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Transaction
Case Studies

Peter A. Sokoloff & Co. regularly analyzes transactions which occur within the industries covered. An archive of these case studies is kept online as a courtesy to our colleagues. To receive by e-mail new case studies as they are prepared, please e-mail bwalko@sokoloffco.com with your contact information.

Archives > Transaction Case Study 66

SOKOLOFF & COMPANY CASE STUDY
Apple, Inc. (NASDAQ: AAPL) to acquire AuthenTec, Inc. (NASDAQ:AUTH)

DATE ANNOUNCED: July 27, 2012
BUYER:   Apple, Inc. (NASDAQ: AAPL)
SELLER:  AuthenTec, Inc. (NASDAQ:AUTH)     
PURCHASE PRICE:  $356M
FORM OF PURCHASE PRICE:  $8 per share

SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES

Year 2010 2011 Trailing Twelve Months
through
March 30, 2012

Revenue

$44.66M

$69.79M

$71.77M

EBITDA

N/A

N/A

$707K

Cash

 

 

$22.77M

Debt

 

 

0

Purchase Price

 

 

$356M

Enterprise Value

 

 

$333.23M

Multiple of Revenue

 

 

4.64

Multiple of EBITDA

 

 

503.5

TRANSACTION DRIVERS
Fingerprint reader AuthenTec was purchased by Apple to strengthen their digital security capabilities. "As cellphones become essentially credit cards, consumers will look to secure them in the event of theft or loss” said Raymond James analyst J. Steven Smigie.  The Associated Press also commented that “Beyond protecting payments, a fingerprint system could keep unauthorized people from accessing email, contact lists and more. Current phones offer protection through passwords, which can be guessed or forgotten.”   

SOKOLOFF COMMENTARY:
Because Apple’s famed closed system approach allows it to dictate the software and security embedded in its mobile devices, with a single shake of its technology sword, it can take Authentec’s rather limited market share in mobile security and turn it into THE standard for mobile security.  In addition to fingerprinting, AUTH’s VPN software has had success in the mobile market, with major wins at Samsung and Portugal Telecom, where it is securing both Apple and Android devices.

Users have long resisted fingerprint security but that will change.  Just as years ago, Detroit couldn’t sell safety and then Volvo showed them that safety sells, so will go the personal security market.  And leave it up to Apple to find the ways to make it extremely user-friendly and unobtrusive.

There are two big IFs in the deal…Can AAPL get it past anti-trust regulators?  What will the final price for AUTH be?  Authentec has been trading above the $8 per share offer price.  Will another bidder step up?
Personally, we would like to see the deal go through.  It’s time to get a real handle on mobile and Internet security.  The world has become a harsh place where few escape the damage wrought by cyber criminals who cast an every increasingly wide net.  We think Apple, with its closed systems architecture, is the only company remotely capable of shutting most of these cybercrimes down permanently.

Microsoft, Google, Samsung and others are victims of their own open environments.  Like the Internet itself, built for open access, that value which has been most attractive is also the biggest hamper to stopping crime.

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