Carbonite: A Business Model Transition, An Activist Investor And An Undervalued Acquisition Candidate
- Quietly transitioned its business to solely focus on SMBs vs. consumers. Higher margin SMBs are 30% of total bookings and 50% of new bookings—and expected to grow 30%+.
- Received a large and growing activist investment from Discovery Group, one of the most effective activist investors that has helped push over 50% of its 53 targets toward an acquisition.
- Valuable brand (tested by my own survey) will enable Carbonite to continue to gain share in a crowded SMB market that is ripe for consolidation.
- Attractive financial profile, with solid revenue growth, a clean balance sheet and both EBITDA and FCF positive—all achieved while transitioning the business, which is largely complete.
- Carbonite has all the characteristics of a prime acquisition candidate and with a discounted valuation relative to comparables and highly relevant precedent transactions; valuation upside of 40-50% is projected.