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The phoenix of PE investments is rising in the technology world

Yogesh Gupta | July 27, 2016
Private equity firms ardently investing in enterprise technology brands is the industry’s new normal.

M&A in the technology world are probably at an all-time high in the first half of 2016.

It's not only technology companies acquiring competitors or complementing companies to boost their product portfolio and market share--private equity (PE) firms are now investing heavily in enterprise technology brands.

The Polycom buy-out reached an interesting turnaround as the video conferencing equipment maker surpassed Canada-based Mitel's offer announced three months ago. Polycom last week decided to go the private route with PE firm Siris Capital.

At least half a dozen prominent enterprise IT companies--Epicor, Qlik, SonicWALL, Lexmark, Quest Software and Polycom--in the past four months have not been acquired by other technology OEMs. They have been invested into by PE firms and global investment firms.

While tech companies buying other tech companies is the norm, there are also non-tech companies getting into the IT fray this year. For example, IT distribution giant Ingram Micro was acquired by Tianjin Tianhai, a Chinese shipping group for $6B. There was also the colossal $32B buyout of chip maker ARM by SoftBank.

Tech, non-tech, PEs and banks -- all want a big bite of the fast-growing IT business.

Change of management during acquisitions is often challenging for the company employees, business partners and client base on both sides of the fence. The integration of work culture, change of management, new GTM and other factors influence the success ratio too.

However, investment by global investment companies or PE firms does not bring legacy (of people, processes and products) as in the case of one tech company buying another. But the challenge of retuning the business strategy of the acquired technology company still looms large.

History beckons

Since 2013, the IT industry has witnessed a slew of private investments in technology companies like Informatica (April 2015), Blue Coat (2012 and then 2015), Riverbed (December 2014) and BMC Software (May 2013).

Websense got acquired for $906M in a private equity deal lead by Vista Equity Partners in May 2013. In 2013 itself, Dell went private for $24.9B. Now, three years later, the tech giant is all set to buy EMC for $57B.

Blue Coat Systems is a success story wherein the security vendor changed hands from one PE firm (Thoma Bravo) in 2012 to another (Bain Capital) in 2015. And finally, Symantec bought Blue Coat this year for a whopping $4.65B.

This year Epicor, SonicWALL, Quest Software, Lexmark, Qlik and Polycom have gone private.

Do private equity firms have the mettle to elevate these enterprise tech companies to the next level? Or will some deals erode the acquired tech company's dominance in the competitive world? Interesting times lie ahead.

IDG Insider

 

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