On Monday,February 6, Kaspersky Lab founder Eugene Kaspersky ruled out an IPO (Initial Public Offering). He announced that the company will be buying back the 20% of the company owned by private equity firm General Atlantic. General Atlantic bought the stake from Kaspersky's ex-wife, Natalya, who was then chairperson of the board at the time.
"You don't have to report to anybody else but yourself," said Kaspersky. The firm’s annual revenue tops $500 million according to the Reuters article.
Kaspersky Lab has grown rapidly over the past five years, gaining ground against its three largest competitors, Symantec, McAfee (purchased by Intel last year) and Trend Micro. Kaspersky may be on pace to pass Trend Micro this year.
http://www.reuters.com/article/2012/02/06/us-kaspersky-idUSTRE81511Z20120206
Kaspersky rules out IPO – should the others? Interesting take by Financial Times on how this and AVG Technologies recent IPO may effect other antivirus vendors plans for going public. In the article - Avast declined to comment on its IPO plans to the Financial Times. Analysts said that Avast could well fare better than AVG, however, as the filing documents had revealed stronger growth prospects for the business. According to the Financial Times, Kaspersky and AVG’s moves could also spell an even longer wait for Sophos.
http://blogs.ft.com/fttechhub/2012/02/kaspersky-rules-out-ipo-should-the-others/#axzz1lfGrilMm
Kaspersky Hits Milestone in Enterprise Quest - This is an informative October article about Kaspersky and includes a chat with the founder on Channelnomics.com.
http://channelnomics.com/2011/10/07/kaspersky-lab-continues-march-enterprise-security-management-products/
Kaspersky Lab Has Good Products
AV-Test www.av-test.org - Kaspersky topped this test among 23 products in Q4 testing.
VB100 (Virus Bulletin, www.virusbtn.com) – Kaspersky Internet Security was four for five in receiving VB100 awards during 2011 for tests this product was in. Their AV solution was only three for five over the same period.
AV-Comparatives www.av-comparatives.org – Kaspersky won Av-Comparative’s Product of the Year Award. (1) They came in third in Av-Comparatives August-December “Whole Product “Real World” Dynamic Protection Test”. (2) Kaspersky received 3 stars out of 3 and placed 6th out of 18 in the “On Demand Detection of Malicious Software Test”.
PC Magazine - Kaspersky Internet Security received 3.0 stars out of five in PC Magazine's reviews of Internet Security Suites 2012. Norton Internet Security topped the list.
PC World – Kaspersky received 4.0 stars out of 5 in PC World's review of 2012 products. G Data topped the list with 4.5 stars .
Avast is Quiet About Their IPO
Avast filed for a $200 million IPO in December. There has been no news about a proposed date. It would have been interesting to hear any management discussions the Avast team had following AVG Technologies' IPO on February 1.
http://kensek.blogspot.com/2011/12/avast-software-files-for-200-million.html
Showing posts with label reuters. Show all posts
Showing posts with label reuters. Show all posts
Monday, February 06, 2012
AVG Technologies Goes Public With Their IPO on NYSE
AVG Technologies' two year (?) trek to go public occurred on the New York Stock Exchange (NYSE) on February 1. For a while, the street had the IPO taking place on the London or Warsaw Stock Exchange. The planned opening Thursday morning on the NYSE was to be somewhere in the range of $16-18 US. Instead, it opened slightly lower and closed at $13.00 on Thursday for a 19% drop. Friday’s close was $13.09. A negative first day pop is never the objective. A positive pop rewards the initial investors, generates buzz, etc.
The three lead underwriters for the IPO (Initial Public Offering) were Morgan Stanley, J.P. Morgan and Goldman Sachs. Those underwriters will also be leading the Facebook IPO.
First Day Press on the IPO (some of the links may have changed)
Financial Times - AVG: not feeling the love
http://blogs.ft.com/beyond-brics/2012/02/02/polands-avg-http://www.blogger.com/img/blank.gifnot-feeling-the-nyse-love/#axzz1lT3sEdh6
Czechposition.com - Shares in Czech anti-virus software firm AVG tank in NYSE debut, despite solid fundamentals
http://www.ceskapozice.cz/en/business/markets-finance/shares-czech-anti-virus-software-firm-avg-tank-nyse-debut-despite-solid-fun
NY Times - Facebook I.P.O. Lifts Some Tech Stocks
http://dealbook.nytimes.com/2012/02/02/facebook-i-p-o-lifts-some-tech-stocks/
Forbes - IPOs: Let's Hope Facebook’s Deal Goes Better than AVG's
http://www.forbes.com/sites/ericsavitz/2012/02/02/ipos-lets-hope-facebooks-deal-goes-better-than-avgs/
Deal Pipeline- AVG IPO gets no Facebook boost
http://www.thedeal.com/content/tmt/avg-ipo-gets-no-facebook-boost.php#ixzz1lTJ4XouF
Reuters - AVG Tech shares crash on market debut. This headline was later amended to AVG Tech shares fall on market debut
http://www.reuters.com/article/2012/02/02/us-avgtech-idUSTRE8112EZ20120202
What Happened?
That’s probably being asked in Prague and Amsterdam. Doing a valuation and pricing a private company for an IPO is an inexact science. Market conditions have changed (actually for the better over the last few months). The “guys in the room” may have been overly optimistic in their forecasts they used to generate their valuation of AVG and then back calculating to $16-18 dollar price. Buyers may be sitting back. It’s a positive sign that the original investors sold only a portion of their stock.
One article mentioned that at the offering price, AVG's price-to-earnings ratio was about 15. The writer stated that this made the shares more costly than those of Symantec, whose shares trade at a P-E ratio of about 11. This isn’t a completely fair comparison. Symantec isn’t s a pure security play given that they own VeriSign. Symantec’s mix of business and consumer security software is different. They have a broader overall security portfolio. They also sell security appliances. Hardware security firms tend to have lower multiples.
AVG Technologies Has Relatively Solid Products
• AV- Test www.av-test.org - They came in sixth out of 23 in Av –Tests’s Q4 testing. Kaspersky topped this test.
• VB100 (Virus Bulletin, www.virusbtn.com ) - AVG was 5 for 6 in receiving VB100 awards during 2011 for tests they were in.
• AV-Comparatives www.av-comparatives.org – (1) AVG Technologies was 11th in av-comparatives August-December “Whole Product “Real World” Dynamic Protection Test”. Symantec topped this one. (2) AVG received 2 stars out of 3 and finished 14th out of 18 in the “On Demand Detection of Malicious Software Test”. Kaspersky won av-comparative’s Product of the Year award.
• PC Magazine - They scored 3.0 stars out of 5 in PC Magazine’s Internet Security Suites 2012 testing. Symantec topped this test with 4.5 stars.
• PC World – They scored 4.0 stars out of 5 along with 7 other companies in PC World’s Best Internet Security Suites 2012 reviews. G Data topped this testing with 4.5 stars.
Now that AVG Technologies has gone public, there will be more visibility into the company. More "numbers"will be available for analysts and the public to view - where revenues are coming from, margins, financing, banking, and all that good stuff. More visibility will be given to projections (with the caveats that all public firms make). Analysts may look at churn, which is about 50%, based on AVG’s installed based of just over 100 million users and over 50 million downloads annually on download.com .
The three lead underwriters for the IPO (Initial Public Offering) were Morgan Stanley, J.P. Morgan and Goldman Sachs. Those underwriters will also be leading the Facebook IPO.
