Private Buyers Dominate the 2017 Storage M&A Landscape

Storage M&A Highlights:
  • While total deal consideration jumped up to $23.5B (primarily due to the announced Toshiba Memory transaction for $18.0B), the total number of transaction dropped to 27 from 34 in 2016.
  • Of the 27 announced transactions, 15 were led by private buyers with 12 companies bought by public entities. Of the 15 private buyers, 9 of them were private equity shops. This is the first time since we started our annual reports in 2005 that private led transactions beat public buyers.
  • Going into 2018, we see a broader range of public buyers entering the storage M&A market but expect private and private equity led transactions to still comprise at least half of the deals.
  • For the second year in a row, we saw very few early stage companies being acquired at attractive valuations. Instead, the M&A market was driven by later stage companies getting acquired at “ho-hum” median price to revenue multiples in the 2.5X range. This shift was driven by a buyer base that that now applies stricter valuation methodologies and is willing to be patient and disciplined on M&A until the new shiny start-up actually shows market validation in this competitive market space.  
  • We see 2018 continuing this trend with deals in the 2X to 5X P/R multiple range with few possibly trending above the 10X range.

For the full report, contact John Rotchford, Managing Director, at john@sasillc.com

Q2 Hits the Brakes on M&A While Venture Funding Places Some Big Bets

Storage M&A:

  • 2017 started strong with 10 deals totaling $1.8B in Q1 but in Q2, buyers hit the brakes with just 4 deals announced
  • The trend of private equity firms acquiring storage companies continues as Quantum Partners acquired Violin, Insight Venture Partners acquired Spanning Cloud and private equity owned Arcserve acquired Fastarchiver
  • Meanwhile NetApp quietly acquired PlexiStor, which is a three-year-old Israel-based startup that has developed software to dramatically improve data access speeds by altering the way data is handled in-memory.  NetApp is looking to the future as persistent memories emerge, especially with Micron and Intel’s 3D XPoint.

Storage Venture Funding:

  • Q2 2017 storage funding was strong at $387M across 7 rounds with an average round size of $55.3M
  • Rubrik’s $180M 4th round was the largest this year to date, bringing its total equity raised to $292M.  Rubrik is disrupting the data protection market by offering data protection appliances that are replacing more costly and complex legacy back-up and disaster recovery platforms.
  • Cohesity raised $90M as it ramps up sales and marketing followed next by Tegile who raised $33M.
  • Qumulo added $30M to its war chest as it goes to battle in the highly competitive scale-out NAS market.
  • Portworx, a storage specialist for containers, brought in $20M as the hype around containers remains strong with the promise of larger use cases and deployments just around the corner

Contact John Rotchford at john@sasillc.com for the full report.

Venture “L” in Q4 Bounces Back in Q1 While HPE Throws Some Cash Around

Storage M&A

  • The year started strong with 10 deals totaling $1.8B with a median deal size of $357M
  • HPE was responsible for the majority of the consideration snapping up Nimble and Simplivity for $1,090M and $650M respectively
  • With a last round valuation of $1B, the Simplivity exit received limited praise but the roughly 4X revenue multiple paid by HP is right down the middle of Price/Sales multiples paid over the last few years.   Hence, the M&A valuation for Simplivity was reasonable but the Unicorn valuation may have been a bit aggressive.
  • Thirty percent of the deals involved private equity firms including Axway’s acquisition of Syncplicity from Skyview Capital, Carbonite’s acquisition of Double-Take from Vision Solutions (aka Clearlake Capital) and StorageCraft/TA Associate’s acquisition of Exablox.
  • Thirty percent of the deals were private-to-private, including Axway/Syncplicity, Stratoscale/Tesora and Datto/OpenMesh.
  • The HPE/Nimble deal was the only public to public transaction in Q1.

Storage Venture Funding

  • Q1 2017 started the year strong with $264M in funding across 12 rounds with an average round size of $22.0M.
  • The quarter was comparable to 2016’s Q3 which was the best quarter of the last year with $275M in total funding across 12 rounds with an average round size of $25.0M
  • Similar to Q1 2016, later rounds in Q1 2017 dominated the quarter.  Panzura (hybrid cloud storage), Kaminario (all flash storage arrays) and Avere Systems (NAS) raised a total of $121M or 46% of total funding.
  • Third round funding was a distance second with rounds for Diamanti (converged infrastructure) and Komprise (storage management software) to total $82M.  Most of the rounds were modest, low double digits, but Kaminario’s 5th round was $75M, the largest by far.

See the entire SASI Q1 2017 Storage Market Review
https://gallery.mailchimp.com/a1acc137bb7554b06df2835fb/files/22ca877d-26b3-43d5-a461-4194e2a4e427/SASI_Q1_2017_Storage_Market_Review.pdf

 

About SASI:

Founded in 2005, SASI is a boutique sell-side M&A advisory firm focused on the IT Infrastructure Market.  Notable transactions include Imation/IronKey sale to Kingston, C2C sale to Barracuda, Cofio sale to Hitachi Data Systems and Nevex sale to Intel.  Current focus areas include software defined storage and networking, emerging flash related technologies and cloud migration and management software.  For more information on SASI, please visit www.sasillc.com or contact John Rotchford, Managing Director at 760-944-3522