ChannelE2E has tracked hundreds of technology M&A deals in 2021. See the complete list of M&A deals here.
The big question on this deal: Will HPE take Zerto down-market into the MSP-driven SMB backup and disaster recovery market, or is this mainly a strategy to boost HPE GreenLake storage services up in the enterprise?
Either way, the deal has some potential channel partner implications. Indeed, roughly 350 managed services providers (MSPs) leverage Zerto's disaster recovery as a service (DRaaS) and ransomware mitigation services across multiple cloud environments. Translation: Acquiring Zerto may provide HPE with a relatively low-cost way to compete against MSP-centric data protection companies such as Acronis (valuation: $2.5 billion) and Datto (valuation: $4.3 billion), among others.
MSP Data Protection Market: Zerto Rivals
Still, it's important to put the M&A deal in context. While Zerto serves roughly 350 MSPs, Datto supports more than 17,300 MSPs as of May 2021, and the Acronis channel partner base spanned 50,000 partners, according to 2021 statements from that company.
Moreover, the MSP-centric data protection market is crowded with investors and M&A activity. Key deals involve:
- April 2021: Druva raised $147 million in late-stage funding that values the cloud data protection software company at more than $2 billion. An IPO could be next.
- February 2021: Arcserve and StorageCraft merged.
- January 2021: Veritas Technologies acquired HubStor.
- January 2021: Hornetsecurity acquired Altaro.
- December 2020: Google acquired Actifio.
- November 2020: Zix acquired CloudAlly
- October 2020: Veeam acquired Kasten for Kubernetes container BDR
- March 2020: Private equity firm Insight Partners acquired Veeam
- December 2019: OpenText acquired Carbonite and Webroot
- January 2019: Amazon acquired CloudEndure
HPE and Zerto: GreenLake Enterprise Implications
In reality, Zerto may have bigger implications up in the enterprise, where HPE continues to expand its GreenLake strategy -- which includes HPE Storage’s shift to a cloud-native, software-defined data services business.
Founded in 2009 and co-headquartered in Herzliya, Israel and Boston, Massachusetts, Zerto has approximately 500 employees and serves more than 9,000 customers.
Zerto in June 2020 raised $33 million in equity financing. That equity funding also allowed Zerto to draw up to $20 million in additional venture debt under an existing credit facility, the company said at the time. Key Zerto investors included Claltech, 83North, Battery Ventures, Harmony Partners, IVP, Pitango Venture Capital, RTP Ventures, and U.S. Venture Partners, Poalim Capital Markets, Bank Hapoalim and Kreos Capital.
Zerto’s management team will join HPE following the acquisition, which is expected to close in the fourth quarter of HPE’s fiscal year 2021, subject to regulatory approvals and other customary closing conditions. After the transaction closes, Zerto will be organized under HPE Storage and will report to Tom Black, senior vice president and general manager, HPE Storage.
Zerto offers recovery, ransomware protection, and data and application mobility across hybrid, multi-cloud environments, according to the statement. Zerto also replicates and migrates data between VMware vSphere and Microsoft Hyper-V environments and natively to Amazon Web Services (AWS) and Microsoft Azure.
Zerto will be available as a service through HPE GreenLake and Data Services Cloud Console. Zerto is expected to contribute more than $130M of run-rate revenue at software gross margins with approximately one-third of revenues incremental to HPE’s as-a-service ARR, according to the statement. The acquisition is also expected to be accretive to non-GAAP operating profit and earnings starting in FY 2023, HPE said.
HPE Acquires Zerto: Executive Commentary
Antonio Neri, president and CEO, HPE commented on the acquisition:
“Data is now the most critical asset. With the explosive growth of data at the edge and across hybrid environments, organizations today face significant complexity in managing and protecting their data. Zerto’s market-leading cloud data management and protection software expands HPE GreenLake cloud data services, allowing customers to protect their data and rapidly act on insights, from edge to cloud.“
Ziv Kedem, CEO, Zerto, added:
“The HPE GreenLake edge-to-cloud strategy and strong leadership is a perfect match for Zerto. Coupling Zerto’s industry-leading cloud data management and protection software platform with HPE’s cloud data services and go-to-market reach will offer an unparalleled experience for our collective customers and partners.”
Additional insights from Joe Panettieri.