Minio

Jan 25, 2017

Two different destinies

Following my article on the Storage Newsletter published 2 days ago that tries to explain and understand why SimpliVity got acquired for a pretty low EVI multiple (Enterprise Value /  Investment - 2.35x) by HPE, Cisco just announced the acquisition of AppDynamics for $3.7B, a price we heard for SimpliVity just a few months ago still from same acquirer. Immediately we realize that the EVI is 11.78x which reflects a super deal for investors and AppDynamics and confirms the hot position of the company.
So what are the differences and common facts ?
Except that both companies have participated to The IT Press Tour - SimpliVity in June 2013 for the 23rd edition - and AppDynamics 2 times in March 2016 for the 18th edition and in June 2014 for the 13th edition - that boosts their visibility, they both play in a hot market segment and are clearly leaders in their respective domain - Hyperconvergence for SimpliVity and Application Performance Management for AppDynamics.

SimpliVityAppDynamics
Year founded20092008
Market SegmentHyperconvergenceApplication Performance Management
IPONoin process
Acq. Amount$650M (cash)$3.7B
Acq. DateJan. 2017Jan. 2017
AcquirerHPECisco
VC Money$276M$314M
EVI*2.35x11.78x
Revenue$150-187M
(estimated)
2014: $23.6M
2015: $81.9M
2016: $150.6M
EVS**4.33x-3.47x24.6x
Emp. #750 (June 2016)1186 (Oct. 2016)

Born in 2008 for AppDynamics and 2009 for SimpliVity, they also raised ton of money - SimpliVity $276M and AppDynamics $314M - and people spoke about huge amount for potential acquisition for SimpliVity in November, around 3 to $4B from HPE, and huge amount as well for AppDynamics working on their IPO for months. So many similar sign between the two but at the end 2 different destinies:
  • No IPO and acquisition for just $650M in cash for SimpliVity, again a very good deal for HPE. SimpliVity was not in a IPO position and revenue was not in the right range, raising money was also a challenge with a too big valuation that creates a big divergence point, these elements seam to be the key difference factor between the 2 companies and acquisition amount.
  • IPO process started with a date of 1st trade this week (tomorrow ?) with a goal to raise $2B that finally morphs in an acquisition by Cisco for $3.7B announced yesterday, Cisco thinking that the price could be higher later, potentially yes.
2017 starts with 3 acquisitions, at least the ones I pay attention to, for a total in the range of $4.4-4.5B. Interesting start...

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