Mergers and Acquisitions

 

IBM Corp. announced it acquired the assets of Exeros Inc., a privately-held data discovery software company. Micro Focus International plc reported it purchased Borland Software Corp. and Compuware Corp.'s Testing and Automate Software Quality (ASQ) Business. Meanwhile, Open Text Corp. announced it entered into a definitive agreement to make Vignette Corp. a wholly owned subsidiary.

Focal Points:

• IBM announced it purchased the assets of Exeros, a Santa Clara, CA-based corporation. Financial details of the acquisition were not disclosed. The intellectual property assets, management, and research and development personnel will become part of the Information Management group within IBM. IBM expects its technology to be used with both its InfoSphere and Optim product lines. Exeros' technology automatically uncovers hidden relationships between databases, helping users make sense of disparate data sources much faster than otherwise possible. This capability can dramatically reduce the cost of data-intensive projects such as data warehousing and master data management and can generate new levels of business intelligence, according to company officials. 
• Micro Focus, a legacy modernization software provider, has entered into an agreement to purchase all of the outstanding shares of Borland in an all-cash transaction. The aggregate value of the acquisition is approximately $75 million. The deal is expected to close at the end of second quarter 2009, early third quarter. Borland, which has been looking for a buyer for quite some time, is a provider of Open Application Lifecycle Management (ALM) solutions. The British firm is also buying Compuware's testing and automated software quality business for approximately $80 million. Compuware does not operate this business as a separate business unit but Micro Focus indicated that it generated approximately $74 million in revenues for the prior fiscal year. Micro Focus stated that these products, along with those of Borland and Micro Focus’ existing product portfolio, will help to establish it as a major player in the $2 billion application testing and application software quality market.
• Open Text, a provider of enterprise content management (ECM) software, is purchasing Vignette, a provider of Web content management (WCM), portal and collaboration software and services, for approximately $310 million. Vignette is based in Austin, TX and employees about 700 people. The unit will become a wholly owned subsidiary of the Canadian ECM vendor once the deal closes, which is expected to be in the second half of 2009. Vignette reported its first quarter 2009 financial results last week. It had revenues of $33.9 million, a decrease of 24.2 percent from the previous year's quarter while its net loss for the quarter on a GAAP-basis was $1.8 million.

Experton Group believes the current economic environment is driving consolidation amongst software vendors. The stronger players are strengthening their market positions while the weaker ones are being forced to retreat to their core competencies or execute exit strategies. The Exeros data discovery software will be a valuable addition to a number of IBM's software lines as well as a plus to its newly formed Business Analytics Optimization consulting practice. The move by Micro Focus into the ASQ market is a logical extension to its existing businesses. However, Open Text Hummingbird already has an extensive WCM offering, which means that this deal is not driven by the need for functionality but for survival. Open Text saw its last quarter's net income plummet 93 percent despite a growth in license, service and support revenues. With the recent acquisition of Interwoven by Autonomy Corp., the independent content management space is now down to two major players. Open Text has struggled through its acquisitions in the past and the success of this move is questionable. IT executives that use or are considering Vignette products should not be lulled into a false sense of security by Open Text's creation of a Vignette subsidiary. Executives should seek protection of their software commitments through contract amendments to reflect the requirement for continuation of the Vignette product lines or no-cost conversions of all software and data dependencies over to Open Text products, should that be necessary.