M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, September 15, 2010

Whatever ... it's only money

With Mark Hurd now out of the way, it seems that HP has unleashed its acquisition crew and given it almost a blank check.  There was 3Par for which HP paid 325 times EBITDA ... catch me, I just fainted ... Now, there's ArcSight.  At $1.5bn, the valuation for this target is almost as rich according to Bloomberg:

The offer also values ArcSight at 57 times the company’s Ebitda, compared with a median 11.5 times Ebitda in 10 comparable deals tracked by Bloomberg.

Seeking Alpha also has some thoughts on the valuation:

HP put the enterprise value of the transaction, which is slated to close by the end of the year, at $1.5bn. That means the tech giant is paying 7.5 times ArcSight’s trailing sales of $200m. (For the current fiscal year, ArcSight is expected to put up about $225m in sales, meaning HP is paying about 6.7x projected sales.) On a trailing basis, both McAfee (MFE) and VeriSign’s (VRSN) identity and authentication business garnered 3.5x sales in their respective sales to Intel (INTC) and Symantec (SYMC). (Morgan Stanley advised both McAfee and ArcSight, while JP Morgan Securities advised VeriSign.)

But this isn't really a new direction for HP.  Actually, they've been in the market buying for some time now ... remember Palm?  They paid $1.2 billion for that company just last April.  Before that it was 3Com.  Now, I've got nothing against HP.  Really, I don't.  In fact, it's great news for shareholders of the sellers.  Clearly it's a make or buy decision and HP has decided to buy.  I'm just a little mystified at why HP appears to insist on overpaying for almost everything.   



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