SOFTWARE GIANTS SNAPPING UP NICHE PLAYERS
Four Canadian firms worth $ 220M
Four Canadian technology companies reported yesterday they will be bought by foreign companies in deals worth an estimated $220-million, part of a trend that is leading tech giants to buy smaller firms with strong prospects.
German software giant SAP AG said it is buying Triversity, a private software company based in Toronto, for an estimated $125-million to $150-million, according to David Shore, a Desjardins Securities analyst .
Telecom equipment maker Avaya Inc. reported it is buying Nimcat Networks, an Ottawa startup, for $46-million in cash, while FileNet Corp. announced the US$11-million purchase of Yaletown Technology Group.
Alacris Inc., an upstart smart-card security systems, said it is being bought by Microsoft Corp. Microsoft, based in Redmond, Wash., didn’t disclose terms of the deal.
“There’s going to be a lot more of these transactions,” said Mr. Shore, who said there are few big acquisition targets left. “Industry growth is minimal so companies are looking to snap up smaller, niche software providers.”
Triversity will expand SAP’s retail customer base, where SAP has lagged behind rival Oracle Corp., which snapped up Retek for US$643.3-million earlier this year after winning a bidding war with SAP.
Bill McDermott, president of SAP America Inc., said buying Triversity was “by far the best option.” SAP said Triversity has 250 customers in the retail sector, including Indigo Books.
“ The industry has matured,” he said. “Market leaders are revered now. Customers have moved far away from developing their own software and best of breed are moving towards fewer suppliers.”
Avaya says Nimcat’s nimX communications software will help make peer-to-peer communications simpler and help companies reduce costs. Steve Kamman, a CIBC World Markets analyst in New York, said the acquisition could “significantly” change the phone systems market. “ We do not expect immediate fireworks but this acquisition bears watching,” he wrote in a research note yesterday.
Companies want to deal with fewer tech suppliers so they can cut software integration costs, an exercise that becomes more expensive and time-consuming when companies are forced to knit together software code from different companies.
Larger tech companies, flush with cash, are ready to whittle down the list of suppliers through acquisition. The growthhungry giants are willing to buy companies with strong complementary technology portfolios and positive cash flow since the tech investing bubble burst in April, 2000.
International Business Machines Corp. bought two Canadian companies this year and five over the past three years.
Smaller companies want to sell because customers are holding the line on information technology expenditures, making it tough for them to grow.
Large mergers and acquisitions aren’t dead, though. Last week, Oracle Corp. said it would buy rival Siebel Systems Inc. for US$ 5.85- billion to expand its presence in the lucrative customer relationship software market.
The database software maker has been on acquisition spree since its US$10.3-billion acquisition of PeopleSoft Inc. closed in December. Symantec Corp., the top maker of anti-virus software, bought Veritas Software Corp. in July for about US$13-billion.