviews of forecasts, budgets,

costs, and other critical data.

• VoloMetrix – In September 2015, Microsoft announced that it entered

into an agreement to acquire VoloMetrix, which was focused on

organizational analytics. Specifically, the software gathers data from

a variety of data sources within a company’s communications systems

and uses it to help analyze performance. Microsoft had been

developing its own solution (Delve) for organization analytics and

indicated it would integrate the VoloMetrix technology into Delve.

VoloMetrix had reportedly raised approximately $17 million. The

consideration was not announced but PitchBook indicated that the

price was approximately $125 million.

• Sensei Project’s Apps – In September 2015, Sensei Project

Solutions announced that Microsoft acquired the rights to its app

catalog for portfolio reporting, dashboards, and time tracking. Sensei

had already been a Microsoft partner. The acquired apps included the

Sensei Task Master app for smartphones, the Sensei Project

Dashboard app for iPad, and the Sensei Portfolio Dashboard app for

iPad and add-in for Project Online.


• Adallom – In September 2015, Microsoft announced it had acquired

Adallom, a cloud security solutions company. Adallom’s solution can

monitor cloud-based offerings such as Salesforce, Box, Dropbox,

Amazon Web Services, and others and tries to find anomalies that

could represent security issues. The price was not announced but

TechCrunch reported that according to sources familiar with the deal it

was close to $250 million. The company had reportedly raised just

under $50 million.

• Incent Games – In August 2015, Microsoft announced it had acquired

Incent Games, which developed the FantasySalesTeam platform to

help companies increase sales productivity. The platform uses team-

based competition (e.g., sales people are “drafted” onto teams as with

fantasy sports) in a gaming type environment to encourage

cooperation and collaboration and to achieve sales targets. Microsoft

indicated that initial customers saw rapid growth in sales after using

the platform. Customers included HP, Siemens, Comcast, and many

others. The company had reportedly raised less than $1.5 million.

• FieldOne Systems – In July 2015, Microsoft announced that it

reached an agreement to acquire FieldOne Systems LLC. FieldOne

provided field service management solutions that enable users to

better provide services to their customers. The solution provides a

broad range of field service related functions such as work order

management, scheduling, and mobile collaboration. The price was not

announced but was reportedly $39 million according to an article in the

VAR Guy. The company was based in New Jersey.

• BlueStripe Software – In June 2015. Microsoft announced the

acquisition of BlueStripe Software, which sold application

management solutions. Its products help monitor and troubleshoot

applications across a variety of heterogeneous operating systems and

cloud environments. According to Crunchbase, it had raised $13.5

million and investors included Trinity and Valhalla.


• 6Wunderkinder – In June 2015, Microsoft announced it had acquired

6Wunderkinder, which created the app Wunderlist. Wunderlist is a “to-

do list” app that had over 13 million customers at the time of the

acquisition. The acquisition price wasn’t disclosed but The Verge

indicated that it was possibly between $100 and $200 million. It had

been based in Germany.

• N-trig – In May 2015, Microsoft confirmed the acquisition of N-trig’s

pen technology, although it may have occurred a few months earlier.

N-trig was an Israeli company that developed the digital stylus

technology which was used in the Surface 3 and Surface Pro 3 tablets.

Microsoft had advertised some of the features of the stylus in ads for

those products. Some initial reports indicated the price was as high as

$200 million, but the Wall Street Journal later indicated it was about

$30 million. C|net reported that N-trig’s revenue was about $20.6

million in the first half of 2014 with a loss of about $5 million. Some

reports indicated that Microsoft acquired the whole company while

others stated it had acquired only the stylus pen technology.

• Datazen Software – In April 2015, Microsoft announced it acquired

Datazen Software. Datazen provided mobile business intelligence and

data visualization solutions for mobile platforms (iOS, Android,

Windows). The solution was optimized for SQL Server Analysis

Services and interactive data visualization.

• Fusion Software’s Mojo Surveys Solution – In March 2015, Fusion

Software indicated that it had sold assets and IP to Microsoft including

its Mojo Surveys solutions. The Mojo Surveys product was a customer

feedback solution developed specifically for Microsoft Dynamics. It

enabled building questionnaire forms inside Dynamics CRM and

automated the data-collection processes.


• LiveLoop – In March 2015, the Wall Street Journal reported that

Microsoft acquired LiveLoop, which developed a service that allows

users to collaborate on PowerPoint presentation documents.

However, after the acquisition, LiveLoop indicated that it would shut

down its existing business after a month, and that the team would help

Microsoft develop collaboration tools across Office products. Investors

included NEA and Webb Investment Network.

• Sunrise Atelier – In February 2015, Microsoft announced it acquired

Sunrise, which sold a calendar app for iOS and Android systems. The

app connects a user’s calendar with a variety of services and

automatically pulls in different types of data, and provided cross-

device/cross-platform access. Microsoft indicated that it had already

been downloaded by millions of users. The price was not disclosed

but TechCrunch reported that sources indicated it was over $100

million. The company was founded in 2012 and had raised only about

$8 million.

• Revolution Analytics – In January 2015, Microsoft announced it

agreed to acquire Revolution. Revolution was a leading supplier of

open source software and services for the programming language R,

which is very popular for statistical analysis and for use with big data.

One of its original investors was Intel. Reportedly, it had raised about

$38 million. According to 451Group, the deal size was $115 million

and the revenue multiple was 28.8X.

• Equivio – In January 2015, Microsoft announced it acquired Equivio,

which developed machine learning solutions for eDiscovery and

governance applications. The solution enables enterprises to sift

through large unstructured sets of data and determine what is relevant

from a compliance or legal perspective. It allows users to sort through

documents using text-analytics to determine which documents they

need. The price was not disclosed but TechCrunch reported that some

sources indicated it was about $200 million.


• HockeyApp – In December 2014, Microsoft announced the acquisition

of HockeyApp (a/k/a Bit Stadium), a Germany based provider of mobile

development services that help developers create and test mobile

applications. Its solution provided crash analytics and app distribution

for iOS, Android, and Windows phone apps.

• Acompli – In December 2014, Microsoft confirmed that it had acquired

Acompli. The price was not announced but ReCode reported that

sources indicated it was approximately $200 million. Acompli

developed a mobile email application. The tool targeted professionals

who needed better email, calendar, and file sharing features on mobile

devices. Redpoint was an investor.

• Aorato – In November 2014, Microsoft announced it acquired Aorato,

which developed enterprise security solutions. Aorato uses machine

learning to detect suspicious activity on a network and can find

anomalies and take actions to protect the system. The price was not

disclosed but there were reports that it was just under $200 million and

that the company had only minimal revenue ($400K per the

451Group). Aorato had raised $11 million from investors that included

Accel, Innovation Endeavors, and Gilot Capital. It was founded in 2011

and based in Israel.

• Mojang – In September 2014, Microsoft announced that it would

acquire Mojang AB for approximately $2.5 billion. Mojang was

primarily known for its Minecraft videogame. Minecraft enables users

to use basic building blocks to create a broad range of buildings and

entire cities. Minecraft had sold more than 50 million copies.

Reportedly, the catalyst for the deal was the creator of Minecraft was

growing tired of dealing with negative comments from the user

community and put out a tweet “Anyone want to buy my share of

Mojang so I can move on with my life?” Soon after, a Microsoft

executive reached out to him. The company was based in Sweden.


• Inception Mobile – Several articles (e.g., OS News) in 2015 stated

that Microsoft acquired Inception Mobile, although the reports also

indicated the deal likely occurred in mid-2014. Inception Mobile

developed solutions to enable porting of apps to different platforms

with a focus on porting from iOS to other platforms.

• InMage – In July 2014, Microsoft announced that it acquired InMage

Systems, which was focused on Cloud-based continuity solutions. Its

solutions help ensure data is backed up and replicated and can be

quickly recovered if there is some type of disaster. Its technology was

used by companies such as HP and SunGard for their disaster

recovery as a service businesses. The company reportedly had raised

about $36 million from several investors including Intel.

• SyntaxTree – In July 2014, Microsoft announced it was acquiring

SyntaxTree, which had created the UnityVS plugin for Microsoft’s

Visual Studio. Unity is a popular game engine and development tool

for game developers. UnityVS enables Unity developers to use Visual

Studio to create and debug code for Unity applications. The company

was based in France.

• Capptain – In May 2014, Microsoft indicated it had acquired Capptain,

a start-up that provides analytics for app developers. Its solution can

send push notifications based on usage patterns. Microsoft noted it

would integrate the technology with Azure’s suite of services. Capptain

(formerly known as Ubikod) had been based in France and had

reportedly raised only $2 million.

• GreenButton – In May 2014, Microsoft announced the acquisition of

GreenButton. Its solution enables customers to manage compute-

intensive workloads in the cloud. Applications can be cloud-enabled

without recoding software. The company was originally based in New

Zealand and already had a close relationship with Microsoft.


• Junction’s JunctionMCR Suite – In March 2014, Microsoft acquired

the JunctionMCR software from Junction Solutions. JunctionMCR is a

suite of multichannel software solutions for the Microsoft Dynamics AX

platform. It provides retailers with visibility across channels (stores,

websites, catalogs, etc.) and assists with managing pricing, inventory,

delivery, and promotions.

• Gears of War Franchise – In January 2014, Microsoft announced that

it acquired the Gears of War franchise (including the rights to existing

and future games) from Epic Games. At the time of the announcement,

it was noted that over 22 million Gears of War games had been sold

for over $1 billion.

• Parature – In January 2014, Microsoft announced that it reached an

agreement to acquire Parature, a supplier of cloud-based customer

engagement tools. Its solutions enable organizations to utilize a

knowledge base available through self-service portals on the Web and

Facebook. It had 70 million users and its customers included IBM,

Ask.com, the US EPA, and others. The price was not announced but

TechCrunch reported that according to sources it was about $100

million. The 451Group estimated the revenue multiple at about 6.7X.

• Apiphany – In October 2013, Microsoft announced that it acquired

Apiphany, an API management delivery platform. Its solutions

provided a portal for companies to manage their APIs. The company

was based in Washington DC.

• HLW Software – In October 2013, Microsoft released a statement that

it acquired specific IP assets from HLW Software Development GmbH.

• Nokia Mobile Phone Unit – In September 2013, Microsoft announced

that it was acquiring Nokia’s handset business for 5.44 billion euros

($7.2 billion at the time) in an all-cash deal. Approximately $5 billion

was for the phone business itself and another $2.2 billion was for

licensing relevant patents. Nokia had been the clear leader in mobile


handset sales for many years but lost significant share when the

industry shifted to smartphones. Nokia had begun using Microsoft

Windows in its phones to try to win back share. Nokia had about $19.7

billion of revenue in 2012 (less than 0.4X multiple using the $7.2 billion

deal value). The acquisition closed in August 2014.

• Blue Horseshoe’s WAX/TRAX Solutions – In July 2013, Blue

Horseshoe announced a collaboration agreement with Microsoft that

included the divestiture of its Warehousing for AX (WAX) and

Transportation for AX (TRAX) solutions to Microsoft. It indicated that

the technology would will help Microsoft accelerate its Microsoft

Dynamics AX supply chain management roadmap. The solutions help

streamline distribution and warehouse operations.

• InRelease Unit – In June 2013, Microsoft announced an agreement to

acquire the InRelease business unit from Quebec-based InCycle

Software. The acquired business provides release management

software on the .NET platform. It was designed to build upon the

features in Microsoft Visual Studio.

• NetBreeze – In March 2013, Microsoft announced that it acquired

NetBreeze, which developed social monitoring and language analytics

tools. Its solution combines natural language processing and data

mining and text analysis.

• MetricsHub – In March 2013, Microsoft announced that it acquired

MetricsHub. The company developed active cloud monitoring

solutions to help customers more efficiently manage their cloud

services at reduced cost. Microsoft noted that it would provide the

solution for free to Azure customers.

• Pando Networks – In March 2013, Microsoft announced the

acquisition of Pando Networks. Pando was a peer-to-peer distribution

company focused on cloud distribution of software, games, and video.

Its biggest market segment was the gaming industry. Pando was

based in New York. Calcalist indicated the price was about $11 million.


• Id8 Group R2 Studios – In January 2013, the Wall Street Journal

reported that Microsoft acquired Id8 Group R2 Studios. The company

had developed technology for distributing and displaying digital media

on TVs. The technology was reportedly going to be used within

Microsoft’s Xbox business unit.


A few major acquisitions made by Microsoft prior to 2013 include:

• Yammer – Social networking company for $1.2 billion in 2012.

• Skype – Major VoIP communications company for $8.5 billion in 2011.

• Greenfield Online – Shopping and price comparison site for $486

million in 2008.

• Fast Search and Transfer – Enterprise search technology for $1.2

billion in 2008.

• Danger – Mobile Internet solutions for $500 million in 2008.

• aQuantive – Digital marketing firm for $6.3 billion in 2007.

• Navision – A Denmark-based software programming company for

$1.45 billion in 2002.

• Great Plains Software – A mid-market business software company

(accounting and ERP) for approximately $1.1 billion in stock in late

2000 (closed in 2001). The solution is now called Dynamics GP.

• Visio – A business graphics software technology company (enables

creation of flowcharts, process charts, timelines, and other business

charts) for approximately $1.4 billion in stock in 2000.

• Hotmail – Web-based email service for over $400 million in 1997.


“Every time we've moved ahead in IBM, it was

because someone was willing to take a chance, put his

head on the block, and try something new.

- Thomas J. Watson, Former IBM CEO

Introduction

IBM originated as the Computing-Tabulating-Recording Company (CTR) in

1911 and was renamed "International Business Machines" in 1924. The

company was the dominant supplier of computing equipment in the

mainframe era and invented many of the core technologies that are still used

today in computing environments. However, IBM has increasingly shifted its

focus to software and services over the past couple of decades.

In the December quarter (Q4:F16), IBM had about $21.8 billion of revenue

and its revenue breakout was Cognitive Solutions (solutions software and

transaction processing software) – 24.3%, Global Business Services

(consulting, global process services, and application management) – 18.9%,

Technology Services and Cloud Platform (infrastructure services, technical

support services, and integration software) – 42.8%, Systems (systems

hardware and operating systems software) – 11.6%, Global Financing

(financing and used equipment sales) – 2.1%, and Other – 0.3%. Although

Cognitive Solutions accounted for about 24% of revenue, it represented

almost 40% of gross profit.

While IBM has historically made some hardware acquisitions, the bulk of its

recent acquisitions have been for enterprise software companies with a

focus on analytics, cloud, and security. A major focus for IBM has been

cognitive computing and enhancing its Watson platform.

Chapter 3: IBM


Select IBM Acquisitions


The following are acquisitions made by IBM since the beginning of 2013:

• Agile 3 Solutions – In January 2017, IBM announced its intent to

acquire Agile 3 Solutions. Agile 3 helps senior executives visualize

and manage risks associated with sensitive data protection. IBM

indicated that adding Agile 3 Solutions to the IBM Security immune

system of capabilities gives it the ability to not only protect critical data,

but demonstrate why it is at risk, and how to remediate that risk. Agile

3 had been an IBM business partner. It was based in San Francisco.

• Ravy Technologies – In January 2017, IBM announced its intent to

acquire Ravy Technologies, which was a sub-contractor to Agile 3

Solutions (noted above). Ravy indicated that it builds agile business

performance management dashboard product suites that help

executive teams efficiently govern and manage enterprise operations.

It was based in Bangalore, India.

• Fluid’s XPS Unit – In November 2016, IBM announced that it had

acquired the Expert Personal Shopper (XPS) unit from Fluid. The XPS

solution is a dialogue-based product recommendation platform that

utilizes IBM’s Watson platform and natural language interaction to

personalize customers’ shopping experiences. The solution could, for

example, provide tailored recommendations to customers on websites.

Its customers included The North Face and 1-800-Flowers. IBM

indicated that the XPS team would become part of IBM’s Interactive

Experience (iX) group.

• Sanovi Technologies – In October 2016, IBM announced that it

signed an agreement to acquire Sanovi Technologies, which provided

disaster recovery software solutions. The company's Application

Defined Continuity (ADC) technology is used for protection across

workloads on both in-house and cloud infrastructure. This includes its


Disaster Recovery Management (DRM) technology. IBM indicated

that Sanovi's software will enhance IBM’s DRM offering and help

automate the disaster recovery process and reduce recovery time and

cost. IBM also indicated it would leverage the technology to help

customers more proactively anticipate potential failures before they

happen. The company was based in Bangalore, India.

• Promontory Financial – In September 2016, IBM announced plans to

acquire Promontory Financial Group, a risk management and

regulatory compliance consulting firm. The firm had 600 professionals

around the world and expertise in addressing compliance standards.

IBM indicated the firm would work closely with Watson. Specifically,

Promontory’s professionals will train Watson, which will learn by

continuously ingesting regulatory information. The firm was based in

Washington DC, with 19 offices around the world.

• G4S Cash Machine Unit – In July 2016, the Financial Times reported

that IBM agreed to acquire the cash machine engineering business

from G4S. The deal included about 380 people including cash

machine (ATM) engineers. It reportedly generated about 23 million

British Pounds of revenue per year. IBM indicated that it could help

reduce costs by using remote diagnostics. It was based in the UK.

• EZ Legacy – In June 2016, IBM announced that it planned to acquire

EZ Legacy, which provides a suite of software (EZSource) that helps

reduce application management costs and improves application

development and maintenance. Its solution assists developers in

quickly understanding and changing mainframe code based on data

displayed on a dashboard and other visual aids. Its visual dashboard

shows developers information to ease the process of modernizing

applications, exposing APIs, and more efficiently leveraging

development resources. EZ had more than 40 customers including 7-

Eleven, ING, and Maybank. It was founded in 2003 and based in Israel

with several offices around the world.


• Bluewolf Group – In March 2016, IBM announced plans to acquire

Bluewolf Group LLC, a provider of cloud consulting and

implementation services, with a strong focus on Salesforce-related

consulting. Bluewolf had been a long-time Salesforce consultant (it

was actually Salesforce’s first consulting service partner) with 12 global

offices and more than 500 employees. IBM indicated Bluewolf would

become part of its Interactive Experience unit within IBM Global

Business Services. The price was not announced but Re/Code

reported that it was slightly over $200 million. The 451Group estimated

that it was approximately $240 million, with a 2.7X revenue multiple.

The company was based in New York.

• Optevia – In March 2016, IBM announced that it acquired Optevia, a

SaaS systems integrator with a focus on Microsoft Dynamics CRM

solutions for public sector organizations. Optevia’s customers included

a variety of ministries, counsels, transportation authorities, and

regulators, including UK Emergency Services and various Government

agencies. The company was founded in 2001 and became part of

IBM’s Global Business Services to focus on cloud-based CRM SaaS

solutions. Optevia was based in the UK.

• Resilient Systems – In February 2016, IBM announced it planned to

acquire Resilient Systems. Resilient developed an incident response

platform which automated the processes required when dealing with

cyber-security incidents. This enables clients (including security/IT as

well as HR, finance, etc.) to respond much faster to cyber incidents,

better mitigate potential security issues, and deal with regulatory

requirements. At the announcement, IBM also introduced its X-Force

Incident Response Service which incorporates Resilient’s technology.

