Why McAfee Went Private, Again
Earlier this week, a large investor group took McAfee private. They paid approximately $12B for the company and took on an additional $2B in debt that were on McAfee’s books. The purchase price represents a premium of approximately 22.6% over McAfee’s closing share price of $21.21 on November 4, 2021. McAfee had just recently gone public again with an initial public offering (IPO) in October of last year.
For better, and sometimes for worse, McAfee is one of the best-known security brands in the world. The company was originally founded in 1987 by John McAfee, who probably needs no further introduction. The sale this week was of the McAfee consumer business. McAfee sold off its enterprise business a couple of months ago, when Symphony Technology Group acquired McAfee’s Enterprise business for $4.0B. Intel, which owned McAfee for a while, retired the McAfee brand for a while, but it was revived after it sold off majority interest in the company. That new enterprise focused company will be rebranded after that deal formally closes, which is expected to be before the end of this calendar year.
Let's take a look at the two major businesses and why investors were compelled to see the potential.
Business Unit Differentiation
The differences in the sales of the two businesses are interesting. McAfee’s enterprise business did $1.3B in revenue in FY2020. The $4.0B sales price, therefore, represented roughly a 3X multiple on revenue. By contrast, McAfee’s consumer business had revenues of $1.6B in FY2020. The sales price of $14B therefore represented an almost 9X multiple on revenue. The difference of course, is mainly accounted for by the different growth rates of the two business units. McAfee’s consumer business has been very successful of late, up 20% year over year in FY2020, for example. By contrast, the enterprise business was basically flat, up 1% year over year in FY2020.
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