Symantec Buys Clearwell for 390M

Symantec is buying e-discovery vendor Clearwell Systems for $390M, in a deal expected to close in September. With Clearwell revenues over $50M, Symantec is expected to have paid 7x trailing twelve months revenue (TTR) for this purchase, which is quite an achievement for Clearwell.

This deal makes a lot of sense for Symantec, which has the lion’s share of the email archiving market. Many of Symantec’s customers have been considering a move to native Exchange archiving capabilities that Microsoft started shipping out of the box with Exchange Server 2010. Symantec has fought back based on its strength in regulatory compliance. Bolstering its e-discovery portfolio makes a lot of sense. Clearwell provides Symantec with similar to latent semantic indexing (LSI).

Symantec has built its compliance portfolio over the past seven years, beginning with the acquisition of KVS in August 2004. The December 2007 acquisition of Vontu vaulted them into data loss prevention--admittedly a rather slow-developing market. Clearwell establishes Symantec as a leader in e-discovery, as evidenced by Gartner’s first e-discovery magic quadrant released earlier this month.

This leaves several attractive – albeit expensive – options for acquisition into the e-discovery market. Guidance Software’s (NASDAQ:GUID) EnCase family of products continues to be the dominant case management solution, however its large size Q1 11 revenues of 23.6M would require a very large suitor. Recommind, kCura and Exterro are other options.

Expect consolidation to continue in this space as e-discovery technologies make use of technologies such as LSI and move towards SaaS-based delivery models. The Clearwell acquisition has set a high bar in terms of valuation so it will be interesting to see how the market evolves.

David Sengupta - In addition to his role as Ferris analyst, David is chief architect for Quest Software, and has been a Microsoft Exchange MVP since 1998.

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