First Day Press on the IPO (some of the links may have changed)
Financial Times - AVG: not feeling the love
http://blogs.ft.com/beyond-brics/2012/02/02/polands-avg-http://www.blogger.com/img/blank.gifnot-feeling-the-nyse-love/#axzz1lT3sEdh6
Czechposition.com - Shares in Czech anti-virus software firm AVG tank in NYSE debut, despite solid fundamentals
http://www.ceskapozice.cz/en/business/markets-finance/shares-czech-anti-virus-software-firm-avg-tank-nyse-debut-despite-solid-fun
NY Times - Facebook I.P.O. Lifts Some Tech Stocks
http://dealbook.nytimes.com/2012/02/02/facebook-i-p-o-lifts-some-tech-stocks/
Forbes - IPOs: Let's Hope Facebook’s Deal Goes Better than AVG's
http://www.forbes.com/sites/ericsavitz/2012/02/02/ipos-lets-hope-facebooks-deal-goes-better-than-avgs/
Deal Pipeline- AVG IPO gets no Facebook boost
http://www.thedeal.com/content/tmt/avg-ipo-gets-no-facebook-boost.php#ixzz1lTJ4XouF
Reuters - AVG Tech shares crash on market debut. This headline was later amended to AVG Tech shares fall on market debut
http://www.reuters.com/article/2012/02/02/us-avgtech-idUSTRE8112EZ20120202
What Happened?
That’s probably being asked in Prague and Amsterdam. Doing a valuation and pricing a private company for an IPO is an inexact science. Market conditions have changed (actually for the better over the last few months). The “guys in the room” may have been overly optimistic in their forecasts they used to generate their valuation of AVG and then back calculating to $16-18 dollar price. Buyers may be sitting back. It’s a positive sign that the original investors sold only a portion of their stock.
One article mentioned that at the offering price, AVG's price-to-earnings ratio was about 15. The writer stated that this made the shares more costly than those of Symantec, whose shares trade at a P-E ratio of about 11. This isn’t a completely fair comparison. Symantec isn’t s a pure security play given that they own VeriSign. Symantec’s mix of business and consumer security software is different. They have a broader overall security portfolio. They also sell security appliances. Hardware security firms tend to have lower multiples.
AVG Technologies Has Relatively Solid Products
• AV- Test www.av-test.org - They came in sixth out of 23 in Av –Tests’s Q4 testing. Kaspersky topped this test.
• VB100 (Virus Bulletin, www.virusbtn.com ) - AVG was 5 for 6 in receiving VB100 awards during 2011 for tests they were in.
• AV-Comparatives www.av-comparatives.org – (1) AVG Technologies was 11th in av-comparatives August-December “Whole Product “Real World” Dynamic Protection Test”. Symantec topped this one. (2) AVG received 2 stars out of 3 and finished 14th out of 18 in the “On Demand Detection of Malicious Software Test”. Kaspersky won av-comparative’s Product of the Year award.
• PC Magazine - They scored 3.0 stars out of 5 in PC Magazine’s Internet Security Suites 2012 testing. Symantec topped this test with 4.5 stars.
• PC World – They scored 4.0 stars out of 5 along with 7 other companies in PC World’s Best Internet Security Suites 2012 reviews. G Data topped this testing with 4.5 stars.
Now that AVG Technologies has gone public, there will be more visibility into the company. More "numbers"will be available for analysts and the public to view - where revenues are coming from, margins, financing, banking, and all that good stuff. More visibility will be given to projections (with the caveats that all public firms make). Analysts may look at churn, which is about 50%, based on AVG’s installed based of just over 100 million users and over 50 million downloads annually on download.com .
Monday, February 07, 2011
March addendum - AVG Shelves IPO Plans, Eyes up to $300 mln Bond. Update to $235 mln Dividend Loan Story
March 9 update -
AVG Technologies Raises Rate on $235 Million Loan for Dividend
March 9 (Bloomberg) -- AVG Technologies, the provider of Internet security software, raised the interest rate and increased the discount on a $235 million term loan it’s seeking to pay a shareholder dividend, according to a person with knowledge of the transaction.
The five-year loan will pay 6 percentage points more than the London interbank offered rate, compared with 4.75 percentage points to 5 percentage points more than the lending benchmark initially proposed, said the person who declined to be identified because the terms are private. The floor on Libor is unchanged at 1.5 percent. For the complete release:
http://www.businessweek.com/news/2011-03-09/avg-technologies-raises-rate-on-235-million-loan-for-dividend.html
There could be a variety of reasons why the yield was sweetened.
February 11 update -
AVG shelves Initial Public Offering (IPO) plans, eyes up to $300 mln bond
AVG Technologies has shelved plans for an initial public offering (IPO) and will instead seek to raise up to $300 million in a bond issue according to a story on February 9 in Reuters. Sources close to the discussions told Reuters the IPO was delayed because of disagreements among shareholders, who instead decided to sell bonds and later make a large dividend payout. Dariusz Pronczuk, managing director at Enterprise Investors (owns 34% of AVG) in quoted in the story.
There may be some interesting chats among vendors at RSA in San Francisco next week. AVG Technologies isn't one of the official participants, but then again, a lot of companies not on the exhibition floor are "around". WWGGD? What would Gordon Gecko do? It was slow in the IPO world in Europe last year, while it increased in Silicon Valley. It'll be interesting to see how this is interpreted on the east side of the pond, by those who follow IPO activity on the London Exchange and the Warsaw Stock Exchange.
http://www.forexyard.com/en/news/AVG-shelves-IPO-plans-eyes-up-to-300-mln-bond-2011-02-09T110616Z
For additional details on the whole Initial Public Offering story, go to “September Addendum - AVG Technologies Prepares to Go Public”
http://kensek.blogspot.com/2010/07/avg-technologies-prepares-to-go-public.html
Original Blog
According to a February 7th Bloomberg story -
AVG Technologies, the provider of Internet security software, set initial pricing on a $235 million term loan to pay a dividend to shareholders, according to a person with knowledge of the transaction.
The five-year debt will pay an interest rate of 4.75 percentage points to 5 percentage points more than the London interbank offered rate, said the person, who declined to be identified because the terms are private. Libor, the rate banks charge to lend to each other, will have a 1.5 percent floor, the person said.
For the complete release:
http://www.bloomberg.com/news/2011-02-07/avg-technologies-sets-pricing-on-235-million-dividend-loan.html
Some questions:
• Typically, aren’t dividends paid out from cash earnings (as opposed to accounting earnings) instead of via a loan?
• Isn’t part of the purpose for AVG Technologies Initial Public Offering (IPO) to allow the investors to realize a real return on their investment?
• It’s common in Silicon Valley for firms to not pay cash dividends. The logic behind this is they can invest the retained cash to ultimately create increased shareholder value through an increase in stock price. Until a company has IPOed, there is no public stock price nor a way to immediately receive a return. Is the company not seeing investment opportunities or is this because of pressure from the investors?
Standard & Poor's Ratings
According to a February 3rd article, “Software Company AVG Technologies Assigned 'B+' Long-Term Rating; Proposed $235 Mil. Loan Rated 'B+'; Outlook Stable” Standard & Poor’s assigned a preliminary “B+” long-term corporate credit rating to AVG Technologies and their “B+” issue rating to the proposed loan.
Some of the figures used in the analysis, “in 2010, we understand that AVG generated about $216 million of revenues and $89.6 million of EBITDA--resulting in what we consider to be a solid EBITDA margin of 41%. In our view, AVG will generate meaningful free cash flows and maintain solid operating margins very close to or above 40% in the coming quarters.”
For the complete article - http://www.standardandpoors.com
About Standard & Poor’s Letter Ratings
The general meaning of the credit rating opinions is below.
‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.
‘AA’—Very strong capacity to meet financial commitments.
‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
‘BBB-‘—Considered lowest investment grade by market participants.
‘BB+’—Considered highest speculative grade by market participants.
‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
‘CCC’—Cu
rrently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
‘CC’—Currently highly vulnerable.
‘C’—Currently highly vulnerable obligations and other defined circumstances.
‘D’—Payment default on financial commitments.
http://www.standardandpoors.com/ratings/definitions-and-faqs/en/us
A quote that has withstood the test of time – “Happiness is positive cash flow.”
AVG Technologies Raises Rate on $235 Million Loan for Dividend
March 9 (Bloomberg) -- AVG Technologies, the provider of Internet security software, raised the interest rate and increased the discount on a $235 million term loan it’s seeking to pay a shareholder dividend, according to a person with knowledge of the transaction.
The five-year loan will pay 6 percentage points more than the London interbank offered rate, compared with 4.75 percentage points to 5 percentage points more than the lending benchmark initially proposed, said the person who declined to be identified because the terms are private. The floor on Libor is unchanged at 1.5 percent. For the complete release:
http://www.businessweek.com/news/2011-03-09/avg-technologies-raises-rate-on-235-million-loan-for-dividend.html
There could be a variety of reasons why the yield was sweetened.
February 11 update -
AVG shelves Initial Public Offering (IPO) plans, eyes up to $300 mln bond
AVG Technologies has shelved plans for an initial public offering (IPO) and will instead seek to raise up to $300 million in a bond issue according to a story on February 9 in Reuters. Sources close to the discussions told Reuters the IPO was delayed because of disagreements among shareholders, who instead decided to sell bonds and later make a large dividend payout. Dariusz Pronczuk, managing director at Enterprise Investors (owns 34% of AVG) in quoted in the story.
There may be some interesting chats among vendors at RSA in San Francisco next week. AVG Technologies isn't one of the official participants, but then again, a lot of companies not on the exhibition floor are "around". WWGGD? What would Gordon Gecko do? It was slow in the IPO world in Europe last year, while it increased in Silicon Valley. It'll be interesting to see how this is interpreted on the east side of the pond, by those who follow IPO activity on the London Exchange and the Warsaw Stock Exchange.
http://www.forexyard.com/en/news/AVG-shelves-IPO-plans-eyes-up-to-300-mln-bond-2011-02-09T110616Z
For additional details on the whole Initial Public Offering story, go to “September Addendum - AVG Technologies Prepares to Go Public”
http://kensek.blogspot.com/2010/07/avg-technologies-prepares-to-go-public.html
Original Blog
According to a February 7th Bloomberg story -
AVG Technologies, the provider of Internet security software, set initial pricing on a $235 million term loan to pay a dividend to shareholders, according to a person with knowledge of the transaction.
The five-year debt will pay an interest rate of 4.75 percentage points to 5 percentage points more than the London interbank offered rate, said the person, who declined to be identified because the terms are private. Libor, the rate banks charge to lend to each other, will have a 1.5 percent floor, the person said.
For the complete release:
http://www.bloomberg.com/news/2011-02-07/avg-technologies-sets-pricing-on-235-million-dividend-loan.html
Some questions:
• Typically, aren’t dividends paid out from cash earnings (as opposed to accounting earnings) instead of via a loan?
• Isn’t part of the purpose for AVG Technologies Initial Public Offering (IPO) to allow the investors to realize a real return on their investment?
• It’s common in Silicon Valley for firms to not pay cash dividends. The logic behind this is they can invest the retained cash to ultimately create increased shareholder value through an increase in stock price. Until a company has IPOed, there is no public stock price nor a way to immediately receive a return. Is the company not seeing investment opportunities or is this because of pressure from the investors?
Standard & Poor's Ratings
According to a February 3rd article, “Software Company AVG Technologies Assigned 'B+' Long-Term Rating; Proposed $235 Mil. Loan Rated 'B+'; Outlook Stable” Standard & Poor’s assigned a preliminary “B+” long-term corporate credit rating to AVG Technologies and their “B+” issue rating to the proposed loan.
Some of the figures used in the analysis, “in 2010, we understand that AVG generated about $216 million of revenues and $89.6 million of EBITDA--resulting in what we consider to be a solid EBITDA margin of 41%. In our view, AVG will generate meaningful free cash flows and maintain solid operating margins very close to or above 40% in the coming quarters.”
For the complete article - http://www.standardandpoors.com
About Standard & Poor’s Letter Ratings
The general meaning of the credit rating opinions is below.
‘AAA’—Extremely strong capacity to meet financial commitments. Highest Rating.
‘AA’—Very strong capacity to meet financial commitments.
‘A’—Strong capacity to meet financial commitments, but somewhat susceptible to adverse economic conditions and changes in circumstances.
‘BBB’—Adequate capacity to meet financial commitments, but more subject to adverse economic conditions.
‘BBB-‘—Considered lowest investment grade by market participants.
‘BB+’—Considered highest speculative grade by market participants.
‘BB’—Less vulnerable in the near-term but faces major ongoing uncertainties to adverse business, financial and economic conditions.
‘B’—More vulnerable to adverse business, financial and economic conditions but currently has the capacity to meet financial commitments.
‘CCC’—Cu
rrently vulnerable and dependent on favorable business, financial and economic conditions to meet financial commitments.
‘CC’—Currently highly vulnerable.
‘C’—Currently highly vulnerable obligations and other defined circumstances.
‘D’—Payment default on financial commitments.
http://www.standardandpoors.com/ratings/definitions-and-faqs/en/us
A quote that has withstood the test of time – “Happiness is positive cash flow.”
Sunday, January 09, 2011
Jan 2012 - AVG Technologies Announces Filing for Proposed Initial Public Offering (IPO)
February 2, 2012 Addendum from Reuters - AVG Tech shares fall on market debut
“Shares of AVG Technologies NV (AVG.N), the maker of free PC and mobile anti-virus software, fell 19 percent on their market debut as investors grow wary of high valuations for newly listed technology companies.”
AVG shares closed at $13, which would mean a company valuation of $707 million. Shares had been sold to investors at $16. For the complete article:
www.reuters.com/article/2012/02/02/us-avgtech-idUSTRE8112EZ20120202
My estimated valuation in a July 26, 2010 blog, using a revenue multiple model, was about $750 to $800 million. Within 7 to 12 percent of the first day closing price! I increased this to over $1.2 billion earlier this year with more current revenue information. Whoops. The wonders of valuation models.
January 13 2012 update - AVG Technologies announced on January 13 2012 that it has filed a Registration Statement on Form F-1 with the U.S. Securities and Exchange Commission in connection with the proposed initial public offering (IPO) of its ordinary shares. AVG has applied to list its ordinary shares on the New York Stock Exchange under the symbol "AVG."
http://www.marketwatch.com/story/avg-technologies-announces-filing-for-proposed-initial-public-offering-2012-01-13
This is a change from previously when they were talking about having an initial public offering on the London Stock Exchange or Warsaw Stock Exchange. According to Reuters, AVG Technologies has filed the IPO for up to $125 million. 2010 revenue was $217 million. Revenue through Q3 was $198 million.
A quick valuation? Assume total revenue for 2011 will end up being $264 million (4/3 x 198). Using a 5x multiple (typical for some other security software valuations), the total valuation of AVG could be around the order of $1.3 billion.
