Is the IT sector mergers market thawing?

Following an extended dry patch in the IT sector M&A market, this month saw what may prove to be the first signs of the post-credit crunch acquisition spree

Besides Oracle’s industry-reshaping $7.4 billion acquisition of Sun Microsystems (see company analysis), there were a handful of deals that could well signify a return to business as usual.

The first saw yet another once-iconic IT company change hands for a bargain basement price, when application modernisation vendor Micro Focus announced its plan to buy development tools supplier Borland for £50 million.

Until the news was announced, Borland’s market capitalisation was around $50 million, so Micro Focus’s offer represents a premium. But it is nevertheless a bargain price for a company that was once considered a competitor to the likes of Microsoft and Oracle.

Borland has in recent years focused on the enterprise end of the software development market, pitching itself as an application life-cycle modernisation (ALM) player. Exactly one year ago, it sold its developer tools division CodeGear to Embarcadero Technologies for $23 million.

The wisdom of that decision, however, came into doubt as its financial performance began to plummet. In its most recent financial quarter, Borland reported a 35% decline in revenue, down to $39.8 million.

In January 2009, Borland CEO Todd Nielsen left to become chief operating officer of virtualisation software pioneer VMware. “It’s definitely not a demotion,” he told Information Age recently.

Micro Focus also announced plans to acquire the software testing division of systems software and IT services company Compuware for £53 million, while also reporting preliminary yearly revenue figure of $228.2 million to 30 April, up 20% on last year (the Newbury, UK-headquartered company is listed on NASDAQ and reports in dollars). The logic of all this activity: As companies look to squeeze more value from the existing assets in the face of an IT spending freeze, application management companies such as Micro Focus stand to gain.

There was further software action on the very same day, as enterprise content management software provider Open Text announced its intention to acquire web content management provider Vignette for $310 million.

The acquisition will bolster Open Text’s web content management offerings, as well as bringing with it an impressive roster of customers that includes NASA, Cathay Pacific and the Stroud & Swindon Building Society.

Pete Swabey

Pete Swabey

Pete was Editor of Information Age and head of technology research for Vitesse Media (now Bonhill Group plc) from 2005 to 2013, before moving on to be Senior Editor and then Editorial Director at The...

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