Down Economy Hasn’t Slowed Acquisitions – But Strategic is the Word
Yesterday in a “Seeking Alpha” email there was a quote from IBM which read,”IBM plans to make mid-sized acquisitions to boost its software business, according to CEO Sam Palmisano. The spend on targets could range as high as $300M, as it seeks to find highly targeted deals that could be accretive in two to three years. “No spurious, off- to-the-side, unrelated things.” No spurious, off-to-the-side, unrelated things, while an odd quote, is on target for what I have been thinking for the past week or so. Most of the time you would believe that in a down or stalled economy companies would be holding tight and not spending money on acquisitions. However, good for those who have money, and there are still those that do have money, and this allows them to perhaps buy companies for less.
But that isn’t the key observation that I’ve been making as of late. I’ve observed that in the areas that I track, acquisitions have been on the rise during the summer and continuing into the fall, not going down, and the focus is on being strategic. For the most part companies aren’t going for the installed base plays as much as in prior years, (although installed base still is certainly a consideration). Instead, the majority of acquisitions lately are being used to fill a gap in product, augment a new product area, or gain a distribution foothold, with installed accretion as gravy.
Case in point - on Tuesday, there were three such acquisitions. IBM acquired Q1Labs to help them build a security business unit. McAfee, a unit within Intel, acquired NitroSecurity; a company that provides real-time security products, in order to greatly bolster the company’s risk and threat assessment capabilities. According to McAfee this acquisition will enable them to identify and help take care of threats in “minutes instead of hours”, which we all have a vested interest in, so strategic is good in this case. Lastly, Avaya acquired Sipera, a UC provider. In this case, Avaya, as they put it, although they will still have their Acme Packet relationship, “adds Session Border Controller as an owned asset” and will accelerate development of SIP-based security offerings for UC and contact centers.
That was just Tuesday. This month had plenty of other examples. Two weeks ago I blogged on my site about NICE’s acquisition of Fizzback, which was a really strategic acquisition that and will significantly enhance NICE’s Customer Experience Management (CEM) portfolio and Workforce Optimization (WFO) offerings, adding a lot of functionality to the company’s Voice of the Customer (VOC) strategy.
Last week it was Verint, also in the workforce management and analytics space and VOC, acquiring Global Management Technologies Corporation (GMT), which in addition to workforce management solutions, specializes in the retail segment. In this case, Verint not only acquires some differentiating technology, complimentary to the company’s existing offerings, but a strong foothold in the retail segment, and some key partnerships that GMT has, which will expand Verint’s reach. In this acquisition, installed base was secondary.
This has been a theme with Verint lately. The case can be made that unlike when Verint acquired Mercom and Witness several years back, in which installed base growth was a bigger factor, the last few acquisitions that Verint has made have all been focused on adding core technology areas; Iontas (2/10) for desktop analytics, PSIM (4/11) for video security, and Vovici (7/11 blog) for enterprise feedback management (and other solutions).
Yes, we had a few acquisitions that seemed weighted towards installed base play. Perhaps Nuance acquiring Loquendo, or 8X8 acquiring Contactual, but there were many more in the strategic realm. To finish this out, just a few of note were Oracle acquiring Inquira for knowledge management for contact centers, Skype acquiring GroupMe for group messaging and conferencing applications for mobile devices, Cisco acquiring Versly for collaboration software for MS Office, and Broadsoft acquiring iLink Communiications for web collaboration. Likely we will see others in the near future.