Advised SUSE Linux, the leading Enterprise Linux company, on its sale to Novell
Nov 2003
(a portfolio company of Apax)
acquired by
$210 million
  • Sector: Infrastructure Software & Cybersecurity
  • Deal Type: Strategic Deals; Venture Capital Exits
  • Engagement type: Sellside
  • Size: $210 million

We are delighted to announce our first transaction at Arma Partners, only a few months after our formation. On the 4th of November our client, SUSE LINUX AG, was acquired by Novell Inc. for $210m in cash. The deal represents the largest VC-backed M&A exit in the European technology sector for the past two years, and an exceptional return for the investors who have supported SUSE.

The transaction was also a significant one for Novell, which rose 25% in value on announcement of the acquisition. In our view, the deal will have a major impact on the Linux industry as Novell now enters the Linux OS sector, a market currently dominated by Red Hat, and both companies compete against Microsoft for enterprise OS deployments worldwide.

– SUSE Linux is a market leader in Linux operating systems in Europe and the second largest provider worldwide

– Established 1992, SUSE Linux had revenues of €40m in 2002, employing 399 staff worldwide

– The company has won significant accounts against incumbent OS companies and is widely seen as the technology leader in Open Source OS

– Novell (NASDAQ: NOVL) provides infrastructure components that work across multiple platforms and are designed to secure and connect personal computers in corporate networked environments

– Specific offerings include identity and access management products, resource management products, Open Enterprise Server, NetWare and Unix

– Novell has over 4,500 employees in 23 offices worldwide

– With the acquisition of SUSE, Novell could re-invent itself to become a leading Linux company

– Novell expands its open source commitment and will become the first to offer comprehensive Linux solutions for the enterprise from the desktop to the server. Novell will be the only $1 billion software company with a Linux distribution

– In the two weeks following announcement, Novell’s market capitalization doubled

– Arma Partners created fierce competitive tension around SUSE and ran an intense Dual Track process (fund-raising and trade sale) that took less than two months from its initiation to announcement

– The process was tailored to maximise value for SUSE shareholders. As a result, the final purchase price was in well in excess of 2x the initial proposals by interested parties, a great result considering the fact that SUSE was loss-making and the M&A environment very unfavourable

– This transaction is widely regarded as an industry-shaping deal which validates Open Source and helps to bring Linux deep into the enterprise

– In conjunction with this deal, IBM invested $50m in the form of convertible preferred stock into Novell