Network World published a slide show detailing what it has termed the “Hottest Tech M&A Deals of 2008” and making the list (slide 14) was Symantec’s acquisition of SwapDrive which was announced back in June. Updata served as sole financial advisor to SwapDrive.

Network World called the deal significant because SwapDrive’s web-based file recovery and backup services provide Symantec with “a new avenue into the consumer storage market.”

Since then, Updata’s M&A activity has not slowed. Updata has announced 7 transactions since SwapDrive for a grand total of 14 in 2008.

Updata, along with Administaff, General Counsel Solutions, Marcum & Kliegman, Morgan Stanley, and Scarlet Heifer, co-sponsored Tech M&A 360: Buyer, CEO, and Banker Perspectives on Maximizing Value in the Post-Bailout Economy last Thursday. This panel event featured Greg Besner (Restricted Stock Systems), Mark Fasciano (Karma411, FatWire), and Updata’s own Joel Strauch and James Socas. Brian Turchin (Cape Horn Strategies) was the moderator.

The event attracted CEOs, Managing Directors, founders, and other top executives from technology startups, banks, and venture capital firms.

The speakers shared their stories of surviving in a tech downturn and gave practical advice about planning and timing an exit. Highlights of the event follow:

• This is an opportunity to shift gears and get creative. Mark Fasciano started an enterprise software company called FatWire with some friends in 1996. Too much capital came in during the Dot-Com Boom and FatWire was overstaffed by the time the tech bust occurred. Sales were flat and the competition was going out of business. Mr. Fasciano noticed that although these were terrible times and his company was hurting, other companies were hurting worse and FatWire had the potential to pull through – but only if something drastic was done. Mr. Fasciano saw his opportunity when one of his competitors, a company called Divine, was being bought in distress – until the buyer itself went bankrupt. FatWire then bought two of the content management businesses out of Divine for a relatively small sum of $6.5 million. He acknowledges that at the time, the deal was difficult to justify. Others would ask what kind of revenue the combined company would generate and Mr. Fasciano did not have the answer. There wasn’t enough time to do the proper due diligence. But he took the chance, bought his competitor out of a very complicated bankruptcy, took the competitor’s product, and jettisoned his own. After this unconventional move during some very rough market turbulence, FatWire had their best growth. Mr. Fasciano sees the current economic downturn as an opportunity to re-evaluate strategy and take risks. He did something counterintuitive: he changed his business profoundly during the worst tech crisis yet to be seen and that has made all the difference.
• There are still M&A opportunities with big technology companies. Updata’s own Joel Strauch follows the infrastructure software sector. He is seeing large vendors with product lines that they need to expand to satisfy the demands generated by the disruption happening in the infrastructure space – this disruption is largely attributable to the increasing trend of virtualization in the data center. Data center virtualization vendors are poised to do well in an economic downturn since their technologies enable big cost savings. This market has traditionally been comprised of a small group of vendors, but new players (such as VMware) are entering and incumbents need to protect themselves and defend against new arrivals by filling the holes in their product lines through acquisitions. There are a lot of opportunities to be had right now and companies are realigning their priorities when they see a really cheap deal.
• The highest bid is not always the best. Greg Besner has some experience with tough times in the tech sector. He began his company in September 2000, which is considered by many to be the beginning of the end of the good times. Restricted Stock Systems’ first product was set to be delivered on September 14, 2001, and their servers were located at 7 World Trade Center. Needless to say, it was a very rough time. But RSS was able to survive, and in 2006 Mr. Besner began to think seriously about selling his company. RSS was having good growth and profitability. He wanted to have a transaction in 2007 because he felt multiples were strong. RSS ended up receiving three bidders, two of which were serious bids – one from a large company and one from a small company. Counter-intuitively, the smaller company made the larger bid. Computershare, the large company, offered $1 million less than the small company. The small company had to raise money in order to finance the deal whereas Computershare had the cash. Mr. Besner felt more confident that if he sold to Computershare, the deal was more likely to close and accepted their offer. The deal officially closed on October 31, 2008, a little over a month after the collapse of Lehman Brothers and Merrill Lynch. Had Mr. Besner taken the larger offer from the company that needed to raise the cash, who knows if given today’s economic environment it would have ever closed? Mr. Besner ended up selling his company to Computershare at 5.8x EV/TTM revenue.
• Strategize – think outside the box. Updata Partners’ James Socas formerly ran corporate development at Symantec and told of a recent conversation he’d had with a former colleague. The colleague is being inundated with calls from bankers – so many calls that he can’t return them all. Mr. Socas, bearish about the current state of the economy, warns that the good old days of 300 IPOs in a year are over and so he recommends some unconventional strategy. Inside-the-box thinking traditionally goes like this: I’d like to sell my company so I’ll call Oracle, IBM, and Cisco. In good times, that isn’t a bad idea. But these days everyone has the same idea so calls to corporate development offices aren’t getting returned in a timely manner if at all. Mr. Socas recommends outside-the-box thinking: If you want to sell, come up with a broader buyer list and think about partnerships or affiliations with private combinations with or  micro-cap companies. Figure out ways to have a dialogue with those companies so that when the economy makes a sale a more attractive option, you’ll already have relationships with potential buyers.