Some AVE revenue figures for 2008, 2009, 2010, and 2011 (you'll have to expand the screen or try clicking on the graphic below). These are from the F-1.
http://www.sec.gov/Archives/edgar/data/1528903/000119312512011146/d218946df1.htm
Original Blog January 11 2011 ---------------------
November 2011 rumors from a Brenon Daly blog - the451group.com . "Several sources have indicated that both AVG Technologies and AVAST Software have picked their underwriting teams and should be filing prospectuses in the coming weeks." http://blogs.the451group.com/techdeals/ . This may be a case of Daly having too much time on his hands.
Initial Public Offering (IPO) plans shelved - see http://kensek.blogspot.com/2011/02/avg-technologies-sets-pricing-on-235.html - February 12 update
For AVG Technologies in 2010, the acronym IPO appears to have stood for “Is Put Off” temporarily or “Is Postponed Only”. After telling the Prague Post on September 29, that “there has been no decision made by the shareholders or anyone else to list in Poland or Prague or anywhere else." http://www.praguepost.com/business/5854-avg-boosts-product-ipo-vague.html there was pretty much been a clamp on news about the IPO. This was in response to an article that November 10 was the IPO date. http://kensek.blogspot.com/2010/09/avg-technologies-ipo-to-appear-on.html
A Q1 initial public offering could make sense for AVG Technologies. In a September 15 Reuters article, “Czech AVG's IPO to be worth 400-800 mln EUR”, Q1 was mentioned as the potential IPO date.
http://www.reuters.com/article/idUSWSF00947520100915 The IPO would probably still occur on the London Stock Exchange (www.londonstockexchange.com) (UK) and/or the Warsaw Stock Exchange (www.wse.com). While the IPO market heated up in the US in the latter half of 2010, this was not the case in Europe. Not having an IPO in 2010 also gave AVG the opportunity to more quietly perform some late Q4 adjusting of staffing levels.
Why No IPO in 2010
There are variety of potential reasons for the IPO not taking place in 2010. The board may have decided to delay. They may not have liked the capitalization, valuation arrived at. The projected numbers for either revenue or licenses for Q3 and Q4 may have been missed. Institutional investors may have not have shown enough interest. AVG Technologies may have been surprised by competitor activities. They may have been disappointed with the 2011 release. Expenses may have been running too high, effecting margins and the company may have wanted to deal with this prior to going public. They also may have still been studying other alternatives to going public while providing an exit strategy for investors to cash out on at least some of their investment.
Some Alternatives to an Initial Public Offering
• Get acquired by a larger internet security/antivirus competitor – Symantec and McAfee would be the obvious choices. Would these companies do it for the market share, to have an alternative brand, to purchase technology, other? Symantec already has PC Tools as an alternate brand. PC Tools also has a free antivirus product for their customers. McAfee doesn’t have a “B” brand, but they do have SiteAdvisor, an AVG LinkScanner(r) competitor. It probably wouldn’t make sense to keep both SiteAdvisor and AVG LinkScanner active.
Under these scenarios – Symantec would have approximately 19.7% of the worldwide antivirus market share if they acquired AVG. A McAfee acquisition would result in a 14.7% market share. The current market leader is Avast with 17.5%. *
• Merge with an internet security competitor as phase one of an exit strategy - With respect to size, Avast and Avira come to mind. Avast! Currently has more customers at 135mm and have recently had a cash infusion. They are also Czech Republic based. Neither Avira nor Avast! Have a major US presence. Avira claims about 100mm customers.
An Avast/AVG merger would result in a combined market share of approximately 27.2%. An Avira/AVG Technologies merger or acquisition would result in a combined market share of about 18%.*
*The above is based on figures from OPSWAT’s “Security Industry Market Share” report for Q4. See http://kensek.blogspot.com/2011/01/opswat-report-on-worldwide-antivirus.html The report is available at www.oesisok.com. http://www.oesisok.com/news-resources/reports/MarketShareReportDecember2010.pdf
• Get acquired by a vendor that may be interested increasing their presence in security - United States companies that come to mind are Cisco and Hewlett Packard. There have “always” been rumors about these companies being interested in Trend Micro. CRN suggested that Oracle should be interested in Trend Micro. Perhaps they would be interested in AVG, though Trend Micro gets a substantial portion of their revenue from business internet security products.
Activities To Increase AVG's Security Position in 2011?
• Purchase share by acquiring a smaller competitor. Virus Bulletin shows close to 100 vendors/products on an alphabetic listing vendors with security solutions (not all of these are smaller than AVG) http://www.virusbtn.com/vb100/archive/results?display=vendors
• Identify and purchase a smaller competitor or competitors that may be more advanced from the perspective of its scanning engines, or cloud technology.
• Purchase additional functionality for the core product. This could be encryption technology, for example (which both Symantec and Trend Micro acquired last year through acquisition).
In July, AVG Technologies had “appointed Goldman Sachs, JP Morgan, Morgan Stanley and UBS as bookrunners for its upcoming IPO with Jefferies acting as co-lead manager.” They may have some additional business reevaluating and updating their valuation (capitalization)during Q4 based on the most current data and competitor movements. http://www.ifre.com/equities-avg-appoints-for-uk-ipo/598999.article
If the company suddenly books a band, something may be coming up!
For additional details, go to “September Addendum - AVG Technologies Prepares to Go Public”
http://kensek.blogspot.com/2010/07/avg-technologies-prepares-to-go-public.html
August 2011 comment - The IPO market has been heating up in Silicon Valley. However, "pundits" are commenting that the recent stock market gyrations following the downgrading of the US government credit worthiness may temporarily put a damper on IPO activity.
“Shares of AVG Technologies NV (AVG.N), the maker of free PC and mobile anti-virus software, fell 19 percent on their market debut as investors grow wary of high valuations for newly listed technology companies.”
AVG shares closed at $13, which would mean a company valuation of $707 million. Shares had been sold to investors at $16. For the complete article:
www.reuters.com/article/2012/02/02/us-avgtech-idUSTRE8112EZ20120202
My estimated valuation in a July 26, 2010 blog, using a revenue multiple model, was about $750 to $800 million. Within 7 to 12 percent of the first day closing price! I increased this to over $1.2 billion earlier this year with more current revenue information. Whoops. The wonders of valuation models.
January 13 2012 update - AVG Technologies announced on January 13 2012 that it has filed a Registration Statement on Form F-1 with the U.S. Securities and Exchange Commission in connection with the proposed initial public offering (IPO) of its ordinary shares. AVG has applied to list its ordinary shares on the New York Stock Exchange under the symbol "AVG."
http://www.marketwatch.com/story/avg-technologies-announces-filing-for-proposed-initial-public-offering-2012-01-13
This is a change from previously when they were talking about having an initial public offering on the London Stock Exchange or Warsaw Stock Exchange. According to Reuters, AVG Technologies has filed the IPO for up to $125 million. 2010 revenue was $217 million. Revenue through Q3 was $198 million.
A quick valuation? Assume total revenue for 2011 will end up being $264 million (4/3 x 198). Using a 5x multiple (typical for some other security software valuations), the total valuation of AVG could be around the order of $1.3 billion.
Some AVE revenue figures for 2008, 2009, 2010, and 2011 (you'll have to expand the screen or try clicking on the graphic below). These are from the F-1.
http://www.sec.gov/Archives/edgar/data/1528903/000119312512011146/d218946df1.htm
Original Blog January 11 2011 ---------------------
November 2011 rumors from a Brenon Daly blog - the451group.com . "Several sources have indicated that both AVG Technologies and AVAST Software have picked their underwriting teams and should be filing prospectuses in the coming weeks." http://blogs.the451group.com/techdeals/ . This may be a case of Daly having too much time on his hands.
