Who will be the next buyer of Veracode?

After completing the acquisition of CA Technologies by Broadcom for $18.9 billion, the semiconductor-maker has undertaken several acquisitions in this market to reach their current position to become one of the leading in the industry. But the acquisition of CA represents a strategic win for Broadcom, furthering its mission to acquire "mission critical technology businesses," following its failed takeover bid for rival Qualcomm. CA Technologies, which manufactures cloud-based and traditional enterprise software, could help diversify Broadcom. 

The deal is purely cash based and values CA stock at about $44.50 per share, or a premium of about 20 percent to the closing price of CA common stock on July 11.

Why the acquisition happened?

The acquisition seems to be more of a mismatch. CA Technologies is into software offerings and Broadcom’s data center and semiconductor offerings do not reveal any direct correlation; hence there would be little scope for integration. Therefore, the acquisition does seem to be a pure-play move to enter a new market for Broadcom. Considering CA Technologies’ attractive profitability numbers and customer base, the acquisition could be viewed as providing a financial bonus for the organization rather than trying to deliver new offerings.

The advantage of CA Technologies is that it is one of the leading players in the legacy software market. CA Technologies has the maximum revenue flowing in from mainframes, followed by enterprise software and then services. They are now looking to boost their subscription and cloud-based modes of deployment, as deploying software on mainframes slows down growth. Analysts expect that Broadcom will benefit in terms of cash flow.

In spite of various contradictions, the two are complementing each other too in various aspects. Since Broadcom has the hardware and CA Technologies makes the software that is embedded in it, the former may have plans to have hardware products such as switches and boxes for datacenters with an embedded software to formulate a single-boxed solution. The acquisition also falls in line with Broadcom’s aim to add to their portfolio of “Mission Critical Technology.” Additionally, one can note that there is a bit of alignment to this deal with their previous acquisitions of Brocade and LSI.

After closing a deal to buy CA Technologies, Broadcom now turns around and sells off a part of its new acquisition. Broadcom is shedding off CA’s Veracode application security testing platform to private equity firm Thoma Bravo for $950 million in cash. CA initially acquired Veracode for $614 million in 2017.

Sources reported that, Thoma Bravo has approached Symantec Corp to express interest in acquiring the U.S. cybersecurity software company. Now the question is how the Private equity firms will do the right bargain, since Bain Capital and Silver Lake are also investors in Symantec.