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Will the enterprise market spend significant IT budget on Windows Vista in 2007?



Software M&A - A Glimpse into Q2

By Ken Bender, Managing Director, and Allen Cinzori, Vice President - Software Equity Group, LLC

The software M&A market continues to handsomely reward sellers with best-of-breed solutions as buyers seek to enhance their product suites with technology and solutions that can provide competitive differentiation. Case in point; Citrix pays a handsome premium for NetScaler, provider of networking hardware and software for secure distribution of applications across the network; Quest broadens its database expertise by adding depth in the higher growth Microsoft SQL Server market; Adobe and Macromedia finally consummate a deal after years of courting; Dessault extends its technology, consolidates a fragmented market, and expands into new verticals with its acquisition of ABAQUS; Computer Associates makes its fourth acquisition since September, this time acquiring NIKU, provider of IT Governance solutions; and Lawson Software seeks to compete with the big boys by acquiring Intentia.

Software M&A Insights

Adobe (NASDAQ: ADBE) acquires Macromedia (NASDAQ: MACR)
Category: Multimedia, Graphics & Publishing Software
Purchase Price $3,021,720,000EV
Seller Revenue $436,170,000
Revenue Multiple 6.9x EV
Payment Terms: Stock

SEG’s Perspective:
Content and document management leader Adobe acquires Macromedia, a leading provider of software solutions for the design, delivery and display of websites and internet applications. Adobe paid a 25% premium in the hopes the combined company can offer a fuller complement of cross-platform products for building document-oriented applications and rich-media web applications. Macromedia’s successful penetration of the high growth wireless device market attracted Adobe which has struggled to do the same. .

Citrix Software (NASDAQ: CTXS) acquires NetScaler
Category: Networking Software
Purchase Price $300,000,000
Seller Revenue $25,000,000 (Estimate)
Revenue Multiple 12.0x
Payment Terms: Cash, Stock

SEG’s Perspective:
Citrix, a leading provider of networking and access infrastructure solutions, acquires NetScaler; a privately held company that provides specialized networking hardware for secure distribution of applications across the network. According to NetScaler, 75% of all daily Internet usage is routed through a NetScaler system. NetScaler customers include Goggle, Yahoo, the MSN, and more than 500 enterprise customers. Citrix, which has typically focused on facilitating secure access in the low growth client/server market, will rely on NetScaler to grow sales in the high growth web application market. NetScaler is the fourth independent web application acceleration technology company to be acquired in the last two months1.

1 Cisco/Fine Ground (10.6x Est), Juniper/Peribit (12.0x Est), Juniper/Redline (11.0x Est)

Computer Associates (NYSE: CA) acquires Niku (NASDAQ: NIKU)
Category: IT Governance
Purchase Price: $283,340,000EV
Seller Revenue: $70,820,000
Revenue Multiple: 4.0xEV
Payment Terms: Cash

SEG’s Perspective:
Enterprise software conglomerate Computer Associates, acquires Niku, a developer of IT governance (ITG) software, which quantifies and measures the business value of IT investments. The deal represents a 27% premium over Niku’s closing stock price prior to announcement and gives Computer Associates a competitive solution in the fast growing ITG space where Niku was able to grow revenue 45% in the last year. The acquisition, CA’s fourth since September, was a “must” for CA, following 2004 ITG acquisitions by CA archrivals IBM (SystemCorp) and Compuware (ChangePoint, at 5.0x).


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