Introduction
Nat Burgess
Welcome to our monthly update. This is Nat Burgess, president of the Corum Group and your host for today’s event. Every month we review valuation and deal trends across the software industry. We’ll cover that ground today, and also add our tri-monthly review of the most significant transactions of the quarter, and there are some interesting ones. Stay turned for the second half of the event, when senior Corum dealmakers give us their perspective on which deals matter and why.
I’ll close with some observations on what we can learn from the frenzy of megadeal activity, and specifically what is happening in the PE world.
Over half of the people who join us every month for these M&A updates are CEOs. You’re an elite group. You’re doing your homework on tech M&A trends. For a deeper dive, join us in New York on October 22nd, where we are the platinum sponsor of the World Financial Symposium’s Growth and Exit Strategies conference. This is a full day event featuring leading deal professionals from PE and M&A, as well as CEOs who serve their companies and corp dev reps from leading buyers. While you’re at wfs.com, also take a look at the market spotlight specials. We focus on your specific vertical markets. We did supply chain management and manufacturing last week. Coming up on the 27th we’re doing a special on Smart Cities, for those of you working in energy, and there are a lot of other vertical market spotlights archived on the site and available on demand.
Now, let’s turn it over to the Corum Research team with our monthly update.
Corum Research Report: Low interest rates boost tech M&A
Elon Gasper
Thanks, Nat. We begin with the Public Markets, operating in correction territory though with considerable divergence between tech and non-tech, as indicated by the S&P Tech index showing more bounce since it’s less influenced by concerns about commodity price drops and emerging market growth than the more general indices — though we have seen some of our 29 Corum subsectors affected more than others.
Still, we continue to view the quarter as an overdue correction, with this month’s bounces a sign our aging bull still has enough get-up-and-go to celebrate its 7th birthday early next year and go on to take the second-longest title.
Historically low interest rates are fueling tech M&A, with colossal leveraged deal potential, such as the Dell-EMC possibility, and activity continues to be supported by cheap debt, massive stockpiles of corporate cash, disruptive trends and buyers’ pressing need for growth, and as we talk to buyers here at Corum, we are hearing no hesitancy regarding tech M&A, and even some indication that the mid market is improving this month.
Our Corum Index suggests a possible link, with the decrease in the number of megadeals freeing corp dev bandwidth for smaller ones, which increased 11%; other metrics were materially stable year over year.
Sector values converged overall while retaining their rank order. In sales to enterprise value ratios, the small lead Vertical took last month narrowed and nearly reversed again with Infrastructure; proportionately, the volatile Consumer sector retreated the most at 23%, Services the least at 6%. EBITDA metrics also held ranks, with the top-valued Horizontal sector clipped back 21%; the more enduring and fundamental demand for profits was evident with the EBITDA average sector move much less than its Sales counterpart, and IT Services even eked out a 1% gain.
Corum’s dealmakers will call out many of the Q3 megadeals with particular insights later in this broadcast, including the largest, Veritas, that Nat will cover, but with the quarter dominated by Vertical markets megadeals, let’s start there, with a look at one late-breaking Vertical ourselves. Yasmin?
Vertical Software Valuation Metrics
Yasmin Khodamoradi
In the final megadeal of the quarter, Vista Equity announced its intent to acquire Solera for $3.7B at 5x revenue. Solera, whose subsidiaries provide automotive claims processing software, started as a PE-backed carve-out, and could once again be back in the PE fold in what will be the largest leveraged buy-out of a vertical software vendor so far this year, though IHS is expected to make a competing bid.
The valuations in the Vertical sector overall fluctuated downwards to January levels for both Sales and EBITDA ratios—though the multiples are still growing for the leading subsector, real estate, and continue climbing up for government as well as energy and environment, while healthcare valuations remain stable.
