Buyer

Seller

Price

Revenue

Mult.

Currency

EMC

(NYSE: EMC)

SMARTS

$260,000,000

$60,000,000

4.3x

Cash

Category: Networking Software

SEG’s Insight:

EMC continues its acquisition-driven evolution from world leader in storage management to leading provider of IT infrastructure and systems management solutions, by acquiring SMARTS, a provider of network systems management software.  The acquisition puts EMC in competition with the likes of BMC, IBM (Tivoli), HP (Open View), and Computer Associates (Unicenter).  EMC was attracted to SMARTS’ 85% gross margins (EMC’s 60% gross margins due to 47% of sales from hardware).  EMC has made significant investments outside of the storage arena by acquiring VMWare, Documentum, and now SMARTS.  In the past 18 months, EMC has spent $4 billion to acquire nine software companies.

Buyer

Seller

Price

Revenue

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International Business Machines

(NYSE: IBM)

Ascential

(NASDAQ: ASCL)

$619,300,000^EV

$271,880,000

2.3x^EV

Cash

Category: Business Intelligence (Extract, Transform, Load)

SEG’s Insight:

The world’s largest information technology company, IBM, plugs a hole between data integration and warehousing in its database product by acquiring Ascential Software, a business intelligence provider focused on data integration.  The acquisition stops short of giving IBM core BI functionality such as query, reporting, analysis, and performance management which IBM’s ISVs such as Cognos supply.  The 18% premium IBM paid over Ascential’s prior day closing stock price also represents a consensus estimated 2.0x EV/Consensus revenue for 2005.  IBM is already 10-15% of Ascential’s license revenues but should be able to broaden Ascential’s reach via its distribution and bundling capabilities.  Data integration has become increasingly competitive as larger vendors weave more of these capabilities into their data management and application integration products.  IBM, Oracle, Microsoft, SAP, and Siebel continue to look to new license revenue growth by building or buying a broader BI offering which puts pressure on the likes of Ascential’s competitor Informatica to broaden its own footprint or look to be acquired.

Buyer

Seller

Price

Revenue

Mult.

Currency

Oracle

(NYSE: ORCL)

Retek

(NASDAQ: RETK)

$552,040,000^EV

$174,240,000

3.2x^EV

Cash

Category: Retail Software

SEG’s Insight:

Database powerhouse Oracle won the bidding war for Retek, a best of breed provider of operational applications for the retail industry, beating out archrival SAP.  Both SAP and Oracle are in the process of building out next generation applications that incorporate a service oriented architecture as well as important business process expertise built directly into the platform.  Oracle hopes that it can leverage its infrastructure to offer a more architecturally elegant solution, while SAP’s comparative advantage comes from its vertically specific processes developed over more than 30 years in the application business.  Retek helps Oracle rapidly expand its time to market in the retail industry, which is one of the fastest growing and least penetrated (It is estimated that 60% of retailers are using their own custom applications) by the packaged software vendors.  With Retek written in Java and 80% of Retek’s customers using Oracle’s database, the deal made more strategic sense for Oracle.  The final purchase price of $11.50 represents an 88% premium to the shares’ close the day before SAP’s original offer.

Buyer

Seller

Price

Revenue

Mult.

Currency

Siebel Systems

(NASDAQ: SEBL)

edocs

$116,000,000

$40,000,000

2.9x

Cash

Category: e-billing software

SEG’s Insight:

In search of incremental revenue and new markets, Siebel Systems acquires edocs, a provider of e-billing and self service software applications.  edocs’ software enables customers to submit and track electronic payments and manage online bills and accounts.  Siebel is hoping vertical applications can help offset 17% year-over-year decline in core CRM license revenue, but the e-billing sector is fragmented and highly competitive.  Siebel previously acquired Motiva (Incentive compensation management) and Eontec (Multichannel retail banking software) 2003 as part of its revenue diversification/vertical market strategy.

Buyer

Seller

Price

Revenue

Mult.

Currency

Verisign

(NASDAQ: VRSN)

LightSurf

$270,000,000

$12,000,000

(Estimate)

22.5x

Stock

Category: Mobile Messaging Software

SEG’s Insight:

Verisign beefs up its Communications Services Group, which serves wireline and wireless telecom carriers, by placing another heavy bet on mobile content delivery.  This time its Lightsurf, a provider of picture mail and video mail solutions for wireless operators.  The deal follows closely on the heals of Verisign’s acquisition of mobile content aggregator Jamba! for $273 million.  Together the two acquisitions will enable Verisign to provide telecoms with solutions to satisfy the growing demand for both third-party and user generated content.  It’s estimated Jamba! alone will contribute $500 million to CY2005 revenues.

Buyer

Seller

Price

Revenue

Mult.