The company was based in Cambridge, MA and had more than 100

customers including 30 of the Fortune 500. The price was not

announced but the 451Group estimates it was $145 million and that

Resilient had approximately $10 million of revenue (14.5X multiple).


• Truven Health Analytics – In February 2016, IBM announced plans

to acquire Truven Health Analytics for approximately $2.6 billion.

Truven provided cloud-based healthcare data, analytics, and

intelligence and had more than 8,500 clients including health plans,

hospitals, life science companies, and government agencies. IBM

indicated that it would incorporate the Truven data into the Watson

Health unit to help improve patient outcomes and reduce costs through

analytics. Truven was based in Ann Arbor, Michigan and had been

around for more than 40 years. The 451Group estimates that the

revenue multiple was 4.3X (just under $600 million of revenue).

• Ecx.io AG – In February 2016, IBM announced plans to acquire ecx.io,

a digital marketing agency. The agency had about 200 marketing

design employees. Its clients included Austrian Airlines, Axalta, and

OPEC and was a specialist in digital technologies including Adobe and

SAP Hybris. IBM indicated that the team would become part of IBM’s

Interactive Experience unit. It was based in Germany.

• Aperto AG – In February 2016, IBM announced an agreement to

acquire Aperto, a digital marketing agency, and that Aperto would

become part of IBM’s Interactive Experience (iX) unit. Aperto had over

300 employees and its customers included Airbus, Siemens, and

Volkswagen. It was based in Germany.

• Iris Analytics – In January 2016, IBM announced that it acquired Iris

Analytics, a machine learning company focused on real-time analytics

solutions to combat payment fraud. Acting as a “virtual analyst” to help

identify new fraud patterns, Iris leverages machine learning models to

help detect fraud and quickly act to help reduce fraudulent events. Its

solution was used by a variety of banks and payment processing

companies around the world. Iris was based in Germany.


• Resource/Ammirati – In January 2016, IBM announced plans to

acquire Resource/Ammirati, a digital marketing and creative agency.

The firm had over 300 employees and was based in Ohio. Its clients

included Nationwide, DSW, Nestle, Rubbermaid, Sherwin Williams,

and Toys R Us. It was founded in 1981 and Apple was its first client.

• UStream – In January 2016, IBM announced that it acquired UStream,

which provided a cloud-based video conferencing service. UStream

provided cloud-based video streaming to enterprises and broadcasters

for applications ranging from corporate keynotes to live music

concerts. It streamed video to about 80 million viewers per month for

customers such as NASA, Samsung, Facebook, Nike, and The

Discovery Channel. IBM subsequently bundled UStream along with

three other previously acquired video acquisitions (Clearleap,

Cleversafe, Aspera) to form a new cloud-based video unit. The price

was not announced but Fortune indicated that sources pegged the

price at about $130 million. The 451Group estimates that this

represented a revenue multiple of approximately 5.2X.

• AT&T’s Managed Hosting Unit – In December 2015, IBM announced

that it was taking over AT&T’s Managed Hosting business, including

acquiring the equipment to support the services. IBM indicated it would

integrate AT&T’s managed services into its cloud services offerings.

• Clearleap – In December 2015, IBM announced it acquired Clearleap,

which provided cloud-based video services. The Clearleap video

platform is optimized for massive scalability and enables clients to

support millions of concurrent users within seconds. Clearleap's open

API framework enables organizations to easily build video into

applications. Customers included HBO, A+E Networks, the NFL, BBC

America, Sony Movie Channel, Time Warner Cable, and Verizon. It

was founded in 2008 and based in Georgia. PitchBook estimates the

price was $210 million and the 451Group estimates it was

approximately $200 million with an 8X revenue multiple.


• Gravitant – In November 2015, IBM announced it had acquired

Gravitant, which developed cloud-based software solutions that help

organizations “broker” computing services and software from a variety

of different suppliers across hybrid clouds. The solution enables IT

managers and users to compare pricing and capabilities and purchase

compute services and software from various suppliers. The company

was based in Austin with significant operations in India, and had been

founded in 2004. According to the 451Group, the price was

approximately $95 million and it indicated that Gravitant likely had only

a couple million dollars of revenue (47.5X multiple).

• Cleversafe – In October 2015, IBM announced that it agreed to

acquire Cleversafe, which developed object-based storage software

and appliances. Its object-based storage technologies enable

customers to more efficiently store and manage massive amounts

(exabytes) of unstructured data. The company had over 200 people

and more than 350 patents, many related to object storage. Company

filings indicated the price was just over $1.3 billion. The 451Group

estimates it had revenue of $25 million (52X revenue multiple).

• The Weather Company (Digital Assets) – In October 2015, IBM

announced that it was acquiring many of the digital assets of the

Weather Company including its website and weather data and

business applications. It did not include the cable TV portion of the

company. IBM indicated it would leverage the data with its Watson

platform to better analyze weather information which is critical to many

different types of enterprises. The price was just under $2.3 billion.

• Advanced Application Corporation – In September 2015, IBM

announced it had entered into a definitive agreement to acquire the

remaining shares of Advanced Application Corporation (AAC) that it

didn’t already own. AAC was an affiliate of Japan-based JBCC

Holdings Inc. and IBM Japan Ltd. It engaged in system integration,

application development, software support, and services. PitchBook

estimates the price was $13.3 million.


• Meteorix – In September 2015, IBM announced plans to acquire

Meteorix, a consulting and integrations firm with a strong focus on

Workday-related services. Workday is a major provider of cloud-based

finance and HR applications and Meteorix had more than 200 certified

Workday consultants and assisted a variety of companies in

implementing Workday-related finance and HR solutions. The

company had been founded in 2011. The price was not announced

but the 451Group estimates that it was approximately $120 million with

a 3X revenue multiple.

• StrongLoop – In September 2015, IBM announced that it acquired

StrongLoop, a provider of Node.js, an application development solution

that allows developers to more easily create applications using APIs.

The Node.js development framework makes it easy to create scalable

APIs. IBM indicated that it planned to integrate the technology into its

software portfolio. Investors included Shasta and Ignition. The

company was founded in 2013 and based in Silicon Valley.

• Merge Healthcare – In August 2015, IBM indicated that it agreed to

acquire Merge Healthcare for $7.13/share, about a 32% premium to

where the stock had traded. The deal size was just over $700 million,

but Merge had approximately $200 million of net debt, bringing the

enterprise value to over $900 million. Merge was a provider of medical

imaging management platforms that enable better handling and

processing of healthcare imaging data. Its solution provides access to

important medical images and analytics anywhere around the world. It

had access to an anonymized research pool of about 30 billion images

(CAT scans, X-rays, etc.). IBM indicated that it planned to combine

the Merge imaging data with its Watson cognitive computing engine to

enable advanced analysis of medical images to help improve

healthcare. The company was over 25 years old when acquired.

Trailing revenue was about $228 million, resulting in an enterprise

value to revenue multiple of approximately 4X.


• AppCore (Cloud Assets) – In August 2015, IBM announced that it

had acquired the Cloud Automation assets, and hired the related

development team, from Iowa-based AppCore. AppCore manages

private cloud storage systems for enterprises.

• Compose – In July 2015, IBM announced it had acquired Compose, a

private company that focuses on the database-as-a-service (DBaaS)

market. It offers MongoBD, Redis, PostgreSQL, and other database-

related solutions for mobile and web-based applications. Compose

enables rapid deployment and provisioning of open source database

services and provides a variety of add-ons that can, for example, move

data among different databases. The company had more than 3,600

customers and was based in Silicon Valley.

• Blue Box – In June 2015, IBM announced it had acquired Blue Box

Group. Blue Box was a managed private cloud provider and its

platforms were based on OpenStack. It offered businesses private

cloud-as-a-service platforms enabling customers to deploy workloads

across hybrid cloud environments. Blue Box was based in Seattle.

• Phytel – In April 2015, IBM announced plans to acquire Phytel, which

developed healthcare management software. Phytel's SaaS-based

registry uses evidence-based chronic and preventive care protocols to

identify and notify patients due for health/care services, while tracking

engagement and measuring quality and financial results. Its population

health management solutions utilize health records to reduce

readmissions, improve patient outreach, and allow physicians to

determine what actions work best. It was based in Dallas. The price

was not announced but the 451Group estimates that it was

approximately $232 million.

• Explorys – In April 2015, IBM announced it had acquired Explorys,

which had been focused on cloud-based healthcare intelligence

solutions and had a large database of clinical data sets. It was spun

off from the Cleveland Clinic and its medical database had over 300


billion data points. Its customers included more than 360 hospitals and

its solution were used, for example, to identify patterns of diseases,

treatments, and outcomes to help analyze and optimize treatment.

IBM noted that it planned to leverage this data with its Watson Health

Cloud platform to improve health care analysis.

• Blekko (select assets) – In March 2015, IBM announced in a blog

post that it acquired “certain assets” from Blekko. Blekko had

developed a web search engine and a social news solution. The

company was based in Silicon Valley and investors included Marc

Andreessen, CMEA Capital, and USVP.

• Alchemy API – In March 2015, IBM announced it acquired Alchemy

API. Alchemy developed cognitive computing APIs and deep learning

solutions. Over 40,000 developers used its platform and some of its

target sectors included computer vision and text analysis. It stated that

it processed over 3 billion documents a month. IBM indicated that it

planned to integrate the deep learning technology into Watson.

• Tgestiona – In March 2015, IBM announced a 10-year deal to help

modernize Telefonica’s HR and finance management systems and

processes. As part of the deal, IBM indicated it would also acquire

three companies of Tgestiona, which had been Telefonica’s historical

business process outsourcing partner. The companies were in Spain,

Argentina, and Peru. Tgestiona was founded in 2001. PitchBook

estimates the price at $24 million. [Although technically 3 Tgestiona

companies were acquired, we view this as one deal based in Spain.]

• Lufthansa IT Business – In November 2014, IBM announced that it

entered into a 7 year outsourcing contract with Lufthansa. As part of

the arrangement, IBM agreed to acquire and manage Lufthansa

Systems’ entire data center operations and indicated that around 1,400

Lufthansa Systems employees would transfer to IBM. Lufthansa is

based in Germany. While this isn’t a typical acquisition (partially an

outsourcing deal), we included it in the list.


• Lighthouse Security – In August 2014, IBM announced that it

acquired the business operations of Lighthouse Security Group, a

cloud security service provider. Its Gateway platform helps protect

identity information and data. It was a subsidiary of Lighthouse

Computer Services and founded in 2007.

• CrossIdeas – In July 2014, IBM announced it had acquired

CrossIdeas, which provided security software that manages user

access to data and applications in both cloud and in-house

environments. CrossIdeas’ Identity and Access solutions help

customers reduce potential risks and meet compliance and audit

requirements. It was based in Rome, Italy and was founded in 2011.

• Cognea Group – In May 2014, IBM announced via a blog that it

acquired Cognea, which had developed an AI/cognitive computing

platform for virtual assistants. Cognea indicated that its virtual

assistants can learn about and understand users’ personalities, which

helps provide more customized interaction with each user. Cognea

noted that it had a variety of customers including HP, NASA, and State

Farm. IBM stated that the technology would be integrated with Watson,

enabling real conversations with users, and that Watson

conversational services would be available to customers. It was

founded in Australia.

• Silverpop Systems – In May 2014, IBM announced at its Smarter

Commerce Global Summit that it acquired Silverpop, a marketing

automation company. Its automated cloud-based platform enables

easier omnichannel marketing and helps marketers to personalize

customer interactions in real time. Silverpop automates the customer

experience based on insights drawn from permission-based data

streams such as social, web, email, and mobile activity. Its customers

included Mazda, AMD, and Stonyfield Farm.


• Cloudant – In February 2014, IBM announced that it entered into an

agreement to acquire Cloudant, which provided a cloud-based

database-as-a-service (DBaaS) solution. Cloudant's JSON cloud-

based data service allows mobile and web developers to store and

access data using a simple API, enabling faster development. Its

platform helped developers quickly implement database solutions for

mobile and web applications. Cloudant had already been an IBM

partner and its solution ran on IBM’s SoftLayer platform. Investors had

included Samsung, In-Q-Tel, Y Combinator, and Avalon Ventures.

According to the PitchBook, the price was about $117 million while the

451Group estimated it was approximately $150 million and that the

company had only about $7 million of revenue (21X multiple).

• Aspera – In January 2014, IBM announced that it completed the

acquisition of Aspera. Aspera’s technology helps securely transmit

extremely large data files over long distances. It indicated that its

solution could accelerate the secure transfer of large files by up to 99.9

percent (potentially reducing a 26 hour transmission of a 24 gigabyte

file down to just 30 seconds). Its fasp protocol avoids the bottlenecks

associated with most networking technology which isn’t optimized for

huge data transfers. Aspera had many corporate customers, including

Apple which used Aspera to upload videos to the iTunes store.

• Associated Dexia Technology Services – In December 2013, IBM

announced that it had signed an agreement with Dexia and several

major financial institutions in Europe to build and manage their IT

infrastructure that was previously managed by Associated Dexia

Technology Services (ADTS). As a result of the transaction, IBM took

a controlling interest in ADTS and renamed it Innovative Solutions for

Finance (ISFF). ISFF had $1.3 billion of sourcing contracts. IBM

indicated that it would implement cloud infrastructure to expand ISFF

services into new markets and optimize the efficiency of its existing

information technology management. ADTS had been founded in

2006, primarily to deliver IT services to Dexia-related financial

institutions. It was based in Brussels, Belgium.


• Fiberlink Communications – In November 2013, IBM announced that

it agreed to acquire Fiberlink Communications, a mobile device

management and security company. Fiberlink’s cloud-based MaaS360

is an enterprise mobility management solution that helps ensure

security and management for documents, applications, and emails.

IBM indicated that MaaS360 would enable it to offer either cloud-based

or on-premise mobile device management (MDM), mobile content

management (MCM), and mobile application management (MAM).

Fiberlink was based in Pennsylvania. The 451Group estimates that the

price was approximately $300 million and that Fiberlink had about $50

million of revenue (6X multiple).

• Xtify – In October 2013, IBM announced the acquisition of Xtify, a

provider of cloud-based mobile messaging tools that help

organizations improve mobile sales and drive in-store traffic. Xtify’s

solutions leverage CRM tools and provide digital marketers with the

ability to create content-rich in-app mobile messaging and push

notifications. IBM indicated that it plans to run Xtify on its SoftLayer

cloud infrastructure. Xtify was founded in 2009. The 451Group

estimates that the price was approximately $40 million and that Xtify

had approximately $5 million of revenue (about an 8X multiple).

• The Now Factory – In October 2013, IBM announced an agreement

to acquire The Now Factory, which provided analytics software for

communications service providers. The Now Factory’s software

analyzes large amounts of network and business data and provides

insights that enable service providers to improve service and reduce

networking issues and outages. In addition to detecting and resolving

issues, the software helps provide insight into how subscribers interact

with mobile applications. PitchBook estimates the deal at just under

$125 million. The company was based in Dublin, Ireland.


• Daeja Image Systems – In September 2013, IBM announced that it

had acquired Daeja Image Systems. Daeja’s software helps

employees get faster access to business information and documents.

Users can open and view hundreds of document and image file

formats, even if the native application is not on their devices, which

saves time and enables social collaboration and document sharing

across an organization. IBM indicated that it would incorporate Daeja

into its Software Group and its Enterprise Content Management

business. It had more than 4,000 customers and was based in the UK.

• Trusteer – In August 2013, IBM announced that it signed an

agreement to acquire Trusteer, a cybersecurity solutions company

focused on combating fraud and malware. Trusteer’s SaaS solution

delivers threat intelligence to tens of millions of endpoints around the

world. It had a particularly strong presence in banks (7 of the 10 top

US banks), many of which use Trusteer to help ensure customer

devices do not have malware. The company had offices in Israel and

Boston, and with the announcement IBM also announced it was

opening a cybersecurity lab in Israel. Investors included USVP.

PitchBook estimates the value at $850 million and the 451Group

estimates it was $900 million and that Trusteer had revenue of about

$35 million (25.7X).

• CSL International – In July 2013, IBM announced it signed an

agreement to acquire CSL International, which provided virtualization

management technology for IBM’s zEnterprise system. Its CSL-WAVE

software enables companies to easily monitor and manage their z/VM

and Linux on System z environments. The software provides an easy

drag and drop interface to enable users to create, visualize, and

connect virtual servers to resources. CSL was based in Israel.


• SoftLayer – In June 2013, IBM announced it signed an agreement to

acquire SoftLayer Technologies, a major cloud computing

infrastructure provider. SoftLayer had about 21,000 customers and 13

data centers. SoftLayer’s solutions enable clients to buy enterprise-

class cloud services on dedicated or shared servers. Its majority

shareholder was GI Partners, which had previously merged SoftLayer

with another one of its portfolio companies called The Planet. Forbes

reported that its sources had indicated the price was about $2 billion

and that SoftLayer had revenue in the $800 million to $1 billion range

(2X to 2.5X). The 451Group also reported a price of $2 billion but

estimated a higher revenue multiple of 4.7X.

• UrbanCode – In April 2013, IBM announced that it acquired

UrbanCode, which automates software delivery, assisting businesses

in releasing and updating applications. Its solution helps resolve

development bottlenecks. The company was based in Cleveland.

• Star Analytics – In February 2013, IBM announced that it entered into

an agreement to acquire the software portfolio of Star Analytics. The

Star Analytics software helps automatically integrate information,

reporting applications, and business intelligence tools across

enterprises (including on-premises or cloud computing environments),

without custom coding or manual effort. Its Star Command Center was

certified to run on Amazon Web Services, Oracle on Demand, and

Microsoft Azure infrastructure.


A few select IBM acquisitions made prior to 2013 include:

• Kenexa – In August 2012, IBM announced the acquisition of Kenexa,

a publicly traded company focused on talent management, for

approximately $1.3 billion ($46/share, a 42% premium to where the

stock had previously traded). Kenexa had been a major provider of

recruitment process outsourcing (recruiting and branding), talent


management, and learning content management solutions. It offered

both cloud-based technology and consulting services. Its clients

included more than 9,000 customers including companies such as

Wal-Mart and Ford. The acquisition occurred soon after Oracle

acquired Taleo, a competitor of Kenexa. Revenue in 2012 was about

$318 million (making the deal about 4X revenue) in the fiscal year

ending June 2012 with about $39 million of EBITDA.

• Netezza – In September 2010, IBM announced it entered into an

agreement to acquire Netezza for about $1.7 billion ($27/share).

Netezza was a provider of high performance analytics in a data

warehousing appliance, enabling rapid implementation and the ability

to quickly perform analytic analysis. The two companies had been

strategic partners. Netezza’s customers included Time Warner, Blue

Cross, Nationwide Insurance, Estee Lauder, and many others. The

deal was approximately 6X Netezza’s projected revenue for 2010.

Netezza was based in Massachusetts.

• Sterling Commerce – In May 2010, IBM announced that it agreed to

acquire Sterling Commerce from AT&T for approximately $1.4 billion

in cash. Sterling provided a variety of software solutions to help

improve e-commerce fulfillment, order management, and B2B

commerce including selling and payments. It had more than 18,000

customers. AT&T (SBC Communications) originally acquired Sterling

during the 2000 technology bubble for $3.9 billion.

