Avellino and Merant go west

10 February 2006

When a British start-up is snapped up by one of its US counterparts, it is invariably a tale of what might have been.

When a promising UK start-up is acquired by a US company, it often leads to a certain amount of soul-searching on this side of the Atlantic (even if that was the UK company's exit strategy all along).

This is the fate that has befallen Avellino, a developer of data cleansing and data profiling tools, which was acquired by Harte-Hanks subsidiary Trillium Software in February. Not only was Berkshire-based Avellino's technology highly rated, but its steady management inspired confidence at a time when many customers had grown more cautious about buying from small vendors.

That prudence led the company to eschew venture capital backing and to expand overseas only cautiously. While that might have been wise in the current slow spending climate, its client list remained overwhelmingly UK-based.

The acquisition makes plenty of sense, believes Bloor Research analyst Philip Howard, because Avellino's software lacked in-depth integration with other data warehousing software vendors, with the exception of Trillium. Furthermore, Avellino had only one direct competitor in Evoke Software, which made it highly prized.

Avellino was not the only Berkshire company bought out by a US suitor. Merant was acquired by Serena Software for £206 million, bringing to an end the saga of a UK company that perhaps tried too hard to expand in the US. Merant was created in 1999, following Cobol tools vendor Micro Focus's purchase of database connectivity specialist InterSolv for $534 million, in a bid by Micro Focus to overcome a feared post-2000 fall in demand for its core mainframe-based products.

Within two years, Micro Focus was resurrected in a spin-off of the Cobol tools business. Then the database connectivity unit of InterSolv was similarly off-loaded as DataDirect Technologies.

The rump Merant was still a sizeable business of £79 million, based on the PVCS/Dimensions change management software and the Collage web content management product.

Serena CEO Mark Woodward says that the two companies offer complementary products in both software change management and web content management. The purchase will help make Serena a clear number two in both markets, he says. He also believes that there is ample opportunity for cost-cutting at Merant.

Both companies were also working on application lifecycle management offerings - a development effort that will now be merged. "This may be the most exciting part of the combination," says Woodward.

Acquirer	Activity	HQ	Target	Activity	HQ	Price
Key IT industry acquisitions in February
BMC Software	Data &systems mgmt s/w	US	NAI's Magic Solutions unit	Helpdesk s/w	US	n/a
Broadcom	Broadband chip sets	US	RaidCore	Data storage s/w	US	$16.5m
Captiva Software	Input management s/w	US	ADP's Context unit	Healthcare claims proc s/w	US	$5.2m
Citrix Systems	Server-centric deployment s/w	US	Expertcity	Desktop access s/w	US	$237.0m
Cognizant Technology	IT services	US	Ygyan Consulting	Offshore SAP services	India	n/a
Harte-Hanks	Direct marekting	US	Avellino	Data profiling software	UK	n/a
Experian	Information services	US	Marketswitch	Ecommerce analytics s/w	US	n/a
Hewlett-Packard	Systems, svcs &s/w	US	Novadigm	Configuration/change mgmt s/w	US	n/a
Hewlett-Packard	Systems, svcs &s/w	US	Consera	IT service-modelling s/w	US	n/a
Hewlett-Packard	Systems, svcs &s/w	US	ThyssenKrupp's Triaton unit	IT services	Germany	n/a
Hewlett-Packard	Systems, svcs &s/w	US	FH Computer Services	Licence management s/w	UK	n/a
Jack Henry &Associates	Banking software &svcs	US	Yellow Hammer Software	Fraud detection s/w	US	n/a
JDA Software Group	Retail management s/w	US	Timera Retail Solutions	Workforce mgmt s/w	US	$13.0m
Juniper Networks	Networking systems	US	NetScreen Technologies	Network security systems	US	$4.0bn
LHS	Telecom s/w	Germany	Schlumberger BSS	Telecom billing s/w	Germany	n/a
Mahindra Group	Engineering, IT &financial svcs	India	Bristlecone	ERP consultancy	US	n/a
NCR	Fin/retail sys &database s/w	US	Optimal Robotics U-Scan unit	Cust self-checkout systems	US	$30.0m
Oblix	Identity management s/w	US	Concluent Software	Web svcs mgmt s/w	US	n/a
Phoenix Software Int'l	Mainframe systems s/w	US	Ascential's Key/Master unit	Data entry s/w	US	n/a
PurchaseSoft	E-procurement s/w	US	Netshare Solutions	E-procurement	Germany	n/a
Quest Software	Data/applns mgmt s/w	US	Aelita Software	MS infrastructure mgmt s/w	US	$115.0m
Serena Software	Change mgmt s/w	US	Merant	Change mgmt s/w	UK/US	£206.0m
Sun Microsystems	Systems, svcs &s/w	US	Kealia	Server technology	US	n/a
Synopsys	Electronic design s/w	US	Analog Design Automation	Electronic design s/w	US	n/a
Synopsys	Electronic design s/w	US	Monolithic System Technology	Chip design s/w	US	$432.0m
Synopsys	Electronic design s/w	US	Accelerant Networks	Chip design s/w	US	n/a
Verity	Content mgmt s/w	US	Cardiff Software	Document mgmt s/w	US	$50.0m
Verity	Content mgmt s/w	US	NativeMinds	Cust self-service s/w	US	$3.8m
Verticalnet	E-sourcing s/w	US	Tigris	E-sourcing s/w	US	$3.5m

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