Initial Public Offering (IPO) plans shelved - see http://kensek.blogspot.com/2011/02/avg-technologies-sets-pricing-on-235.html - February 12 update
For AVG Technologies in 2010, the acronym IPO appears to have stood for “Is Put Off” temporarily or “Is Postponed Only”. After telling the Prague Post on September 29, that “there has been no decision made by the shareholders or anyone else to list in Poland or Prague or anywhere else." http://www.praguepost.com/business/5854-avg-boosts-product-ipo-vague.html there was pretty much been a clamp on news about the IPO. This was in response to an article that November 10 was the IPO date. http://kensek.blogspot.com/2010/09/avg-technologies-ipo-to-appear-on.html
A Q1 initial public offering could make sense for AVG Technologies. In a September 15 Reuters article, “Czech AVG's IPO to be worth 400-800 mln EUR”, Q1 was mentioned as the potential IPO date.
http://www.reuters.com/article/idUSWSF00947520100915 The IPO would probably still occur on the London Stock Exchange (www.londonstockexchange.com) (UK) and/or the Warsaw Stock Exchange (www.wse.com). While the IPO market heated up in the US in the latter half of 2010, this was not the case in Europe. Not having an IPO in 2010 also gave AVG the opportunity to more quietly perform some late Q4 adjusting of staffing levels.
Why No IPO in 2010
There are variety of potential reasons for the IPO not taking place in 2010. The board may have decided to delay. They may not have liked the capitalization, valuation arrived at. The projected numbers for either revenue or licenses for Q3 and Q4 may have been missed. Institutional investors may have not have shown enough interest. AVG Technologies may have been surprised by competitor activities. They may have been disappointed with the 2011 release. Expenses may have been running too high, effecting margins and the company may have wanted to deal with this prior to going public. They also may have still been studying other alternatives to going public while providing an exit strategy for investors to cash out on at least some of their investment.
Some Alternatives to an Initial Public Offering
• Get acquired by a larger internet security/antivirus competitor – Symantec and McAfee would be the obvious choices. Would these companies do it for the market share, to have an alternative brand, to purchase technology, other? Symantec already has PC Tools as an alternate brand. PC Tools also has a free antivirus product for their customers. McAfee doesn’t have a “B” brand, but they do have SiteAdvisor, an AVG LinkScanner(r) competitor. It probably wouldn’t make sense to keep both SiteAdvisor and AVG LinkScanner active.
Under these scenarios – Symantec would have approximately 19.7% of the worldwide antivirus market share if they acquired AVG. A McAfee acquisition would result in a 14.7% market share. The current market leader is Avast with 17.5%. *
• Merge with an internet security competitor as phase one of an exit strategy - With respect to size, Avast and Avira come to mind. Avast! Currently has more customers at 135mm and have recently had a cash infusion. They are also Czech Republic based. Neither Avira nor Avast! Have a major US presence. Avira claims about 100mm customers.
An Avast/AVG merger would result in a combined market share of approximately 27.2%. An Avira/AVG Technologies merger or acquisition would result in a combined market share of about 18%.*
*The above is based on figures from OPSWAT’s “Security Industry Market Share” report for Q4. See http://kensek.blogspot.com/2011/01/opswat-report-on-worldwide-antivirus.html The report is available at www.oesisok.com. http://www.oesisok.com/news-resources/reports/MarketShareReportDecember2010.pdf
• Get acquired by a vendor that may be interested increasing their presence in security - United States companies that come to mind are Cisco and Hewlett Packard. There have “always” been rumors about these companies being interested in Trend Micro. CRN suggested that Oracle should be interested in Trend Micro. Perhaps they would be interested in AVG, though Trend Micro gets a substantial portion of their revenue from business internet security products.
Activities To Increase AVG's Security Position in 2011?
• Purchase share by acquiring a smaller competitor. Virus Bulletin shows close to 100 vendors/products on an alphabetic listing vendors with security solutions (not all of these are smaller than AVG) http://www.virusbtn.com/vb100/archive/results?display=vendors
• Identify and purchase a smaller competitor or competitors that may be more advanced from the perspective of its scanning engines, or cloud technology.
• Purchase additional functionality for the core product. This could be encryption technology, for example (which both Symantec and Trend Micro acquired last year through acquisition).
In July, AVG Technologies had “appointed Goldman Sachs, JP Morgan, Morgan Stanley and UBS as bookrunners for its upcoming IPO with Jefferies acting as co-lead manager.” They may have some additional business reevaluating and updating their valuation (capitalization)during Q4 based on the most current data and competitor movements. http://www.ifre.com/equities-avg-appoints-for-uk-ipo/598999.article
If the company suddenly books a band, something may be coming up!
For additional details, go to “September Addendum - AVG Technologies Prepares to Go Public”
http://kensek.blogspot.com/2010/07/avg-technologies-prepares-to-go-public.html
August 2011 comment - The IPO market has been heating up in Silicon Valley. However, "pundits" are commenting that the recent stock market gyrations following the downgrading of the US government credit worthiness may temporarily put a damper on IPO activity.
Tuesday, September 21, 2010
Internet Security 2011 – Rush To Release Part V
September 28 addendum - AVG 2011 should be available September 29.
October 8 Addendum - Link to PC Magazine AVG Internet Security 2011 Review AVG IS 2011 PC Magazine Review http://tinyurl.com/366n5mg
F-Secure has now joined the companies releasing their consumer Internet Security 2011 and Anti-virus 2011 solutions. The announcement for F-Secure Internet Security 2011 and F-Secure Anti-virus 2011 took place on September 15.
About F-Secure Internet Security 2011 and Anti-virus 2011
F-Secure promotes multi-layered protection with their F-Secure Internet Security 2011 product. They state that their Browsing Protection feature will warn you which sites are safe to enter. F-Secure utilizes multiple scanning engines for the antivirus protection.
F-Secure’s DeepGuard in the cloud protection is designed to provide instant protection again new threats. F-Secure DeepGuard 2.0 incorporates a feature called Network Lookups to enable instant protection against emerging threats. It detects when a Windows application is launched and F-Secure’s Network Look-up feature asks about the application. If “the cloud” replies that the application is good, it’s allowed.
Their products also relies on some local decision logic, so there is still protection, even when there is no working network connection.
PC Magazine’s Neil Rubenking gave F-Secure Internet Security an overall score of 3.0 out of 5. He liked the interface and the small footprint of the product. Overall, he felt that the security components were “good” and that the product had potential. He favored Kaspersky or Norton over F-Secure. However. Rudimentary found fault with the product's parental control and found that the test systems were sluggish at times.
http://www.pcmag.com/article2/0,2817,2369358,00.asp
F-Secure Anti-virus 2011 scored a slightly higher at 3.5 out of 5.0 with Rubenking complimenting the product for its cloud based and reputation based detection. http://www.pcmag.com/article2/0,2817,2369143,00.asp
F-Secure Product Testing and Certification (2010 Releases)
F-Secure has received VB100 status for the last 4 recent tests it has submitted for. http://www.virusbtn.com/vb100/archive/results?display=summary . Its Internet Security 2010 product has been certified by ICSA Labs for both cleaning and detection - https://www.icsalabs.com/products?tid_1[]=4264&x=35&y=12&=Apply . ICSA Labs' web site - www.iscalabs.com
2011 Internet Security Solutions Released
The lines below contain feature checklists for a number of each of the company's products.
• BitDefender Total Security 2011 was released around August 16. For product details - http://www.bitdefender.com/solutions/total-security.