Some large historical IBM acquisitions included SPSS (business analytics,

2009, $1.2 billion), Cognos (business intelligence, 2008, $5 billion), Internet

Security Systems (IT security, 2006, $1.3 billion), FileNet (content

management software, 2006, $1.6 billion), Ascential Software (enterprise

data integration software, 2005, $1.1 billion), Rational Software (DevOps

and software development, 2003, $2.1 billion), PWC Consulting (business

and technology consulting, 2002, $3.5 billion), and Informix (database

software, 2001, $1 billion).


“If someone asks me what cloud computing is, I try not to

get bogged down with definitions. I tell them that, simply

put, cloud computing is a better way to run your business.”

- Marc Benioff, Salesforce CEO

Introduction

Salesforce was founded in 1999 and is the leader in customer relationship

management (CRM) platforms. It was an early pioneer in providing cloud-

based pay-as-you-go platforms to enterprises, rather than the traditional

approach of selling software packages. In fact, for many years it often wasn’t

categorized as an enterprise software company since it didn’t actually sell its

software to companies. More recently, the company has focused on

expanding beyond basic CRM into a variety of other cloud-based market

segments (sales automation, analytics, marketing, etc.) through acquisitions

and internal developments, and has expressed strong interest in AI and

machine learning technologies (e.g., its Einstein AI platform).

In its recent Q4:F17 quarter (ending January 2017), Salesforce reported

revenue of $2.29 billion. Its revenue breakout was: Sales Cloud (CRM) –

35%, Service Cloud (Live Agent chat software, Lightning customer service

management console, Communities self-service portals, etc.) – 27%,

Salesforce Platform/Other (platform for building apps) – 17%, Marketing

Cloud (personalized email marketing and mobile messaging) – 13%, and

Services – 8%.

Salesforce has made several significant acquisitions including Demandware

(e-commerce) and ExactTarget (marketing automation). In several cases,

the companies that Salesforce acquired were already Salesforce partners

and had solutions that utilized CRM data.

Chapter 4: Salesforce


Select Salesforce Acquisitions


The following are acquisitions by Salesforce since the beginning of 2013:

• Sequence – In January 2017, Sequence announced that it was being

acquired by Salesforce. Sequence was a digital services company. It

assists with customer experience, brand, and content strategies. It also

provides UI/UX design services including prototyping and usability

testing. Some example engagements included developing a website

for Chevron, creating an iPhone restaurant ordering app, and

customizing several solutions for Best Buy. Sequence also had a

relationship with Apple. The firm was based in San Francisco.

• Unity&Variety – In January 2017, Salesforce’s word processing

business Quip announced that it was acquiring Unity&Variety. The firm

reportedly consisted of just three people and had developed a mobile

game (Pinchworm) and was developing new productivity tools. The

team previously helped design products at Facebook including

Slingshot and a redesign of Messenger.

• Twin Prime – In December 2016, Twin Prime announced that it was

acquired by Salesforce. Its solution utilizes machine learning

techniques to analyze real-time network data, and identify and

prioritize performance gaps in mobile apps. It can then help optimize

mobile performance so companies can deliver content faster,

regardless of location, device, or network. According to the New York

Business Journal, it had raised about $11.5 million since it was

founded in 2011. Its investors included Draper Fisher Jurvetson and

True Ventures.


• Krux – In October 2016, Salesforce confirmed that it agreed to acquire

Krux. Krux developed a data management platform that tracks data

across multiple devices to increase engagement with users. The CEO

indicated that Krux uses AI to analyze trillions of signals to better

identify audience segments for targeted marketing. It reportedly had

over 200 customers, including Ticketmaster and L’Oreal. According to

Salesforce 10-Q documents, the consideration was about $742 million

($368 million in cash, 4.2 million shares of stock worth $317 million at

the time, and $56 million in options and restricted stock) and Krux had

about $18 million in cash. The 451Group estimates revenue was about

$50 million, which would result in a multiple of more than 14X.

• Gravitytank – In September 2016, Gravitytank announced that it was

acquired by Salesforce. Gravitytank was an innovation consulting firm

focused on design, research, and strategy. It assists clients in

developing products, packaging, branding, and product strategies.

Clients have included OfficeMax, United Way, Goodyear, and Frito-

Lay. The firm indicated that as part of Salesforce it would help

customers identify new business opportunities and disrupt their

industries. PitchBook estimates the consideration at just under $30

million, although a Salesforce 10-Q indicates it acquired three

companies in the quarter with a total value of about $38 million, so this

estimate may be high. It was based in Chicago.

• HeyWire – In September 2016, HeyWire announced that it was being

acquired by Salesforce. HeyWire was focused on cloud-based mobile

messaging for enterprises. HeyWire had already been working with

Salesforce and indicated that after the acquisition it would bring its

mobile messaging technology to the Salesforce Service Cloud,

providing fully integrated mobile messaging capabilities that enable

companies to connect with their customers. PitchBook estimates the

price at $34 million, although as noted above (in Gravitytank) this

estimate may be high. HeyWire was based in Massachusetts.


• BeyondCore – In August 2016, Salesforce announced that it signed

an agreement to acquire BeyondCore, an enterprise data analytics

company. Its solution automatically analyzes data from databases,

Hadoop, or other sources and uses a variety of analytics (diagnostic,

predictive, prescriptive, etc.) to develop significant insights for

enterprises. It allows managers to continuously monitor their business,

with automated analysis and a Dynamic Dashboard. According to

Salesforce’s 10-Q, the consideration was approximately $107 million

($21 million in cash, nearly 1.1 million shares of stock worth about

$81.5 million at the time, and $4 million of stock options and restricted

stock) and BeyondCore had about $2 million of cash. The 451Group

estimates its revenue was only about $5 million (21X multiple). Menlo

Ventures was an investor.

• Quip – In August 2016, Salesforce announced that it agreed to acquire

Quip, which had developed cloud-based word processing solutions

(somewhat similar to Google Docs). It was especially focused on

mobile applications. A co-founder of Quip was previously the CTO of

Facebook. A Salesforce 8-K issued at the time of the announcement

indicated it would provide $582 million in stock for the portion of the

company that Salesforce did not already own, as Salesforce had been

an investor in Quip. However, a Salesforce 10-Q indicated the

consideration was $412 million consisting mostly of stock (4.8 million

shares), and that Quip had $28 million of cash. There were also

reports of additional earn-outs (TechCrunch reported that its sources

indicate that including earn-outs it may have been approximately $750

million, but that was unconfirmed). The company was founded in 2012.

• Coolan – In July 2016, Coolan announced that it had been acquired

by Salesforce. Coolan had developed software that analyzes data

center hardware to help optimize operations. The company reportedly

had 10 employees. The founder of Coolan previously helped direct

Facebook’s and Google’s hardware initiatives and contributed to the

launch of the Open Compute Project. Investors included North Bridge

and Social Capital. It was based in Silicon Valley.


• Demandware – In June 2016, Salesforce announced that it signed an

agreement to acquire Demandware, a publicly traded supplier of

enterprise cloud commerce solutions. The transaction was for

approximately $2.9 billion ($75/share), or $2.8 billion net of acquired

cash, about a 56% premium to where Demandware’s stock previously

traded. Trailing revenue was about $254 million (so the deal was

about 11X revenue). Demandware’s solutions enable companies to

provide personalized eCommerce experiences for customers to

enhance sales. Its platform accelerates how quickly companies can

launch new sites or promotions, and it includes order management,

customer engagement, fulfillment, post-sales service, and intelligence

across all channels (mobile, web, stores, etc.). Customers included

L’Oreal, Lands’ End, Adidas, Nine West, Panasonic, Samsonite, and

Brooks Brothers. It was founded in 2004 and had an IPO in 2012.

• Implisit – In May 2016, Dow Jones Business News reported that

Salesforce acquired a data automation startup named Implisit Insights

for reportedly “tens of millions of dollars.” Implisit was an Israeli

company that developed solutions that utilize information stored in

customer databases to help salespeople make better decisions. It

could, for example, make recommendations to improve the chances of

winning new business and alert management to deals at risk. It

reportedly had raised only $3.3 million. A Salesforce 10-Q implies it

paid about $17 million, without specifically mentioning Implisit.

• MetaMind – In April 2016, Salesforce indicated that it acquired

MetaMind, which had developed advanced deep learning

technologies, including image recognition capabilities. However,

Salesforce stated that it would phase out MetaMind’s existing offerings

after a month and the team would focus on enhancing Salesforce’s

machine learning capabilities. Salesforce’s CEO Marc Benioff was an

investor in MetaMind, along with Khosla Ventures. The reported price

was $32.8 million, net of cash acquired.


• PredictionIO (TappingStone) – In February 2016, Salesforce

announced it agreed to acquire PredictionIO (originally known as

TappingStone). The company had developed machine learning

software and had shifted to an open-source model. Its software makes

it easier for developers to create machine learning prediction engines

and solutions. The company indicated that it had 8,000 developers

using its technology and powered 400 apps. It was founded in 2012

and originally based in London and called TappingStone, but moved to

Silicon Valley. It raised a $2.5 million seed round in 2014. PredictionIO

indicated that the team would work on SalesforceIQ’s machine learning

capabilities. The price was not announced but Salesforce noted that it

spent a total of $41.6 million on TappingStone and Your SL (listed next)

without disclosing how much was paid for each.

• Your SL – In February 2016, Salesforce acquired Your SL, a German

consulting and implementation firm. Its focus areas were Salesforce

integration, strategy consulting, cloud technologies, and product

development. It had more than 100 employees and was based in

Berlin, Germany.

• Steelbrick – In December 2015, it was announced that Salesforce

signed an agreement to acquire Steelbrick. Steelbrick developed a

variety of configure, price, quote (CPQ) solutions and subscription

billing apps, optimized for the Salesforce cloud platform. The platform

helps automate a variety of “quote to cash” steps such as the pricing

of the various features and options that go into a proposal. Salesforce

had previously relied on partners (e.g., Apttus) for these types of

features. Reports indicated that the deal was about $360 million in

stock minus the $60 million in cash that Steelbrick had. However,

Salesforce was already an investor in the company (owned about 6%).

The 451Group estimated that Steelbrick had revenue of $11 million

(implying about a 27X multiple).


• MinHash – In December 2015, MinHash announced on its website that

it was acquired by Salesforce. MinHash was a small company

(reportedly only 4 people from eBay and Oracle) that developed a

virtual assistant for marketing that allowed users to search media

sources for trends and create appropriate marketing campaigns based

on that analysis.

• AKTA – In September 2015, AKTA announced that it was being

acquired by Salesforce. AKTA was a digital experience and design

consultancy that helped companies improve the customer experience

through better design. Customers included Starbucks, Motorola, and

Verizon. The company was based in Chicago.

• Kerensen Consulting – In June 2015, Salesforce announced that it

signed an agreement to acquire Kerensen Consulting. Kerensen was

a cloud consulting firm which assisted hundreds of European

companies in transitioning to the cloud. It provides business consulting

services with a focus on CRM and front office. The price was

reportedly $24.2 million. It was based in France.

• Tempo AI – In May 2015, Tempo AI announced that it had been

acquired by Salesforce. Tempo AI developed a smart calendar app

that could help organize a user’s day. The company indicated it would

phase out its app after a month and focus on Salesforce solutions. It

had been founded at SRI International in 2011 and was based in

Silicon Valley. The price was not announced but a Salesforce filing

indicated that it spent $33.1 million for both Tempo AI and Toopher

(listed next), without specifying how much was spent for each.

• Toopher – In April 2015, Toopher announced that it had been acquired

by Salesforce. Toopher was a security software start-up that

developed a two-factor authentication solution (including the user’s

location). It could enhance the security options for enterprises for

employees with mobile devices. Toopher’s service was phased out

after the deal so the team could focus on Salesforce projects.


• RelateIQ – In July 2014, RelateIQ announced it was being acquired by

Salesforce for approximately $390 million, mostly in stock. RelateIQ

had close to $40 million of cash so the enterprise value was

approximately $350 million (a Salesforce 10-Q indicates that the final

valuation was $340.2 million). RelateIQ developed data analysis

software that could analyze information from a company’s CRM

system and emails and make recommendations to improve the sales

process and enhance sales (e.g., who salespeople should be calling

more, who they are not paying enough attention to, etc.). Investors

included KPCB, Redpoint, and Jerry Yang’s AME Ventures.

• Cloudconnect – In November 2013, Cloudconnect announced that it

was part of Heroku, a Salesforce company. Cloudconnect focused on

assisting enterprises in connecting their data and cloud services. It

indicated that as part of Heroku, the team will help companies create

great apps and experiences by connecting their customer data. The

founder had been a Vice President at Salesforce in the past.

• ExactTarget – In June 2013, Salesforce announced that it signed an

agreement to acquire ExactTarget for approximately $2.5 billion in

cash ($33.75/share, about a 53% premium to where the stock had

traded), or about $2.4 billion, net of ExactTarget’s cash. ExactTarget

had developed a cloud-based marketing automation platform that

enables companies to leverage customer data from across the

enterprise to develop better optimized marketing campaigns and take

advantage of a variety of marketing automation tools to improve sales.

The company had more than 6,000 customers including Coke, Nike,

and Gap. Trailing revenue was about $317 million (7.6X revenue

multiple). It was not yet profitable. It was based in Indianapolis.


• EdgeSpring – In June 2013, EdgeSpring announced that it was being

acquired by Salesforce. EdgeSpring developed enterprise business

intelligence solutions. Its solutions included EdgeMart and Lens

Framework (dynamic visualization). The company had just come out

of stealth mode after raising $11 million from KPCB and Lightspeed,

and the CEO previously worked at Salesforce. Its customers included

DocuSign, Equinix, EllieMae, and Pandora. The price, according to a

Salesforce 10-Q, was $133.7 million.

• Clipboard.com – In May 2013, Clipboard announced that it had been

acquired by Salesforce. Clipboard developed a “web-clipping” solution

that allowed users to select items on the web and save them into

storage to view them later. The clipped content could be marked and

shared. The company had about 100,000 users. However, it indicated

its solution would be phased out as it would use its technology for

Salesforce-related solutions. The price was not announced but

TechCrunch reported that sources indicate it was a $12 million deal.

However, Salesforce 10-Q documents imply it was about $7 million.

• EntropySoft – In February 2013, VentureBeat reported that

Salesforce acquired EntropySoft, which developed software tools for

enterprise content integration. EntropySoft’s tools help extract data for

improved marketing, and its Connector Hub solution enables

customers to access documents stored in many different types of

repositories. The price was not announced but Salesforce later

reported in its 10-Q that it acquired a French company for $22.2 million

in cash, net of $2.1 million of cash acquired. The company was based

in France.



A few major deals that Salesforce announced prior to 2013 include:

• Buddy Media – In June 2012, Salesforce announced it entered into

an agreement to acquire Buddy Media for approximately $689 million

in cash and stock ($467 million in cash, $184 million in stock, $38

million in vested stock and options) plus an earnout that could increase

the value up to $745 million. Buddy Media’s social marketing suite

helps companies gain customer insights, from initial contact to

purchase, to help improve customer relationships and improve sales.

It was a Facebook Preferred Marketing Developer, a LinkedIn Certified

Developer, and a Google Engagement Solutions partner. It was

founded in 2007 and its focus had been to provide marketers with the

ability to place content on social media and measure its effectiveness.

• Radian6 – In March 2011, Salesforce announced that it agreed to

acquire Radian6 for approximately $276 million in cash and $50 million

in stock, net of acquired cash. Radian6 had developed a social media

monitoring tool that helps companies track and monitor their social

media efforts. It also provides an engagement platform that helps

companies connect with individuals online. By better monitoring social

media sites (Facebook, Twitter, blogs, etc.) for customer feedback and

data, companies can improve marketing and increase sales. Its

customers included GE, Dell, Molson Coors, PepsiCo, and UPS.

• Heroku – In December 2010, Salesforce announced that it agreed to

acquire Heroku for $212 million, net of acquired cash. Heroku provided

cloud-based platform-as-a-service solutions for writing Ruby-based

applications. It was used by over 100K Ruby developers.

• Jigsaw – In April 2010, Salesforce announced it agreed to acquire

Jigsaw for $142 million in cash plus a $14.2 million earn-out. Jigsaw

provided a cloud-based crowd-sourced database of business contacts.

It had over 1.2 million members and 21 million contacts.


“We have always tried to buy assets that were the best-in-class

or assets that were ascending in value and actually bringing

new and innovative solutions to market.”

- Bill McDermott, SAP CEO

Introduction

SAP was founded in 1972 by five former IBM employees. Its focus was real-

time enterprise applications (as opposed to overnight batch solutions that

had previously been commonplace). The company’s initial application suites

were generally successful, but SAP received a significant boost when it

introduced a client-server version of its application software (R/3) in the early

1990s, which became extremely popular. Since then, SAP has diversified

into a variety of enterprise software markets.

SAP reported revenue (per IFRS) of about €6.7 billion in the December 2016

quarter (Q4:F16), with the following revenue breakout: Cloud Subscriptions

and Support – 12.3%, Software Licenses – 32.4%, Software Support – 41%,

and Services – 14.3%.

SAP has had periods during which it has been an active acquirer. From 2005

to 2007, for example, it completed nearly 20 transactions. During 2015,

however, it announced only one acquisition. The company became active

again in 2016 with seven acquisitions. Some of its largest (multi-billion

dollar) acquisitions included Hybris (e-commerce), Ariba (e-commerce),

SuccessFactors (HR/employee management software), Sybase (relational

database), and Business Objects (business intelligence software).

Chapter 5: SAP


Select SAP Acquisitions


The following are acquisitions that SAP made since the beginning of 2013:

• Abakus – In December 2016, SAP indicated that its Hybris unit agreed

to acquire Abakus. Abakus was a marketing attribution company that

measures customer data across all channels to help marketers

optimize spending and budgets. The Abakus attribution system utilizes

game theory to optimize marketing recommendations. SAP indicated

that it would integrate Abakus’ marketing analytics with SAP Hybris

Marketing. The 451Group estimates the price as $22.5 million. It was

founded in 2013 and based in California.

• Volume Integration – In December 2016, Volume Integration

indicated that it was acquired by SAP’s National Security Services

(SAP NS2). The company assists its customers in designing and

developing analytical cloud capabilities. It also developed Volume

Analytics, an analytics framework designed for continuous risk

evaluation. It was based in Reston, Virginia.

• Plat.One – In September 2016, Plat.One announced that it was

acquired by SAP. Plat.One developed an enterprise-grade IoT

solutions platform. Its platform enables enterprises to manage devices

across a wide number of industry standard machine and messaging

protocols. Its solutions include an adaptive architecture and pre-built

solutions accelerators for several different IoT use cases. The platform

helps devices talk to one another. Plat.One indicated that its solutions

managed over 200,000 devices for 25 enterprise customers, including

BT and Telecom Italia. It was founded in Italy.

• Hipmunk – In September 2016, SAP’s business unit Concur

announced that it entered into an agreement to acquire Hipmunk.