One trend we have been seeing this quarter is the number of healthcare acquisitions by Asian buyers. For example in India, Practo Technologies, a medical search portal recently financed by China’s Tencent, is reported to have spent $12M on INSTA Health Solutions, a hospital management platform. This should expand Practo’s geographical reach and allow Practo’s users to book their appointments in real time.
Japanese buyer Konica Minolta grew its presence in healthcare by acquiring Viztek, a medical imaging SaaS provider out of North Carolina just last week. This should help shore up the primary imaging capabilities of Konica Minolta’s Medical Imaging unit.
We also saw Shanghai Jiuchuan acquire SHL Telemedicine for $120M, which Corum deal-maker Rob Schram will discuss later.
In one of the largest deals of the Financial Services sector, Yodlee, a developer of financial account management SaaS, was acquired by Envestnet for $660M at 6x revenue. Yodlee’s set of personal-finance apps gather transactional data, which should strengthen Envestnet’s relationship with banks.
Portware, which develops trade execution management software, was rolled up by Connecticut-based buyer FactSet Research Systems for $265M. Portware’s use of artificial intelligence and strong expertise in trading will complete FactSet’s current offerings in the foreign exchange industry.
Investment and financial services software provider SS&C Technologies announced its second pair of transactions this year:
- Primatics Financial for its financial risk management SaaS
- Varden Technologies which offers investment reporting and communications SaaS
Now, both platforms can scale up with the help of acquirer SS&C, which is clearly on a growth path after its $425M purchase of Citigroup’s Alternative Investor business in August and its megadeal with Advent Software back in February.
Moving on the A/E/C vertical, Trimble Navigation picked up two companies in September, Norwegian building information modeling and CAD software provider Vianova Systems and Spatial Dimension out of Canada, which provides software for the mining industry.
Similarly we saw Constellation Software make its fourth acquisition this year with Datamine, which also provides mining and geological modeling software.
Netfabb, a German-based 3D printing software maker, was picked up by 3D printing bellwether Autodesk, which also invested in netfabb’s parent company, FIT Technology Group. The combination of these 3D printing powerhouses should lead to enhanced capabilities for Autodesk, as it builds on Netfabb’s 80,000 strong user base.
Finally, in the real estate sector, Cincinnati-based Dotloop, an e-signature SaaS provider, was picked up by Zillow here in Seattle for $108M, which will enable Zillow’s 10,000 broker partners to buy and sell homes online.
We also saw plenty of activity out of India, as Housing.com, picked up 3 real-estate companies there: CRM SaaS provider HomeBuy360, rental property management SaaS BigBHK, and real-estate portal Plat. These acquisitions should allow Housing.com to offer real-estate agents in India a more complete, full-service solution. This trend was seen in parts of Southeast Asia as well.
How did the Internet sector do last quarter, Aaron?
Internet Software Valuation Metrics
Aaron King
Valuations in the Internet Sector are still dropping from last quarter, but remain well above other sectors supported by travel, leisure and consolidation waves. The Social Network subsector showed a small increase to keep the overall sector a bit more stable.
Vegas.com was purchased by Las Vegas-based Remark Media for $25M. Remark's goal is to make Vegas.com the go-to booking destination for millennial travelers. Earlier this year Remark acquired Hotelmobi, a company engaged in the development, ownership and operation of hotel booking applications.
Rakuten announced that it has purchased the remaining shares in Tokyo-based World Travel System. By acquiring WTS, Rakuten will be able to directly purchase overseas air tickets from the world’s major airlines, including Japanese airlines.
New York-based online cruise travel distributor CruiseNorway.com was acquired by Seattle-based Global Voyages Group. This is GVG’s second acquisition this year; earlier it picked up Florida-based SmallShipCruises.com, one of the world’s longest-operating sites for small ship information, after the death of travel writer founder Shirley Linde.
In a new twist on a pattern we’ve been reporting on this year — that is, services firms buying into tech — Virginia-based business software directory search and survey site Capterra was bought by Gartner for $210M. The remarkable 10x valuation on Capterra suggests that this was a competitive process, and one could speculate that rival Forrester was outbid and is still on the hunt.
