Investment firm acquiring BMC Software
KKR could inject more funding into software provider
Houston-based BMC Software is being acquired by global investment firm KKR, a deal that analysts say could provide more funding to the 38-year-old systems software provider while realigning its product strategy and connecting it to other companies in KKR’s portfolio.
“You want to have the right investors,” said Stephen Elliot, program vice president with technology research firm IDC. “And in this case, KKR has the potential to fund the company for growth.”
The investment firm has a track record of supporting technology companies, with more than $26 billion invested in the technology, media and telecom sector during the past decade. With the deal announced Tuesday, KKR will acquire BMC from a private investor group that has owned the company since 2013.
The acquisition is expected to close in the third quarter. The price of the deal was not disclosed.
“We have achieved strong momentum over the past several years, and KKR’s interest in us is a testament to that success and the strength of our team,” Peter Leav, president and CEO of BMC, said in an email. “With
“We have achieved strong momentum over the past several years, and KKR’s interest in us is a testament to that success and the strength of our team.” Peter Leav, president and CEO of BMC
KKR as our partner, we will be able to continue to invest for the future while benefiting from their significant operational expertise and financial backing.”
BMC will remain a private company, despite being purchased by the publicly traded KKR, and will maintain its current management team, Leav said in the email. BMC has about $2 billion in revenues and 6,000 employees worldwide.
Elliot described KKR as a Goliath with deep pockets and tremendous operating expertise. BMC’s future, however, will depend on whether KKR wants to push the company toward new, innovative markets, or if it wants to rake in money from the mainframe cash cow.
BMC was founded during the era of massive mainframe computers. Technology has evolved over the years, but mainframes are still used by banks, retailers, airlines, car manufacturers and others to run mission-critical applications.
The mainframe business generates significant earnings for BMC, and KKR could view BMC as a way to make easy profits, Elliot said.
Or the investment firm could invest staff and financial resources into BMC and accelerate its growth and current portfolio. BMC creates software and SaaS services, where customers use software without downloading it onto their computers, for a variety of technologies. Elliot highlighted security, automation and artificial intelligence as potential areas for growth and acquisitions.
“Does KKR want to manage to growth, or do they want to manage for profit?” Elliot asked.
KKR said in the news release that it plans to accelerate growth, which could include mergers and acquisitions.
Kenneth Gonzalez, research director for IT service management at research and advisory firm Gartner, said the deal should be viewed as validation of BMC. KKR rigorously vets companies and invests in only a handful of them, he said.
Having an outside company examine BMC’s product offerings could help it refocus on products that are currently successful. It could also help drive the company toward what employees have told Gonzalez are central to BMC’s future: the cloud and DevOps.
The latter is a way of organizing software development and operations teams to foster more collaboration and accountability to help provide timely delivery and meet customer needs.
“I think that this deal actually makes a lot of sense,” Gonzalez said.
BMC was founded in September 1980 by Scott Boulette, John J. Moores and Dan Cloer. Moores bought out Boulette and Cloer in the early ’80s, and the company shifted its focus from contract services to software for IBM mainframes.
BMC has at times provided market-leading, if not dominating, products. Other patches were tougher, requiring layoffs to cut costs and acquisitions to catch up with the newest technologies.
It was taken private after being confronted by activist shareholders in 2012, when Elliott Associates and Elliott International acquired more than 5 percent of BMC’s common stock. Elliott proposed its own slate of directors and urged management to consider selling the company.
Instead, BMC initiated a poison pill strategy that would dilute the majority owner’s shares if a person or group acquired beneficial ownership of 10 percent or more of the company’s common stock.
BMC was ultimately purchased for about $6.9 billion in 2013 by a private investor group led by Bain Capital and Golden Gate Capital. BMC previously told the Chronicle that it likely would have become private either way.