Citrix acquired in $16.5 billion deal, hinting at further pure-play consolidation

Diving brief:

  • Citrix Systems, a software provider specializing in virtualization, is set to go private in a $16.5 billion cash acquisition deal, the company announced Monday.
  • Acquirers Vista Equity Partners and Evergreen Coast Capital Corporation plan to merge Citrix with software company TIBCO, a Vista portfolio company specializing in enterprise data management. Shareholders will receive $104 in cash per share, a premium of 24% over the closing price on December 20, when the first reports of a possible acquisition were released.
  • The merger, a sign of continued consolidation among pure-play software vendors, will result in a combined base of 400,000 customers and 100 million users in 100 countries, according to the company. Its customer base will include 98% of the Fortune 500.

Overview of the dive:

The Citrix deal illustrates consolidation in the IT market, with pure-play companies becoming an attractive target for mergers and acquisitions.

The corporate computing space features some recent examples of moves towards a private corporate structure. In December, cloud-based security software provider Mimecast agreed to go private in a $5.8 billion cash deal with a private equity firm allow. Before that, enterprise data management company Cloudera also went private in June, after accepting a $5.3 billion acquisition deal to a group of buyout companies.

In this case, acquirers would likely expect an integration between Citrix and TIBCO to have a multiplier effect on their value, according to Brian Jackson, research director in the CIO practice at Info-Tech Research Group.

“They can take on debt and leverage it to grow a business that grows their recurring revenue base,” Jackson said in an email. “Once companies are well integrated and can attract a higher valuation, there could be an opportunity to return to the public markets.”

The Citrix deal signals a market shift toward consolidation, with attention shifting away from pure market players, said Tony Harvey, senior research director at Gartner. “The interesting thing that we’ll have to wait to see what happens is how they fit in [Citrix] with TIBCO data analytics.”

There’s a potential upside to taking a company off the public market, Harvey said.

“The benefit of going private is that it allows you to do some of the most complex restructurings that impact revenue and bottom line without having to deal with Wall Street and stock price issues. action,” Harvey said.

Citrix acquisition comes shortly after a leadership transition, with CEO David Henshall resign in october. On an earnings call in November, interim CEO Bob Calderoni spoke of an ongoing restructuring process “focused on growth.

By privatizing Citrix, acquirers could turn to a playbook introduced by Dell Technologies nearly 10 years ago, Jackson said. The company went private in a $25 billion contract in 2013, a response to the decline in PC sales and the need for a new strategy. Two years later, the company begins a new chapter in its trajectory with the Acquisition of EMC for $67 billion in 2015.

“It rejuvenated his brand in the business and provided new opportunities to find efficiency at scale,” Jackson said. “After integrating Dell and EMC, Dell Technologies returned to the public markets in 2018 to raise funds to pay down debt.”

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