M&A Activity In The Current Downturn Re-Shapes The Software And Services Markets

A couple of weeks ago I finished a review of the key M&A events in the software and services markets in the first half of 2009. In the research we analyzed the M&A, including divestment, activities of about 100 leading software and services providers. Unsurprisingly the volume of M&A deals was not very high, but what was key to our approach was examining the drivers underlying the acquisitions – why were companies making transactions and how would they affect their portfolio and go-to market approaches.

We found two core drivers were leading to M&A – those which were solution-orientated and those which were market-orientated. In the market-orientated M&A category, the majority were focused on portfolio expansion – those deals such as Deloitte’s acquisition of BearingPoint’s public services business unit or FTI Consulting’s acquisition of CXO, a leading turnaround management services firm. Solution-oriented M&A included deals where the primary drivers were acquiring new or established technologies – such as CA’s acquisition of Cassat, which was aimed at helping CA speed up the development of its cloud-style architecture.

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At the core of the research was the belief that M&A during the downturn is fundamentally shifting the landscape of the software and services market. The pace of acquisitions is heating up, especially in the services sector, and we are expecting to see an industry transformed in the next 12 months. And in order to keep up with the changes, we will continue to publish this review on a bi-annual basis.

Look out for my review of M&A activity to be published in the next couple of weeks.

Daniel