Upside to Iron Mountain's Mimosa Acquisition

Feb.24.10 | About: Iron Mountain (IRM)

A data storage and information management company, Iron Mountain Incorporated (NYSE:IRM) announced that it has acquired Mimosa Systems Inc. for approximately $112 million in cash. Based in Santa Clara, California, Mimosa is a leader in enterprise-class content archiving solutions. It is also a leading provider of on-site digital storage services.

The acquisition will provide Iron Mountain with an integrated archive for email, SharePoint data and files, and will enable the company to offer an on-premises archiving option to complement its existing cloud-based archives.

Mimosa will be incorporated into Iron Mountain’s Total Email Management Suite. The acquisition will enhance Iron Mountain’s data storage and management technologies and services for customers. The combination of on-premises archive by Mimosa and cloud-based offerings will help Iron Mountain clients store, recover and discover digital content on the go.

While Iron Mountain provides records management, data protection and recovery and paper shredding services, its digital arm, Iron Mountain Digital, provides cloud-based services to customers.

Mimosa’s NearPoint is an enterprise archiving platform with applications for retention and disposition, eDiscovery, compliance supervision, classification, recovery and end-user search. The company believes that the combination of Mimosa’s NearPoint solution with its own content archiving, data protection and recovery and eDiscovery solutions will help customers reduce the cost and risk of storing and managing information and drive long-term synergies.

The company said that the acquisition of Mimosa is expected to result in a modest dilution of earnings in its first year of closing. However, accretive synergies and revenue growth are expected to drive profits beyond 2010.

The acquisition will also help Iron Mountain gain Mimosa's key customers such as United Healthcare Group Inc. (NYSE:UNH) and Flextronics International Ltd. (NASDAQ:FLEX) in addition to 1,000 more customers.

The president and CEO of Mimosa Systems, T. M. Ravi, will become Chief Marketing Officer for Iron Mountain Digital. The rest of the Mimosa employees will also be retained.

Iron Mountain is positioned as a leader in record management, data protection and information destruction. We believe that strong demand trends for email, instant messaging, digital archiving and electronic documentation storage management in an increasingly complex regulatory and legal environment presents new opportunities for the company.

Iron Mountain has also utilized an aggressive acquisition strategy to supplement solid internal growth in storage revenues. The company has made four acquisitions since 2001 in the digital storage segment.

By the end of 2007, Iron Mountain had acquired its partner Stratify Inc., a leader in advanced electronic discovery services for the legal market, for $158 million. Stratify was its largest acquisition in the digital segment.

We believe that with continued focus on its acquisition strategy, Iron Mountain has been trying to expand into digital business. However it faces intense competition in the digital space from EMC Corp. (EMC), Symantec (NASDAQ:SYMC) and NetApp (NASDAQ:NTAP).