In our special focus on Corporate Software, analyst Mark Schappel of The Benchmark Company has some good and some bad news to share on the nature of M&A activity in the Corporate Software space:

The Good

• “On the plus side, several large and mid-sized software vendors have a lot of cashto spend. Most software companies are profitable, have little if any debt and don’t pay a dividend. So they have plenty of cash, good cash flow and positive operating margins.”
• “Another positive is that smaller vendors and some startups may be motivated sellers, especially if they are having cash troubles. Some of these smaller companies don’t have the access to the financing the way they did a few years ago. Also, valuations are low.”

The Bad

• “Some impediments include fewer buyers than in the past. For instance, over the years, Oracle bought PeopleSoft, Siebel, Hyperion and BEA Systems. All those acquired vendors were themselves buyers at one time. Now there just aren’t as many buyers in the software space as there used to be. The PLM space or the business intelligence space is another good example. Most of the big business intelligent vendors have been bought — Hyperion by Oracle, Cognos by IBM and BusinessObjects by SAP. So the available buyers are fewer.”
• “Another M&A impediment in this environment is the lack of available credit that has sidelined some of the financial buyers, such as private equity funds. It’s
  also keeping some of the acquisitive minded software vendors on the sidelines as well, such as Open Text or Infor that have relied on debt to help finance their acquisition sprees.”

For the complete Corporate Software report, including a full interview with Mr. Schappel, as well interviews with a variety of other analysts giving a complete overview of this space, click here.

This entry was posted on Monday, May 11th, 2009 at 5:42 pm and is filed under Technology Stocks. You can follow any responses to this entry through the RSS 2.0 feed.