Data Backup and Storage Mergers, Acquisitions, and Consolidations

backup mergers and acquisitions

There have been a number of mergers and acquisitions (M&A) and consolidations in the cloud data backup and storage industry lately. Bigger companies have been buying smaller ones with the intention of boosting their portfolios. What do these transactions tell us about this industry’s growth? To answer that question, some of these consolidations are worth discussing.

j2 Global Offers to Buy Carbonite

Carbonite announced that j2 Global had made an unsolicited offer to acquire 100% of its shares at $15 a share in cash, making the offer worth about $366.4M. j2 Global already owns 10% of Carbonite, and is trying to get the remaining 90% of the company. As Carbonite has been growing steadily for the past several years (Q3 revenue was $31M, and at this pace, annual revenue is expected to surpass $120M), it only makes sense for j2 Global to try again to fully acquire Carbonite.

This latest offer of $15 per share represents a 43% premium over the 2012 attempt to buy Carbonite at $10.50 per share. Carbonite rejected j2 in 2012 citing too low of an offer; they believed their own strategies more productive to shareholder wealth enhancement. This year’s new premium proves Carbonite’s success in creating value for its shareholders.

j2 Global provides Internet-based software solutions for digital media companies, government agencies, and other businesses. Acquiring no less than 30 cloud backup and disaster recovery companies in the past few years—including Securstore, Livedrive, BUMI, eTegrity, XiloCore, e-ternity, Recovery Networks, NextVault, and many others—j2 Global’s presence is being felt in the world of data backup. Some are asking where this trend is going and what its potential impact on certain enablers in the industry might be.

If this latest offer is accepted by Carbonite, j2 Global’s intention is to integrate it into its Business Cloud Services Division. Carbonite has not yet accepted or rejected the latest offer. Carbonite’s board has hired Sidley Austin LLP as an advisor to examine the offer, and plans to make its decision known by mid-January 2015.

Carbonite’s Acquisition of MailStore

Carbonite just announced that it was acquiring MailStore, an email archive solution for small and medium businesses (SMBs), for a cash value of approximately $20M. This announcement was made while Carbonite itself was a takeover target of j2 Global.

With this MailStore acquisition, Carbonite has advanced its mission of global expansion, allowing it to carve a niche for itself. Businesses all over the world rely on email archiving and indexing solutions to keep a complete history of their business data, as well as to ensure data integrity. Emails are becoming increasingly important, and as a data backup company, Carbonite needs to provide email archiving solutions to its growing business clients. MailStore, therefore, is a great boost to Carbonite’s expansion in the business sector.

Both Carbonite and MailStore are committed to the provision of simple but powerful solutions for data protection to SMBs. As such, MailStore will be a natural fit, and an excellent acquisition. This is further echoed by the new Carbonite CEO Mohamad Ali who said,

“MailStore is a great fit for Carbonite, as both companies are committed to providing SMBs with powerful yet simple data protection solutions. In addition to offering email archiving to businesses worldwide with MailStore’s existing solutions, Carbonite will integrate MailStore’s robust full-text search and indexing capabilities into our product portfolio to help our business customers better manage, understand, and leverage their data.”

Datto Acquires Backupify

Datto, provider of cloud backup, disaster recovery, and business continuity solutions, has finalized its plans to acquire Backupify. The latter is a leading cloud-to-cloud backup and recovery solutions provider for Software as a Service (SaaS) application software. This acquisition is anticipated to lead to the creation of the first complete platform responsible for the protection of business data regardless of where the data is. This merger will create technologies that will protect data for nearly two million business customers and 8,000 partners with an excess of 100 petabytes of cloud data worldwide.

Backupify, with over 2 million users—both consumers and businesses—provides cloud-to-cloud backup and recovery solutions for SaaS applications. It protects online services such as Salesforce, Google Apps, Smartsheet, Facebook, Twitter, and many more.

“At a time when data lives in and flows freely from on-premises servers and systems, virtualized environments, and third-party clouds, data protection and recovery takes on a whole new meaning,” said Austin McChord, founder and CEO of Datto.

It made sense for these two companies, with two complementary services, to join hands and give customers a complete package.

“Until now, the cloud platform market had no way to fully extend data protection across the digital landscape. The strengths of Datto and Backupify in this area are incredibly complementary,” said Rob May, CEO of Backupify.

Thoma Bravo and Teachers’ Private Capital to Acquire Riverbed Technology

In late October 2014, Riverbed Technologies sold its SteelStore product line to NetApp for an all-cash transaction of $80M. In mid-December, Thoma Bravo and Teachers’ Private Capital agreed to buy Riverbed for an all-cash transaction of $3.6B, subject to approval by Riverbed stockholders and regulatory approvals.

“Riverbed’s strong product portfolio provides unmatched optimization, visibility, and control across the hybrid enterprise, which has positioned the company extremely well in a rapidly-changing landscape,” said Orlando Bravo, a managing partner at Thoma Bravo.

Western Digital’s HGST Acquires Skyera

Recently, huge companies have been acquiring smaller startups. Some of the deals included SanDisk acquiring Fusion-io for $1.1B, Western Digital (WD) snapping up Virident for $685M, and EMC getting XtremIO for $430M. This time, WD got Skyera.

WD, via its enterprise storage division HGST, has acquired all-flash array provider Skyera in an all-cash transaction. The terms have not been disclosed. Skyera—whose investors include Micron, Toshiba, and SK Hynix—designs solid-state drives (SSDs) and specializes in NAND using its own proprietary technology and very high density solutions. Skyera develops solid-state storage systems for scale-out cloud and enterprise data centers.

WD, which plans to integrate Skyera into HGST, has been acquiring a number of companies in the SSD area recently. Skyera brings to HGST a strong technical team augmented by valuable intellectual property.

This acquisition shows that the storage industry is focusing on the ever-expanding data centers. It will broaden WD’s innovative scope.

Mike Cordano, President of HGST, said, “Flash solutions represent a large, exciting growth area for HGST and uniquely complement our existing portfolio.” This feeling is equally shared by Steve Milligan, President and CEO of WD, who said, “The Skyera acquisition supports our strategic growth objectives and plans to deliver long-term value to customers, shareholders, and employees.”

Companies in cloud computing, data backup, and online storage will need to differentiate themselves going forward. This means they need to be innovative with their products and services. They need to add and expand their offerings by either creating new solutions or acquiring new companies. We expect 2015 to be a strong year for M&A activities in the cloud data backup, online storage, and cloud computing industries.

We wish you happy holidays! May we see many more such deals in 2015!