Datto Holding Corp.'s move to go private comes amid a growing need for data protection for organizations that are increasingly skewing digital when it comes to running their businesses.
Datto, a provider of security and cloud-based software solutions, is being bought by security software company Kaseya Holdings Inc. Datto shareholders will receive $35.50 per share, representing a 52% premium over the company's stock price on March 16. The transaction value of the deal is $5.82 billion, while the enterprise value is $6.20 billion.
The all-cash transaction is being funded by an equity consortium led by venture capital and private equity firm Insight Partners and includes investments from TPG Capital, Sixth Street Partners and Temasek.
Datto sells a range of backup, IT management and network management tools designed for managed service providers, or MSPs — companies that sell services such as IT management, data protection and security to customers.
Kaseya is a provider of IT management and security offerings for MSPs and small to medium-sized businesses that use its software for security, backup and data recovery.
"Both Kaseya and Datto have focused their sales and product development efforts on building out offerings that can be sold by MSPs to their customers," said Henry Baltazar, a research director for the storage practice at 451 Research. "Beyond the long-lasting business continuity requirements that both of these vendors have catered to, the rising threat of ransomware has heightened the need for comprehensive data protection."
In 451 Research's "Voice of the Enterprise: Storage, Data Management and Disaster Recovery" 2022 study, 59% of respondents claimed they were increasing their spending on backup services or backup storage because of the potential threat of ransomware.
In the fourth quarter of 2021, Datto reported revenue of $164.3 million, up 18.2% from $139.0 million in the prior-year quarter, which was its first as a public company.
In a February SEC filing, Datto said its cash totaled $222.7 million and it had no debt outstanding.
Datto and Kaseya claim the deal will allow the combined entity to better sell data protection, IT management and security offerings to MSPs and meet their requirements in a rapidly evolving tech ecosystem.
"The alignment of our missions and focus makes us a natural fit," Kaseya CEO Fred Voccola said in a statement.
The acquisition, which is expected to close in the second half of 2022, will not have a negative impact on existing customers, the companies said. Datto customers will see no change to their current contracts or pricing, while Kaseya will continue to maintain Datto's brands, products and services.
Datto went public on the New York Stock Exchange in October 2020 at $27 per share. Upon completion of the transaction, the company's common stock will no longer be listed on the exchange.
Following the deal announcement, Datto's shares jumped more than 20% on April 11, closing at $34.65. Year-to-date as of April 11, the company's stock was up 31.5%, while the tech-heavy Nasdaq was down 14.3%.
