Data Management Venture Funding Rolls on with $1.3B while M&A Plays Small Ball

Missing a multi-billion blockbuster deal, total consideration plummeted to under $1B while the deal count of 28 remains roughly even with past years.  While 2017 was a year marked by private equity buyers jumping in with both feet, 2018 sees the return of strategic buyers rolling up smaller players.  The 2018 median deal size declined to $50M but the median price to revenue multiple jumped up to 5.2X and for technology focused transaction, that multiple went up to 6.0X.  M&A slowed in the second half of 2018 with just 9 announced deals.  For 2019, we see a healthy M&A market that is likely to top the 28 deals in 2018 with total consideration moving well north of $1B.  The public markets are shaky and there are economic concerns both within the U.S. and internationally.  However, we do not see the pace of innovation slowing in data management and actually see more market disruption coming in 2019.  We also see discreet data management solutions merging together which will cause “one trick pony” start-ups to consider M&A sooner than later.  The larger incumbents are fully aware of the increased pace of innovation and in many instances, will simply buy vs. build in 2019.  For the full report please contact John Rotchford, Managing Director, at john@sasillc.com.

 

A Breakout First Half for Private Storage Buyers While Venture is Poised for Another +$1B Year

Storage M&A Highlights:

The first half of 2018 had 19 deals totaling $853M with a median deal size of $47.5M and a 5.7x average price to revenue multiple. The three largest deals in the first half of 2018 were:

  1. Microsoft’s $250M acquisition of NAS provider Avere Systems with a healthy Price/Revenue multiple of 12.5x
  2. HPE’s $190M acquisition of Plexxi, hyperconverged network software provider with a 9.5x Price/Revenue multiple
  3. Carbonite’s $145.8M acquisition of Mozy which provides online data and computer backup SaaS

Nutanix gets busy on the M&A front picking up Netsil and Minjar Cloud Solutions while DDN picks up the Lustre File System business from Intel. The cloud migration software sector sees further consolidation with Google picking up Velostrata and VMware acquiring CloudVelox. In a bold move, SMART Global enters the HPC systems business with the acquisition of Penguin Computing. We are also seeing additional late stage private companies catching the M&A bug with Druva, Rubrik, and Veeam all inking deals in the first half of 2018.

Storage Venture Funding Highlights:

  • Venture funding for the first half of 2018 reached $643M, driven by a strong Q2 led by Cohesity ($250M) and Qumulo ($93M). The amount raised is slightly up from the $627M raised in the first half of 2017.
  • Other notable rounds include object storage software player Scality raising $60M and Rstor, an early stage, Cisco backed start-up raising $45M in its 1st round of funding. In the object storage space, Cloudian also raised $25M in it’s 5th round of funding.
  • With the continual movement to cloud models and software defined XYZ, it is again surprising to see 62% of the funding or $401M going into storage systems start-ups. By contrast, only 6% or $40M went into SaaS start-ups.
  • Late stage rounds dominated the first half of 2018 with 71% of total funding or $458M

For the full report, please contact John Rotchford, Managing Director, Strategic Advisory Services International at john@sasillc.com.