Hipmunk developed a website and mobile apps to assist users with

travel. Its solutions compare data from several top travel sites to


provide the best flights, hotels, and/or Airbnb rentals. Its AI personal

travel assistant (Hello Hipmunk) helps users with booking

recommendations. The company had reportedly raised $55 million

from investors that included Y Combinator, Ignition Partners, IVP,

Nokia Growth Partners, Oak Investment Partners, and SV Angel.

• Altiscale – In August 2016, there were several reports that SAP

agreed to acquire Altiscale, and SAP confirmed it acquired Altiscale

the following month. Altiscale provided a cloud-based version of

Hadoop for storing, processing, and analyzing data. The Altiscale Data

Cloud provides servers, networking, and software configured for

performance, reliability, and security. The price was not announced

but VentureBeat indicated that it may have been over $125 million.

Investors included Accel Partners, AME Cloud Ventures, Northgate,

General Catalyst, Sequoia Capital, and Wildcat Venture Partners.

• Fedem Technology – In June 2016, SAP announced the acquisition

of Fedem Technology. Fedem developed engineering software to

improve mechanical designs using product modeling and static and

dynamic structural analysis. Its focus application areas included oil

and gas, renewable energy (e.g., optimizing wind turbine designs),

marine applications, and mechanical industries. SAP indicated that it

would incorporate the technology into its next-generation IoT solutions

for applications such as predictive maintenance and structural integrity

monitoring. The company was based in Norway.

• Mellmo (Roambi) – In February 2016, SAP announced the acquisition

of “key assets” of Mellmo, also known as Roambi. Roambi was a

mobile business intelligence company that created a broad range of

data presentation and visualization solutions to help customers more

easily visualize data, including creating mobile dashboards and

dynamically updating charts. Roambi had a cloud-based back end

which enabled easy connections to a variety of data sources.


• Multiposting – In October 2015, Multiposting SAS announced that it

was acquired by SAP. Multiposting provided a variety of e-recruitment

solutions. The company indicated that it provided the first job and

posting tool available online. Multiposting stated that it had 1,200

clients, including many of the largest companies in France. SAP

integrated it into its SuccessFactors portfolio. Multiposting had been

founded in 2008 and based in Paris.

• Concur – In September 2014, SAP announced it agreed to acquire

Concur Technologies for $8.3 billion in cash ($129/share), about a 20%

premium to where the stock had previously traded. Concur was a

major supplier of cloud-based corporate travel and expense

management solutions and had over 20,000 clients (25 million users)

in 150 countries. SAP indicated that there would be synergies with its

Ariba procurement software. SAP noted that the majority of its

customers don’t use Concur and that only 30% of Concur’s customers

use SAP, providing significant potential cross-selling synergies.

Concur’s trailing revenue was about $668 million (over 12X revenue

multiple). The transaction closed in late 2014. Concur had been

founded in 1993 and was based in Bellevue, Washington.

• OpTier – In August and September 2014, a number of tech articles

(451 Group, TechCrunch) indicated that OpTier may have shut down

and sold some of its assets to SAP. OpTier was initially focused on

business transaction monitoring and had been shifting to code-level

application performance monitoring (APM). Its cloud-based APM

solution helped businesses (Deutsche Bank, Aflac, etc.) proactively

manage, monitor, and optimize their production applications. A deal

price was not announced but the 451Group indicated that it believed

SAP paid $10 to $20 million for the IP and assets it obtained. The

company had raised more than $100 million and was based in Israel.


• SeeWhy – In May 2014, SAP announced the acquisition of SeeWhy.

SeeWhy provided cloud-based behavioral target marketing solutions

to help businesses increase customer engagement. SeeWhy’s

behavioral marketing solutions trigger real-time 1-to-1 marketing

campaigns using email advertising across desktop, mobile, and social

channels, based on individual customer behaviors. SAP noted that

SeeWhy would complement its Hybris platform with personalized

marketing based on real-time customer behavior that converts

customer interactions into sales. The company was based in Boston.

• Fieldglass – In March 2014, SAP announced that it agreed to acquire

Fieldglass. Fieldglass provided cloud-based vendor management

system services. Its tools help customers procure and manage

contractors and suppliers including contracts and statement of work

services. The company was based in Chicago and had more than 250

corporate customers (e.g., Verizon, AIG, American Airlines, VMware).

Madison Dearborn Partners invested $150 million for a majority stake

in 2010. Several technology articles (e.g., Crain’s Chicago Business)

reported that the deal exceeded $1 billion and PitchBook indicated it

was just under $975 million. The 451Group estimated a revenue

multiple of 11.8X.

• KXEN – In September 2013, SAP announced that it agreed to acquire

KXEN. KXEN had developed automated data mining and predictive

analytics solutions that enable business users to implement analytics,

without requiring expertise in programming or advanced math, to

improve decision making. Its InfiniteInsight software and Cloud

Prediction platform provided fast insights for customer acquisition,

cross-selling, and other related activities. Customers included Lowe’s,

CBS, Barclays, Vodafone, and Sears. The company had been

founded in 1998 and was based in San Francisco. The price was not

announced but PitchBook estimated it was $30.5 million and the

451Group indicated it was approximately $40 million with a 3.3X

revenue multiple.


• Hybris – In June 2013, SAP announced that it agreed to acquire

Hybris, a major supplier of e-commerce software solutions. The Hybris

platform enables businesses to sell products and services to

customers across many channels (Web, mobile, call center, etc.). Its

data management technology provides a single view of customers,

products, and orders across many different channels. Customers

included GE, 3M, P&G, and Levi’s. The company was founded in 1997

and was based in Switzerland. Its majority investor was HGGC. The

price was not announced but the Wall Street Journal reported that one

source indicated it was about $1 billion. The 451Group indicated

(based on SAP’s 6-K) it was $1.34 billion, and estimated that the

revenue multiple was 10.7X.

• KMS Software (Select Assets) – In April 2013, SAP acquired certain

assets from KMS Software, which provided Web-based human capital

management software and solutions for electronic onboarding, off-

boarding, forms management, and new-hire engagement. Its

XpressHR software platform assists in on-boarding new employees,

verifying employment eligibility, and processing government and

corporate forms. Customers included Bank of America, Citigroup, GE,

Kodak, and KPMG.

• Camilion – In March 2013, SAP announced the acquisition of

Camilion. Camilion developed solutions for the insurance industry for

product development, underwriting, and product life-cycle

management. Its solutions help insurance companies bring new

products to market faster and speed up transactions. SAP indicated it

would combine Camilion with its own SAP for Insurance solution to

create an “All-in-One” solution for insurance. Camilion was founded in

2001 and had been collaborating with SAP since 2008. It had offices

in Canada and the US.


• SmartOps – In February 2013, SAP announced plans to acquire

SmartOps, a provider of inventory and supply chain management

optimization solutions. The SmartOps solution helps track and analyze

inventory, capacity, demand, and lead times to help optimize inventory

and service levels. Its predictive analytics help manage global

distribution networks and supply chains. SmartOps had already had a

working relationship with SAP and had been founded in 2000.

• Ticket-Web – In February 2013, SAP announced plans to acquire

Ticket-Web, GmbH. Ticket-Web provided ticketing solutions and CRM

software for sports and entertainment promoters. It had an online

ticketing service (Entrée-tickets) and solutions for customer financial

process management and CRM. Its solutions enable venues and

promoters to market and issue tickets for a variety of events on the

web. The company was based in Germany.


A few select SAP acquisitions that occurred prior to 2013 include:

• Ariba – In May 2012, SAP announced that it agreed to acquire Ariba

for approximately $4.3 billion ($45/share), about a 20 percent premium

to Ariba’s closing price and about 8.6X trailing revenue. Ariba was a

major supplier of cloud-based Internet commerce and ePurchase

applications and was an early provider of cloud-based solutions. The

company was based in Palo Alto and had an IPO in 1999 as one of the

first successful B2B software companies.

• SuccessFactors – In December 2011, SAP announced that it entered

into an agreement to acquire SuccessFactors for approximately $3.4

billion in cash ($40/share in cash, a 52% premium to the previous

closing price). The company provided cloud-based employee

management software that helped customers in assessing employee

performance, ensure effective recruitment, and efficiently managing

other human resource related tasks. It has over 3,500 customers


around the world and generated about $91 million of revenue in the

quarter prior to the deal announcement. SuccessFactors went public

in 2007 and was based in South San Francisco.

• Sybase – In May 2010, SAP announced that it agreed to acquire

Sybase for approximately $5.8 billion ($65/share in cash, a 56%

premium). Sybase provided relational database software and allowed

SAP to provide its own database product making it less dependent on

reselling Oracle database solutions. Sybase had its IPO in 1991.

• Business Objects SA – In October 2007, SAP agreed to acquire

Business Objects for about $6.8 billion (4.8 billion euros). Business

Objects was an early leader in business intelligence software. It

reportedly had over 43,000 customers including 80 percent of the

Fortune 500. It sold a variety of products for combining and analyzing

data from various sources and displaying relevant data (reporting, data

visualization, performance management, etc.). It had major offices in

Silicon Valley, Paris, and Vancouver and had been founded in 1990.


“If you agree with everything I have said, then I have failed.”

- John Chambers, former Cisco CEO

Introduction

Cisco was founded in 1984 by Leonard Bosack (Stanford University

computer science department) and Sandy Lerner (managed computers at

Stanford’s Graduate School of Business), who were married at the time. The

company originally modified and commercialized multi-protocol routing

software that had been developed at Stanford (which became the basis for

Cisco’s original iOS software). Stanford initially viewed this as IP theft and

forced Bosack to resign and contemplated filing charges, but it subsequently

licensed the routing software to Cisco. Cisco became the leader in multi-

protocol routers and later diversified into switches and other networking

equipment. When Internet usage became pervasive in the late 1990s, Cisco

was well positioned to capitalize on the opportunity and became the world’s

most valuable company in 2000, with a market cap that exceeded $500

billion. While routers and switches still account for more than 40% of its

revenue, Cisco has diversified into a variety of other market segments (e.g.,

IP phones, WebEx, wireless, security, enterprise software).

In the quarter ending January 2017 (Q2:F17), Cisco reported revenue of

$11.58 billion. Its revenue breakout was: Switching (Catalyst and other

switches) – 28.5%, NGN Routing (routers) – 15.7%, Collaboration (IP

phones, WebEx, TelePresence, etc.) – 9.2%, Data Center (Unified

Computing System) – 6.8%, Wireless (WiFi access points and solutions

including Aironet and Meraki) – 5.5%, Security (various security software

solutions) – 4.6%, Service Provider Video (cable infrastructure and video

software) – 2.1%, Services – 26.7%, and Other – 1%.

Chapter 6: Cisco


Cisco had its IPO in 1990 and has been an acquisitive company since 1993.

In fact, the general view is that the reason Cisco became the leader in

networking was because it out-acquired many of its original competitors

(3Com, Cabletron, etc.) and bought up many of the differentiated start-ups.

For example, while Cisco was original focused on routers, it acquired

Cresendo Communications, Kalpana, and Grand Junction in the 1993-1995

timeframe. Leveraging the LAN switching technologies from these acquired

companies, Cisco developed its Catalyst family of switches, which allowed it

to become the leader in LAN switching.

Cisco has used acquisitions to diversify into a variety of other market

segments including cable infrastructure (Scientific Atlanta), optical

networking equipment (Pirelli and Cerent), home networking (Linksys),

web/video conferencing (WebEx, Tandberg), and security (Sourcefire).

During the past few years, it has focused primarily on enterprise software

acquisitions, including the recent AppDynamics deal (applications

performance management).

Select Cisco Acquisitions


The following are Cisco acquisitions since the beginning of 2013:

• AppDynamics – In January 2017, Cisco announced its intent to

acquire AppDynamics. AppDynamics was a private company, but had

already filed for an IPO (including an S-1 and two amendments) and

was expected to go public within days or weeks of when Cisco agreed

to acquire the company. AppDynamics had developed tools for

monitoring the performance of applications across delivery platforms.

By monitoring and gathering information about applications, it could

help identify potential issues and resolve slow-downs and other issues.

Cisco indicated that AppDynamics helps transform complex siloed

data into insights across an enterprise. The consideration was $3.7


billion in cash and assumed equity awards (just under $3.6 billion net

of cash). According to its latest filings, trailing revenue was

approximately $206 million (making the deal more than 17X revenue)

and trailing operating income was a loss of more than $125 million.

The company was founded in 2008 (as Singularity Technologies, and

changed its name in 2009). AppDynamics has offices in 13 countries

and about 1,200 employees and is based in San Francisco.

• Heroik Labs (Worklife) – In October 2016, Cisco announced the

acquisition of Heroik Labs (a/k/a Worklife). The company developed

software to help increase meeting productivity. It provides a variety of

meeting-related functions such making it easy to share agendas before

a meeting, take notes during a meeting, and share notes and action

items after a meeting. It was based in San Francisco.

• ContainerX – In August 2016, Cisco announced its intent to acquire

ContainerX. ContainerX was focused on the container market. It

developed technology to help enterprises manage and integrate

containers across data centers. Its solutions enable users to view their

entire infrastructure and all containers in one management console. It

also provides APIs for enterprises interested in integrating the

platform’s capabilities into custom management portals. ContainerX

had been around for less than 2 years when Cisco announced the

acquisition. It had 8 people and was based in Silicon Valley.

• CloudLock – In June 2016, Cisco announced its intent to acquire

CloudLock. CloudLock was focused on cloud security. It developed

cloud access security broker (CASB) technology that provides

enterprises with visibility and analytics around user behavior and

sensitive data in cloud services. The company used APIs to help

enterprises monitor security of documents and content that is shared

or stored in the cloud. It worked with a broad range of applications

(Office365, Salesforce, and many others). Cisco indicated the

acquisition would enhance its security portfolio and build on Cisco’s

Security Everywhere strategy. Cisco agreed to pay $293 million in


cash and assumed equity awards, plus additional retention-based

incentives. CloudLock reportedly had raised approximately $35 million

from investors such as Cedar Fund, Salesforce, and Bessemer. It was

based in the Boston area.

• Synata – In March 2016, Cisco announced the acquisition of Synata.

Synata enables users to search on-premise and cloud-based

applications simultaneously. Synata had expertise in encrypted search

and Cisco indicated Synata’s technology could work on top of Cisco

Sparks end-to-end encryption without negatively impacting speed.

Cisco noted that the technology would be used to enhance its Cisco

Spark business collaboration service. According to Crunchbase,

Synata had raised $1.5 million. Synata was based in San Francisco.

• Leaba Semiconductor – In March 2016, Cisco announced its intent

to acquire Leaba Semiconductor. Leaba was only about two years old

and had not yet introduced its first product, but was reportedly

developing a highly-integrated networking chip solution. The founding

team previously founded Dune, which had been acquired by

Broadcom. Investors included Pitango and Bessemer. Cisco agreed

to pay $320 million in cash and assumed equity awards, plus additional

retention based incentives. Leaba was based in Israel.

• CliQr Technologies – In March 2016, Cisco announced its intent to

acquire CliQr Technologies. CliQr provided an application-defined

cloud orchestration platform to model, deploy, and manage

applications, across a variety of different environments. CliQr's

CloudCenter platform helps IT organizations move applications to the

cloud, deploy self-service IT environments, or gain visibility and control

across clouds and applications. Cisco indicated the acquisition would

help customers accelerate their private, public, and hybrid cloud

deployments. Cisco had already been utilizing CliQr’s technology.

Cisco agreed to pay $260 million in cash and assumed equity awards,

plus retention based incentives. It was based in Silicon Valley.


• Jasper Technologies – In February 2016, Cisco announced it was

acquiring Jasper Technologies. Jasper developed an IoT service

platform. The platform enables companies to connect any device over

the cellular network. Jasper’s software also manages the connectivity

of IoT devices and focuses on managing and automating the lifecycle

of IoT services and solutions. The company had over 3,500 enterprise

customers and 27 service providers. Cisco indicated that Jasper would

become its IoT Cloud Business Unit. Jasper had raised approximately

$200 million, per Crunchbase. The price was approximately $1.4

billion. The 451Group estimates revenue was about $120 million

(11.7X revenue multiple). It was based in Silicon Valley.

• Acano – In November 2015, Cisco announced its intent to acquire

Acano. Acano provided collaboration infrastructure hardware and

conferencing software. Its products include gateways and video and

audio bridging technology that allows customers to connect video

systems from multiple vendors across both cloud and hybrid

environments. Cisco agreed to pay $700 million in cash and assumed

equity awards, plus additional retention based incentives. It had been

founded in 2012 and several of the key employees came from Cisco

and Tandberg. The 451Group estimates revenue was only $10 million

(70X revenue multiple). It was based in London.

• 1 Mainstream – In October 2015, Cisco announced its intent to

acquire 1 Mainstream, which provided a cloud-based video platform to

help quickly launch live and on-demand OTT video services to a variety

of connected devices. Its technology enables service providers,

broadcasters, media companies, and digital content companies to

deliver media content to almost any connected media device. Its

customers included Sky and CBS News. TV company Sky had been

an investor. PitchBook estimates the price was $125 million. It had

been founded in 2012 and was based in Silicon Valley.


• Lancope – In October 2015, Cisco announced its intent to acquire

Lancope, a network security company. Lancope provides a variety of

network behavior analytics, threat visibility, and security intelligence.

Its “NetFlow” and “StealthWatch” solutions track activity in networks in

real-time to look for erratic activity. Cisco had been a customer. Other

customers included HP and Gannett. Cisco indicated the price was

$452.5 million in cash and assumed equity awards, plus retention

incentives. Investors included Canaan Partners, HIG Partners, and

GMG Capital. The 451Group estimates it had about $75 million of

revenue (6X). The company was based in Alpharetta, Georgia.

• ParStream – In October 2015, Cisco announced its intent to acquire

ParStream. ParStream provided an analytics database that allows

companies to analyze large amounts of data and store the data in near

real-time anywhere in the network. ParStream’s database was built

specifically for IoT environments as it allows customers to analyze

large amounts of data with minimal infrastructure. Its solution included

advanced compression and indexing capabilities. ParStream was

based in Germany.

• Portcullis – In September 2015, Cisco announced its intent to acquire

Portcullis, a cybersecurity consulting firm. Portcullis’ consulting

services include vulnerability assessments, forensic testing, security

training, and security audits. Most of its clients were based in Europe,

and it was located in the UK.

• Pawaa – In August 2015, Cisco announced that it acquired Pawaa.

Pawaa was a policy-based document sharing company and provided

secure on-premise and cloud-based file sharing software. Pawaa had

been part of Cisco’s Entrepreneurs in Residence program. It was

based in Bangalore, India. PitchBook estimates the price was only

about $5 million.


• MaintenanceNet – In July 2015, Cisco announced its intent to acquire

MaintenanceNet. MaintenanceNet provided a cloud-based software

platform that uses data analytics and automation to manage renewals

of recurring customer contracts and related activities. Its software

identifies customers with service contracts that are coming up for

renewal or with products that are not yet covered, and provides

automated quoting and notifications. Cisco had already been working

with MaintenanceNet since 2009. Cisco indicated it would pay $139

million in cash and retention incentives. It was based in California.

