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August 8, 2019 
martin wolf Transaction Analysis
 
Broadcom to Acquire Symantec's Enterprise Security Business 


*Financial Information
  • EV: $10.7 Billion
  • EV/REV: 5.35x 
  • EV/EBITDA: 8.23x
Transaction Facts
  • Chipmaker Broadcom Inc. (NASDAQ: AVGO) announced its intent to acquire cybersecurity giant Symantec's (NASDAQ: SYMC) enterprise security business for $10.7 billion in cash.
  • This deal comes about a month after a rumored deal fell apart between the two companies. 
  •  According to the press release, the deal is expected to drive more than $2 billion of incremental run-rate revenues and $1.3 billion of Pro Forma EBITDA. 
  • The deal is expected to close in the first quarter of 2020 subject to regulatory approvals. 
  • Symantec shares were up 12.30 percent during trading today after word leaked in the WSJ yesterday after the market closed. Symantec shares were up 3 percent today after market close and Broadcom stock moved up 1 percent in after-hours trading immediately following the announcement. 
martin wolf  Analysis
  • Landing on Its Feet: Broadcom has had a checkered record with recent acquisitions -- it was blocked last year in its bid to acquire rival Qualcomm Inc., and a rumored acquisition of Symantec's entire business earlier last month also fell apart. However, though smaller than these proposed transactions, this deal helps Broadcom diversify its business and will complement enterprise software capabilities gained in its acquisition of CA Technologies last year. While Broadcom bought the underperformer from Symantec, Symantec gets to keep the best part of its business: consumer security, with its recurring revenue and well known brand.
  • Critical for Symantec: The market's response to the rumored announcement yesterday and the confirmation after market close today shows this deal was vital for Symantec. The company has faced several challenges this year, including internal investigations, executive departures and high debt levels. A strategic buyout of its underperforming enterprise business could help Symantec cut costs and boost its profits. Symantec's CEO Richard Hill also has a demonstrated history of smart acquisition decisions -- including the decision to merge with Lam Research when he was CEO of Novellus
  • Proven Cost Take Out: Broadcom's surprise acquisition of CA Technologies last year was not well received -- CA Technologies was perceived as an underperforming asset in an uninteresting group. However, Broadcom made it work. It was able to consolidate quickly and expertly took out costs. This acquisition presents a new opportunity to follow the same model. Though Symantec has underperformed, it is in a desirable space. With the right decisions, Broadcom should find Symantec's enterprise security business repairable and improvable. 
For more information about this transaction, click here to read the press release.
 
*All financial information and multiples are for Symantec's enterprise business. 

martin wolf  was not the advisor in this transaction.

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Headquartered in Scottsdale, Arizona with an office in New York, martinwolf is a leading M&A Advisory focused on middle market companies in the IT Services, IT Supply Chain, IT-Enabled Business Process Outsourcing and Software as a Service (SaaS) space. Since 1997, our team has completed more than 160 transactions in over 20 countries and sold eight divisions of Fortune 500 companies. 

 

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