Panelists strongly advised cultivating relationships with other CEOs. Mr. Fasciano mentioned that he played golf with the CEO of a competitor. Although it isn’t likely you’ll get a CEO to divulge the details of the state of his own company, in times of economic stress they’re all too eager to share information about other companies. Mr. Besner recommended networking at tradeshows and reaching out to potential acquirers as potential partners first. After all, it’s much easier to convince a company they need you when they’re using your technology and you’re servicing their customers. Mr. Strauch agreed with this advice and added that it’s important to show these potential buyers that you can make money for them and that a good number of deals happen between companies that know each other very well.

The driving theme of the evening was about recognizing the downturn for what it is and thinking about strategy in a different way. Times are rough now, but they’re not as bad as they were during the technology bust of 2001. Some creative thinking could yield unexpected positive results.

Today Marshal and 8e6 Technologies announced their agreement to merge and become Marshal8e6. Individually, Marshal is an email and web content security provider based in the UK, and 8e6 Technologies provides web filtering appliances and is based in the US. Combined, these two companies offer technology that secures all Internet-based communications including internal corporate emails, Internet-based email services, websites, and instant messaging. Marshal 8e6 serves more than 20,000 customers in 96 countries.

Ed Macnair, CEO of Marshal said: "Today’s threat landscape does not discriminate between web-based and email threats. To combat these threats effectively, you need the ability to integrate email and Web security…Marshal8e6 has all the pieces in place to be the new leader in the Secure Web Gateway market."

Updata Advisors served as the sole financial advisor to Marshal. This deal marks Updata’s fifth security deal this year and the fourteenth overall in 2008.

ClinPro, a leading contract research organization (CRO) based in New Jersey, has combined with San Francisco-based CRO Pacific Data Designs, a portfolio company of DW Healthcare Partners. Updata Advisors was pleased to have served as the sole financial advisor to ClinPro and its shareholders in this transaction.

The combination of ClinPro and PDD creates a best-in-class organization that specializes in data management and biostatistical programming services for the pharmaceutical, biotechnology, and medical device industries. Both organizations are known for the excellence of their client service, their outsourcing solutions, and the processes and technology they deploy during sponsor clinical and post-marketing trials. Combined, they offer a bi-coastal platform for expanded client reach and offerings.

This deal underscores Updata's strength in mergers and acquisitions advisory for companies in the business services sector, particularly technology-enabled outsourcing organizations focused in verticals like pharmaceuticals and healthcare. Updata expects to see ongoing consolidation among companies in the fast-growing CRO space as pharmaceutical and biotechnology firms seek to speed FDA approval initiatives while focusing on core competencies.

Off the heels of other recent Updata transactions such as Managed Objects’ sale to Novell and Secure Computing’s acquisition of Securify, this deal marks the eighth transaction Updata Advisors has announced since the beginning of the summer and the thirteenth of 2008. Amid the current economic turmoil, we continue to announce and close deals and guide our clients toward Greater Outcomes^®.

Q3 2008 has seen unbelievable market turbulence. Although the number of deals we tracked in Q3 is just slightly up from Q2, announced enterprise value has fallen way down – a 51% drop.

"While deals are still getting done, they are taking longer to complete as buyers are cautious yet opportunistic during an uncertain economic period," said Ira Cohen, Managing Partner at Updata Advisors. "The climate tends to favor strategic versus financial buyers, as they continue to seek key acquisitions to capture market share, expand product portfolios or reach new customer segments. We're also seeing selected cross-border activity with U.S. targets."

Highlights from the report include:

• Private equity deals are down 43% among the M&A transactions tracked by Updata this quarter versus last quarter.
• 41% of the transactions for this quarter were cross-border deals. Among the cross-border deals that Updata tracked this quarter, 37% involved a U.S. target company versus only 17% for similar transactions in Q2 of 2008.
• M&A trends vary by sub-sector. Financial technology transactions represented 43% of all enterprise application software deals tracked by Updata in the quarter, driven by acquisitions of processing, lending, consumer protection and identity theft solutions.
• Total enterprise value for enterprise application software and security M&A is up from Q2 2008. Median multiples of enterprise value over trailing twelve months' revenue are up from last quarter in infrastructure software and security.

To see the full report, click here.