• OpenDNS – In June 2015, Cisco announced it was acquiring

OpenDNS, a security-as-a-service company. OpenDNS funnels

customer traffic through its own DNS servers which incorporate a

variety of web filtering technologies to avoid malware and other

security issues. OpenDNS had many data centers around the world

and indicated that it had more than 65 million customers and managed

about 70 billion DNS requests per day (and each provides it with data

to learn from and help avoid security issues). The announced price

was $635 million in cash. The 451Group estimates a revenue multiple

of about 25X. The company was based in San Francisco.

• Piston Cloud Computing – In June 2015, Cisco announced its intent

to acquire Piston Cloud Computing. Piston OpenStack was a software

product that automated the orchestration of a private cloud

environment on commodity servers. Cisco implied the acquisition was

more of an acqui-hire as it indicated that Piston’s distributed systems

engineering and OpenStack talent would enhance Cisco’s capabilities

in cloud automation and bring operational experience on the

infrastructure that powers Cisco’s OpenStack Private Cloud. Cisco

noted that the company had expertise in distributed systems and

automated deployment. Piston was based in San Francisco.


• Tropo – In May 2015, Cisco announced its intent to acquire Tropo.

Tropo provided cloud-based APIs that enables developers to more

easily embed real-time communications in their applications. Tropo’s

APIs were used by over 200K developers. Cisco indicated the

technology would be used in a collaboration platform-as-a-service.

Tropo was based in Silicon Valley.

• Embrane – In April 2015, Cisco announced its intent to acquire

Embrane. Embrane provided a lifecycle management platform for

application-centric network services. Embrane’s Heleos platform

allows network operators to create and shut down instantiations of

network services, helping service providers automatically manage and

configure networks. Cisco indicated the acquisition would enhance the

capabilities of its Application Centric Infrastructure (ACI). The founders

were previously Cisco executives. The 451Group estimates the

consideration was about $55 million and that the company had only

about $1.5 million of revenue. It was based in Silicon Valley.

• Neohapsis – In December 2014, Cisco announced its intent to acquire

Neohapsis. The company provided consulting and services related to

information security, risk management, and compliance. Many of its

clients were large enterprises, including Fortune 500 companies. It

specialized in penetration testing, risk assessment, and networking

infrastructure evaluations. Cisco indicated the team would become

part of Cisco Security Services. PitchBook estimates the deal size at

$35 million. It was based in Chicago.

• Metacloud – In September 2014, Cisco announced its intent to acquire

Metacloud. Metacloud developed and operated private clouds using

an “OpenStack-as-a-Service” model. Metacloud allows service

providers to combine public cloud deployments with remotely managed

OpenStack private clouds, and to deliver Intercloud offerings to their

customers. Cisco indicated that Metacloud would help accelerate its

strategy to build a global Intercloud. The 451Group estimates the deal

size was $149 million. It was based in Pasadena, California.


• Memoir Systems – In September 2014, Cisco announced its intent to

acquire Memoir Systems. Memoir developed semiconductor memory

IP and tools that enabled ASIC and SoC developers to create high

speed programmable chips for networking applications. Specifically,

Memoir had soft-logic IP that it indicated could speed up memory

access by as much as 10X, while reducing memory footprint. Memoir

achieves this by having 10 ports that can simultaneously access

independent addresses in the same memory bank in the same clock

cycle at full speed (rather a single operation per clock cycle which is

typical). Cisco indicated the technology was important for 100G

networking and it was already using the technology in its Nexus 9000

switches. Memoir was based in Silicon Valley.

• Assemblage – In June 2014, Cisco announced the acquisition of

Assemblage. Assemblage provided collaboration apps for real-time

shared whiteboarding, presentation broadcasting, and screen sharing.

The technology enables users to collaborate via browsers by

accessing collaboration apps from the cloud. It supports 40 different

file types to enable quick and efficient collaboration. As it listed its

headquarters as San Francisco, we classified it as a US company,

although it had an office in (and its founders were from) Denmark.

PitchBook estimates the deal was just over $2 million.

• Tail-f Systems – In June 2014, Cisco announced its intent to acquire

Tail-f, which provided multi-vendor network service orchestration

solutions. Tail-f’s products help service providers and enterprise IT

organizations implement applications, network services, and solutions

across networking devices. It provides a single view of infrastructure

(layer 2 to 7) across all hardware devices and enables easier

provisioning across a variety of environments. Its customers included

AT&T and Deutsche Telekcom. Cisco indicated it paid $175 million

including retention. Reports significantly vary on how much revenue

Tail-f had (from $10 million to over $30 million). The company was

based in Stockholm, Sweden.


• ThreatGrid – In May 2014, Cisco announced its intent to acquire

ThreatGrid. ThreatGrid provided cybersecurity solutions that included

sandboxing technology and malware analysis. ThreatGrid reportedly

had close ties to Sourcefire, which Cisco had previously acquired and

Cisco indicated that the technology would be integrated into the

FireAmp malware detection solution that it obtained from Sourcefire.

The 451Group estimates that the price was about $55 million. It had

approximately 25 employees and was based in New York.

• Collaborate – In December 2013, Cisco announced the acquisition of

Collaborate.com (also known as Kibits). Collaborate created a mobile

collaboration application that provides unified document sharing, task

management, and team communication capabilities. The solution

helps the mobile workforce to collaborate with team members on

projects. Users can create virtual collaboration rooms where they can

chat and share documents, notes, photos, and videos. PitchBook

estimates the deal size was $26 million. It was based in Boston.

• Insieme Networks – In November 2013, Cisco officially disclosed a

stealth start-up named Insieme Networks and also announced that it

was acquiring the company. Insieme was a “spin-in.” Reportedly,

Cisco previously funded the company with $135 million and had an

option to acquire it for $700 million, which it exercised. The founders

of Insieme had been long-time Cisco executives. Insieme was focused

on developing software defined networking (SDN) solutions for the

switching/routing market. It was based in Silicon Valley.

• Whiptail – In September 2013, Cisco announced its intent to acquire

Whiptail. Whiptail provided scalable solid state memory systems.

Cisco indicated the price was approximately $415 million in cash and

retention. Whiptail’s solutions included the Accela all-flash storage

array and INVICTA, which supported scaling, high-availability, modular

and multi-protocol technology. Whiptail had already been a Cisco

partner. Investors included Ignition Partners, RRE Ventures, Spring

Mountain, and SanDisk. The 451Group estimates it had about $20

million of revenue (over 20X multiple). It was based in New Jersey.


• Sourcefire – In July 2013, Cisco announced that it agreed to acquire

Sourcefire for $76/share in cash or $2.7 billion (about a 29% premium

to where the stock had traded), or just under $2.5 billion net of cash.

Sourcefire was a supplier of intelligent cybersecurity solutions. Its

solutions focused on network security and malware protection. Its

products included the Firepower family of security appliances (intrusion

prevention systems, firewalls, etc.) and its Advanced Malware

Protection solution which uses analytics to protect networks and

endpoints. Most of its solutions are based on Snort, an open-source

intrusion detection system (IDS). Sourcefire indicated that its threat-

centric approach provides customers with protection before, during,

and after an attack. It had about $233 million of trailing revenue (10.7X

revenue multiple). It was based in Maryland.

• Composite Software – In June 2013, Cisco announced it was

acquiring Composite Software. Composite provided data virtualization

software and services. The Composite Data Virtualization Platform is

data virtualization middleware that virtualizes data from across the

network and makes it appear as if the data is in one location. It

provides users with a consolidated view of data to assist in making

better decisions. Cisco indicated that it would pay approximately $180

million in cash and retention-based incentives. Composite was based

in Silicon Valley.

• JouleX – In May 2013, Cisco announced its intent to acquire JouleX,

which developed software for enterprise IT energy management. Its

solutions gain visibility into networked devices for energy

management, analytics, and compliance. This can help reduce the

energy costs associate with enterprise IT, without the need for meters

or device-side agents. Cisco indicated that it would pay $107 million

in cash and retention. The 451Group estimates the revenue multiple

at just under 12X. The company was based in Atlanta, but was

originally based in Munich, Germany and still had R&D there.


• Ubiquisys – In April 2013, Cisco announced its intent to acquire

Ubiquisys. Ubiquisys was a supplier of 3G and LTE small-cell

technologies for heterogeneous networks. Cisco indicated that the

acquisition would enable a comprehensive small-cell solution for

service providers that supports the transition to next-generation radio

access networks. It had approximately 70 carrier customers including

T-Mobile, Google, and Softbank. Cisco indicated that it was paying

$310 million in cash and retention incentives. It was based in the UK.

• SolveDirect – In March 2013, Cisco announced its intent to acquire

SolveDirect. SolveDirect provided cloud-based solutions that enable

enterprises to automate the sharing of data and workflows with service

partners to drive operational efficiencies. Historically, sharing data in

a secure manner required significant manual effort, which SolveDirect

helps eliminate. SolveDirect's primary solution was ServiceGrid, a

platform that can monitor service level agreements and implement a

variety of workflows. The reported implied value was about $21.2

million with trailing revenue of $8.2 million (2.6X). SolveDirect was

located in Vienna, Austria.

• Cognitive Security – In January 2013, Cisco announced it agreed to

acquire Cognitive Security. Cognitive focused on using artificial

intelligence to detect cyber threats through behavioral analysis of real-

time data. Cisco indicated the team would join its Security Technology

Group. The company reportedly had 28 employees. Cognitive was

based in Prague, Czech Republic.

• Intucell – In January 2013, Cisco announced it was acquiring Intucell

for $475 million in cash. Intucell provided self-optimizing network

software which helps carriers manage and configure their networks

automatically based on network demands. This helps towers

communicate and reduce dropped calls and improves mobile network

speeds. The company had raised about $6 million from Bessemer.

The 451Group estimates the revenue multiple was nearly 16X. It was

based in Israel.



Some major Cisco acquisitions made prior to 2013 include:

• Meraki – In November 2012, Cisco announced that it was acquiring

Meraki for approximately $1.2 billion. Meraki provided solutions to

enable on-premise mesh Wi-Fi networking, as well related security and

management solutions. It grew out of a project at MIT. Investors

included Google, Felicis Ventures, and Sequoia. Meraki had

reportedly reached the $100 million revenue run rate. Cisco indicated

the deal would help customers empower mobile workforces and

generate new revenue opportunities for its partners.

• NDS – In March 2012, Cisco announced its intent to acquire NDS

Group for approximately $5 billion, including the assumption of debt

and retention-based incentives. NDS provided software to assist

media companies and service providers with securely delivering video

and entertainment offerings. Its customers included Cox and DirecTV.

Cisco indicated the deal would expand its Videoscape platform. NDS

was owned by Permira and News Corp and was founded in Israel.

• Tandberg – In October 2009, Cisco announced that it agreed to

acquire Tandberg for approximately $3 billion. Tandberg was based in

Norway and provided a variety of teleconferencing systems including

network infrastructure and video conferencing equipment. Cisco noted

that the products would be integrated into its TelePresence portfolio.

• Starent – In October 2009, Cisco announced that it agreed to acquire

Starent Networks for approximately $2.9 billion. Starent was a public

company and a provider of IP-based mobile infrastructure networking

equipment. Its solutions enabled mobile operators to provide

multimedia services (e.g., video, Internet access, VoIP, etc.) to

subscribers.


• Pure Digital (Flip Video) – In May 2009, Cisco acquired Pure Digital

for $590 million in stock. Pure Digital was primarily known for its Flip

consumer video cameras. Cisco indicated the acquisition would

enable it to more quickly penetrate the consumer markets. However,

Cisco announced a restructuring a couple of years later in which it shut

the Flip business unit down.

• Nuova – In April 2008, Cisco agreed to acquire Nuova Systems.

Nuova developed data center networking equipment and its first

product was a 10 gigabit Ethernet switch that supported virtualization.

Several of the executives were former Cisco executives and it was

referred to as a “spin-in” transaction.

• WebEx – In March 2007, Cisco agreed to acquire WebEx for

approximately $3.2 billion in cash ($2.9 billion net of its $300 million of

cash). WebEx provides online video conferencing solutions. In 2006,

WebEx had reportedly generated $380 million of revenue and almost

$50 million of operating income.

• IronPort – In January 2007, Cisco announced it was acquiring IronPort

Systems for $830 million. IronPort was a security company focused

on enterprise applications such as spam and spyware protection.

• Scientific Atlanta – In November 2005, Cisco agreed to acquire

Scientific Atlanta for approximately $6.9 billion in cash. Scientific

Atlanta was a major supplier of video set-top boxes and video

distribution infrastructure for the cable TV market.

Some older notable transactions included Linksys (2003, home networking

equipment, $500 million), Andiamo (2002, data storage products, $2.5

billion), Arrowpoint (2000, LAN switching equipment, $5.7 billion), Pirelli

(1999, fiber optic communications, over $2.1 billion), IBM’s Networking unit

(1999, networking hardware equipment unit divested by IBM, $2 billion),

Cerent (1999, optical/SONET communications equipment, $6.9 billion),

Geotel Communications (1999, Voice-over-IP communications solutions,

$2 billion), and Stratacom (1996, ATM switching equipment, $4 billion).


Although not large in terms of deal size, several of Cisco’s early LAN

switching acquisitions, including Crescendo (1993, $94.5 million), Kalpana

(1994, $204 million), and Grand Junction (1995), were critical to

establishing Cisco’s networking switch business, which remains its largest

business unit.


“Data is the new science. Big Data holds the answers.

Are you asking the right questions?”

- Patrick P. Gelsinger, former CEO of VMware

Introduction

VMware was founded in 1998 and has been a pioneer in virtualization

technology. The company was acquired by EMC in 2003 for $625 million

and EMC later sold 15% of its VMware equity to public investors through a

VMware IPO in 2007. In 2013, VMware announced its Infrastructure-as-a-

Service vCloud Hybrid Service (vCloud Air). With Dell’s acquisition of EMC,

VMware is now a subsidiary of Dell Technologies (per VMware’s 10-K, Dell

controlled approximately 82.8% of VMware’s outstanding common stock as

of the end of 2016, although VMware announced in March 2017 that it was

buying $300 million of its stock from Dell as part of a stock buyback program).

Despite the Dell ownership, VMware remains a publicly traded company.

In the December 2016 quarter (Q4:F16), VMware had revenue of just over

$2 billion, with 44% from licensing and 56% from services.

VMware has been a leader in enterprise virtualization technologies, but has

expanded into other markets and technologies including mobile device

management, security, and applications delivery. Its largest acquisition was

AirWatch (mobile device management) in 2014 for about $1.5 billion.

Chapter 7: VMware


Select VMware Acquisitions


The following are VMware acquisitions since the beginning of 2013:

• PlumGrid (IP and assets) – In December 2016, there were several

reports that VMware acquired IP assets and hired several employees

from PlumGrid. PlumGrid developed software defined networking

(SDN) technology solutions. Its IO Visor solution is an I/O processor

that sits in the Linux kernel and controls virtual domains for network

virtualization, monitoring, and security. According to Crunchbase,

PlumGrid has raised approximately $46 million.

• Arkin Net – In June 2016, VMware announced its intent to acquire

Arkin Net, which provided software defined data center security and

operations solutions. Its solutions enable customers to obtain deep

operational visibility into security, applications availability, and the data

center. Arkin was already a VMware partner and VMware indicated

Arkin would help accelerate adoption of its NSX and software defined

data centers. Arkin also integrates with networking systems from

Cisco, Juniper, Brocade, and others.

• Boxer – In October 2015, VMware announced plans to acquire Boxer

and indicated that it would be integrated into its AirWatch unit. Boxer

developed a personal information/email management solution for

enterprises that utilizes a container approach to security and

applications management. Its email management solution integrates

with other applications such as Facebook, Salesforce, Yahoo, Box,

Dropbox, and Twitter. Boxer initially focused on iOS applications but

previously made a small acquisition of its own (Enhanced Email) to

expand to Android devices.


• Immidio – In February 2015, VMware announced that it had acquired

Immidio, which provided a user environment management system

solution. Immidio’s solution enables enterprises to provision

applications and settings to users regardless of the device or operating

system. Immidio was founded in 2008 and based in Amsterdam.

• Continuent – In October 2014, VMware announced it acquired the

assets of Continuent. Continuent developed database clustering and

replication technologies. Continuent helps enterprises run business-

critical applications on cost-effective open source software. VMware

indicated that it planned to incorporate the technology into its vCloud

Air public cloud, and will initially continue to provide Continuent’s

Tungsten solution as an infrastructure agnostic hybrid solution.

Continuent was founded in 2004.

• CloudVolumes – In August 2014, VMware announced the acquisition

of CloudVolumes, which provided real-time application delivery

solutions that help enterprises deliver applications to virtualized

environments. It solutions help virtualize everything above the

operating system and can deliver server or desktop workloads to any

virtual machine. PitchBook estimates the deal size as $45 million. The

company was based in Silicon Valley.

• Virtual Systems (Certain Assets) – In April 2014, PitchBook

indicated that VMware acquired certain cloud-based migration assets

from Virtual Systems Solutions. It was based in Singapore.

• Third Sky (certain assets) – In March 2014, VMware acquired most

of Third Sky, a provider of IT service management consulting,

education, and technology, although it indicated that some

assets/customers were not part of the deal and that Third Sky would

remain a separate entity. VMware stated that the biggest issue for

many customers is not the technology itself but how to best optimize

and manage it and, therefore, comprehensive services were important.

Third Sky was based in San Francisco.


• AirWatch – In January 2014, VMware announced the acquisition of

AirWatch, a major supplier of mobile device management software, for

approximately $1.54 billion ($1.18 billion in cash and $364 million in

installment payments and assumed unvested equity). AirWatch had a

broad range of software supporting BYOD, container management,

mobile security, email management, and other solutions that help

enterprises manage mobile access. Forbes reported that its sources

indicated that AirWatch had revenue in the $85-100 million range,

putting the valuation at more than 15X revenue. The company was

founded in 2003 as Wandering WiFi and received a $200 million

funding in 2013 from Insight Ventures and Accel.

• Desktone – In October 2013, VMware announced that it acquired

Desktone, which provided a desktop virtualization platform for

delivering Windows desktops and applications as a cloud service. Its

desktop-as-a-service solution helps accelerate the move of desktops

to the cloud, with each user obtaining a separate virtual environment.

Its customers included Dell, NEC, Fujitsu, and Time Warner Cable. Its

investors included Softbank and Highland Capital. The company was

founded in 2007 and was based in Boston.

• Virsto – In February 2013, VMware announced it signed an agreement

to acquire Virsto Software, which provided software that optimizes

storage performance in virtual environments. Virsto was based in

Silicon Valley. Its solution improves utilization, increases performance,

and accelerates VM storage provisioning, while also reducing the cost

and complexity for cloud computing and applications virtualization. It

was founded in 2007 and based in Silicon Valley. Investors included

August Capital, Canaan, Interwest, Southern Cross, and Correlation

Ventures. The price was not announced but the 451Group estimates

that it was $184.5 million and that the company had only a couple

million of revenue (92X).



A couple of major VMware acquisitions made prior to 2013 include:

• Nicira – In July 2012, VMware announced it agreed to acquire Nicira

for approximately $1.26 billion (a little over $1 billion in cash, with the

rest in stock). Nicira was focused on software defined networking

(SDN) and virtualizing the network. Nicira created proprietary versions

of the OpenFlow, Open vSwitch, and OpenStack networking projects.