• Kaspersky - Kaspersky announced Kaspersky Internet Security 2011 on August 16 For product details -http://usa.kaspersky.com/products_services/compare/
• Panda Security – Panda Internet Security Suite 2011 was announced on July 27. For product details - http://www.pandasecurity.com/usa/homeusers/solutions/
• Webroot - Webroot Internet Security Complete 2011 was announced on July 26. For product details http://www.webroot.com/En_US/consumer-compare.html
• Symantec – Symantec introduced their Norton consumer security solutions in early September. For product details: http://www.symantec.com/norton/products/charts/comparison.jsp?pcid=mp
• Trend Micro - Trend Micro introduced their Titanium product line in early September. For product details: http:// Trend us.trendmicro.com/us/products/personal/titanium-maximum-security/ and click on “product comparison”
• F-Secure - F-Secure announced their internet security product line on September 15. For product details: http://www.f-secure.com/en_US/products/home-office/internet-security/ and then click on compare products.
2011 Internet Security Solutions That Haven’t Been Released
• AVG – Should be releasing the AVG 2011 product line around the end of September.
• McAfee – No official release date has been announced for the next release of McAfee Total Protection.
• Avast – No official release date has been announced.
• Avira – No official release data has been announced.
As an aside, AVAST Software gained its 130 millionth user at 7:52:52 (Central European Time) on September 7 according to a September 14 press release. http://www.avast.com/pr-avast-software-crosses-the-130-million-user-threshold
AVG Technologies’ Initial Public Offering (IPO)
No firm date from AVG Technologies as to when they will have their initial public offering. Originally slated for the London (UK) exchange, it may now take place on the Warsaw exchange and one other, in fact. This is according to a Reuters article dated September 15, “Czech AVG's IPO to be worth 400-800 mln EUR-sources” The Initial Public Offering may now take place in the first quarter of 2011. http://www.reuters.com/article/idUSWSF00947520100915
A September 12 Financial Times article where “bankers have signaled they are aiming for an autumn listing.” “UK tech sector poised for deal flurry” http://www.ft.com/cms/s/2/eed0f540-be9c-11df-a755-00144feab49a.html
The August 13 issue of the IFR European ECM Briefing had mentioned the IPO taking place in Q3/Q4. They had listed the estimated capitalization in the range of US $300m-400m. It appears as if Q3 will not happen. http://www.ifrbriefings.com/examples/euro_ecm.pdf
The flurry of acquisitions over the summer – Intel acquiring McAfee, and Hewlett Packard acquiring 3Par (at a substantial premium) and Arcsight, may have motivated AVG to slow down the offering.
See also: "AVG Technologies Prepares To Go Public" http://kensek.blogspot.com/2010/07/avg-technologies-prepares-to-go-public.html
October 8 Addendum - Link to PC Magazine AVG Internet Security 2011 Review AVG IS 2011 PC Magazine Review http://tinyurl.com/366n5mg
F-Secure has now joined the companies releasing their consumer Internet Security 2011 and Anti-virus 2011 solutions. The announcement for F-Secure Internet Security 2011 and F-Secure Anti-virus 2011 took place on September 15.
About F-Secure Internet Security 2011 and Anti-virus 2011
F-Secure promotes multi-layered protection with their F-Secure Internet Security 2011 product. They state that their Browsing Protection feature will warn you which sites are safe to enter. F-Secure utilizes multiple scanning engines for the antivirus protection.
F-Secure’s DeepGuard in the cloud protection is designed to provide instant protection again new threats. F-Secure DeepGuard 2.0 incorporates a feature called Network Lookups to enable instant protection against emerging threats. It detects when a Windows application is launched and F-Secure’s Network Look-up feature asks about the application. If “the cloud” replies that the application is good, it’s allowed.
Their products also relies on some local decision logic, so there is still protection, even when there is no working network connection.
PC Magazine’s Neil Rubenking gave F-Secure Internet Security an overall score of 3.0 out of 5. He liked the interface and the small footprint of the product. Overall, he felt that the security components were “good” and that the product had potential. He favored Kaspersky or Norton over F-Secure. However. Rudimentary found fault with the product's parental control and found that the test systems were sluggish at times.
http://www.pcmag.com/article2/0,2817,2369358,00.asp
F-Secure Anti-virus 2011 scored a slightly higher at 3.5 out of 5.0 with Rubenking complimenting the product for its cloud based and reputation based detection. http://www.pcmag.com/article2/0,2817,2369143,00.asp
F-Secure Product Testing and Certification (2010 Releases)
F-Secure has received VB100 status for the last 4 recent tests it has submitted for. http://www.virusbtn.com/vb100/archive/results?display=summary . Its Internet Security 2010 product has been certified by ICSA Labs for both cleaning and detection - https://www.icsalabs.com/products?tid_1[]=4264&x=35&y=12&=Apply . ICSA Labs' web site - www.iscalabs.com
2011 Internet Security Solutions Released
The lines below contain feature checklists for a number of each of the company's products.
• BitDefender Total Security 2011 was released around August 16. For product details - http://www.bitdefender.com/solutions/total-security.
• Kaspersky - Kaspersky announced Kaspersky Internet Security 2011 on August 16 For product details -http://usa.kaspersky.com/products_services/compare/
• Panda Security – Panda Internet Security Suite 2011 was announced on July 27. For product details - http://www.pandasecurity.com/usa/homeusers/solutions/
• Webroot - Webroot Internet Security Complete 2011 was announced on July 26. For product details http://www.webroot.com/En_US/consumer-compare.html
• Symantec – Symantec introduced their Norton consumer security solutions in early September. For product details: http://www.symantec.com/norton/products/charts/comparison.jsp?pcid=mp
• Trend Micro - Trend Micro introduced their Titanium product line in early September. For product details: http:// Trend us.trendmicro.com/us/products/personal/titanium-maximum-security/ and click on “product comparison”
• F-Secure - F-Secure announced their internet security product line on September 15. For product details: http://www.f-secure.com/en_US/products/home-office/internet-security/ and then click on compare products.
2011 Internet Security Solutions That Haven’t Been Released
• AVG – Should be releasing the AVG 2011 product line around the end of September.
• McAfee – No official release date has been announced for the next release of McAfee Total Protection.
• Avast – No official release date has been announced.
• Avira – No official release data has been announced.
As an aside, AVAST Software gained its 130 millionth user at 7:52:52 (Central European Time) on September 7 according to a September 14 press release. http://www.avast.com/pr-avast-software-crosses-the-130-million-user-threshold
AVG Technologies’ Initial Public Offering (IPO)
No firm date from AVG Technologies as to when they will have their initial public offering. Originally slated for the London (UK) exchange, it may now take place on the Warsaw exchange and one other, in fact. This is according to a Reuters article dated September 15, “Czech AVG's IPO to be worth 400-800 mln EUR-sources” The Initial Public Offering may now take place in the first quarter of 2011. http://www.reuters.com/article/idUSWSF00947520100915
A September 12 Financial Times article where “bankers have signaled they are aiming for an autumn listing.” “UK tech sector poised for deal flurry” http://www.ft.com/cms/s/2/eed0f540-be9c-11df-a755-00144feab49a.html
The August 13 issue of the IFR European ECM Briefing had mentioned the IPO taking place in Q3/Q4. They had listed the estimated capitalization in the range of US $300m-400m. It appears as if Q3 will not happen. http://www.ifrbriefings.com/examples/euro_ecm.pdf
The flurry of acquisitions over the summer – Intel acquiring McAfee, and Hewlett Packard acquiring 3Par (at a substantial premium) and Arcsight, may have motivated AVG to slow down the offering.
