American giant 3M is acquiring Attenti Holdings for $230 million, in a stellar exit for the Israeli technology company's venture backers.
3M, a highly diversified holding company, said it will be paying cash for Attenti, whose technology is used to remotely monitor criminals and elder care patients.
The sale represents a wonderful exit for Attenti's two principal investors, Francisco Partners and the Israeli branch of the U.S. venture capital firm Sequoia Capital, which had jointly acquired the entire stake in the company in December 2008 for $77.4 million.
Attenti, then known as Dmatek, was the first Israeli company to float stock on the London Stock Exchange's AIM market - a good venue for smaller companies. It went public at 75 pence a share, reflecting a market cap of $21 million.
In 2000, Dmatek stock began to be traded on the main London exchange.
According to the Israel Venture Capital Research Center, Dmatek raised a total of about $16 million on the stock market. Its last issue, in 2000, was made at a market cap of $90 million.
Attenti's case presents an unusual exit story among Israeli high-tech companies. It was founded in 1990 by three ex-air force pilots: Doron Dovrat, Mike Goldstein and Avishai Harel. At first it was a software venture, but after three years the partners decided that a change of business model was in order, and moved to hardware.
In 1993 Attenti, as Dmatek, focused on two main elements: devices to monitor prisoners and devices to monitor printing processes. In printing, it operated through a subsidiary called Advanced Vision Technology, which listed on the Frankfurt Stock Exchange. It was sold in 1997 to a group of venture investors, and Dmatek focused on monitoring technology, through its subsidiary Elmo-Tech.
In 2000, Elmo-Tech spawned a subsidiary of its own, Home Free, based in Milwaukee. It focuses on monitoring devices for elderly people suffering from dementia or Alzheimer's disease.
In any case, it hasn't been considered a startup for a long time now.
"3M is buying Attenti because it's a living, kicking business," says its CEO, Yoav Reisman. "This isn't just an acquisition of technologies."
Reisman joined Dmatek in 1993. "I assume [the backers] didn't think their exit would take 20 years," he quips. "But I always told them, I'm not in a hurry to go anywhere. It will come."
In addition to Sequoia, the other major winner in the acquisition by 3M is Francisco Partners, one of the world's largest private equity firms, based in London and San Francisco. It specializes in the high-tech sector and has a total of $5 billion in investments. One of Francisco Partner's earlier investments was the Israeli company Ex Libris.
Attenti, which employs about 340 people at its Tel Aviv headquarters, is expected to have sales of about $100 million this year. Reisman will personally chalk up a profit of several million dollars in the deal with 3M.
Several of his management colleagues will also make handsome profits on the transaction. For Sequoia, the sale will hand the firm three to four times its investment, but even more than that, Sequoia had just invested in Attenti a year and a half ago, meaning that its phenomenal return was made in a very short time.
3M acquired Attenti to get into electronic monitoring devices, which leads to large savings for correctional authorities. Instead of criminals being put behind bars, their location can be monitored.