How has Infrastructure done, Amber?
Infrastructure Software Valuation Metrics
Amber Stoner
Infrastructure valuations have seen a dip since Q2, particularly sales multiples. However Security continues to be a strongly traded subsector with an increasing number of deals happening each quarter. We identified Security as a top 10 disruptive tech trend at the beginning of the year and we’ve written a Security white paper to be published this quarter.
Microsoft reached into Israel as Tel Aviv-based cybersecurity startup Adallom became its latest acquisition in the country, to reinforce its cloud and Office programs. The move, reportedly worth $250M, fits Satya Nadella's strategy of focusing on top cloud services.
Also in Israel, Internet of Things security firm Sansa Security, specializing in both mobile and computer chip defense solutions, was bought by chip maker ARM. The acquisition is sized at a reported $85M and should further strengthen ARM’s position in the growth of connected devices worldwide.
Cisco finalized a deal with UK-based security consultancy firm Portcullis, which will complement its risk and compliance skills, building on the 2014 acquisition of Neohapsis.
In the storage space, in addition to the Veritas-Carlyle deal that Nat will discuss, data backup and protection company Intronis was acquired by Barracuda Networks for $65M. With this move, Barracuda plans to expand its channel reach into the managed service providers market.
And earlier this week, IBM shored up its cloud storage portfolio by acquisition of object-based storage vendor Cleversafe to help its customers handle large amounts of multimedia data and to gain leverage in the growing object storage market.
IT Services Software Valuation Metrics
Elon Gasper
As mentioned, developed market IT Services values based on EBITDA ratios bucked the trend with a small increase, and the sector overall was relatively stable;
While even the more highly-valued emerging markets IT Services subsector held on over the quarter much better than the general market in those regions, its dependence on low labor costs a contrarian factor.
Notable transactions included Chicago-based ServiceNow consulting specialist Fruition Partners, which was purchased by Computer Sciences, for $130M, adding 300 practitioners and 800 clients worldwide to CSC.
Customer care provider SITEL, based in Nashville, was acquired for $55M in a cross-border deal by the much smaller French CRM outsourcer Acticall in its first deal in almost a decade, heralding what the buyer CEO called “a new phase of growth,” leveraged by bank financing and its controlling shareholder, part of the multi-billionaire Mulliez family, often compared to the Walton family of Wal-Mart fame. Note the smart money taking advantage of these miniscule interest rates despite clearly not needing to; that’s how easy credit fuels M&A.
Back on this side of the pond, New York ecommerce integrator CrossView was nabbed for $38M by diversified Dallas omnichannel marketing player PFSweb. Though payment to the founders included some stock and earnout, over 30M was delivered in cash — roughly twice what the acquirer had on its balance sheet; again, favorable bank financing boosting the tech M&A pace.
Also in the UK, network infrastructure consultant Electra-net was wired into the business process management giant Capita for $57M as that buyer continues a string of consolidations capped just this week by a much larger deal for Xchanging, also in UK — but we can talk about that next month.
It’s time to look at Q3 for Horizontal applications.
Horizontal Software Valuation Metrics
Amber Stoner
Valuations in the Horizontal sector have dipped a bit since last quarter, but the SCM subsector has not only held value, but gained since Q2. While the SCM space was dominated by the GT Nexus-Infor deal, which we discussed in the SCM Market Spotlight that Nat mentioned earlier, there were a number of other deals in the space in Q3 as well.
Jump Technologies sold its JumpTrack proof-of-delivery solution to ECi Software Solutions. With a focus on e-signature solutions for deliveries, this deal echoes the Dotloop-Zillow deal Yasmin talked about that was announced a week earlier.
San Francisco-based SeeControl was picked up by Autodesk; SeeControl’s software controls and manages remote devices and provides analytics. The deal should enable Autodesk to integrate SeeControl’s IoT platform into its PLM solutions for manufacturing and building industries.
