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Archives > Transaction Case Study 58
SOKOLOFF & COMPANY CASE STUDY: Tekelec to be acquired by group of PE Firms
BUYER: A consortium led by SIRIS CAPITAL GROUP including the affiliates of THE COMVEST GROUP, funds and accounts managed by GSO CAPITAL PARTNERS LP, SANKATY ADVISORS, LLC, ZELNICK MEDIA & OTHER SIRIS LIMITED PARTNERS AND AFFILIATES.
SELLER: TEKELEC (Nasdaq: TKLC)
SELLER’S FINANCIAL INFORMATION AND M&A MULTIPLES
TKLC is a market leader with acclaimed products for the communications industry. The most recent accolade came on October 3rd, when an analyst at Current Analysis gave the Tekelec Policy Server an unprecedented Five-Star Product Review. Earlier this year, Analysys Mason named Tekelec the "leading independent software vendor in the policy management segment" for the second consecutive year. Frost & Sullivan also recognized Tekelec's Diameter Signaling Router for the "New Product Innovation Award, Diameter Routing" for its superior ability to help operators overcome Diameter signaling challenges in LTE networks.
This positions TKLC to make major sales jumps as global operators seek to improve revenues and margins to pay for the huge cap ex requirements necessary to squeeze profits out of 4G and broadband pipes big enough to pass Niagara Falls.
As a prelude to the offer announcement, on October 19th, Tekelec revised its Q3 guidance upward, indicating it would show about three times the profit previously advised. This caused the stock to spike by more than $2 from the previous $7 range and begin a rise to a point where it only jumped 11% on the November 7th offer announcement. If the company can grow or even sustain this level of earnings in the year ahead, the multiple paid by Sirius and friends will drop considerably, making this a notably great deal, even for the flintiest of PE players.
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