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Top 25 Waterloo Technology Acquisitions – Wisdom from the Data

by Randall on February 8, 2015 · 2 comments

Posted in: Business Strategy,Entrepreneurism,Investing,Management,Randall Howard,Software,Startups,Web

The acquisition of MKS by PTC in 2011, caused me to reflect a bit on what good acquisitions might look like and what they might teach us about building (sometimes elusive) long term shareholder value. As a result, over the last 6 months, I’ve progressively assembled a collection on the most significant acquisitions in the Waterloo area. To my knowledge, such information has hitherto never been collected. We all love to speculate, but it is more productive to ground that speculation with facts.

The following table is intended to summarize value creation through the lens of several key benchmarks.

RANKCOMPANYACQUIRERPRICE (US$mln)ACQUIREDAGE (yrs)EMPLOYEESSALES (US$)
TOTALS236411.23779983
1PixstreamCisco36921-Dec-200041966
2DalsaTeledyne34114-Feb-2011311000200
3MKSPTC30431-May-20112736075
4MitraAGFA2523-Jan-20021240050
5BluegillCheckfree25028-Apr-2000415020
6UnitronPhonak9122-Nov-20003530063
7SlipStreamRIM911-Jun-2006612013
8Tsavo MediaCyberplex7510-Jun-20109120110
9WATCOMPowersoft7411-Feb-1994131008
10LivePageJanna Systems6820-Sep-19999121
11EMJSynnex6414-Jul-200425350303
12DSPFactoryAMI Semiconductor519-Sep-200467516
13MaplesoftCybernet Systems501-Sep-2009215012
14PrinterOnSamsung402-Sep-2014145010
15SS TechnologiesWoodhead Industries3531-Jul-199877550
16ReqwirelessGoogle3223-Jun-20054151
17TribeHRNetSuite3022-Oct-20134244.5
18Global Beverage GroupHighJump Software261-Nov-20061520022
19PostRankGoogle253-Jun-20114200
20KaparelRittal2110-Dec-20004307.1
21VideoLocusLSI Logic2014-Nov-20022170
22RapidMindIntel1919-Aug-20095253
23BufferBoxGoogle1830-Dec-20122100
24Software MetricsEquitrac8Feb-20008353
25Volker CraigNABU619818455.9

NOTES:

  1. Sources: public records, internet, personal recollections and interviews with 25 key ecosystem participants. In the interests of data utility, I welcome any revisions or comments regarding accuracy or completeness.
  2. All data are “normalized” into US Dollars, using an exchange rate current on the date of the acquisition. The use of US$ reflects the fact that most technology companies are really valued in US$ and hence that makes comparisons, both across the data and to other jurisdictions, more meaningful.
  3. The sample set is limited to my sense of what a technology company is – your mileage may vary.
  4. Acquisition PRICE includes cash, stock and post deal incentives, including earn outs.
  5. Several companies were re-acquired after the first acquisition (e.g. WatCom and LivePage). These follow on transactions are not reflected in this data.
  6. Some companies spun out several acquisitions, such as Kaparel which was sold out of Pixstream or SS Technologies, originally spun out of Sutherland Shultz.
  7. AGE represents the time in years from founding to the (first) acquisition.
  8. EMPLOYEES is the world wide count.
  9. SALES, given the high growth nature of many of these businesses, levels generally reflect the run rate at acquisition, rather than purely using an LTM (“Last Twelve Months”) measure.

CONCLUSIONS

The above data suggests a lot of trends and insights. It contains a wealth of insights, and also the individual narratives of each of these companies is, in itself, worthy of more discussion and analysis. In aggregate, however, the data suggest some key ideas to me:

  1. Acquisition prices are a great proxy for long term shareholder value, precisely because leading global technology companies provide an informed, third party valuation that likely has way more science than most earlier stage technology company valuation.
  2. Building larger companies takes time. The myth of the “quick flip” startup is (mostly) just that.
  3. As I discuss in my next post, building major technology companies is hard. We don’t (yet) seem to have “cracked the code” on this and need to learn how to build more over time.
  4. The aggregate scale of these companies, at the time of their acquisition, is materially significant to our region – almost 4 000 employees and almost $1 billion in revenue.
  5. Companies take much longer to build than most would expect. While the range in ages from 2 to 35 years is quite diverse, the average age of 11.2 years shows the time, resources and hard work to build real businesses.
  6. Acquisitions are good for our economy. Many people consider acquisitions to be a bad thing, but for those companies that were already at reasonable scale, most have continued to grow post acquisition. In addition to the wealth generated and its spinoffs, the acquirors bring new ideas and often jobs to our region. This is yet another reason why building larger technology companies is so important.

I am hoping that this data collection regarding acquisitions, and my initial take on conclusions, might stimulate further discussion around the notion of building significant value in businesses.

Please feel free to comment, or even contact me, with insights, questions and corrections.

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About Randall

Randall Howard is a serial entrepreneur and long term technologist with a passion for social innovation.

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  • jeffcatl

    It would be interesting to compare this data to similar data from other regions. The point would be to focus on certain measurements that can indicate effectiveness of the ecosystem in each region. The data could point to identifying where to focus in order to improve results. An investment banker in Boston has been compiling some industry data of this type for as long as I’ve know him. I’ll send a link by email as I think you’ll find it useful, or interesting at the least.

  • Hi Jeff, yes indeed that was my thinking as well. The exercise was sufficiently time consuming and detailed that a Waterloo area focus was achievable for me. I’ve already had some interest potentially in having some business school/MBA researchers take the project to a broader geography. So, please do connect me and share anything on this you have.

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