B2B EDI and invoicing SaaS vendor Wesupply, based in the UK, was bought by HighJump which it intends to use to expand its electronic data interchange services into Europe.
The social analytics space continues consolidating. New-York based online marketing SaaS vendor Maxymiser was acquired by Oracle, enabling it to create more customized and attractive marketing campaigns.
Spredfast teamed up with fellow social marketing SaaS-company Shoutlet to boost their social marketing resources and compete with others in the field, such as Sprinklr and Hootsuite.
And predictive analytics vendor Fliptop was snapped up by LinkedIn; Fliptop’s expertise should help LinkedIn accelerate its Sales Solutions offering and B2B marketing platforms.
Contract renewal management SaaS provider, MaintenanceNet, was acquired by Cisco for $139M. MaintenanceNet’s products, with the ability to alert customers to service contracts that are coming up for renewal, are complementary to Cisco’s prior acquisition of Corum client SolveDirect, an ITSM provider that enables enterprises and service providers to integrate with service partners.
And for the last of our six sectors, Consumer, Aaron?
Consumer Software Valuation Metrics
Aaron King
Valuations in the Consumer sector slightly decreased last quarter, with EBITDA ratios making a small upswing in September. The Entertainment subsector, driven by several large transactions, continues to grow rapidly and keep the whole sector stable and attractive.
In January Corum announced “Sports & Gaming” as one of the key tech trends for 2015. Today the forecasts are clearly confirmed by numerous deals in this subsector.
Dallas-based fantasy eSports firm AlphaDraft was acquired by the largest one-day fantasy sports operator, FanDuel. This duet continues FanDuel’s series of transactions this year. In the last couple of months it picked up numberFire, leading sports analytics company, and Kotikan, which earlier cooperated with FanDuel to create a mobile app for fantasy sports. These collaborations may allow FanDuel to gain an edge in its rivalry with its nemesis, DraftKings, data leak scandal and upcoming congressional hearing notwithstanding.
European TV giant Modern Times Group remains active on the M&A scene. MTG grabbed controlling interests in two companies within a month. By adding Turtle Entertainment—an eSports provider with focus on online tournaments—MTG strengthened its on-demand video entertainment services, and then significantly expanded the number of users with the help of Dutch online gaming and video sharing network producer, Zoomin.TV. MTG spent a total of $135M on the two deals.
Ivory Tower, the French creator of the popular racing videogame The Crew, just completed a long-term cooperation with gaming titan Ubisoft and was purchased in the process.
Elon Gasper
And that’s our update on Q3 of 2015 — its public market drama ending at a correction plus some rebound, but perhaps also a wake-up call that no business cycle lasts forever. What do you think, Nat?
Nat Burgess
It’s hard to argue with that Elon: No business cycle lasts forever. Corum’s research shows that the average age of a company selling today is 14 years. That means they’ve operated successfully through a market trough. Some of the blockbuster deals we’re profiling this month, the companies have been around for decades.
You have to run your company for growth and success, no matter what the market delivers. When the market is bad, you worry about payroll, you worry about expenses. When the market is good, you should be thinking about wealth creation, harvesting value, creating value. A market correction won’t put you out of business, but it might push back your plans for an exit. With some clever structure in arriving markets you can amplify your gains.
Michael Dell and Silverlake achieved a 90% paper gain in the year following their buyout, well over $20B in a rising market. So there is opportunity today, and we’re helping our clients take advantage of that.
Q3 Deal Spotlights
Let’s turn things now to our featured speakers. As I mentioned earlier, we’re having senior Corum dealmakers give us their perspective on some of the more interesting transactions that have happened recently in the last quarter. To do that, I’d like to turn this over first to Mark Johnson in Stockholm.
