HP Buys ArcSight: Caviar Not Catfish

This morning, HP announced it was buying ArcSight for $1.5 billion, at a 70% market value premium compared to its value a month ago.

My colleague John Kindervag will probably be blogging on this acquisition in more detail, so I won’t steal his thunder. That said, I do have a few quick observations about the deal. The ArcSight acquisition should be seen against the broader tableau of the consolidation wave we have seen over the past two quarters:

  • In April, Symantec bought PGP and Guardian Edge for $70m and $300m, respectively
  • In May, Symantec bought VeriSign’s security business for $1.3 billion
  • In July, IBM bought BigFix for $400m
  • Last month, Intel bought McAfee for $7.7 billion
  • Shortly thereafter, HP bought Fortify for an undisclosed amount, likely not less than about $150m
  • Two weeks ago, CA bought Arcot, a fraud management and adaptive authentication vendor, for $200m

That is about $10.1 billion in deal-making. All of these deals have a common theme: the acquisition targets are all leaders in their respective markets. That is because we are at the point in the market cycle where the larger potential acquirers have enough cash in the bank to buy top-shelf companies. There is not a lot of bottom-fishing going on. Why have catfish when you can have caviar?

Because the balance sheets of big potential acquirers like Symantec, Microsoft, IBM, Oracle et al are relatively healthy, we will likely continue to see additional M&A activity through the end of the next year and into Q1 2011.

Comments

Security M & A

yes at first blush there seems to be a sudden burst of hype and froth in the security sector. Gartner do not seem to think it is ' a trend ' - well if ' one swallow alone does not a summer make ' ; what do, well over a dozen deals in the last 6 months in the security space qualify as ?? - Feels like a scorching summer to me!!

What does it all mean - yes there is cash; there is a shortage of good quality assets ( hence the bidding wars ) ; lack of innovation by the big guys ( so innovation by acquisition ) ; and of course Internet growth continues at great speed driven by technology evolution ( 3G/4G/LTE); mobile Internet; Global recession - leads to lower cost models of distribution ie Internet; and every day anecdotes about being hacked / Facebook accounts being hijacked etc etc . All leads to much greater need for security!! So this may well be a long Summer !!!

Have a look at my blog on this subject : http://rossmac2310.blogspot.com/2010/09/security-m-gone-bit-crazy.html