Software Firm Double-Take Agrees to $242 Million Buyout

In late 2006, software security firm Double-Take Software (DBTK) went public at $11. While there was an initial rise in the stock, the past couple years have seen it fall to less than half that, and while it recovered somewhat, its value remains a bit below that IPO price today.

Now, Double-Take has agreed to a $242 million buyout from private-equity firm Thoma Bravo, which will be organizing the deal under the auspices of one of its portfolio companies, Vision Solutions, which develops availability and disaster recovery solutions for IBM (IBM) products.

A First Glance at Double-Take

Double-Take serves a hot market: It provides affordable technologies to move, manage and protect data. The systems scale across many infrastructures, including Microsoft (MSFT) and even Linux. In fact, Double-Take has recently launched a product to deal with the complexities of cloud computing.

The company sells its products though a direct sales force as well as a global network of server manufacturers, including Dell (DELL) and HP (HPQ). It has roughly 22,000 customers.

Over the past couple years, Double-Take has acquired several companies like TimeSpring Software and emBoot. The intention was to diversify from its core focus on the disaster-recovery market.

Nonetheless, Double-Take has had trouble getting traction. In the most recent quarter, revenues inched up just 3.9% to $18.9 million, and the company took a net loss of $500,000. It also issued a caution for its second-quarter results because of push-back on software deals. As a result, Double-Take provided muted full-year guidance of $84 million to $88 million in revenues and non-GAAP earnings of $0.27 to $0.36 per share.

Attractive Valuation?

So far in today's trading, the shares of Double-Take are up only 7.35% to $10.37. Then again, the company said it received unsolicited buyout offers in April, when the buzz was that the ultimate buyer would be Dell or HP.

At this valuation, the company certainly looks attractive -- which is probably why Double-Take drew interest from private-equity operators. The company's enterprise value (EV) is roughly $130 million (when you subtract the cash of $88.7 million). Thus, the deal comes to roughly 1.5 times EV (assuming the company hits the low-end of its revenue estimate). A more typical buyout valuation is 2 times EV.

Admittedly, Double-Take's immediate growth prospects are weak. But a firm like Thoma Bravo can afford to wait for things to turn around, and, if they do, eventually net a nice return.