Mark Johnson
We are continuing to see more deals in the Sports Technology space. This summer Adidas acquired Runtastic, an Austrian fitness platform. This deal comes on the heels of Under Armour buying up two social fitness companies, MapMyFitness in the US and Endomondo in Copenhagen.
Fitness apparel brands such as Under Armour and Adidas are looking to use technology such as smart handsets and wearables to help increase their engagement and loyalty with their customers via apps and social media. Consumers are presented with increasingly more fashion and apparel options, and these brands are using technology to heighten user engagement and extend their reach.
This is a perfect fit with Adidas's miCoach wearables. It also brings 70M users into the Adidas ecosystem. Sensors and software provide insights to users of all athletic abilities allowing them to take control of their training and share their athletic experiences.
Nat Burgess
Thank you, Mark. I’d now like to hand it over to Jeff Brown, former CEO of an energy software company, he’s in Houston.
Jeff Brown
This summer, Melrose sold Elster, a German smart meter company to Honeywell for $5.1B. Three years ago Melrose paid $2.3B for Elster. How did they get a 230% increase in EV when growth slowed to 5% and the US market flat lined?
Melrose is a hybrid investor/operator that “makes good businesses better”. They cut costs, reorganized and spent on operations. Elster had sales wins in France, Mexico and Brazil and pushed into services and product add-ons for energy management, SmartCity and IoT, global markets that are growing well. Profits rose by two-thirds.
There are strong synergies with Honeywell. Elster has world-class metering with global distribution. Honeywell has controls. Elster is ahead of the shift to natural gas, a clean fuel. The combination builds a strong platform for growth and acquisitions.
There’s good M&A activity to benchmark, few meter candidates left to buy and Honeywell will use offshore cash to fund the deal.
Solid execution, good timing and offshore cash. That’s how you do it.
Nat Burgess
Thanks, Jeff. It’s great to have you decipher how they created so much value. Thanks for all the work you’re doing at Corum, helping our clients achieve similar results.
Now we’ll hear from the person who has probably managed more Vertical market M&A deals than anyone else in the world, Ward Carter.
Ward Carter
In August, financial services giant FIS acquired long-time industry stalwart SunGard. It’s fascinating to see how industry sectors and software companies morph over time through acquisitions. We like active acquirers like SunGard, which completed over 150 acquisitions during the past 20 years, including several Corum clients in the financial services sector.
There are challenges to gauging returns to investors on a deal like this, as SunGard had previously encompassed financial systems, datacenter operations, education, and public sector solutions, but later, fueled by acquisitions across all these areas, had split off the public sector, datacenter, and education businesses to others, so this final piece going to Fidelity is really just the financial services arm.
Once a publically traded company, SunGard was able to really turn up the acquisition volume once they were taken private, arguably because they gained access to a large pool of funding from their private equity owners and—I’m guessing—were able to take a longer term view to acquisitions, and no longer distracted with meeting analyst expectations on the next quarterly earnings call.
As much as we hate to see a brand like SunGard disappear, we know that FIS will keep up the acquisition pace, as FIS has been a consistent strategic acquirer of software firms since 2004.
Nat Burgess
Thanks, Ward.
Now let’s hear from Jim Perkins, who was a Corum client years ago, and who is now making headlines as a VP at Corum doing deals in the gaming industry.
Jim Perkins
This summer, Corum completed the sale of Canadian-based Digital Extremes to Hong Kong based Leyou Technologies and Beijing based Perfect World. We acted as the exclusive advisor to Digital Extremes. This marked one the most significant video game deals so far this year.
Despite the rather turbulent Chinese stock markets, the deal was completed right on the tail of a major drop on the Hong Kong Exchange, on the terms originally agreed to by the parties with an enterprise value of $120M. Chinese buyers are actively looking for strong investments, particularly in gaming, and have huge stockpiles of cash to do so with.
Their interest lie in mostly original IP, with a proven Western track record of monetization, and the added value of bringing proven gaming IPs into the Asian gaming markets. Korea and China are clearly the dominant buyers in gaming M&A today.
