Dan Primack

The latest on private equity, M&A, deals and movements — from Wall Street to Silicon Valley

Early investor secures big profit on ArcSight sale

September 13, 2010: 9:00 AM ET

Merger Monday has been sweet to ArcSight shareholders, who learned that HP has agreed to pay $43.5 per share in cash for a company that had spent most of 2010 hovering at around $25 per share. But the big winner in this $1.5 billion bonanza is Kleiner Perkins, the venture capital firm that first invested in ArcSight more than eight years ago.

Kleiner was one of several VC shops to invest a total of around $30 million into ArcSight, a Cupertino, Calif.-based maker of security and compliance software. It appears to have put in at least $10 million out of its tenth fund, including as lead of a $9.5 million Series B round in April 2002. Other investors prior to ArcSight's 2008 IPO included SVIC, Integral Capital Partners, Institutional Venture Partners, New Enterprise Associates, In-Q-Tel and Samsung Ventures.

After ArcSight began trading on the Nasdaq, Kleiner held 5.88 million shares, or a 19% stake. It disposed of over 400,000 shares in June 2009, and another 1.77 million shares one year later. Those two sales earned Kleiner around $49 million (based on market prices at the time), and left it with around a 10.1% ownership stake.

The HP deal vales Kleiner's remaining ArcSight shares at nearly $152 million. All together, that means more than $200 million cash-out on around $10 million cash-in. That's what the venture world calls a home run (or at least a bases-clearing triple), even if it did take the better part of a decade to achieve...

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About This Author
Dan Primack
Dan Primack
Senior Editor, Fortune

Dan Primack joined Fortune.com in September 2010 to cover deals and dealmakers, from Wall Street to Sand Hill Road. Previously, Dan was an editor-at-large with Thomson Reuters, where he launched both peHUB.com and the peHUB Wire email service. In a past journalistic life, Dan ran a community paper in Roxbury, Massachusetts. He currently lives just outside of Boston.

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