A person takes a photograph with an Apple iPhone of Cloudera signage during the company’s initial public offering (IPO) on the of the New York Stock Exchange (NYSE) in New York, April 28, 2017.
Michael Nagle | Bloomberg | Getty Images
Cloudera’s agreement on Tuesday to sell to a group of buyout firms in a transaction valued at $5.3 billion continues a 2021 trend: most of the big-dollar deals in tech are going to private equity.
Of the 12 largest tech acquisitions this year in the U.S., excluding special purpose acquisition companies, seven of them have been orchestrated by private equity firms, according to data from FactSet.
The biggest was Thoma Bravo’s purchase of security software vendor Proofpoint in April in a deal valued at $12.3 billion. In February, Stone Point Capital and Insight Partners agreed to buy tech-powered real estate company CoreLogic for close to $6 billion.
Clayton, Dubilier & Rice and KKR said they’re teaming up to buy Cloudera in part to help the data analytics company more rapidly transition to the cloud. Alongside the takeover announcement, Cloudera said it’s purchasing two small companies — Cazena and Datacoral — to broaden its public cloud offerings.
Buyout firms have been increasingly active in tech in recent years, primarily snapping up companies that have experienced slowing growth and stock market underperformance. Deal-making has picked up since the early days of the coronavirus pandemic as more organizations have come to rely on digital tools to operate their business and stay connected with employees.
Ernst & Young said in a report early this year that technology accounted for 24% of private equity deals by total value in 2020, up from 19% in 2019.
“Overall, the take private of Cloudera is just another example of the tremendous amount of private equity money looking for a home in the software sector given the strong margin and retention profile of these companies,” analysts at Stifel wrote in a report Tuesday. “We expect M&A, both strategic and financial, to remain active in the space in the coming quarters/years.”
Cloudera shares climbed 24% to close at $15.93, just below the $16 acquisition price. Before Tuesday’s rally, the stock was up 25% in the past year, trailing the Nasdaq Composite’s 45% gain.
Cloudera vs. Nasdaq
CNBC
Cloudera has struggled as a public company since holding its IPO in 2017. The company, along with Hortonworks, came to the market as a leader commercializing the open-source analytics technology called Hadoop. Cloudera and Hortonworks merged at the beginning of 2019 in what ended up as a $3 billion deal, well below where the companies had been valued years earlier.
Competition has ramped up in the cloud database and analytics market, both from infrastructure vendors like Amazon, Microsoft and Google and from emerging companies like Snowflake and Databricks.
Before the acquisition of Proofpoint, that company’s stock had gained 9% over the previous 12 months, compared with the Nasdaq’s 62% jump. Proofpoint’s revenue growth slowed to 18% in 2020 from 24% in 2019 and 39% the year before that.
Among the other top private equity deals in tech this year are Veritas Capital’s $7.1 billion purchase of Perspecta, which provides services to the government, and McAfee’s $4 billion sale of its enterprise business to a consortium led by Symphony Technology Group.
While private equity deals account for more than half of the biggest tech acquisitions this year, the two largest purchases have been strategic. Microsoft agreed in April to buy speech recognition company Nuance Communications for $16 billion. And in January, UnitedHealth Group’s Optum said it was buying health-tech company Change Healthcare for close to $13 billion including debt.
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