Expect further landmark deals by the end of 2015, and into the first half of 2016, even in the face of volatile public markets.
Nat Burgess
Now we’re turn it over to Rob Schram, a senior VP at Corum’s headquarters.
Rob Schram
In another notable deal out of China, Shanghai Jiuchuan Investment Group recently acquired Israeli SHL Telemedicine for $130 million. SHL provides cardiac monitoring wearable devices that connect with a user's smartphone to transmit medical data to healthcare professionals, as well as telemedicine monitoring and remote management services and an electronic health records SaaS.
Shanghai Jiuchuan owns more than 3,000 hospitals in China and provides information systems to hospitals and clinics serving over 30 million people. They see SHL Telemedicine as a strategic platform investment for penetrating the Chinese market through world-class technology. The IoT acquisition pattern is continuing as smartphone connectivity enables pervasive monitor, control, and telemetry of real-time actionable data for healthcare and many other vertical markets, driving more non-tech players like this one into tech M&A.
Nat Burgess
Thank you, Rob. Now we’ll go to Silicon Valley transplant John Simpson, another Corum VP based here at our headquarters.
John Simpson
The Media Technology space has been red hot in 2015, including more than 10 deals in September alone. Major players on both sides of the M&A negotiating table include Warner Bros, Amazon and Infocus.
One particularly notable transaction was Swedish giant Ericsson paying $125M for Envivio and its advanced video encoding and compression technology. This deal meshes with Ericsson’s recent string of buys to boost its media operations support solutions unit for its global customer base of over 400 TV service providers and content owners.
At stake is consumer’s increasing demands for ever-better access to TV content across multiple devices through cable-based and broadcast media channels. We look for more such Ericsson announcements in the future.
Nat Burgess
Now we’re going to go to Dan Bernstein, another Corum VP here at headquarters and he’s going to profile a deal that is more on the media side of the house, but frankly we define software broadly, and if the Gutenberg press could have handled distribution of content as well as printing of content, I think it would be a good analogy to how technology plays in the media world today.
Dan Bernstein
In media, content is king. It is with that philosophy that Fox bought a 73% stake in National Geographic media for $725M in September. The deal shifts the venerable 127-year-old non-profit into a for-profit venture.
The National Geographic Channel launched with Fox in 1997, which turned out to be a trial period for the future partnership. With the acquisition, National Geographic can double its investment into research and education, while in turn Murdoch acquires leadership within a new media vertical.
NewsCorp is no stranger to media acquisitions, most notably acquiring Dow Jones for $5 Billion in 2007. The Internet has forever changed journalism, but the battle for eyeballs rages on. NatGeo’s content will bring a whole new set of viewers under the Fox umbrella monetized through advertising online, print and on TV.
The relevance of the National Geographic brand will have greater weight when promoted across all of Fox’ properties, making sure that it survives well into the 21st century and a new opportunity is formed for advertisers to capitalize on new demand, supply, and cross promotional vehicles, both online and offline.
Nat Burgess
Thanks, Dan.
Our next speaker is Jon Scott who is also a former Corum client and CEO of multiple companies, who is now based at Corum’s office in Amsterdam.
Jon Scott
Mapping technology continues to evolve and improve and a case in point is the recent acquisition of Nokia's mapping business unit HERE by a consortium of automakers including Audi, Daimler and BMW.
There are a lot of interesting elements to this $3B acquisition. First is that in the past you didn't think of car companies as buyers of advanced software technologies. But this has changed. They no longer just license technology from others. They have discovered that they can get competitive advantage by controlling technology like nav.
Turns out that HERE had an 80% market share for in car nav systems. Nokia sold their mobile phone business to Microsoft in 2014 and then acquired Alcatel Lucent for a year later and the HERE unit didn't fit well anymore. But who would be interested in it?
