Mitra

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.

Rank	Company	Acquiror	Acquisition Price [4] (UIS$ millions)	Date Acquired	Date Founded	Company Age (years)	Employees	LTM Sales ($US Million)	NOTES	Price/Sales	Revenue/Emp	CAGR	$/Employee
1	Pixstream	Cisco	369	December 21, 2000	1996	4	196	5.4	2	68.3	27 551	47.2	1.88
2	Dalsa	Teledyne Technologies	341	February 14, 2011	1980	31	1000	200	3	1.7	200 000	0.85	0.34
3	MKS	PTC – Parametric	304	May 31, 2011	May 1, 1984	27	360	75		4.1	208 333	0.96	0.84
4	Mitra Imaging	AGFA Healthcare	252	January 3, 2002	1990	12	400	50		5	125 000	3.38	0.63
5	Bluegill	Checkfree	250	April 28, 2000	1996	4	150	20	5	12.5	133 333	68.57	1.67
6	Unitron	Phonak	91	November 22, 2000	1965	35	300	62.6	6	1.5	208 667	0.67	0.30
7	SlipStream	RIM	91	June 1, 2006	2000	6	120	13	7	7	108 333	14.33	0.76
8	Tsavo Media	Cyberplex	75	June 10, 2010	2001?	9	120	110	8	0.7	916 667	6.83	0.63
9	WATCOM	Powersoft	74	February 11, 1994	1981	13	100	8	9	9.3	80 000	2.4	0.74
10	LivePage	Janna Systems	68	September 20, 1999	1990?	9	12	1	10	68	83 333	3.64	5.67
11	EMJ	Synnex Canada	64	July 14, 2004	1979	25	350	303	12	0.2	865 714	1.18	0.18
12	Dspfactory	AMI Semiconductor	51	September 9, 2004	1998	6	75	16		3.2	213 333	14.87	0.68
13	MapleSoft	Cybernet Systems	49.8	September 1, 2009	April 30, 1988	21	50	12	13	4.1	240 000	1.17	1.00
14	PrinterOn	Samsung	40	September 2, 2014	2000	14	50	10		4	200 000	2.15	0.80
15	SS Technologies	Woodhead Industries	35	July 31, 1998	1991	7	75	50	14	0.7	666 667	11.6	0.47
16	Reqwireless	Google	32	2001	June 23, 1905	4	15	1		32	66 667	30	2.13
17	TribeHR	NetSuite	30	October 22, 2013	2009	4	24	4.5	18	6.7	187 500	45	1.25
18	GBG	HighJump Software	26	November 1, 2006	1991	15	200	22	11	1.2	110 000	2.09	0.13
19	PostRank	Google	25	June 3, 2011	March 1, 2007	4	20	0		n/m	n/m	n/m	1.25
20	Kaparel (Pixstream)	Rittal	21	December 10, 2000	1996	4	30	7.1	17	3	236 667	50.62	0.7
21	VideoLocus	LSI Logic	20	November 14, 2002	May 1, 2001	2	17	0		n/m	n/m	n/m	1.18
22	RapidMind	Intel	19	August 19, 2009	2004	5	25	3		6.3	120 000	18	0.76
23	BufferBox	Google	17.5	December 30, 2012	2011	2	10	0		n/m	n/m	n/m	1.75
24	Software Metrics	Equitrac	8	February 1, 2000	September 1, 1992	8	35	3	16	n/m	n/m	n/m	0.23
25	Volker Craig	NABU	5.9	1981	1973	8	45	5.9		1	131 827	6	0.47
TOTAL			2364			11.16	3779	982.5		11.5	259 998	15.8	0.62

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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.

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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.