It had been in stealth mode for five years. It reportedly had raised

approximately $50 million from investors that included Andreessen

Horowitz, Lightspeed Venture Partners, and New Enterprise

Associates. Reports indicated that the acquisition led to a rift between

Cisco and EMC, as Nicira was viewed as competitive with Cisco.

• SpringSource – In August 2009, WMware announced the acquisition

of SpringSource, which provided Web application development and

management tools and services. It was a strong supporter of “lean

software.” VMware indicated that the acquisition would help its clients

more efficiently build and manage applications, both internal and in the

cloud. The consideration was approximately $420 million, including

$362 million in cash and equity and an assumption of $58 million of

unvested stock and options.


“Set out to build a company and make a contribution,

not an empire and a fortune.”

- Bill Hewlett and David Packard, HP Cofounders

Introduction

Bill Hewlett and David Packard started their company Hewlett-Packard (HP)

in Packard's garage in 1939, with an initial capital investment of $538. Their

first successful product was an audio oscillator. The company expanded into

a variety of laboratory instrumentation and later became a major supplier of

calculators, computers, printers, servers, network equipment, storage,

software, and other electronics.

In 1999, the company spun off its electronic test and instrumentation and

semiconductor businesses (which became Agilent; later Agilent spun off the

semiconductor piece as Avago, which later acquired Broadcom and is now

Broadcom Limited). HP acquired Compaq in 2001 to help consolidate the

PC market.

In November 2015, Hewlett-Packard split into two publicly traded companies:

Hewlett Packard Enterprise (servers, storage, software, networking

equipment, services) and HP (desktop PCs, notebook PCs, printers,

displays, and other related products).

In May 2016, HP Enterprise (HPE) announced it would spin-off its Enterprise

Services unit (much of which came from its acquisition of EDS in 2008) and

merge it with CSC to form DXC Technology. The spin-off was completed at

the beginning of April, 2017. However, HPE retained its Pointnext

technology services unit.

Chapter 8: HP Enterprise


In the January 2017 quarter (Q1:F17), HPE had revenue of $11.4 billion, with

the following breakout: Enterprise Group (servers, storage, networking,

technology services) – 55.4%, Enterprise Services – 35.4%, Software –

6.3%, Financial Services – 7.2%, and Corporate (intersegment eliminations)

– negative 4.4%. This was prior to the spin-off of Enterprise Services.

HP had been a fairly active acquirer through 2011, making several high-

profile acquisitions in 2010 and 2011 (e.g., 3Com, Palm, 3Par, ArcSight,

Vertica, and Autonomy). However, with Meg Whitman taking over the CEO

position in September 2011 and the general view that HP had significantly

overpaid for many of its acquisitions (especially Autonomy), HP all but

stopped its M&A activity for a couple of years (2012, 2013), before making a

few acquisitions in 2014 and 2015. HPE has recently become very active

with several acquisitions during the past few months.

Select HP Enterprise Acquisitions


The following is a list of acquisitions made by Hewlett-Packard or Hewlett-

Packard Enterprise (since the company was split in 2015) since the

beginning of 2013. It excludes acquisitions made by HP after the split (e.g.,

Samsung’s printer unit). It also excludes the spin-out of the HPE services

unit and its merger with CSC to form DXC since it will not be part of HPE.

• Nimble Storage – In March 2017, Hewlett-Packard Enterprise

announced it agreed to acquire Nimble Storage, a public supplier of

Flash-based storage arrays, for $12.50/share in cash (about a 45%

premium to where the stock previously traded) or approximately $1.1

billion ($917 million net of cash). HPE indicated that Nimble’s

predictive flash offerings for the entry to midrange segments would

complement its midrange to high-end 3Par solutions, allowing it to

provide a full range of flash storage solutions. HPE also indicated it

would incorporate Nimble’s InfoSight Predictive Analytics platform


across its storage portfolio. Nimble had revenue of $402.6 million in

its previous fiscal year (ending January 2017), resulting in a revenue

multiple of about 2.3X. Nimble had a GAAP operating loss of $156.6

million and a non-GAAP reported loss of $61.1 million in its previous

fiscal year. It was based in Silicon Valley.

• Niara – In February 2017, Hewlett-Packard Enterprise announced it

agreed to acquire Niara. Niara developed behavior analytics solutions

to help its customers detect and protect themselves against advanced

cyber-attacks that have penetrated perimeter defenses. Its solution

utilizes machine learning technologies. The Niara solution establishes

baseline characteristics for all users and devices across the enterprise.

Subsequently, the software looks for anomalous, inconsistent activities

that may indicate a security threat. HPE indicated it planned to

incorporate the technology into its Aruba ClearPass solution.

PitchBook estimates the deal size as $40 million. The 451Group

estimates it was $55 million with $2 million of trailing revenue. Niara

was based in Silicon Valley.

• Cloud Cruiser – In January 2017, HPE announced that it agreed to

acquire Cloud Cruiser, which helps enterprises track and control the

use of public and private cloud computing. Cloud Cruiser's analytics

enable companies to measure, analyze, and control their usage and

spend in private, public, and hybrid cloud environments. Customers

included Accenture, KPN, and TD Bank. It was founded in 2010 and

based in Silicon Valley.

• SimpliVity – In January 2017, HPE announced it agreed to acquire

SimpliVity, which provided software-defined, hyper-converged

infrastructure. HPE indicated that it intends to offer the SimpliVity

Omni Stack software qualified for its ProLiant DL380 servers, and then

offer a range of integrated HPE SimpliVity hyper-converged systems

based on HPE ProLiant Servers. The price was $650 million. The

451Group estimates revenue was about $100 million (6.5X multiple).

The company was founded in 2009 and was based in Massachusetts.


• SGI – In August 2016, Hewlett-Packard Enterprise announced it

agreed to acquire SGI for $7.75/share in cash (about a 30% premium

to where SGI’s stock had traded) or approximately $275 million, net of

cash and debt. SGI was founded in 2009 when Rackable Systems

acquired Silicon Graphics, after Silicon Graphics filed for bankruptcy,

and changed the name of the combined company to SGI. Silicon

Graphics was founded in 1981 and was considered one of the hottest

tech companies during the 1980s and early 1990s. Its initial focus was

advanced 3D graphics workstations and it developed a variety of

graphics innovations, but ran into a variety of issues as the

performance of conventional PCs improved. SGI focused on high

performance computing and supercomputers, and provided high-end

servers, storage, and software. It had 1,100 customers including many

in the scientific, government, and technical community. Revenue in

F2016 was $533 million (about 0.5X revenue). The acquisition was

completed in early November, 2016.

• Rasa Networks – In May 2016, a number of tech magazines (e.g.,

Network World) reported that HPE signed an agreement to acquire

Rasa Networks. Rasa developed network performance and analytics

solutions, and reports indicated that its solutions would be used by

HPE’s Aruba unit for creating a unified wired/wireless networking

management framework. The founder had previously worked at Cisco.

• Trilead – In February 2016, Trilead announced that it became part of

HP Enterprise. The company offered low cost data protection software

for VMware vSphere and Microsoft Hyper-V environments. It offered

a free edition that could do a simple back up of a virtual machine, but

also provided Pro and Enterprise versions that offered many more

back-up features and support for a variety of products. The company

was based in Switzerland.

• NetCam – In July 2015, PitchBook reported that Japan Systems, a

subsidiary of Hewlett-Packard, acquired Japanese-based NetCam

Systems (camera control software for CCTV) for $8.6 million.


• ActiveState's Stackato Unit – In July 2015, Hewlett-Packard

announced that it was acquiring ActiveState Software’s Stackato

business. The Stackato unit provided an enterprise-ready Platform as

a Service (PaaS) solution based on the Cloud Foundry open standard.

ActiveState was based in Vancouver, Canada.

• ConteXtream – In May 2015, HP indicated that it acquired

ConteXtream, which had developed software defined networking

(SDN) and network function virtualization (NFV) solutions. It generally

targeted service providers and indicated it had a major US wireless

carrier as a customer. Investors included Benamou, Comcast,

Norwest, Gemini, Sofinnova, and Verizon. It was founded in 2007.

• Aruba Networks – In March 2015, HP announced that it reached an

agreement to acquire Aruba Networks for approximately $3 billion, or

$2.7 billion net of cash and debt ($24.67/share, about a 34% premium

to where the stock had traded when preliminary reports of the deal first

emerged in February 2015, but about 9% from when the deal was

officially announced). Aruba provided a variety of mobile network

access devices and related solutions for enterprises. Aruba’s products

included WiFi access points, controllers, and analytics products, as

well as security and networking management solutions for mobility

networks. Aruba had revenue of about $729 million in F2014 (deal

multiple of about 3.7X). It was based in Silicon Valley.

• Voltage Security – In February 2015, Voltage Security announced it

signed an agreement to be acquired by HP. Voltage provided data-

centric encryption and tokenization technology, with a focus on

protecting payment data. HP indicated that it would fold it into its Atalla

security unit. The company was founded in 2002 by a Stanford

professor and three of his students. The 451Group estimates the value

at $175 million, with a revenue multiple of 5X. Investors included

Hummer Winbald, Jafco, Menlo Ventures, Morgenthaler, and Siemens

Capital. It was based in Silicon Valley.


• Mind Pirate’s Callisto Platform – In December 2014, Mind Pirate

announced that its Callisto Platform was acquired by Hewlett

Packard's IoT & Wearables Group. The company developed a

platform for wearable computing applications to make it easier for

developers and OEMs to deploy apps across IoT and wearable

applications. It was based in Silicon Valley.

• Eucalyptus – In September 2014, HP announced it signed an

agreement to acquire Eucalyptus, which provided open source

software for building enterprise clouds, including both private and

hybrid clouds. It was particularly known for its Amazon Web Services-

compliant private cloud solutions. The price was not announced but

Forbes indicated its sources indicated it was below $100 million but

above the $55 million the company had raised.

• Shunra – In April 2014, HP indicated that it signed an agreement to

acquire the network virtualization business and technology of Shunra.

Shunra’s solutions enable testing of mobile software applications prior

to deployment, enabling developers to find problems across many

environments and fix potential issues before the software is released.

It had already been an HP partner. The price was not announced but

reports indicated that it was between $25 million and $50 million.


Some HP acquisitions made prior to 2013 include:

• Autonomy – In August 2011, HP announced it reached an agreement

to acquire UK-based Autonomy for approximately $11.7 billion (about

a 64% premium to where the stock had traded). Autonomy’s solutions

were focused on analysis of large scale unstructured big data. In

November 2012, HP indicated it was taking an $8.8 billion accounting

charge after claiming "serious accounting improprieties" and "outright

misrepresentations” associated with the deal.


• ArcSight – In September 2010, HP announced an agreement to

acquire ArcSight for $1.5 billion. ArcSight provided a variety of

enterprise cybersecurity and compliance software solutions.

• 3Par – In September 2010, HP announced an agreement to acquire

3Par for $2.35 billion. 3Par was a supplier of utility storage (highly

virtualized multi-tenant storage arrays built for public and private cloud

computing).

• Palm – In April 2010, HP agreed to acquire Palm for approximately

$1.2 billion (about a 23% premium to where the stock had traded). At

one point, Palm had been a leader in mobile devices with its Palm Pilot

solutions.

• 3Com – In November 2009, HP agreed to acquire 3Com for

approximately $2.7 billion. 3Com was a major supplier of Ethernet

switches and other networking equipment.

Some large older acquisitions include EDS (IT services and consulting) in

2008 for $13.3 billion, Opsware (data center automation software) in 2007

for $1.6 billion, Mercury Interactive (IT management software and services)

in 2006 for $4.5 billion, and Compaq Computer (PCs) in 2002 for $25 billion.


“I always worry about the start-ups. The people who are in the

garage right now inventing new products and not having a

business model to preserve.”

- Shantanu Narayen, Adobe CEO

Introduction

Adobe Systems was founded in 1982. The co-founders (John Warnock and

Charles Geschke) had been working at Xerox PARC but formed Adobe to

sell the PostScript language. The solution was released in 1984 and Apple

decided to use the technology in its LaserWriter printers, which provided

Apple with advantages for desktop publishing and was a catalyst for Adobe’s

business. Adobe subsequently introduced a variety of consumer software

solutions including Photoshop (1989), Acrobat (1993), and Media Player

(2008). Its acquisition of Macromedia in 2005 also greatly expanded its

product offerings (e.g., Flash animation software, Dreamweaver, etc.). In

2011, Adobe announced its Creative Cloud solution which is a software-as-

a-service offering that includes a suite of software for graphic design, video

editing, web development, photography, and cloud services.

In its Q1:F17 quarter (ended March 3, 2017), Adobe reported revenue of

$1.68 billion. Its revenue breakout was: Subscription – 82%, Products –

11%, and Support/Services – 7%. Its breakout by business unit was: Digital

Media (including Creative Cloud, Document Cloud, Photoshop, Illustrator,

Premier Pro, etc.) – 68%; Marketing Cloud (Analytics, Target, Social, Media

Optimizer, Audience Manager, TubeMogul, etc.) – 28%, and Other – 4%.

Within Digital Media (68% of revenue), Creative Cloud represented 56% of

total revenue, with other Digital Media accounting for 12%.

Chapter 9: Adobe


With respect to acquisitions, Adobe isn’t as active as some of the other

companies mentioned in this report, but it generally acquires at least a couple

of companies each year and occasionally has years in which it is very active

(e.g., 2006, 2011). Its most significant deal was Macromedia in 2005 which,

as previously noted, greatly expanded its product line. Its acquisition of

Neolane provided it with a presence in marketing automation solutions.

Select Adobe Acquisitions


The following is a list of Adobe acquisitions since the beginning of 2013:

• TubeMogul – In November 2016, Adobe announced that it entered

into an agreement to acquire TubeMogul for $14 per share (about an

82.5% premium to where the stock had previously traded), or

approximately $540 million net of debt and cash. TubeMogul provided

a video advertising platform that enabled brands and agencies to plan

and buy video ads across a variety of channels (PCs, mobile, TVs,

etc.). TubeMogul’s video demand-side platform was utilized by many

customers, including several that were also Adobe Marketing Cloud

customers (e.g., Allstate, Johnson & Johnson, Kraft, Liberty Mutual

L’Oreal, Southwest Airlines). TubeMogul had approximately $212

million of trailing revenue (about a 2.5X multiple). The company was

based in California.

• Livefyre – In May 2016, Adobe announced it agreed to acquire

Livefyre. Livefyre’s solutions provide an online commenting system as

well as tools to assist enterprises in engaging with their audiences.

Adobe noted that Livefyre enables brands to integrate real-time social

experiences into their content strategy. Adobe indicated it would

include the Livefyre technology in its content management service

(Experience Manager) but continue to offer it as a stand-alone solution.


• ComScore’s Digital Analytix Unit – In November 2015, Adobe

announced it agreed to acquire the Digital Analytix business (including

products and customer accounts) from ComScore. The unit focused

on enterprise analytics. Adobe indicated that the acquisition would

expand the Adobe Analytics footprint in the enterprise media and

entertainment vertical. ComScore indicated the price was $45 million.

• Mixamo – In June 2015, Adobe indicated that it had acquired Mixamo.

Mixamo was a 3D graphics technology company. Adobe had

previously partnered with Mixamo to develop 3D workflows and noted

that it would integrate Mixamo’s technology into Photoshop (to enable

designers to better create and customize 3D content) and Creative

Cloud. Mixamo had reportedly raised about $11 million from investors,

which included AMD, Granite, and Keynote.

• Collective’s DCO Technology – In April 2015, Adobe announced the

acquisition of the Dynamic Creative Optimization (DCO) technology

(Ensemble) from Collective. Adobe indicated that the acquired

platform would provide advertisers with tools to build and deploy ads

through Adobe Media Optimizer in real-time. The technology was

originally developed by Tumri, which Collective acquired in 2011.

• Fotolia – In December 2014, Adobe announced that it agreed to

acquire Fotolia. Fotolia was a stock photo and video website that

contained over 34 million images and videos. Adobe indicated that

Fotolia would continue to operate as a stand-alone business, but that

it would be integrated into Adobe’s Creative Cloud Service. Fotolia

was based in New York and was owned by KKR, TA Associates, and

management. The price wasn’t announced but was reportedly

approximately $800 million. PitchBook estimates it was $860 million.

• Aviary – In September 2014, Aviary announced that it had been

acquired by Adobe. Aviary provided a software development kit that

enables developers to incorporate photo-editing into their apps. In

addition, Aviary had created a variety of its own apps. Aviary indicated


that its technology had been used to edit more than 10 billion photos.

Some of its clients included Walgreens and Yahoo. Aviary stated that

its tools would continue to be available, but that the team would work

with Adobe to provide solutions combining technology from both

companies. It had reportedly raised nearly $20 million from investors

that included Spark Capital, Vision Ventures, and Bezos Expeditions.

• Search Discovery’s Satellite Unit – In July 2013, Satellite indicated

that it had been acquired by Adobe. Satellite was focused on tag

management technology to help marketing agencies with media

tracking across websites. It was part of a larger marketing agency

named Search Discovery. The 451Group estimates the deal size was

only $6 million. It was based in Atlanta.

• Neolane – In June 2013, Adobe announced it agreed to acquire

Neolane for approximately $600 million in cash. Neolane was a digital

marketing automation solutions company focused on cross-channel

campaign management. Its solution integrated marketing data from

across an enterprise to provide automation and execution of marketing

campaigns across the Web, email, social media, direct mail, and point

of sale. Customers included Samsung, Sony, Dior, Ikea, and Alcatel-

Lucent. Adobe indicated that Neolane would become a solution in its

Marketing Cloud. TechCrunch estimated that revenue was just under

$60 million (10X) while the 451Group estimates it was $70 million

(8.6X). Neolane was founded in 2001 and based in Paris. Investors

included Battery Ventures, Auriga Partners, and XAnge Private Equity

• Ideacodes – In May 2013, Adobe announced that the Ideacodes team

was joining Adobe. Ideacodes was a design and creativity consulting

firm focused on enhancing the user experience for applications and

digital products. It had worked on a number of product user interfaces

and websites. The co-founders of Ideacodes were appointed Creative

Directors of Adobe’s Creative Cloud. It was based in San Francisco.


• Thumb Labs – In May 2013, Thumb Labs announced that it was

acquired by Adobe. Thumb Labs was a mobile apps design agency.

The transaction was apparently an “acqui-hire” as Thumb Labs

indicated that while it would support its existing customers for a period,

its primary focus would be developing mobile apps for Adobe’s

Behance unit (which Adobe acquired in late 2012). Thumb had already

been working closely with Behance. Thumb was based in New York.


Some Adobe acquisitions made prior to 2013 include:

• Behance – In December 2012, Adobe announced it agreed to acquire

Behance. Behance provided a platform for artists to showcase and

distribute their work, and had more than one million members. The

price was $130 million in cash. It was based in New York.