See also: "AVG Technologies Prepares To Go Public" http://kensek.blogspot.com/2010/07/avg-technologies-prepares-to-go-public.html
Monday, July 26, 2010
AVG Technologies Proposes Initial Public Offering (IPO) on NYSE
February 2, 2012 Addendum from Reuters - AVG Tech shares fall on market debut
“Shares of AVG Technologies NV (AVG.N), the maker of free PC and mobile anti-virus software, fell 19 percent on their market debut as investors grow wary of high valuations for newly listed technology companies.”
AVG shares closed at $13, which would mean a company valuation of $707 million. Shares had been sold to investors at $16. For the complete article:
www.reuters.com/article/2012/02/02/us-avgtech-idUSTRE8112EZ20120202
If you scroll down further in this blog, my estimated valuation in mid 2010 was about $750 to $800 million. I increased this to over $1.2 billion earlier this year (more recent revenue data).
January 13, 2012 update - AVG Technologies announced on January 13 that it has filed a Registration Statement on Form F-1 with the U.S. Securities and Exchange Commission in connection with the proposed initial public offering (IPO) of its ordinary shares. AVG has applied to list its ordinary shares on the New York Stock Exchange under the symbol "AVG."
http://www.marketwatch.com/story/avg-technologies-announces-filing-for-proposed-initial-public-offering-2012-01-13
This is a change from previously when they were talking about going doing an initial public offering on the London Stock Exchange or Warsaw Stock Exchange. According to Reuters, AVG Technologies has filed for the IPO for up to $125 million. The bookrunning managers for the proposed offering are Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Goldman, Sachs & Co. Co-managers for the proposed offering are Allen & Company LLC, Cowen and Company, LLC and JMP Securities LLC. AVG had revenues of $218 million in 2010 and $198 million through Q3 2011.
Original Blog From August 2010
Last week, it was announced that “AVG Technologies has appointed Goldman Sachs, JP Morgan, Morgan Stanley and UBS as bookrunners for its upcoming IPO (initial public offering), with Jefferies acting as co-lead manager. The software firm is understood to be planning a primary listing in London to access institutional investors in the UK, but marketing will focus on American investors as AVG’s brand is strongest in the US”. http://www.ifre.com/equities-avg-appoints-for-uk-ipo/598999.article.
IPO Date?
So when will internet security provider AVG Technologies go public on the London Stock Exchange? – No official date has been announced. Earlier this year the company talked about going public during the latter half of 2010. The Prague Post had a fairly extensive chat with the company in April (Chasing a Billion Dollar Market)about AVG in general, and this was brought up. One question is whether the IPO will occur before or after the next major release of the company’s product lines. Going public before release could allow for a nice uptick, should the new version be favorably reviewed by the marketplace.
IPO activity has been relatively slow during calendar year 2010. Activity for initial public offerings seems to be increasing during the second half of 2010 versus the first half.
A number of competing companies will introduce new versions in the Q3 timeframe. Symantec has Norton Internet Security and Norton Antivirus in beta. Trend Micro’s Virus Scan API is in beta. McAfee Total Protection 4.5 is in beta. BitDefender Total Security 2011 and their Mac security product are in beta. Panda has rolled out their 2011 product line. Webroot has rolled out their consumer Internet Security suite. This isn't a comprehensive list. In order to be part of boxed promotions in the retail channel for their internet security suite, AVG is going to have to release something by early October, at the latest.
Market Capitalization
Valuating a software company for an IPO is always interesting. The market comparison approach was recommended in an article in Corporate Finance Review. In this approach, the company going public is compared to comparable publicly traded companies or recent transactions involving similar private companies.
A second approach they wrote about is using a revenue multiple of similar public software companies.
Potential comparable public traded companies to compare AVG Technologies to could include McAfee, Symantec, and Trend Micro. Potential reasons these aren't perfect: McAfee - Broader product line. They promote that they scale to the enterprise. They sell appliances, SW, and Software as a Service, which makes them a SW and HW company. They are a pure security play, however. Symantec has a broader product line than AVG. They promote that they scale to the enterprise while AVG is an SMB play. Symantec isn’t just a security company (Veritas acquisition, for example. Trend Micro has a broader product line. Their business products scale to the enterprise. Many of AVG Technologies’ competitors are private, so "numbers" are unavailable. So these three companies are probably the best comparable ones.
The author also discussed the asset approach (SW companies don’t possess a lot of physical assets) and the earnings approach. He wasn’t fond of the latter for a variety of reasons, including: the company may have been managed for growth, the company may have been focused on developing the technology, and valuation models based on earnings are highly sensitive to assumptions made. “Valuing Software Companies: One Size Does Not Fit All” Corporate Finance Review September/October 2007. http://www.thevenemareport.com/pdfs/3-Valuing%20Software%20Companies.pdf
Doing a comprehensive discounted cash flow analysis (while fun for quants) can be difficult. For AVG, there’s the free product, where revenue comes from someone other the home user. AVG gets revenue from the toolbar/Yahoo! (no, you’re not forced to use the Yahoo as your search engine). The “consumer paid” product line. Revenue from 3rd party partners who let individuals who want to download AVG Antivirus Free Edition upgrade to a paid product in exchange for purchasing something from the 3rd party. The “business paid” product line. The OEM business (deal with WatchGuard, for example http://www.watchguard.com/news/press-releases/wg438.asp ). There are the antivirus engine and the behavioral engines. Deals with ISPs. The Data Feed Solution (aggregate web activity of over 40mm AVG users marketed to 3rd parties) More detailed descriptions are on http://www.avg.com/us-en/gsa-solutions.
Other methods – Book Value, Internal Rate of Return (IRR) Profit/Sales Multiple, P/E (Price/Earnings ratio), Dunn-Rankin formula, free cash flow.
So what will the market capitalization of AVG Technologies be? (Note that the below uses no proprietary information!)
In October 2009, TA Associates paid more than $200 million for a 25% stake in AVG. “European Private Equity in Review”, full year 2009 edition at www.mergermarket.com. http://www.avg.com/us-en/press-releases-news.ndi-224903. This suggests that at the time of sale, 100% of the equity in AVG had a worth of about $800 million US.
In 2008, Symantec paid a revenue multiple of 5x and 4.8x for PC Tools and Message Labs, respectively. In 2009, McAfee paid a revenue multiple of 4.9x for MX Logic. Using a 5x multiple suggests a market cap of about $750 million US for AVG in early 2009. http://blog.updataadvisors.com/2009/11/05/avg-technologies-rakes-in-big-multiple-on-small-revenue/.
End of year 2009 revenue data? Unavailable. 2010 year to date revenue data? Publicly unavailable. It’s information like this that AVG, and the investment firms and bankers they’re partnering with are probably taking into “the room”, along with business projections for the next several years (with and without acquisitions), in order to arrive at an appropriate capitalization/valuation. Doing the math, and having an initial share price below what the math suggests is a way for a quick rise in price on opening day. An argument could be made that this leaves money on the table, however.
It will be interesting. Conversations may get intense. Beverages of all sorts will be consumed.
September Addendum
According to a Reuters article dated September 15, “Czech AVG's IPO to be worth 400-800 mln EUR” AVG Technologies Initial Public Offering “IPO” may take place in the first quarter of 2011. This is a change from what AVG has been saying. Previously, the London Exchange (UK) was mentioned as to where the company was going to be listed. Now it may be on the Warsaw exchange “and one other”. http://www.reuters.com/article/idUSWSF00947520100915
This differs from a September 12 Financial Times article where “bankers have signaled they are aiming for an autumn listing.” “UK tech sector poised for deal flurry” http://www.ft.com/cms/s/2/eed0f540-be9c-11df-a755-00144feab49a.html
The recent security technology acquisitions in North America may have contributed to the IPO not taking place third quarter
“Shares of AVG Technologies NV (AVG.N), the maker of free PC and mobile anti-virus software, fell 19 percent on their market debut as investors grow wary of high valuations for newly listed technology companies.”
