We’ve seen a flurry of merger and acquisitions (M&A) deals during the past few days. We don’t think the moves necessarily say much about the broader market, but let’s take a look at a few of the deals and their impact on the acquiring company.
Oracle Acquires SelectMinds
Enterprise software giant Oracle (click ticker for report: ) is acquiring human resources cloud application developer SelectMinds. SelectMinds focuses on developing software to manage social connection, employee referrals, and former employee relationships. We like the dynamics of the HR software business because hiring remains a tremendously expensive and difficult process. Even as firms such as LinkedIn (click ticker for report: ) focus on business networks, job placement remains inefficient and difficult to measure. We expect companies to continue to invest in the area to gain the highest returns possible on their investments in new human capital. We think the product will make a nice addition to Oracle’s HR capabilities. We’re assuming this acquisition will have a net-neutral impact in our model, so our valuation for Oracle remains unchanged.
iRobot Acquires Evolution Robotics
iRobot (IRBT) will acquire rival floor automatic floor cleaning robot developer Evolution Robotics for $74 million in cash. Evolution’s products, Mint and Mint Plus will give iRobot a presence in hard surface floors where the company is weak. The deal will add $4 million-$6 million in revenue during fiscal year 2012 and $22 million-$24 million in fiscal year 2013, though the transaction will likely be dilutive to earnings. The multiple for the deal may be high, but iRobot thinks the real value lies in intellectual property and talent. In fact, Evolution Robotics’ CEO Paolo Pirjanian will join iRobot as chief technology officer. Regardless, the near-term fortunes of the company will likely be determined by military spending rather than commercial and consumer cleaning, in our view.
Google Acquires Nik Software
Google (click ticker for report: ) will acquire Nik Software, developer of photo application Snapseed, though terms of the deal are unknown. In spite of its price tag ($4.99), Snapseed boosts over 9 million users and won an award for iPad (click ticker for report: ) app of the year. This move is a response to Facebook’s (click ticker for report: ) acquisition of Instagram, as it will be integrated into Google+ services. We suspect the user base is slightly different than Instagram’s, which is free and a social media complement to Facebook and Twitter. Rumors of Facebook’s demise are greatly exaggerated, in our view, and we don’t think this deal will boost Google+’s popularity that much.
Waste Connections Will Acquire R360 Environmental Solutions
Waste Connections (click ticker for report: ) is set to acquire oilfield waste disposal firm R360 Environmental Solutions for around $1.3 billion in cash. R360 currently boasts annualized revenue of approximately $300 million, and it is highly exposed to the Bakken, Permian and Eagle Ford basins—regions where continued drilling activity will be robust. Waste Connections expects the deal to add 400 basis points to consolidated EBITDA margins once the deal closes. Though the deal exposes the firm to some compelling growth markets, we aren’t exactly sure how Waste Connections expects to pay for the deal just yet (the firm had just $136 million in cash on the balance sheet as of its most recent quarter). Still, the deal makes the company a meaningful player in non-hazardous E&P waste disposal. However, shares score just a 3 on the Valuentum Buying Index (our stock-selection methodology), so we aren’t interested in the company in the portfolio of our Best Ideas Newsletter at this time.
Danaher to Acquire IRIS International
Industrial conglomerate Danaher (click ticker for report: ) is set to acquire medical diagnostics maker IRIS International (IRIS) for $19.50 per share, net of cash and debt ($338 million total). The deal represented a premium of about 45% from IRIS’ Friday closing price, though the offer was still far short of IRIS’s all-time high in the mid-2000’s. The deal isn’t too large for Danaher, but we certainly like the move because we’re bullish on the medical diagnostics space. IRIS hasn’t been very profitable, but we think Danaher will be able to achieve meaningful synergies and cost savings. Nevertheless, we think shares are fairly valued at this time.