M&A Alert - November 10, 2009
Logitech agrees to acquire Lifesize Communications
Transaction Overview
In a bid to expand into the corporate and SMB videoconferencing market, on November 10th, 2009 Logitech International (NASDAQ: LOGI) agreed to purchase Lifesize Communications for $405mm in cash.
Target Description
Lifesize Communications is a high-definition videoconferencing equipment manufacturer and service provider, in the increasingly popular ‘Telepresence’ marketplace, which aims to replace business travel with high quality video and audio connections to simulate face-to-face meetings. Since 2005 Lifesize has received $80 million in funding from Austin Ventures (Venu Shamapant), Norwest Venture Partners (Vab Goel), Redpoint Ventures (Jeff Brody), Sutter Hill (Ron Bernal), Tenaya Capital (Brian Paul) and Pinnacle Ventures. Lifesize competes Polycom, Citrix, and Cisco Systems via Web-X and their recently announced acquisition of Tandberg. Lifesize currently has over 9,000 customers, was founded in 2003 by Craig Malloy and Van Goel of Norwest Partners and is based in Austin, TX, with offices in Europe and Asia.
Buyer Description
Logitech International S.A. is maker of peripheral devices and equipment for PCs. Logitech makes keyboards, mice, computer speakers, PC webcams, MP3 players and Bluetooth headsets. This acquisition was led by Gerald Quindlen, President and CEO of Logitech, the Lifesize business will be run as a separate division run by current Logitech CEO Craig Malloy. Logitech was co-founded in Apples, Vaud, Switzerland, in 1981 and is based in Switzerland and Fremont, CA.
Logitech is paying $405mm in cash for Lifesize Communications. Revenues for CY 2009 and CY 2010 are expected to be $90mm and between $125 – $145 mm, respectively.
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| Transaction Value | $405mm |
| Transaction Value/CY 2009 E Revenue | 4.5x |
| Transaction Value/CY 2010 E Revenue | 2.8x-3.2x |
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The most recent comparable transaction is Cisco’s recently announced acquisition of Tandberg (3.5x LTM)
Note: Data is sourced from Capital IQ and Company’s Press Releases.
(1) LTM is as of 9/30/2009. LTM Revenue was $857.6mm.
Strategic Rationale
In an effort to broaden into growth markets, Logitech begins to move from its consumer PC peripheral roots into the corporate market with the acquisition of Lifesize. Historically, video conferencing capabilities have been prohibitively expensive for widespread adoption, particularly for small and medium size businesses. That had rapidly changed with the increased availability of high-speed internet connections, VoIP, and decreasing hardware costs. Logitech positions itself to participate in a $2 billion video conferencing market, which is growing at about a 20% rate annually.
Architect Partners’ Observations
Logitech, while recognized for high quality products and design, has been hemmed in by participating in product categories with only modest growth potential. Lifesize, while expensive for Logitech vis-à-vis its own valuation (1.52 x LTM revenues), squarely positions the company as an attractive, growing market and brings a corporate sales and distribution and DNA into their heretofore consumer-central organization. A clear overview of the market can be found here.