Turns out that Uber would for obvious reasons and so would some of Nokia's biggest mapping customers: the automotive manufacturers. Uber passed at paying $3B but Audi-Daimler-BMW thought it was better off to form a consortium and buy the company.
Why? They already were licensing the technology and didn't want to see it get into the wrong hands. Now they control the company that provides 80% of all in-car navigation technology. And I bet this fits with their IOT strategy for their vehicles. Watch for more announcements.
Nat Burgess
Thanks, Jon. If anyone, like me, has wrestled with nav systems that are more than about two years old in cars, we wish we could trade in the cars like we trade in our phones. Hopefully they’ll start to get it right.
That concludes our spotlight on significant transactions except for the last one, which I will talk through.
I’m profiling the acquisition of Veritas, which Symantec divested to a PE consortium led by the Carlyle Group. The deal was valued at $8B. This is cash that is going to help Symantec reinvent themselves once again. But there is some history here that I wanted to talk about.
Ten years ago I met with Mark Leslie, the CEO of Veritas. He’s the guy who founded and built the company, and it was a leading storage vendor at the time. He took it public, and then Symantec came along and offered a big multiple. Mark couldn’t turn it down, he would have been sued by his institutional investors. He had to do the deal. But he had big visions. Unfortunately he never got to realize them.
Meanwhile, Symantec was on the ropes. They were making billions in antivirus, but Microsoft was about to bundle a similar function in Windows and competition was heating up. At the time, Symantec paid $13.5B to acquire Veritas and became the fourth largest software company in the world, after SAP, Microsoft and Oracle. Boy that seems like a long time ago.
Mark and I didn’t spend a lot of time on that deal when we talked back then. It was a win for his shareholders. He had to do it. Instead, we talked about what makes software companies successful and Mark asked me a hypothetical question, which I’d like you to ask yourselves now. “Tell me if you would invest in this company, Nat. This company makes a product for $100,000. Customers are willing to buy it for $100. However, if the company can scale up production to the millions of units, the cost per unit will drop to $10. Would you invest?”
I said no. Mark went on to say that manufacturing companies succeed by learning how to achieve productions of scale, economies of scale. The more they make, the cheaper the cost per unit gets, and at some point they can cross the line and make money.
His theory on software was that software companies have a similar learning curve, learning how to sell their products. He called it the sales learning curve. He has a deep, rigorous methodology that he applied to build Veritas into a powerhouse, and he now teaches that at the Stanford grad school for business.
By the way, the company in his example? That was Intel. And Intel made a fortune for their early investors. The relentless mission to scale up production and squeeze out cost resulted in a behemoth that defined the PC market for a decade.
How did we get here? Well, Symantec is selling Veritas for $8B. That’s $5.5B less than they paid for it. Mark’s been busy making angel investments.
What do we learn from all this? Well, first, the team matters a lot. Most of you are CEOs. Execution matters a lot. The better mousetrap alone doesn’t do it. It’s important to have a good idea and a good product, but frankly it matters more that the management team is capable of executing on a high level. Veritas on its own might have challenged the giants in our industry.
Second, and perhaps more topical for today’s event, we take this as a reminder that PE has gradually taken hold of the reins from the public market. During the downturn, it was PE firms taking public companies private that set the valuations, not the retail and institutional investors. Today it is PE firms funding unicorns to a scale where they’re too big to go public, and increasingly there appears to be no upper limit on the size of PE transactions.
The Dell EMC deal that Elon mentioned earlier is a case in point. Both companies are arguably worth about $50B, but make no mistake about it, this is not a merger of equals. This is Michael Dell and his financial partners making an acquisition. And for all of you listening today, this is a reminder that it is a great time to be a shareholder in a privately held company that is creating value, because we’re getting deals done.
This concludes our webcast. It looks like we have more questions than we can answer in our time, but we’ll get to the ones that are trailing via email. I would encourage all of you to reach out to us directly if you’d like to speak with us regarding your situation.
Now we’ll take you to our close.