• Omniture – In September 2009, Adobe announced it agreed to

acquire Omniture for $21.50 per share (about a 24% premium to where

the stock had traded), or about $1.8 billion in cash. It was implemented

through a tender offer. Omniture was a provider of online business

optimization software. Its solutions enabled customers to capture and

analyze data generated by their websites and other sources to gain

business insights into the effectiveness of marketing and sales

initiatives. It had over 5,000 customers including AOL, eBay, Wal-

Mart, Microsoft, Neiman Marcus, Sony, and HP. Omniture had revenue

of about $300 million in 2008 (revenue multiple of about 6X).

• Macromedia – In April 2005, Adobe announced it agreed to acquire

Macromedia and that each share of Macromedia would be exchanged

for 0.69 shares of Adobe. At the time of the announcement this was

$41.86/share (about a 25% premium) or about $3.4 billion in stock.

Macromedia was a major supplier of web design and Flash animation

software. Its Dreamweaver platform was a major software solution for

designing websites and its Flash animation software was also popular.


Macromedia had 2004 revenue of about $370 million (about a 9.2X

multiple). It was based in San Francisco.

• Frame – In June 1995, Adobe agreed to acquire publicly-traded Frame

Technology for $500 million in stock (0.52 shares of Adobe for each

share of Frame). Frame developed software for creating technical

documents on Unix systems for large enterprises.

• Aldus – In March 1994, Adobe announced that it agreed to acquire

Aldus. The original agreement was for 1.15 shares of Adobe for each

share of Aldus (about $513 million in stock), but the price was later

reduced to 1 share of Adobe stock ($446 million) after Aldus had a

lawsuit and settlement with Altsys regarding a software solution

(Freehand). Aldus was a software company focused on desktop

publishing solutions. Its best-known product was PageMaker. It was

based in Seattle.


“No app is free. You’re trading your privacy for data.”

- Mike Gregoire, CEO of CA Technologies

Introduction

CA Technologies (formerly known as Computer Associates International)

was started in 1976. The company’s initial focus was providing enterprise

software for IBM mainframe computers. Its first major product was a sorting

solution (CA-Sort) but it quickly expanded to providing a broad range of

mainframe software solutions. It had rapid growth during the 1980s and

1990s due, in part, to acquisitions. Specifically, it acquired many other IBM

mainframe applications software companies. It was the second pure

software company to exceed $1 billion in revenue (after Microsoft).

However, the company ran into a number of issues in the early 2000s,

including an SEC investigation into accounting practices and fraud charges,

which led to a complete management overhaul. After several years of

turmoil, the company subsequently recovered and has more recently

focused on cloud-based solutions.

In the December 2016 quarter (Q3:F17), CA had revenue of just over $1

billion, with the following revenue breakout: Mainframe Solutions – 54%,

Enterprise Solutions – 39%, and Services – 7%.

CA was a very active buyer during the 1980s and 1990s and made several

acquisitions that exceeded a billion dollars in the late 1990s/2000 period

(e.g., Platinum Technologies, Legent, Cheyenne, Sterling Software). In

2010, it acquired several cloud-based solutions companies to provide a

greater cloud-based presence. During the past few years, it has been less

active but has made a dozen acquisitions since early 2013, including several

in the applications testing/delivery and identity management sectors.

Chapter 10: CA Technologies


Select CA Technologies Acquisitions


The following are CA acquisitions since the beginning of 2013:

• Veracode – In March 2017, CA announced that it agreed to acquire

Veracode for approximately $614 million in cash. Veracode provided

application security testing. Its solutions enable automated on-

demand application security testing early in a product’s lifecycle to

address security issues and reduce risk. The solution also performs

static testing to detect issues in custom code and third party

applications. Veracode was founded in 2006 and had over 500

employees. The 451Group estimates that trailing revenue was about

$110 million (5.6X multiple). The company had offices in Burlington,

MA and London.

• Mobile System 7 – In December 2016, Mobile System 7 indicated that

it had been acquired by CA Technologies. Mobile System 7’s Sentry

platform enables customers to intelligently manage deployed systems

and secure data, and helps enterprises deal with changes in mobile. It

also offered custom engineering services for mobile solutions. The

company was founded in 2012 and based in McLean, Virginia.

• Automic Software – In December 2016, CA Technologies announced

it agreed to acquire Automic Software. Automic developed business

automation software, including Continuous Everything which allows

enterprises to automate business functions and workflows, without

engineers. It includes modules for service, developers, and operations.

CA indicated that the transaction was valued at approximately 600

million euros (about $636 million) net of cash and equivalents acquired.

Automic had about 600 employees and was based in Vienna, Austria.

It was founded in 1985. According to the 451Group the revenue

multiple was about 5.1X.


• BlazeMeter – In September 2016, CA Technologies announced it

agreed to acquire BlazeMeter. BlazeMeter provides open source

continuous applications performance testing solutions. CA indicated

the solution would further expand its DevOps offerings. The

BlazeMeter solution allows developers to test earlier and often in the

application lifecycle to improve test coverage and catch and resolve

issues prior to production. Another advantage was that the platform

worked with other open-source tools such as Apache JMeter and

Selenium. The company was founded in 2011 and based in Israel.

The price was not announced, but Geektime indicated that the deal

may have been as much as $100 million. However, the 451Group

estimates that it was $60 million and that BlazeMeter had about $5

million of revenue (12X multiple).

• Espresso Logic – In September 2015, PitchBook indicates that

Espresso Logic was acquired by CA. Espresso provided database

back-end services for mobile and Web developers. Its solution helped

developers connect applications to various external databases. It was

based in Silicon Valley.

• Xceedium – In August 2015, CA announced that it signed an

agreement to acquire Xceedium. Xceedium was a provider of

privileged identity management solutions for protecting on-premises,

cloud, and hybrid IT environments. The company’s Xsuite platform

protects privileged account credentials, implements role-based access

controls, and monitors privileged user sessions. Its solutions also help

enterprises comply with a variety of security and privacy mandates. It

was founded in 2000 and based in Virginia. Investors included

ArrowPath Venture Partners and Nationwide Mutual Capital. The price

was not announced, but the 451Group estimates that the consideration

was approximately $100 million with a revenue multiple of 6.7X.


• IdMlogic – In June 2015, CA Technologies announced it acquired

IdMlogic, which developed intelligent identity management

applications. Its Sigma solution provided analytical decision making

tools for identity management and security. IdMlogic was already a

CA partner and provided the front end application for CA’s Identity

Suite solution. It was based in Israel. The price was not announced

but Globes reported that their sources indicated it was for

approximately $20 million. The 451Group estimates the price was $25

million with a 6.3X revenue multiple.

• Grid Tools – In June 2015, CA announced it acquired Grid Tools,

which provided a variety of tools for automated software testing to

improve development and time-to-market. Its solutions supported

synthetic data creation, test data management, test design, and

optimization. Grid Tools was founded in 2004 with offices in Oxford

and New York.

• Rally Software – In May 2015, CA announced it agreed to acquire

Rally Software Development, a public company focused on Agile

software and services for about $480 million net of cash ($19.50/share,

about a 44% premium to where the stock had traded). Rally had a

SaaS platform to manage software development by aligning

development and business objectives and facilitating collaboration.

Rally had FY2015 revenue of nearly $88 million (making the deal about

5.5X revenue) and its customers included more than 35 of the Fortune

100 companies. It was based in Boulder, Colorado.

• Identropy (SCUID assets) – In October 2014, Identropy announced

that its SCUID platform was acquired by CA. SCUID was a cloud-

based identity management solution targeting the Identity-as-a-

Service market. Identropy was based in New York.


• Layer 7 Technologies – In April 2013, CA announced the acquisition

of Layer 7, a major provider of API management tools. APIs are

increasingly used by developers to more quickly develop applications.

CA indicated the acquisition would help API development by providing

the tools to test and publish APIs and also help manage APIs and verify

them through authentication and authorization. During the previous

week, Intel acquired Mashery which also provided API management

tools. Reports indicated Layer 7 had about $30 million of revenue in

2012 and was projecting over $50 million in 2013. The 451Group

estimated trailing revenue at $35 million. The price was initially not

announced but later reported to be $155 million (about a 4.4X multiple).

Layer 7 was based in Vancouver, Canada.

• Nolio – In April 2013, CA announced it had acquired Nolio, which

provided automated application delivery solutions that help customers

reduce release time, standardize application releases, and enable

faster release automation for cloud-based and traditional applications.

The price was not announced but TechCrunch reported that its sources

indicated the price was between $40 and $42 million. The 451Group

estimated the price as $42 million with a 14X revenue multiple. Nolio’s

investors included Cedar Fund, Blumberg, and Iris Capital. The

company was based in Israel.


A couple of major earlier CA acquisitions included:

• Interactive TKO – In June 2011, CA announced an agreement to

acquire Interactive TKO (ITKO) for $330 million. ITKO was a provider

of service simulation solutions for developing applications in composite

and cloud environments. ITKO's LISA solution enables organizations

to "mock up" a service at enterprise speed and enterprise scale – even

if the application is unfinished or unstable or the physical resource is

unavailable.


• Nimsoft – In May 2010, CA announced an agreement to acquire

Nimsoft for $350 million. Nimsoft was a provider of IT performance

and availability monitoring solutions for emerging enterprises and

Managed Service Providers. The Nimsoft Unified Monitoring solution

is designed to allow MSPs complete visibility into the performance and

availability of their customers' business applications across both

internal and external IT infrastructures.

Prior to 2001, CA made several relatively large acquisitions including

Sterling Software (diversified software provider) in 2000 for $3.9 billion,

Platinum Technology (initially database management software, but

diversified into many software markets) in 1999 for $3.5 billion, Cheyenne

Software (backup software) in 1996 for $1.2 billion, Legent (management

of distributed computing) in 1995 for nearly $1.8 billion, and Uccel (tape

management and job scheduling) in 1987 for $870 million. Sterling Software

and Platinum had each previously been very acquisitive.


“Look, don't congratulate us when we buy a company,

congratulate us when we sell it. Because any fool can

overpay and buy a company.”

- Henry Kravis, KKR Co-founder

Introduction

PE Firms Increasingly Active in Enterprise Software

An increasingly significant group of buyers in the enterprise software sector

has been private equity firms. PE firms have a strong preference for

recurring revenue businesses and with the software industry increasingly

shifting towards SaaS-type recurring revenue models, software companies

have become more attractive for financial buyers, and PE firms now account

for a significant portion of the enterprise software M&A activity.

Private equity firms generally make two different types of acquisitions:

platform acquisitions (in which they directly acquire a generally large

company) and add-on acquisitions (in which they acquire companies to help

grow one of their portfolio companies, and often the acquisition is made

through the portfolio company). In general, platform acquisitions tend to be

larger deals and many PE firms have a strategy of buying a platform

company with the intent of rolling up several smaller related companies to

increase the size and enhance the value of the platform company.

Private equity firms are also generally active when large companies want to

divest businesses as corporations may not want to sell their business units

to their competitors. Dell, for example, sold its software business (Quest and

SonicWall) to Francisco Partners and Elliott Management, and Intel divested

a majority stake in McAfee to TPG.

Chapter 11: Private Equity Firms / Vista Equity


There have been a number of very large acquisitions of public enterprise

software company by private equity firms during the past few years. For

example, in 2013 BMC Software was acquired and taken private by a group

that included Bain Capital, Golden Gate Capital, and Insight Venture

Partners for $6.9 billion. In early 2016, SolarWinds was acquired by Thoma

Bravo and Silver Lake Partners for approximately $4.5 billion.

Some of the active PE firms with a focus on the enterprise software sector

include Vista Equity Partners, Thoma Bravo, Francisco Partners, Marlin

Equity, Insight Venture Partners, TA Associates, Summit Partners, Accel-

KKR, Silver Lake, Golden Gate Capital, Vector Capital, TPG, Warburg

Pincus, Symphony Technology Group, Sumeru Equity Partners, North

Bridge, Battery Ventures, JMI Equity, TCV, Spectrum Equity, Volition

Capital, Norwest Venture Partners, Genstar Capital, Polaris, K1 investment

Management, Level Equity, Great Hill, Bregal Sagemount, HGGC, Riverside

and Westview Capital, although there are many others. Some of these firms

focus on larger acquisitions, while others tend to acquire smaller middle-

market companies. In addition, there are a number of generalist private

equity firms (KKR, Bain, etc.) that will occasionally make acquisitions in the

technology/software sector.

Just to give some sense for how active these firms are, we included a section

later in this chapter listing the acquisitions made by just one of these PE

firms, Vista Equity Partners, since the beginning of 2016 (a 15-month period).

This includes direct acquisitions, acquisitions made by its portfolio

companies, and mergers between portfolio companies. As noted later in

the chapter, Vista Equity alone has been involved in about 45 acquisitions or

mergers since the beginning of 2016 (mostly software companies), which is

significantly more than any of the strategic buyers listed in this report, and

Vista is just one of many software-focused private equity firms.


Some PE Firms Offering “Strategic Valuations”

Historically, private equity firms were interested only in highly profitable

companies and would traditionally offer valuations based primarily on single

digit multiples of trailing EBITDA (e.g., 7X or 8X trailing EBITDA was typical

for an attractive company). As a result, these firms were generally not

competitive when there was strong interest from the major strategic buyers,

given some of the valuations noted in previous chapters.

Of course, not every software company is of interest to buyers such as

Oracle, IBM, and Microsoft, so there has been a lot of PE activity in the

enterprise software sector during the past decade. In addition, PE firms are

very well-suited for situations in which the current owners want to retain a

meaningful portion of the equity and potentially get a “second bite at the

apple” in the future (i.e., sell a portion of their stock now, grow the business,

and then sell the rest later when the business is hopefully even larger and

more valuable).

However, PE firms have raised substantial amounts of capital in recent years

and in order to successfully add to their portfolios, many have been open to

offering valuations that are above “traditional PE firm valuations” for

attractive enterprise software companies. In some cases, we have seen

private equity firms outbid strategic buyers.

Additionally, there is a small group of software focused PE firms that have

begun offering valuations for attractive software companies that are

substantially above traditional EBITDA multiples. These firms have become

more competitive even with some of the premium strategic buyers. A few

examples of high-profile deals in which PE firms have offered “strategic”

valuations include:

• Vista Equity/Marketo – In 2016, Vista Equity Partners acquired

publicly traded marketing automation software company Marketo for

nearly 8 times revenue and Marketo was not yet even profitable.


• Vista Equity/Cvent – In 2016, Vista Equity acquired Cvent (event

management platforms and software) for about 8X revenue and more

than 50X EBITDA.

• Thoma Bravo/Qlik – In 2016, Thoma Bravo acquired Qlik for about

4.2X revenue and Qlik had negative trailing EBIT.

While these examples are exceptions to the rule (most PE firms still value

companies based on EBITDA multiples), we have generally seen PE firms

become more competitive on valuation during the past few years.

Select Vista Equity Partners Acquisitions

Vista Equity M&A Since the Beginning of 2016

Given the large number of enterprise software acquisitions done by private

equity firms and their portfolio companies over the past few years, we will

not attempt to list or summarize them in this report. However, just to give a

sense for the level of activity, below is a list of some of the recent acquisitions

made by one specific firm, Vista Equity Partners.

Vista Equity Partners is a major private equity firm focused on investing in

software and technology-enabled businesses. It has over $28 billion in

cumulative capital commitments, with offices in Austin, San Francisco, and

Chicago. It was founded in 2000.

The following are select acquisitions it has made since the beginning of 2016

including platform acquisitions (e.g., Marketo, Ping Identity, Cvent, etc.),

add-on acquisitions (generally made by its portfolio companies), and

mergers between its portfolio companies.

• D+H – In March 2017, Bloomberg reported that Vista Equity agreed to

acquire D+H (DH), a public Canadian financial services provider, for

C$25.50 per share, or about C$4.8 billion (US$3.55 billion) including

the assumption of debt obligations. News surfaced about the deal


back in December 2016, so the premium was about 36% from that

point, but only 11% relative to just before the announcement. D+H’s

traditional business had been check printing, but it had diversified into

other financial services, and acquired Fundtech (payment-technology)

for $1.25 billion in 2015. Vista indicated it would combine D+H with

UK-based Misys, another one of its portfolio companies in financial

services. The deal was reportedly done at about 16X EBITDA and 2.8

revenue. It was based in Toronto.

• Upp Technology’s irms Unit – In February 2017, Vista’s portfolio

company Aptean reportedly acquired the irms/360 Enterprise

Solutions business unit from Upp Technology. The irms unit provides

warehousing management, asset management, and emergency

management systems, all built on a cloud platform.

• Skyfence – In January 2017, Vista’s portfolio company ForcePoint

announced that it acquired the Skyfence business from cybersecurity

firm Imperva (public cybersecurity company). The Skyfence unit

provided cloud access security broker (CASB) solutions. Skyfence

helps companies to determine which cloud applications are in use by

employees, analyzes content in real-time to prevent malicious or

unauthorized leakage, and helps identify and block cyber-attacks.

• Digidentity – In January 2017, Vista’s portfolio company Solera

Holdings announced that it acquired Digidentity. Digidentity provides

technologies to authenticate online identities. Solera had been an

investor in the company. It was based in the Netherlands.

• Maximum Solutions – In January 2017, Vista’s portfolio company

Active Network announced it acquired Maximum Solutions. Maximum

provided recreation industry software. Its MaxGalaxy software

supports applications such as facility reservation, league scheduling,

membership management, and PoS. It had over 1,000 customers.


• Autodata – In January 2017, Vista’s portfolio company Solera

announced that it agreed to acquire Autodata, a provider of technical

information and knowledge solutions for the automotive service,

maintenance, and repair industries. It originally focused on do-it-

yourself manuals, but evolved to providing digital cloud-based

diagnostics and repair intelligence for professional mechanics

(including information on more than 40,000 car models). Autodata had

been owned by Bowmark Capital and Rothschild’s Five Arrows prior to

Vista’s acquisition. The 451Group estimated that the consideration

was just under $420 million. It was based in the UK.

• SunGard Public Sector and Educational Businesses – In

December 2016, FIS announced that it signed an agreement to sell its

SunGard Public Sector and Educational businesses to Vista Equity for

$850 million. The unit provides technology solutions to address public

safety and public administration needs of government entities and K-

12 school districts. Vista indicated that the Public Sector business

would become a new Vista-owned independent company and the

Education business would become part of Vista-owned PowerSchool.

• Cvent/Lanyon – In November 2016, Vista announced the merger of

Lanyon (which it previously acquired) and Cvent (which it more

recently acquired, as noted in more detail below). The announcement

indicated that the combined company would operate under the Cvent

name. Cvent is a cloud-based enterprise event management company

and Lanyon developed cloud-based software for managing corporate

meetings, events, and travel programs.

• Mozu – In October 2016, Vista’s portfolio company Kibo announced it

acquired Mozu, the retail e-commerce SaaS solution from Volusion.

Mozu is a cloud commerce platform that helps enterprises manage

their online presence, including commerce, branding, engagement,

and publishing. It increases marketing agility and reduces the time for

site changes and marketing updates.


• GovDelivery/Grancius – In October 2016, Vista merged two of its

Government-related software companies. Specifically, Grancius and

GovDelivery, both Vista portfolio companies as noted below,

announced they were merging.

