Features

Tech Acquisitions on the Rise in 2006

By Priya George

"We'll probably see an increase of about 20 percent this year," Boston Corporate Finance CEO Murray Beach said. "The number of transactions demonstrates the general health of the industry." Boston Corporate Finance investment analysts believe the high level of tech merger and acquisition activity will continue this year with deals likely to come in IT services, enterprise software, security and storage.

During the first six months in 2006, the firm recorded 1,993 transactions for IT companies, up 15.6 percent from January through June in the prior year. Analysts at the investment firm estimate there were 3,449 IT M&A transactions last year.

One of the key factors behind the rise is the increase in the number of multi-billion dollar deals within the telecom and media sectors, with six acquisitions in excess of USD 10 billion during the first six months of the year compared to none for the same period last year.

There is little sign the buying spree will let up, "Companies are buying up smaller competitors, especially in the service-oriented architecture (SOA) and business intelligence (BI) sectors, to fill in products missing in their offerings," Beach said.

"The infrastructure companies are trying to bulk-up and add everything they want to sell," said Bill Swanton, vice president at AMR Research Inc. "Today's acquisition of MRO Software by IBM is similar to what HP did when it picked up Mercury Interactive."

The two fastest growing sectors for acquisition activity are media, with an 86 per cent increase in the number of deals over the last two years, and software, with a 73 percent increase over the same period.

Peter Rowell, executive chairman of Regents Associates, said in the report, "Major players are seeking differentiation but this is tough to achieve through raw technology provision. Uniqueness can really ever only come from the customer experience that is driven by the applications and related content they use."

He said, "There are no signs of an immediate downturn or crash at present. However, the industry has a history of working in eight-year cycles. It may be significant that the market is warming again just seven years on from the crazy days of 1999."

Some major acquisitions of the year include:

1. HP’s Acquistions of OuterBay: early this year, HP agreed to acquire OuterBay, a California-based provider of archiving software for enterprise applications and databases. With OuterBay’s technology HP is able to help organisations manage database growth and improve database performance by up to 80 percent. The transaction also created an opportunity for HP’s enterprise business in the database archiving market and also complements the company’s data protection, email archiving and file movement technologies.

2. Microsoft’s Acquisiton of Azyxxi and alliance with MedStar: in a bid to expand its presence in hospitals and medical centers, Microsoft announced plans to acquire, Azyxxi, and form an alliance with MedStar Health, in July 2006. Azyxxi, which has been designed using Microsoft development tools, brings together patient data from various sources, and makes it available when needed.

3. Microsoft Ups Stock Buyback: Microsoft expects to acquire about USD 3.8 billion in a recently completed 'Dutch Auction'. The company expects to acquire 155 million shares at a price of USD 24.75 per share.

4. VeriSign to Acquire GeoTrust for USD 125 Mln: Web Security firm VeriSign Inc. has agreed to acquire GeoTrust Inc., a supplier of solutions to secure e-business transactions, for about USD 125 million in cash.

5. Dolce Enters Agreement to Acquire Seaway Project Management: Dolce Financial announced the letter of intent with Seaway Project Management, Walter Zarusky and Jerry Budziak to acquire all the issued and outstanding shares of Seaway Project Management.

6. Microsoft to Acquire Whale Communications: Microsoft is set to acquire Whale Communications, a provider of secure access products, including secure sockets layer (SSL), virtual private networks (VPN) and Web application firewalls, enabling businesses to protect corporate applications and data when accessed remotely by mobile workers, partners and customers.

7. Opsware to Acquire Storage Management Company: Opsware, a provider of IT Automation software, has agreed to acquire Boulder, Colorado-based Creekpath Systems, a developer of storage management software for USD 10 million in cash, with a maximum potential earnout of an additional USD 5 million in cash. The deal is expected to close in early August.

8. HP to Acquire Retail Photo Solutions Provider Silverwire: Hewlett-Packard has agreed to acquire Silverwire Holding AG, a commercial digital photography solutions and software provider with a strong presence in the retail photo market. Financial terms of the transaction were not disclosed.

9. IBM to Acquire Rembo to Upgrade Security Solutions: International Business Machine Corp. has agreed to acquire Rembo Technology, a privately held Swiss Software company, which helps organisations automatically install or upgrade operating systems. IBM has not disclosed the financial details of the transaction.

10. Cisco to Acquire Network Access Vendor Meetinghouse: Cisco Systems Inc. has agreed to acquire privately held Meetinghouse Communications, a provider of client-side 802.1X supplicant security software that allows enterprise customers to restrict network access to only authorised users and/or host devices attempting to gain access to networked resources through both wired and wireless media.

11. EMC to Acquire RSA Security for USD 2.1 Bln: data Storage company EMC Corp. has signed a definitive agreement to acquire RSA Security Inc. for USD 28 per share in cash or nearly USD 2.1 billion, net of RSA's existing cash balance. EMC said the acquisition is expected to be completed late in the third quarter or early in the fourth quarter of 2006.

12. Cisco to Acquire Metreos, Audium: Cisco Systems Inc. has agreed to acquire privately held companies Metreos Corp. of Austin, and Audium Corp. of New York, in two separate deals. Both of these companies offer easy to use, drag and drop, application creation/integration environments, which will strengthen Cisco's Service Oriented Network Architecture (SONA).

13. Permeo Technology to Extend Blue Coat Proxy Infrastructure to Enterprise Endpoints: Blue Coat Systems has signed a definitive agreement to acquire Permeo Technologies for approximately USD 60.8 million. This transaction amount will include approximately USD 13.4 million in cash and approximately USD 47.4 million in Blue Coat common stock, based on the closing price of Blue Coat common stock of USD 45.72 on 30 December 2005.

14. Oracle Snaps Up HotSip: Oracle has entered into an agreement to acquire Sweden-based HotSip AB. HotSip is a provider of telecommunications infrastructure software and Session Initiation Protocol (SIP) enabled applications for IP telephony, presence, messaging and conferencing on new converged networks.

15. Secure Computing Snaps Up CipherTrust: In a merger that is expected to address the convergence of threat and messaging management gateways, Secure Computing has signed a definitive agreement to acquire CipherTrust, a privately-held messaging security company that provides layered security solutions to stop inbound messaging threats such as spam, viruses, intrusions and phishing, and protects against outbound policy and compliance violations associated with sensitive data leakage.


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