The State of Software M&A: A New Mindset

December 1, 2010

The State of Software M&A: A New Mindset

A look at the latest data shows an uptick in software M&A volume and valuations but the real story is the new mindset buyers and sellers are bringing to the table.

By Ken Bender, Software Equity Group

It was estimated several years ago that some 65% of software acquisitions over the past 20 years did not come close to yielding the benefits or returns acquirers anticipated. As such, they were viewed as failures due to a plethora of contributing factors, including misguided strategy, grossly inadequate integration planning, poor due diligence, culture clashes... it’s a long list. Whether the percentage is accurate or not, few will dispute that trillions of dollars spent on mergers and acquisitions have, in many cases, yielded very disappointing returns.

Of course, there have been many thousands of software transactions in the past decade that have met or exceeded expectations, and a good number have proven to be enormously successful. Those wins helped assuage the disappointing returns and write-offs of prior deals, and motivate public software companies and private equity/growth equity firms to continue buying. In the go-go days of the last decade, particularly 1999 – 2001 and 2006 – 2007, it was easier to focus on the wins, and write-off the losses.

But a long, brutal and scary recession has chastened buyers, and has made the historically acceptable mortality rate unacceptable going forward. An analysis of the latest data shows that software buyers are still buying, but a qualitative assessment of thee nvironment reveals that M&A thinking and approach has changed.

New Webninar: How to Use the Cloud Today?

The SandHill Group, Cloud Technology Partners (CloudTP), and Microsoft are hosting a Webinar titled "How to Use the Cloud Today?" on Dec 2, 2010 at 1:00 pm. Learn about the state of the cloud, including the forces driving cloud adoption, the cloud value proposition, the profile of cloud users, and the challenges they face, from Sand Hill analyst and cloud blogger Kamesh Pemmaraju. Hear cloudTP founder and chief architect Erik Sebesta address how to transform your business using cloud solutions. Listen as Microsoft Azure expert Mark Eisenberg describes Azure use cases. Register today.

Leveraging Recruiting Solutions to Ramp Up Hiring

Burton Goldfield of TriNet discusses recent difficulties in recruitment and how hiring managers can help in this post to the SandHill.com Blog on Software Recruiting.

Top Ten ERP Software Predictions for 2011

After a year of unpredictability in ERP, Eric Kimberling of Panorama Consulting Group shares his top ten enterprise software predictions for the coming year in this post to the SandHill.com Blog on Predictions for 2011.

Global Forces Shaping the Future of Business and Society

McKinsey’s managing director, Dominic Barton, and other partners discuss global trends and the ways companies can act on them. Learn more in this article from The McKinsey Quarterly.

Share That Story!

Read an oped or blog post you found particularly insightful? Share the story with one-click of an icon at the top of the article. Choose to print, email, Tweet, Facebook, LinkedIn, Digg, Reddit, Buzz, Yahoo Mail, or Gmail and spread SandHill.com's thought leadership among your friends and colleagues.

Poll: Software M&A?

How has the software M&A climate changed over the past year?
Take our Pulse Poll >>

The Latest Software Business News on SandHill.com

All Headlines: PARC backs cloud startup.

VC Activity: Ethernet-based storage company Coraid raised $25 million in funding.

M&A Deals: Predictions for 2011 cloud computing, including Oracle’s cloud computing purchases.

Executive Moves: Salesforce names J.P. Rangaswami Chief Scientist.

Quote of the Week

“[Google] worked hard to do the right thing by our users and our industry... making it easy for users to take their data with them when they switch services.”

- A Google representative after being targeted by an EU antitrust probe.

This Week's Sponsor

Ness Software Product Labs delivers the next generation of the managed software development lab - R&D and software product development outsourcing and consulting that extends software product capacity and drives innovation. Ness operates over 50 labs for ISVs and other product-oriented clients, utilizing delivery centers across India and Eastern Europe. These centers are designed to provide software ISVs and enterprise organizations who rely on proprietary software to generate their revenues with a complete extension of their internal R&D software development team.
Click here for more.

Software Pulse

Software Pulse is a publication of SandHill.com, the online resource for software business strategy.

Publisher: M.R. Rangaswami
Editor: Maryann Jones Thompson
Assistant Editor: Jane Ann Chien

To subscribe, click here.

To unsubscribe see the bottom of this email.

Send us your feedback,
click here.

SandHill.com is published by Sand Hill Group, which provides investment and management advice to emerging leaders in the $600 billion enterprise software, services and solutions market. Sand Hill Group produces the Software and the Enterprise series of conferences for industry executives, and authors research reports on cutting-edge technology topics.

Share Your Insight

SandHill.com wants to publish your opinions. Email your insight on the software business to SandHill.com editor, Maryann Jones Thompson.