Currency

WebSideStory

(NASDAQ: WSSI)

Avivo

$39,702,000

$3,800,000

(Estimate)

10.5x

Cash, Stock

Category: Website Search & Content Management

SEG’s Insight:

Hot of its September 2004 IPO with the coffers full of acquisition currency, WebSideStory, a provider of on-demand web analytics services used to track online behavior, picks up Avivo (“Atomz”), a leading provider of hosted site search and web content management applications used to manage large websites.  Combined, Atomz extends WebSideStory’s product set creating a suite of on-demand digital marketing apps which marketing professionals can use to manage all of their online marketing initiatives.  The $39 million purchase price comprises $34.7 million of restricted stock and $4.3 million of cash.  Assuming certain revenue milestones are met post closing, Atomz shareholders will receive an additional $4.1 million in 15 months.  Atomz had $19 million of venture funding.

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Seller

Price

Revenue

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Silver Lake, et. al

SunGard

(NYSE: SDS)

$11,300,000,000

$3,560,000,000

3.2x

Cash

Category: Financial Software

SEG’s Insight:

In the second largest leveraged buy-out ever, a consortium of investors led by Silver Lake Partners acquires SunGard, developer of software and solutions primarily to financial institutions.  SunGard put itself in play several months ago after announcing its plans to spin off its disaster backup unit which generates significant recurring revenue.  The purchase price, an unimpressive 14% premium to SunGard’s pre-announcement closing price, is expected to be financed with $3.5 billion in cash and the remainder debt.  SunGard has grown consistently, and has trailing twelve month revenue greater than $3.5 billion, with excellent operating margins (19.7%)  Nevertheless, SunGard’s stock price has seen only modest increase, as the company has failed to generate much excitement among investors.

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Seller

Price

Revenue

Mult.

Currency

Infor Global Solutions

Mapics

(NASDAQ: MAPX)

$347,000,000

$172,800,000

2.0x

Cash

Category: Manufacturing Vertical Software

SEG’s Insight:

With U.S. manufacturers struggling to retain customers and compete globally, their IT solution providers are sharing the pain, with consolidation predictable.  Infor Global Solutions (formerly Agilisys), a provider of manufacturing and distributed software to select industries acquires Mapics, a competing developer of software for discrete and batch processes manufacturers.  The purchase price represents a 10% premium to Mapics’ pre-announcement closing share price.  The combined company will boast more than 17,500 customers in 70 countries.  Mapics had increased trailing-twelve-month (TTM) revenue 10.4% and TTM EBITDA 131% year-over-year (YOY) but was unable to excite investors, as demonstrated by a 15.4% decrease in enterprise value from 4Q03 to 4Q04. 

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Seller

Price

Revenue

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Currency

UGS PLM

Tecnomatix

(NASDAQ: TCNO)

$228,000,000

$98,730,000

2.3x

Cash

Category: Manufacturing Process Management

SEG’s Insight:

UGS, a leading provider of product lifecycle management (PLM) software, acquires Tecnomatix, provider of manufacturing process management (MPM) solutions primarily to the automotive, electronics and aerospace industries.  The Tecnomatix acquisition is UGS’ fourth since being broken off from EMS last May, and will help provide a more holistic PLM offering.  The two companies have shared an alliance since 2002 and have seen increasing demand for MPM solutions.  The purchase price represents a 39% premium to Tecnomatix’s average closing share price over sixty days prior to the announcement.

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Seller

Price

Revenue

Mult.

Currency

Elekta AB

(SSE: EKTAb)

IMPAC

(NASDAQ: IMPC)

$190,000,000^EV

$69,160,000

2.7x

Cash

Category: Healthcare Software

SEG’s Insight:

Elekta, developer of solutions primarily for cancer treatment facilities, acquires IMPAC, a provider of clinical and financial information systems for cancer care facilities. Combined, the companies will serve more than 3,000 hospitals and cancer centers. Elekta and IMPAC plan to deploy IMPAC technologies in Europe and Asia while offering IMPAC's US customers treatment solutions from Elekta.  The purchase price is a 22% premium over IMPAC’s closing share price prior to announcement.

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Seller

Price

Revenue

Mult.

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InterActiveCorp.

(NASDAQ: IACI)

Ask Jeeves

(NASDAQ: ASKJ)

$1,856,470,000^EV

$261,330,000

7.1x

Stock

Category: Internet Search

SEG’s Insight:

IAC/InterActiveCorp, which operates a variety of businesses, including CitySearch, Expedia, and Ticketmaster, acquires Ask Jeeves, the fourth-largest internet search engine with 7% market share.  The all-stock acquisition fills a hole in IAC's diverse lineup of more than 40 Web sites while Ask Jeeves will have access to a significant increase in resources ($4.1 billion in cash) to compete against Google and Yahoo! in the fiercely competitive paid search market.  Ask Jeeves earned an impressive $52.4 million on revenue of $261 million last year.