OpenText -- parent of Carbonite and Webroot -- continues to scour the market for potential technology business acquisitions. But the valuations of target acquisitions are too lofty, OpenText CEO Mark Barrenechea told Bloomberg.
Indeed, microcap software companies are now valued at 19.1 times annual EBITDA for 2021, up dramatically from 15.8 times annual EBITDA for 2019, according to Microcap.co.
OpenText generates plenty of money for potential M&A deals -- and more cash is on the way. Indeed, the company expects to generate $6 billion in free cash flow over the next five years, Bloomberg mentions.
Carbonite, Webroot and Cyber Resilience for MSPs
Still, Barrenechea prefers to focus on organic growth. Key moves include continued investments in Carbonite and Webroot, which develop backup, disaster recovery (BDR), data protection and cybersecurity software that MSPs consume and VARs resell to small businesses.
OpenText acquired Carbonite and Webroot for $1.45 billion in 2019. Fast forward to present day, and the combined business now pitches cyber resilience to MSPs and VARs in the enterprise market, and corporate IT managers in the enterprise. Also, OpenText now offers its own managed security services to enterprise customers.
Admittedly, multiple MSP-focused backup and security companies are moving into the cyber resilience market. And Webroot faces intensified competition from endpoint detection and response (EDR) software companies such as SentinelOne and CrowdStrike.
The competition is particularly intense in the MSSP sector, where 28 percent of the Top 250 MSSPs for 2021 now name either SentinelOne or CrowdStrike as a key partner.
Prepared for a Technology Valuation Correction
Still, Carbonite maintains a big footprint in the backup market. And thousands of MSPs continue to run Webroot for for anti-virus, network and Web security. For now, parent OpenText seems focused on organic growth. But if technology industry valuations experience a correction, watch for Barrenechea to consider acquisitions.