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451 Research: Inorganic Growth
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An insider’s view on tech M&A transactions and trends, Inorganic Growth covers the numbers as well as the story behind them. Brenon Daly is the primary writer, with insights from across 451 Research. Hundreds of more in-depth M&A analysis reports and data can be found in 451 Research's... More
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  • Vonage Dials Up A Discount In $130m Purchase Of Vocalocity 0 comments
    Oct 10, 2013 5:46 PM | about stocks: VG, RNG

    By: Scott Denne

    Vonage (NYSE:VG) picks up Vocalocity for $130m in a sizeable and relatively safe bet to turn around a declining business. It's a big bite for Vonage, which will be borrowing heavily to fund the deal. But at least Vonage is getting a discount on its purchase of the business VoIP provider: Vocalocity is valued at less than half the level of its competitors on the public markets.

    Vocalocity posted $28m in revenue for the first half of the year, up 39% from the same period a year ago. While that growth is faster (due partially to starting at a smaller base) than its larger public rivals 8x8 and RingCentral (NYSE:RNG), its valuation is lower. According to our quick math, Vonage is valuing Vocalocity at just about 2.5x trailing 12-month sales. Meanwhile, RingCentral currently boasts a 7.7x trailing sales valuation, while 8x8 pencils in at 6.7x.

    To cover its largest acquisition, Vonage is paying $105m in cash ($30m from its treasury and drawing $75m from its revolver), along with $25m in stock. Even though the new paper dilutes existing shareholders, Wall Street backed the purchase. Vonage's long-suffering shares jumped 15% on the deal, hitting their highest level in more than two years.

    For more real-time information on tech M&A, follow us on Twitter @451TechMnA.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: VG, RNG
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