M&A activity in the world of “all things related to cloud” didn’t disappoint in 2017. While there was only one blockbuster cloud service provider acquisition, it seemed like every week we saw a new merger or purchase in the news. Many of these were the purchase of cloud-related service companies by traditional enterprise hardware and service companies looking to move their businesses into the cloud era.
Here are the cloud-related M&A highlights:
Cloud community collaboration company, Jive, was acquired by Aurea for $462M. The plan is to integrate Jive into Aurea’s customer experience management platform. The acquisition gives Aurea a tool for creating internal and customer-facing communities, a key piece in today’s customer service environment. A tight internal-external collaboration integration may provide value needed to stave off evolving solutions from Slack, Microsoft, Facebook, Cisco and Salesforce.
Cisco acquired 9 companies in 2017 (7 in 2016, 11 in 2015, so about their average), most of them had some sort of connection to cloud:
- AppDynamics for $3.7B, a cloud application and business monitoring platform. Cisco swooped in to make the buy the day before AppD was scheduled to go public. The acquisition helps bridge Cisco from a networking to a cloud and application focus.
- Perspica for an undisclosed amount, a machine learning-based operations analytics company. The Perspica engineering folks will be folded under the AppDynamics team to add a real-time intelligence layer that can surface more data, more quickly.
- Saggezza for an unknown amount, another cloud and analytics-focused company that continues to add to their engineering talent acquisition.
- Viptela for $610M, a third SD-WAN solution to “complement” IWAN and Meraki.
- MindMeld for $125M, helps companies build conversational interfaces with cloud-based, AI-driven services.
- Observable Networks, a real-time, network behavior and security monitoring solution that runs out of AWS and Azure.
- Springpath for $320M, developers of a distributed file system for hyperconvergence that enables server-based storage systems.
- Broadsoft for $1.9B, one of the leaders in providing Unified Communications solutions to service providers.
- Cmpute.io, a SaaS-based solution that helps automate cost-optimization of cloud service purchases.
VMware bought SDN startup VeloCloud, one of the more prominent players trying to disrupt the SD-WAN market, which historically has been led by networking vendors with hardware-based solutions. VMware also purchased monitoring company Wavefront, a startup that specializes in metrics monitoring for cloud networking. The acquisition lets VMware “leapfrog into application management of next-generation modern applications,” according to VMware Senior Vice President Ajay Singh.
Hewlett-Packard Enterprise’s (HPE) shopping spree continued in 2017 with the purchase of a few cloud related companies:
- Cloud Technology Partners, helps business customers plan and build cloud computing capabilities.
- Simplivity for $650M, a hyperconverged hardware solution to compete with Nutanix and DellEMC.
- Nimble Storage for $1B, flash storage company to augment their existing 3Par-based solutions.
- Cloud Cruiser, a cloud cost optimization company.
- Niara, a security analytics company specializing in User and Entity Behavioral Analytics, UEBA, will be folded into the Aruba team.
Microsoft acquired Cycle Computing for its high-performance cloud computing expertise. The addition will help bolster its high-performance computing pitch to current and future Azure customers. Cycle Computing makes a product that allows customers with special high-performance computing needs to run their outsized workflows across multiple cloud providers.
Rackspace acquired enterprise application specialist TriCore Solutions. It what was its largest acquisition at that time, Rackspace acquired the 513 employees and 275 enterprise customers of TriCore. This brings an elevated level of enterprise app (Oracle, SAP, Microsoft, AWS, HP) support to the Racskpace Managed Services portfolio.
Rackspace acquired rival Datapipe to create an MSP-zilla. The two privately held companies did not disclose the financial details of the transaction, but Datapipe has raised more than $310 million in equity funding since its launch in 1998 and this deal surely didn’t come cheap. Datapipe’s majority owner, Abry Partners, will become an equity investor in Rackspace and the combined company will have more than 6,700 employees and do more than $2.4 billion in annual revenue.
What’s in store for 2018?
According to industry experts, the acquisition pace is going to increase in 2018. Private equity investors are becoming more interested in the “high-tech solution provider market”. The state of the financial market is also in one of those cycles where bigger looks better despite the challenges that come with larger acquisitions. The solution providers with a solid customer base and growth strategy are the most sought after of the category.
The “real action” in the M&A market in 2018 will likely be on the traditional side where the technology is moving faster than ever, the floodgates may be opening up to usher in a great deal of cash that needs to go somewhere. Also, changes to the tax plan in the coming year could bring cash that is being held overseas back to the U.S. With more cash available, the likelihood of bigger deals, such as Dell’s acquisition of EMC will be high. We are very likely to see some really big brands be both hunters and hunted.