8 Feb 2015

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Top 25 Waterloo Technology Acquisitions – Wisdom from the Data

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.

RankCompanyAcquirorAcquisition Price [4] (US$M)Date AcquiredDate FoundedCompany Age (years)EmployeesLTM Sales (US$M)NOTES
1PixstreamCisco369Dec 21, 2000199641965.42
2DalsaTeledyne Technologies341Feb 14, 201119803110002003
3MKSPTC304May 31, 2011May 1, 19842736075
4Mitra ImagingAGFA Healthcare252Jan 3, 200219901240050
5BluegillCheckfree250Apr 28, 200019964150205
6UnitronPhonak91Nov 22, 2000
196535300635
7SlipStreamRIM91Jun 1, 2006
20006120137
8Tsavo MediaCyberplex75Jun 10, 2010200191201108
9WatcomPowersoft74Feb 11, 19941981131008.09
10LivePageJanna Systems68Sep 20, 199919909121.010
11EMJSynnex Canada64Jul 14, 200419792535030312
12DspFactoryAMI Semiconductor51Sep 9, 2004199867516
13MaplesoftCybernet Systems50Sep 1, 2009Apr 30, 199821501213
14PrinterOnSamsung40Sep 2, 20142000145010
15SS TechnologiesWoodhead Industries35Jul 31, 199819917755014
16ReqwirelessGoogle32Jun 23, 200520014151
17TribeHRNetSuite30Oct 22, 201320094244.518
18GBGHighJump Software26Nov 1, 20061991152002211
19PostRankGoogle25Jun 3, 2011Mar 1, 20074200
20Kaparel (Pixstream)Rittal21Dec 10, 200019964307.117
21VideoLocusLSI Logic20Nov 14, 2002May 1, 20012170
22RapidMindIntel19Aug 19, 200920045253
23BufferBoxGoogle17.5Dec 30, 201220112100
24Software MetricsEquitrac8Feb 1, 2000Sep 1, 1992835316
25Volker CraigNABU5.9198119738455.9
TOTALS2 36411.23 779983

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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