Insight Bite

We are all familiar with press releases announcing M&A deals, however these PRs rarely reveal the intricacies of the transaction; neither do they consider the main parties’ motivations. In our new Exit Insight series, we examine in more detail what lies behind a technology M&A deal.

The first to feature in the Exit Insight series is the ARM Ltd acquisition of Allinea Software, an industry-leading provider of software tools for High Performance Computing (‘HPC’) systems and Deep Learning. This transaction marked the culmination of three years of planning, with Matthew Byatt advising Allinea’s Board on the exit.

Here, Kelly Horner interviews Matthew on the deal…

This acquisition was a long time in the making. What was the background?

It all started in 2012 when Acuity met Allinea. Unlike the input from other advisors, our arguably bold suggestion was that it was too early to sell the business; the technology was too nascent and there was little awareness amongst buyers.

…our arguably bold suggestion was that it was too early to sell the business…

Our advice therefore was that the best way to build value was to get to know and ‘warm up’ potential buyers over a period of several years in what we commonly refer to as an ‘influence campaign’. The benefits of this strategy included:

• Increasing awareness amongst potential buyers;
• Gaining real market feedback to help inform strategy and the exit process;
• Enabling buyers to ‘see’ the company’s value and ensure that offers are strategically priced;
• Building business relationships being built on the basis of trust.

Allinea’s Board took this advice to heart and worked extensively to develop senior and deep relationships throughout the HPC / Deep Learning ecosystem. In 2016 Allinea revisited an exit and, by getting first-hand feedback, were able to quickly ascertain potential market reaction.

Why did Acuity want to work with Allinea on this process?

We had got to know the management team since 2012 and through this process we had developed a great understanding of the technology and what it could bring to the marketplace. We were impressed with how Allinea had cultivated deep buyer relationships and most importantly, thanks to the time we spent with potential technology buyers, we were well aware of the overall interest in HPC and Deep Learning. The market window for selling the business was well and truly open. This insight was spot on.

We had got to know the management team since 2012 and through this process we had developed a great understanding of the technology and what it could bring to the marketplace.

Why did Allinea choose Acuity?

Our advice in 2012 and our willingness to help and get to know the business over a long period of time demonstrated a certain level of commitment; we played the long game and proved ourselves. They valued our technical understanding as the Board knew that Allinea had a complex value proposition that would be difficult to articulate. The Partners’ strong technical backgrounds in processor IP and tool chains, plus the knowledge that our Partners would be deeply involved in the deal, were important factors in Allinea’s decision. In addition, our international reach in terms of buyer network was of value to the Allinea team; we have curated an excellent network of key potential buyers in both the HPC and Deep Learning sectors.

Why did ARM buy Allinea?

ARM acknowledged Allinea as an industry leader in development and performance analysis tools that maximized the efficiency of software for HPC systems. They recognised that currently 80 percent of the world’s top twenty-five supercomputers use Allinea’s tools. ARM also saw future applications such as artificial intelligence, machine learning and advanced data analytics.

ARM was well aware that developers in HPC and Deep Learning were facing new challenges requiring advanced tools designed to enable them to continue to innovate. Allinea’s ability to debug and analyse many-node systems is unique, and ARM recognised that this acquisition would ensure that this capacity was available to their whole system, and to the other CPU architectures prevalent in HPC.

The acquisition of Allinea saw ARM continue their HPC momentum, bringing Allinea’s expertise into ARM to equip partners with access to a comprehensive software tool suite that addresses complex system challenges.

ARM was well aware that developers in HPC and Deep Learning were facing new challenges requiring advanced tools designed to enable them to continue to innovate.

Why did Allinea sell to ARM?

Allinea felt that being part of a larger organisation was needed to help the company realise its potential; therefore, finding the right partner was essential. There was great synergy and rapport between Allinea and ARM, and strong relationships that had been established and nurtured since Acuity made the introductions back in 2012.

As part of ARM, Allinea is now able to take advantage of product synergies between ARM’s compilers, libraries and advisory tools and their existing and future debugging and analysis tools. Their combined expertise and understanding of the challenges facing this market will deliver new solutions to the customers.

Talk us through the process itself, how did it go?

All processes have their challenges but this one went relatively smoothly; forty-two days from the start of due diligence to completion. ARM’s team was very helpful, professional and pragmatic.

We were impressed by the levels of interest in the company. It meant that we were able to generate multiple offers on behalf of the Board and close the deal with ARM, ultimately giving shareholders a great return. In fact, the most difficult part was identifying the best party to take forward – we were literally spoilt for choice.

…the most difficult part was identifying the best party to take forward – we were literally spoilt for choice.

We worked with Mills & Reeve, in Birmingham and Cambridge, who represented Allinea, and Mayer Brown who represented ARM. Mills & Reeve had been working with Allinea on a commercial basis for a number of years. Both legal teams worked well together and adopted a pragmatic approach.

And the result?

The sale of Allinea to ARM was a great result for all parties. Some three months on since the transaction completed, the Allinea team are thriving within ARM and are already making a difference. No doubt this is just the beginning in the next phase of Allinea’s journey.