Two high-growth privately held firms that IBM has snapped up this year were tracking toward IPOs but instead elected to take IBM's all-cash offers. The 451 Group says the IBM-acquisition cashouts proved far richer-and quicker-for Initiate Systems and BigFix than going public would have.From The 451 Group's blog post on seekingalpha.com:

In addition to the current snarling bear market and the onerous regulatory requirements, we've noticed yet another hurdle IPO candidates have to clear to get to the public market: IBM. With last week's purchase of BigFix, the tech giant has gobbled up two private companies this year that were both tracking for an IPO. In February, Big Blue snagged Initiate Systems, a master data management vendor that had filed to go public in late 2007 but pulled its prospectus in mid-2008.

IBM's acquisitive intentions aren't likely to cool off as the company has said it's prepared to invest $20 billion in acquisitions over the next several years. While the purchases of Initiate and BigFix didn't bite too deeply into that stash, 451 speculates that both companies made out significantly better by becoming part of IBM than they would have in offering shares on the public market:

Although terms weren't disclosed, we understand that Big Blue handed over $425m, or 5.3 times trailing revenue, for Initiate. And we hear from multiple sources that IBM paid $400m, or nearly 8x trailing revenue, for BigFix. . . .

As a final thought, we highly (highly, highly) doubt that if either Initiate or BigFix came public right now, it would garner anywhere near a $400m valuation. . . . More likely, skittish investors would discount the debut valuation to around $250m, give or take. Add in lockup periods and other considerations in an IPO that draw out the path to liquidity, and it's no wonder both Initiate and BigFix took a rich, all-cash offer from IBM.

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