By Brenon Daly
If nothing else, the long Labor Day weekend gave us all a chance to catch our breath following a week of some of the most frenetic dealmaking we’ve seen in some time. We had bidding wars, doubleheader deals and even a billion-dollar chip transaction. But in some ways, the loudest buzz in the tech M&A market came from a deal that didn’t happen: ArcSight (ARST) still stands on its own.
The ESIM vendor was supposedly in play, at least according to a thinly sourced and almost woefully vague recent article in The Wall Street Journal. Not to pick apart the piece, but listing a half-dozen of the largest tech companies as ‘potential bidders’ misses a great deal of context. For instance, we noted two and a half years ago that Hewlett-Packard (NYSE:HPQ) was rumored to have offered about $600m for ArcSight the summer before it went public. ArcSight is now worth twice HP’s rumored bid, and roughly four times the amount the market valued it at when it came onto the Nasdaq in February 2008, just before the IPO window pretty much slammed shut. (For the record, Morgan Stanley (NYSE:MS) led the ArcSight offering.)
That stellar aftermarket performance raises another interesting point about ArcSight: despite the fact that its shares have quadrupled during a time when the Nasdaq has essentially flat-lined, the company has never done a secondary offering. It has just 37 million shares outstanding. That strikes us a narrow base for a firm with $200m in sales and a market valuation of more than $1bn. But maybe the company figures it shouldn’t bother selling shares at current market prices if it stands to get a substantial takeout premium on top of that. For our part, we wouldn’t at all be surprised to see ArcSight get a second exit.