There comes a time, in a consolidating market, when the consolidators begin to run out of acquisition options. And, as with any food chain, once a predator is suitably engorged, it is never too long before it starts looking like a tasty morsel for a more powerful foe.
For French business intelligence tool maker Business Objects, the game is up. Although it acquired German data quality tool maker fuzzy informatik for an undisclosed sum in September, this was far from enough to stave off its own acquisition. In early October, the company was bought by German applications giant SAP for 4.8 billion ($6.8 billion), one of the largest software acquisitions of the decade so far – and SAP’s largest ever.
Historically, SAP has avoided large acquisitions, preferring instead to develop its own technology. But recently, that position changed. “We know we cannot do everything ourselves,” SAP CEO Henning Kagerman told the company’s user conference in May 2007.
SAP’s rationale for the deal is simple enough. With Business Objects, it acquires some market leading technology with which to enrich its portfolio, albeit from a highly commoditised technology market, and perhaps more importantly, it has added some 44,000 customers to its roster.
“The acquisition of Business Objects is part of SAP’s stated strategy to double our addressable market by 2010,” said Kagerman in a statement.
Surely aware of the forthcomng fate of its arch-rival, Canadian business intelligence vendor Cognos acquired corporate performance management specialist Applix for $339 million. Cognos’ given reason was that Applix’s online analytical processing (OLAP) technology would help it to maintain technological leadership. But some questioned whether that was worth the price – five times Applix’s yearly sales revenue.
Boosters defended the price, highlighting the opportunities for Cognos to differentiate itself in a crowded market. Applix’s performance management focus means its sales and marketing are targeted towards the chief financial officer, a potential lifeline for the company, as applications giants such as SAP, Oracle and Microsoft monopolise the IT executives’ attention.
As a strategy to avoid acquisition, though, the Applix buy was perhaps shortsighted, observed David Kasabian, an analyst with AMR Research. Should the deal go through as expected, Cognos might itself become a more attractive target for a software heavyweight looking to bolster its BI capabilities than it was without Applix.
Mergers and acquisitions September 2007 – IBM bolsters software story with Princeton Softech and WebDialogs buys
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