2015 was a Record Breaking Year for Storage M&A

Storage M&A:

2015 was a recording breaking year in terms of total consideration that nearly reached $100B – The Dell/EMC deal at $63.1B is the largest storage related deal in history with WD/SanDisk the second largest with $19B in consideration.  These two deals certainly signal the arrival of multiple storage market disruptions coming from flash, software defined storage, cloud services and the general movement away from proprietary solutions to software running on commodity systems.

2015 can also be viewed as the pinnacle year for storage industry consolidation as we are now down to half the public storage companies that we initially tracked back in 2005 –  The consolidation has reduced the number of storage related buyers in the market but we have seen new entrants from cloud services and also private equity.  Newly public firms like Pure Storage and the planned IPO of Nutanix and others will add to new buyers flush with cash and public stock for deals.

For 2016, we see another strong year in terms of deal volume around 30 but will likely see total consideration drop back down to historical levels.

Of the 29 deals in 2015, 13 were technology focused with a median deal size of $152M and a price to revenue multiple of 4.9X – Technology deals totaled $2.1B while Business deals totaled $95.3B with 16 deals that had a median deal size of $694M and a price to revenue multiple of 2.6X.

For SASI’s complete 2015 Storage M&A and Venture Funding Report, please contact Christine Tosney at christine@sasillc.com.

 

Q3 2015 Storage M&A and Funding Review

Q3 selected highlights include:

– Q3 2015 total consideration was high at $8.8B driven by $8B Carlyle/Veritas

   transaction and $694M Seagate/Dot Hill deal

– Total deal volume was at 7 which continues the steady pace for 2015

– Q3 2015 Storage related funding cools down a bit to $288M on 12 rounds of funding. 

– Compared to last quarter, total funding has declined 62% from $468M as the average

   round size has shrunk from mid to high $30’s to mid $20’s. 

– The largest round was Tintri’s $125M later round as it prepares for IPO, followed by

   Scality with a $45M round. 

– Components shows life with infinite.io, Crossbar and Liqd raising $3.4, $35M and

   $5.7M respectively. 

Dell Acquires EMC for $63.1B

An indelible mark on enterprise IT

-by Brenon Daly Simon Robinson

Announcing the largest tech deal since the Internet bubble burst, Dell plans to pay approximately $63.1bn for EMC. The debt-laden combination would create a sprawling IT giant with multibillion-dollar businesses in many of the primary enterprise technology markets, including storage, information security, IT services, servers and PCs. (For context, the combined Dell-EMC entity would be larger than Hewlett-Packard Enterprise (post-split), NetApp, Juniper Networks and Symantec combined.) Dell’s bold transformational transaction is not coming cheap, however. The company is valuing EMC significantly more richly than it valued itself when it went private two and a half years ago.

Further, Dell’s relatively pricey bulking up comes at a time when a number of rival enterprise IT vendors are slimming down. More to the point, several of these competitors are unwinding earlier blockbuster acquisitions they made in hopes of staying more relevant in a shifting IT market. The arrival of the public cloud has siphoned off billions of dollars that once flowed unimpeded to Dell, EMC and other first-generation technology firms. However, IT customers increasingly lack the appetite to buy, install and manage dozens of ‘piece parts’ and mold them into a cohesive whole. As a result, we can look at the combination of Dell and EMC as essential if the traditional IT model is to survive the onslaught from public cloud providers, most notably Amazon Web Services.

Though Dell has been on a path to build a ‘better together’ story for almost a decade, it clearly hasn’t been enough. In its effort to buy its way out of the commodity PC business, the company stitched together a patchwork of properties. However, the resulting ‘big picture’ has still not materialized. Dell has lacked a core focus point, as well as the heft and scale in any one market to dominate. Further, it has so far not sufficiently penetrated the large enterprise segment, or moved beyond its two longtime key verticals of healthcare and the public sector. Against this backdrop, it’s easy to see the attraction of EMC, which brings large enterprise credibility in storage, perhaps the industry’s most focused and effective sales operation and, in VMware, still one of the most strategic entities on the market.

EMC’s attractiveness also shows through in the valuation that Dell is paying, if not when viewed against the broader tech M&A market than certainly when put against Dell’s own worth. According to terms, Dell is paying 2.5x trailing sales and 11.5x trailing EBITDA for EMC. For comparison, in orchestrating the take-private of his namesake company, Michael Dell and his consortium paid just one-quarter the price-to-sales multiple of EMC and half the cash-flow multiple. Dell’s LBO, which stands as the third-largest private equity tech transaction in history, valued the company at just 0.5x trailing sales and 5.2x trailing EBITDA.

Look for a full report on the proposed Dell-EMC pairing later today on our website and in tomorrow’s 451 Market Insight.