On Tuesday the data-integration giant announced that it has accepted a $5.3 billion offer to be acquired by European private-equity firm Permira and the Canada Pension Plan Investment Board. Informatica shareholders will receive $48.75 in cash for each share of Informatica common stock.
The deal is said to be the largest leveraged buyout so far in the U.S. this year.
“Informatica is a clear leader in the essential field of enterprise data solutions,” said Permira Partner Brian Ruder. “We are very excited about the company’s ongoing transition to cloud and subscription-based services, as well as its continued pursuit of four separate billion-dollar market opportunities in cloud integration, master data management, data integration for next-generation analytics, and data security.”
Informatica’s board of directors has unanimously approved the merger agreement and will recommend that Informatica shareholders adopt it as well. The transaction is expected to be completed in either the second or third quarter of 2015.
“Normally, when a public company like Informatica goes private, it’s because they need to invest in some foundational technology or other organisational change that they don’t want to have to explain or justify to Wall Street,” said Carl Olofson, Research Vice President, IDC.
Informatica sees cloud integration as a key opportunity and has already been investing in it, Olofson added. It’s also looking to evolve its technology to serve the rapidly changing big-data space of Hadoop and NoSQL databases.
“I suspect that they want to retool to take better advantage of these opportunities without the prying eyes of the public examining them, and without needing to worry about the vicissitudes of share-price shifts,” Olofson said.
In a way, the sale of Informatica qualifies as the latest in a series of technology “dominoes” falling into private ownership, said Charles King, principal analyst with Pund-IT.
“Like Dell and Tibco before it, Informatica is a steadily profitable company whose share value has failed to reflect its overall success,” King said. “That, in turn, has led its management and investors to consider other options, including entertaining acquisition offers.”
The $48.75-per-share offer is a significant premium over the recent price of Informatica stock.
“So long as the new owners can retain experienced management and Informatica’s substantial customer base, the agreement should play out well for everyone involved,” King predicted. “If that proves to be the case, I expect to see additional technology companies heading toward private ownership.”
The deal is a good offer, said Ray Wang, founder and principal analyst with Constellation Research.
But he does have one reservation: “When you are owned by a European private-equity firm and competing with west coast VCs, the company is at a disadvantage,” he said.
In particular, European private-equity firms “like to use drip financing, often don’t allow companies to grow as fast as their potential and force profits over long-term expansion,” Wang said.