AVG shares closed at $13, which would mean a company valuation of $707 million. Shares had been sold to investors at $16. For the complete article:
www.reuters.com/article/2012/02/02/us-avgtech-idUSTRE8112EZ20120202
If you scroll down further in this blog, my estimated valuation in mid 2010 was about $750 to $800 million. I increased this to over $1.2 billion earlier this year (more recent revenue data).
January 13, 2012 update - AVG Technologies announced on January 13 that it has filed a Registration Statement on Form F-1 with the U.S. Securities and Exchange Commission in connection with the proposed initial public offering (IPO) of its ordinary shares. AVG has applied to list its ordinary shares on the New York Stock Exchange under the symbol "AVG."
http://www.marketwatch.com/story/avg-technologies-announces-filing-for-proposed-initial-public-offering-2012-01-13
This is a change from previously when they were talking about going doing an initial public offering on the London Stock Exchange or Warsaw Stock Exchange. According to Reuters, AVG Technologies has filed for the IPO for up to $125 million. The bookrunning managers for the proposed offering are Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC and Goldman, Sachs & Co. Co-managers for the proposed offering are Allen & Company LLC, Cowen and Company, LLC and JMP Securities LLC. AVG had revenues of $218 million in 2010 and $198 million through Q3 2011.
Original Blog From August 2010
Last week, it was announced that “AVG Technologies has appointed Goldman Sachs, JP Morgan, Morgan Stanley and UBS as bookrunners for its upcoming IPO (initial public offering), with Jefferies acting as co-lead manager. The software firm is understood to be planning a primary listing in London to access institutional investors in the UK, but marketing will focus on American investors as AVG’s brand is strongest in the US”. http://www.ifre.com/equities-avg-appoints-for-uk-ipo/598999.article.
IPO Date?
So when will internet security provider AVG Technologies go public on the London Stock Exchange? – No official date has been announced. Earlier this year the company talked about going public during the latter half of 2010. The Prague Post had a fairly extensive chat with the company in April (Chasing a Billion Dollar Market)about AVG in general, and this was brought up. One question is whether the IPO will occur before or after the next major release of the company’s product lines. Going public before release could allow for a nice uptick, should the new version be favorably reviewed by the marketplace.
IPO activity has been relatively slow during calendar year 2010. Activity for initial public offerings seems to be increasing during the second half of 2010 versus the first half.
A number of competing companies will introduce new versions in the Q3 timeframe. Symantec has Norton Internet Security and Norton Antivirus in beta. Trend Micro’s Virus Scan API is in beta. McAfee Total Protection 4.5 is in beta. BitDefender Total Security 2011 and their Mac security product are in beta. Panda has rolled out their 2011 product line. Webroot has rolled out their consumer Internet Security suite. This isn't a comprehensive list. In order to be part of boxed promotions in the retail channel for their internet security suite, AVG is going to have to release something by early October, at the latest.
Market Capitalization
Valuating a software company for an IPO is always interesting. The market comparison approach was recommended in an article in Corporate Finance Review. In this approach, the company going public is compared to comparable publicly traded companies or recent transactions involving similar private companies.
A second approach they wrote about is using a revenue multiple of similar public software companies.
Potential comparable public traded companies to compare AVG Technologies to could include McAfee, Symantec, and Trend Micro. Potential reasons these aren't perfect: McAfee - Broader product line. They promote that they scale to the enterprise. They sell appliances, SW, and Software as a Service, which makes them a SW and HW company. They are a pure security play, however. Symantec has a broader product line than AVG. They promote that they scale to the enterprise while AVG is an SMB play. Symantec isn’t just a security company (Veritas acquisition, for example. Trend Micro has a broader product line. Their business products scale to the enterprise. Many of AVG Technologies’ competitors are private, so "numbers" are unavailable. So these three companies are probably the best comparable ones.
The author also discussed the asset approach (SW companies don’t possess a lot of physical assets) and the earnings approach. He wasn’t fond of the latter for a variety of reasons, including: the company may have been managed for growth, the company may have been focused on developing the technology, and valuation models based on earnings are highly sensitive to assumptions made. “Valuing Software Companies: One Size Does Not Fit All” Corporate Finance Review September/October 2007. http://www.thevenemareport.com/pdfs/3-Valuing%20Software%20Companies.pdf
Doing a comprehensive discounted cash flow analysis (while fun for quants) can be difficult. For AVG, there’s the free product, where revenue comes from someone other the home user. AVG gets revenue from the toolbar/Yahoo! (no, you’re not forced to use the Yahoo as your search engine). The “consumer paid” product line. Revenue from 3rd party partners who let individuals who want to download AVG Antivirus Free Edition upgrade to a paid product in exchange for purchasing something from the 3rd party. The “business paid” product line. The OEM business (deal with WatchGuard, for example http://www.watchguard.com/news/press-releases/wg438.asp ). There are the antivirus engine and the behavioral engines. Deals with ISPs. The Data Feed Solution (aggregate web activity of over 40mm AVG users marketed to 3rd parties) More detailed descriptions are on http://www.avg.com/us-en/gsa-solutions.
Other methods – Book Value, Internal Rate of Return (IRR) Profit/Sales Multiple, P/E (Price/Earnings ratio), Dunn-Rankin formula, free cash flow.
So what will the market capitalization of AVG Technologies be? (Note that the below uses no proprietary information!)
In October 2009, TA Associates paid more than $200 million for a 25% stake in AVG. “European Private Equity in Review”, full year 2009 edition at www.mergermarket.com. http://www.avg.com/us-en/press-releases-news.ndi-224903. This suggests that at the time of sale, 100% of the equity in AVG had a worth of about $800 million US.
In 2008, Symantec paid a revenue multiple of 5x and 4.8x for PC Tools and Message Labs, respectively. In 2009, McAfee paid a revenue multiple of 4.9x for MX Logic. Using a 5x multiple suggests a market cap of about $750 million US for AVG in early 2009. http://blog.updataadvisors.com/2009/11/05/avg-technologies-rakes-in-big-multiple-on-small-revenue/.
End of year 2009 revenue data? Unavailable. 2010 year to date revenue data? Publicly unavailable. It’s information like this that AVG, and the investment firms and bankers they’re partnering with are probably taking into “the room”, along with business projections for the next several years (with and without acquisitions), in order to arrive at an appropriate capitalization/valuation. Doing the math, and having an initial share price below what the math suggests is a way for a quick rise in price on opening day. An argument could be made that this leaves money on the table, however.
It will be interesting. Conversations may get intense. Beverages of all sorts will be consumed.
September Addendum
According to a Reuters article dated September 15, “Czech AVG's IPO to be worth 400-800 mln EUR” AVG Technologies Initial Public Offering “IPO” may take place in the first quarter of 2011. This is a change from what AVG has been saying. Previously, the London Exchange (UK) was mentioned as to where the company was going to be listed. Now it may be on the Warsaw exchange “and one other”. http://www.reuters.com/article/idUSWSF00947520100915
This differs from a September 12 Financial Times article where “bankers have signaled they are aiming for an autumn listing.” “UK tech sector poised for deal flurry” http://www.ft.com/cms/s/2/eed0f540-be9c-11df-a755-00144feab49a.html
The recent security technology acquisitions in North America may have contributed to the IPO not taking place third quarter
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