• GQ Life Sciences – In October 2016, Vista’s portfolio company

Aptean announced the acquisition of GQ Life Sciences, which provided

life science patent search solutions. Its GenomeQuest product

provides researchers with the ability to search for biological sequences

across more than 800K patents.

• Chalkable – In October 2016, Vista’s portfolio company PowerSchool

announced it acquired Chalkable. Chalkable provided educational

data management, student achievement, and professional learning

solutions to the K-12 school markets. Its Positive Reinforcement

System and incentive-based rewards helps improve student success

rates. More than 5,000 schools used Chalkable’s solutions.

• Baynote – In September 2016, Vista’s portfolio company Kibo

announced that it acquired Baynote. Baynote was a provider of

machine learning solutions for digital commerce. Its BaynoteOne

solution combined real-time intent with historical preferences to

provide compelling offers and products to consumers. It had over 300

customers including Jockey and Hayneedle.

• GovDelivery – In September 2016, GovDelivery announced that it

signed an agreement to be acquired by an investor group led by Vista.

GovDelivery is a digital marketing platform built exclusively for public

sector organizations to promote usage of services and enhance public

awareness. GovDelivery indicated that its platform was used by over

1,800 customers to reach over 120 million people. Vista acquired it

from Actua which had owned GovDelivery since 2009. The reported

price was $153 million.


• Infoblox – In September 2016, Infoblox announced that it entered into

an agreement to be acquired by Vista, and the transaction was

completed in November. Infoblox was a major provider of DNS,

DHCP, and IP (DDI) address management. The transaction was at a

price of $26.50 per share (about a 16% premium to where the stock

traded the day before, but news of a potential deal had been reported

well before that) or approximately $1.6 billion ($1.34 billion net of cash).

The revenue multiple was about 3.7X.

• RDC – In September 2016, RDC (Regulatory DataCorp) announced it

had been acquired by Vista Equity. It had previously been owned by

Bain Capital Ventures and others. RDC provided counterparty risk and

financial regulatory compliance data and software solutions to financial

institutions and technology companies. RDC works as an extension to

its customers’ compliance teams, providing precise risk alerts and

ongoing monitoring for enhanced protection and performance.

• Grancius – In August 2016, Vista announced that it agreed to acquire

a majority stake in Grancius. Grancius provides software/tools for

Government-related activities. It helps government agencies and

school districts use web-based tools to encourage citizen engagement.

As one example, it provided software for Fort Lauderdale to help

manage citizen advisory boards. It had been owned by K1 Investment

Management and was based in Denver.

• SRB Educational Solutions – In August 2016, Vista portfolio

company PowerSchool announced the acquisition of SRB Educational

Solutions. SRB provided administrative and ERP solutions for K-12

school boards and districts, and had a variety of customers in Ontario

and throughout the Canadian provinces. It was based in Canada.


• Stardyne’s GEMS Division – In August 2016, Vista’s portfolio

company Aptean announced that it acquired Stardyne’s Government

and Enterprise Management Solutions (GEMS) Division. Its offerings

included revenue management, financial ERPs, citizen portals, tax and

utility billing systems, and enterprise asset management solutions. It

was primarily focused on the public sector, but also addressed private

sector applications. It was based in Canada.

• UnboundID – In August 2016, Vista’s portfolio company Ping Identity

announced that it acquired UnboundID, a provider of customer identity

and access management solutions.

• Enservio – In July 2016, Vista’s portfolio company Solera announced

that it acquired Enservio, a provider of property contents software and

services for the insurance and homeowner marketplaces. Its

ContentsExpress solution helps claims professionals work smarter and

faster. It also provides a solution for claim payments.

• Invision – In July 2016, Vista’s portfolio company Mediaocean

announced that it acquired Invision, a major supplier of cross-device

sell-side workflow solutions for media companies.

• DoApp – In June 2016, Vista’s portfolio company Newscycle acquired

DoApp, which developed a platform for media companies to deliver

content on mobile devices as well as a mobile advertising solution and

a mobile news content sharing app.

• Advanced Public Safety – In June 2016, Vista’s portfolio company

Aptean announced the acquisition of Advanced Public Safety from

Trimble. APS provides software solutions for law enforcement

agencies and public safety organizations.

• Invoiceware International – In June 2016, Vista’s portfolio company

Sovos Compliance announced that it planned to acquire Invoiceware,

which provides e-invoicing and tax reporting solutions in multiple

countries from a single platform.


• Ping Identity – In June 2016, Vista announced that it acquired Ping

Identity. Ping is a major supplier of identity defined security solutions

enabling employees to securely access enterprise data. Its Identity-

as-a-Service (IDaaS) solution was used by customers such as GE,

Disney, Cisco, Kraft, and Walgreens. Its recurring revenue was

reportedly expected to reach more than $100 million in 2016 when the

deal was first announced. The 451Group estimates the price was

approximately $600 million. It was based in Denver.

• Haiku Learning – In June 2016, Vista’s portfolio company

PowerSchool acquired Haiku Learning, which provided cloud-based

learning management and classroom collaboration tools.

• JumpForward – In May 2016, Vista’s portfolio company Active

Network acquired JumpForward, which provided technology platforms

for college sports programs such as solutions for NCAA recruiting,

compliance, and office management. Its solutions were used by more

than half of the Division 1 collegiate sports programs.

• Marketo – In May 2016, Marketo announced that it entered into an

agreement to be acquired by Vista in a go-private transaction for

approximately $1.79 billion in cash ($35.25/share, about a 64%

premium to where the stock had traded prior to news reports that it was

exploring a sale, and a 9% premium to its previous closing price).

Marketo is a major supplier of engagement marketing and marketing

automation software. Its solutions address marketing automation,

email, mobile, and analytics. It had more than 4,600 customers at the

time of the announcement and is based in Silicon Valley. The

transaction was at nearly 8X revenue and Marketo was not yet

profitable. The transaction closed in August 2016.

• ColSpace – In May 2016, Vista’s portfolio company MediaOcean

announced that it acquired ColSpace, a provider of cloud-based

collaborative media planning software that helps improve global

marketing campaigns. It was founded in 2000.


• Tienet – In May 2016, Vista’s portfolio company PowerSchool

announced that it acquired Tienet, a software solution developed by

Maximus that helps educators manage instruction and special

education. The software can help identify students who are struggling

and meet their needs. It was used in more than 900 districts and 3,000

schools across North America.

• Vertafore – In May 2016, Vista announced that it, along with Bain

Capital, agreed to acquire Vertafore from TPG Capital. Vertafore

provides a variety of different software solutions for the insurance

industry including management systems, agency solutions, and carrier

solutions. The reported price was $2.7 billion including assumed debt.

• Cheaspeake System Solutions – In May 2016, Vista’s portfolio

company Trintech announced that it acquired Cheaspeake, a provider

of financial transaction account reconciliation and treasury software

solutions. Its products include account reconciliation software,

unclaimed property compliance software, and financial risk

management software.

• TeacherMatch – In May 2016, Vista’s portfolio company PeopleAdmin

announced that it acquired TeacherMatch, a provider of cloud-based

talent management solutions for the education and government

markets. Its solution helps in hiring and onboarding new employees.

• Cvent – In April 2016, Cvent announced that it entered into an

agreement to be acquired by Vista Equity for approximately $1.65

billion ($36/share in cash, about a 69% premium to where the stock

had traded) or about $1.5 billion net of cash. Cvent is a cloud-based

enterprise event management company. Its software helps event

planners with online event registration, event management, mobile

apps for events, surveys, and other event related activities. The price

was approximately 8X trailing revenue.


• Mainspring – In April 2016, Vista’s portfolio company Accruent

acquired Mainspring Healthcare Solutions, which provided software to

support service departments in hospitals. Vista subsequently sold

Accruent to Genstar Capital.

• Focus Technology Group – In April 2016, Vista’s portfolio company

Agdata acquired Focus Technology Group, which provided data

collection and management solutions for the animal health industry. Its

solutions included supply chain data, marketing/sales automation, and

analytics for animal health and agriculture markets.

• Interactive Achievement – In February 2016, Vista’s portfolio

company PowerSchool acquired Interactive Achievement which

provided standards based instructional assessment and analytical

solutions for school districts. It assists with data driven curriculum

decisions to improve student performance. It was founded in 2006.

• Fiverun – In January 2016, Vista announced the acquisition of

Fiverun, which provides mobile point of sale solutions. Its cloud-based

solutions are sold to retailers around the world. Vista integrated

Fiverun with two other acquisitions it made (MarketLive and

Shopatron) to form a new company named Kibo.

• Telarix – In January 2016, Telarix announced that it had been acquired

by Vista Equity. Telarix is a supplier of billing, trading, routing, and

price list management tools for communications service providers,

including many of the largest carriers. It has become a standard for

electronic information exchange within the telecom industry.

• AssetPoint – In January 2016, Vista’s portfolio company Aptean

announced the acquisition of AssetPoint, a provider of computerized

maintenance management and enterprise asset management

software. Its TabWare solution is used across a variety of industries.

It had been a portfolio company of Triton Pacific.


• BCC AdSystems – In January 2016, Vista’s portfolio company

MediaOcean announced the acquisition of BCC AdSystems, a provider

of software for the Asian Pacific advertising and marketing industries.

It was based in Australia.

• Vivid Seats – In January 2016, Vivid Seats announced an investment

from Vista Equity, which the 451Group reports as a majority

acquisition. Vivid Seats is a large independent marketplace for tickets

for sporting events, concerts, and other ticketed events. It was

founded in 2001 and based in Chicago.

• Sidewinder – In January 2016, Vista’s portfolio company Forcepoint

announced the acquisition of Sidewinder, a provider of proxy-based

firewall software and hardware solutions for federal customers.

• Stonesoft – Vista Equity had previously partnered with Raytheon to

acquire Websense for $1.9 billion, with Raytheon owning just over 80%

and Vista owning the rest. In January 2016, Websense acquired

Stonesoft from Intel. Stonesoft had been a public security company

that Intel previously acquired. Stonesoft provided advanced firewall

software and hardware solutions. The combined Websense/Stonesoft

company was rebranded as Forcepoint.


Select Acquisitions with Revenue Multiples

This section includes a list of M&A transactions highlighted in this report

(from 2013 through Q1:17) in which both the transaction consideration and

the revenue of the target were either known or estimated in articles or by

M&A data providers (e.g., 451Group, PitchBook). A few caveats:

• The transactions represent only a small percentage of the total number

of acquisitions.

• The data is biased in that the transactions in which the multiples are

known tend to be the larger public deals since private company

financial data generally isn’t available.

• In many cases, the deal size and/or multiple was estimated by 3rd party

sources (e.g., 451Group, PitchBook, news articles). In some cases,

these reports are accurate, but in others they may be significantly off.

For a few transactions, there were conflicting estimates from sources

(in which case, we subjectively picked one).

• For valuation analysis, enterprise value should be used rather than

deal value. However, the data presented is a mix of deal values and

enterprise values. Enterprise value is usually available for public

companies but generally is not for private company acquisitions.

• Revenue generally refers to trailing revenue (last four quarters), but in

some cases may refer to past fiscal year or current year forecast.

• There were a few transactions in which it is believed that the target

company was essentially pre-revenue or minimal revenue. We

generally excluded these as they would result in extremely high

multiples which would skew the averages.

• For the “average” we used a ceiling of 40X (any multiple above that is

set to 40 when calculating the average).

• Additional details about each deal and data source can be found in the

acquisition summaries in the report.

Appendix


Date Buyer Target Deal Value ($M) Revenue ($M) Multiple

Mar-17 HP Enterprise Nimble Storage $917 $403 2.3

Mar-17 CA Veracode $614 $110 5.6

Mar-17 Vista Equity D+H $3,550 $1,247 2.8

Mar-17 HP Enterprise Niara $55 $2 27.5

Dec-16 CA Automic Software $636 $125 5.1

Nov-16 Adobe TubeMogul $540 $212 2.5

Oct-16 Salesforce Krux $724 $50 14.5

Oct-16 Cisco AppDynamics $3,593 $206 17.4

Sep-16 CA BlazeMeter $60 $5 12.0

Sep-16 Vista Equity Infoblox $1,341 $358 3.7

Aug-16 HP Enterprise SGI $275 $533 0.5

Aug-16 Salesforce BeyondCore $105 $5 21.0

Jul-16 Oracle NetSuite $9,374 $846 11.1

Jun-16 Microsoft LinkedIn $26,200 $3,214 8.2

Jun-16 Salesforce Demandware $2,791 $254 11.0

May-16 Oracle Opower $532 $149 3.6

May-16 Vista Equity Marketo $1,790 $226 7.9

Apr-16 Vista Equity Cvent $1,504 $188 8.0

Apr-16 Oracle Crosswise $50 $1.5 33.3

Apr-16 Oracle Textura $663 $92 7.2

Mar-16 IBM Bluewolf Group $240 $90 2.7

Feb-16 Microsoft Xamarin $400 $38 10.7

Feb-16 IBM Resilient Systems $145 $10 14.5

Feb-16 Cisco Jasper Technologies $1,400 $120 11.7

Feb-16 IBM Truven Health $2,600 $599 4.3

Jan-16 Oracle AddThis $175 $20 8.8

Jan-16 IBM Ustream $130 $25 5.2

Dec-15 IBM Clearleap $200 $25 8.0

Dec-15 Salesforce Steelbrick $300 $11 27.3

Nov-15 Microsoft Secure Islands $85 $8 10.6

Nov-15 IBM Gravitant $95 $2 47.5

Nov-15 Cisco Acano $700 $10 70.0

Oct-15 IBM Cleversafe $1,309 $25 52.4

Oct-15 Cisco Lancope $453 $75 6.0

Sep-15 IBM Meteorix $120 $40 3.0

Aug-15 IBM Merge Healthcare $904 $228 4.0

Aug-15 Oracle Maxymiser $170 $40 4.3

Aug-15 CA Xceedium $100 $15 6.7

Jun-15 Cisco OpenDNS $635 $25 25.4

Jun-15 CA IdMlogic $25 $4 6.3


Source: Data from company press releases, 451Group, PitchBook, and various technology news reports.

Details on each can be found in the report. * - The “Average” uses 40X for any multiple above that.

Date Buyer Target Deal Value ($M) Revenue ($M) Multiple

May-15 CA Rally Software $480 $88 5.5

May-15 Microsoft Revolution Anlytics $115 $4 28.8

Apr-15 Cisco Embrane $55 $1.5 36.7

Mar-15 HP Aruba $2,684 $729 3.7

Feb-15 HP Voltage Security $175 $35 5.0

Dec-14 Oracle Datalogix $1,200 $125 9.6

Nov-14 Microsoft Aorato $200 $0.4 500.0

Sep-14 SAP Concur $8,300 $668 12.4

Jul-14 Oracle TOA Technologies $550 $45 12.2

Jun-14 Oracle Micros Systems $4,641 $1,338 3.5

Mar-14 SAP FieldGlass $1,000 $85 11.8

Feb-14 Oracle BlueKai $408 $63 6.5

Feb-14 IBM Cloudant $150 $7 21.4

Jan-14 Microsoft Parature $100 $15 6.7

Jan-14 VMware AirWatch $1,540 $93 16.6

Dec-13 Oracle Responsys $1,501 $194 7.7

Nov-13 IBM Fiberlink $300 $50 6.0

Oct-13 Oracle BigMachines $450 $60 7.5

Oct-13 Oracle Compendium $15 $2 7.5

Oct-13 IBM Xtify $40 $5 8.0

Sep-13 Microsoft Nokia Mobile Unit $7,200 $19,690 0.4

Sep-13 Cisco Whiptail $415 $20 20.8

Sep-13 SAP KXEN $40 $12 3.3

Aug-13 IBM Trusteer $900 $35 25.7

Jul-13 Cisco Sourcefire $2,494 $233 10.7

Jun-13 Salesforce ExactTarget $2,398 $317 7.6

Jun-13 IBM SoftLayer $2,000 $425 4.7

Jun-13 SAP Hybris $1,341 $125 10.7

Jun-13 Adobe Neolane $600 $70 8.6

May-13 Cisco JouleX $107 $9 11.9

Apr-13 CA Layer 7 Tech $155 $35 4.4

Apr-13 CA Nolio $42 $3 14.0

Mar-13 Cisco SolveDirect $21 $8 2.6

Feb-13 Oracle Acme Packet $1,700 $287 5.9

Feb-13 VMware Virsto $185 $2 92.3

Jan-13 Cisco Intucell $475 $30 15.8

Average*: 12.4

Median: 8.1


Select Acquisitions with Public Company Premiums

This section includes a list of the acquisitions in this report (since 2013) in

which the target was a public company, with a focus on the premium the

buyer paid with respect to the stock price of the target company just prior to

when the deal was announced. We excluded a few acquisitions (e.g.,

Oracle/Micros, HPE/Aruba, Vista/Marketo, etc.) in which news of a potential

deal was reported well in advance of the official deal announcement resulting

in a run up in the target’s stock price ahead of the announcement. Deal value

generally refers to enterprise value.

Source: Company announcements, 451Group, PitchBook and various news reports.

Date Buyer Target Deal Value ($B) Premium

Mar-17 HP Enterprise Nimble Storage $917 45%

Nov-16 Adobe TubeMogul $540 82%

Aug-16 HP Enterprise SGI $275 30%

Jul-16 Oracle NetSuite $9,374 19%

Jun-16 Microsoft LinkedIn $26,200 50%

Jun-16 Salesforce Demandware $2,791 56%

May-16 Oracle Opower $532 30%

May-16 Vista Equity Cvent $1,504 69%

Apr-16 Oracle Textura $663 31%

Aug-15 IBM Merge Healthcare $904 32%

May-15 CA Rally Software $480 44%

Sep-14 SAP Concur $8,300 20%

Dec-13 Oracle Responsys $1,501 38%

Jul-13 Cisco Sourcefire $2,494 29%

Jun-13 Salesforce ExactTarget $2,398 53%

Feb-13 Oracle Acme Packet $1,700 22%

Average 41%

Median 35%


Notes


Menalto Advisors, LLC (“Menalto Advisors”) is a preeminent middle market technology M&A advisory

firm. Investment banking services are provided by Menalto Advisors, a registered broker-dealer and

member of FINRA and SIPC. Menalto Advisors provides financial advisory services related to mergers,

acquisitions, private capital financings, and other similar transactions. Menalto Advisors is regulated by

FINRA, but does not provide research or analyst reports or solicit or carry accounts for, or offer or sell

securities products to, retail customers.

The information and opinions in this document have been prepared by Menalto Advisors. This document

is provided for informational purposes only. It is not a research report, as such term is defined by

applicable laws and regulations. Nothing contained herein is to be construed as an offer to buy or sell or

a recommendation to buy or sell or a solicitation of an offer to buy or sell any type of financial instruments

or securities. The information contained in this document should not be construed to represent an

analysis of any company or security to form the basis for any type of investment decision. This document

should not be construed to provide legal or tax advice, and you are encouraged to seek legal counsel for

any legal or tax related questions or issues.

We believe the information contained herein to be reliable, but Menalto Advisors makes no

representation as to the accuracy or completeness of the information. Menalto Advisors does not

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been verified by Menalto Advisors to be accurate, and we therefore cannot be certain whether the

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