This morning, HP announced it was buying ArcSight for $1.5 billion, at a 70% market value premium compared to its value a month ago.
My colleague John Kindervag will probably be blogging on this acquisition in more detail, so I won’t steal his thunder. That said, I do have a few quick observations about the deal. The ArcSight acquisition should be seen against the broader tableau of the consolidation wave we have seen over the past two quarters:
- In April, Symantec bought PGP and Guardian Edge for $70m and $300m, respectively
- In May, Symantec bought VeriSign’s security business for $1.3 billion
- In July, IBM bought BigFix for $400m
- Last month, Intel bought McAfee for $7.7 billion
- Shortly thereafter, HP bought Fortify for an undisclosed amount, likely not less than about $150m
- Two weeks ago, CA bought Arcot, a fraud management and adaptive authentication vendor, for $200m
That is about $10.1 billion in deal-making. All of these deals have a common theme: the acquisition targets are all leaders in their respective markets. That is because we are at the point in the market cycle where the larger potential acquirers have enough cash in the bank to buy top-shelf companies. There is not a lot of bottom-fishing going on. Why have catfish when you can have caviar?
Because the balance sheets of big potential acquirers like Symantec, Microsoft, IBM, Oracle et al are relatively healthy, we will likely continue to see additional M&A activity through the end of the next year and into Q1 2011.