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Big Blue's big data buyout: Tech startups choose billion-dollar sales over IPOs
Analyst IPO Market Commentary
Most tech entrepreneurs would choose to forge their own path than, say, work for IBM or Cisco.
Yet in the past month, three big-data tech firms that had reportedly hired banks to lead IPOs have instead opted for sales totaling $4.5 billion.
A difficult market for tech
Given 2016's tumultuous market, cashing out could be preferable to the low valuations available from an IPO. The Vix Volatility Index has been elevated for six months, and has risen so far in 2016. Only four companies have been able to go public this year, all biotechs with substantial insider support. Broader market indices are down across the board, and multiples in the tech sector have been crushed. A whopping 74% of IPOs from last year trade below the offer price, and the year's average return from IPO is -22%
Three big data companies acquired in February; previously selected banks for an IPO
Truven Health Analytics
$600 mil ('15)
~$130 mil ('16)
~$175 mil ('15)
A provider of US healthcare data for hospitals and others,
Truven Health Analytics was acquired for $2.6 billion
- well below the $3 billion price it had reportedly sought when it selected banks for an IPO in March 2015. Closest peer Inovalon (
) now trades 27% below its February 2015 offer price.
Internet-of-Things company Jasper was acquired by Cisco for $1.4 billion
, nearly the same valuation it achieved in April 2014 before selecting banks that November for an IPO. Jasper had notable backers, including Benchmark, Sequoia and AllianceBernstein.
In a PE-to-PE sale,
driving camera company Lytx was acquired for more than $500 million
by GTCR. Backed by Insight Venture Partners, WCAS and others, the company reportedly selected banks in June 2013 for an IPO, and added a new CFO in April 2015.
Acquisitions have held steady, but IPO activity has slowed sharply.
Several large IPO-bound companies were acquired after markets began tumbling last year - Petco, Ballast Point and IDC to name a few - and the trend has continued in 2016. Since September, 10 companies have achieved an enterprise more than $1 billion at IPO, and 10 pre-IPO companies we track have announced they would be acquired for $1 billion or more.
Keywords / Tickers: IBM, CSCO, Jasper, Truven, Lytx
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