Private equity firm Carlyle Group is known for striking mega deals. It is set to make more headlines this year, as it announced on Tuesday a mega deal to buy Veritas, the data-storage company, for $8 billion. The deal is set to be the largest leveraged buyout of 2015 in the US.
The private equity firm is buying the data-storage unit from Symantec Corp. The firm has been in negotiations with Symantec for months, but it seems the parties have now reached an agreement.
The deal will be financed primarily from Carlyle’s US-focused buyout fund and GIC, the sovereign wealth fund from Singapore. There are other co-investors involved in providing equity for the mega deal, but these remain unnamed.
The deal is expected to be finalised by the end of the year and it will see a shake up in Veritas’ management. Bill Coleman is appointed as the new CEO of the company, with Bill Krause taking the lead as the Chairman.
Patrick McCarter, managing director at Carlyle, said in the official statement, “Bill Coleman is a proven leader whose strategic vision and strong execution skills will leverage Veritas’s new-found position as a private, stand-alone company to grow the firm and provide customers an integrated information management solution.”
Symantec announced last year that it is looking to split its operations into two separate units. R Ray Wang, founder of the Constellation Research, told TechCrunch, “The sale allows Symantec to double down on their core by buying them time to deal with the cloud revenue conversion”. As the deal is made with cash, Symantec is well positioned to make the most of the $8 billion and move its operations into the cloud format.
The Carlyle deal is among the biggest in the US this year. It will overtake the $5.3 billion leveraged buyout of software company Informatica Corp, which took place in April.
Going After Carve-Outs
While private equity firms have been complaining about the high valuations this year, Carlyle wasn’t afraid of striking the mega deal with Symantec. The decision to buy the data-storage unit fits well with the firm’s previous approach to snapping these so-called carve-outs.
Private equity firms like Carlyle have long been able to convince struggling companies to sell difficult units to firms, as a way to re-focus the company’s strategy. The decision to sell Veritas is an example of this, as Symantec hopes to get its struggling fortunes back on the right track.
Furthermore, Carlyle has become increasingly focused on the Technology, Media & Telecom sector, which is now the largest sector for Carlyle in terms of investments. It has so far invested in 243 companies in the sector, with over $18 billion equity invested in these companies.
Carlyle’s managing director, Cam Dyer, said, “Our significant experience investing in software businesses, as well as our extensive experience with carve-out transactions, positions us well to support Bill and the existing management team in creating value at Veritas”.
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