Cloud Computing and SaaS Deals Top Merger, Acquisition Activity in 2012

By Laura Stotler

A new final-year mergers and acquisitions (M&A) analysis from Ernst & Young shows that cloud computing and Software-as-a-Service (SaaS) company deals dominated the M&A landscape in 2012.

The report also features analyses of activity for the final quarter of 2012, and shows that the "cloud/SaaS megatrend ran away from the rest of the pack of deal-driving trends in 2012."

The report bodes well for the future of cloud computing and managed services, indicating that these types of companies comprised more than 15 percent of global technology M&A deal volume.

It also shows that enterprise software suppliers represented a major growth area for M&A deals in tandem with their increased focus on cloud offerings.

SAP's $4.5 billion acquisition of Ariba, a supply chain SaaS provider, for example, was the second-largest dollar value deal within the sector in 2012. It came in second only to the purchase of NDS Group Ltd. by Cisco Systems. Concurrently, Oracle also had a number of significant deals last year including its $2-billion purchase of Taleo, a human capital management SaaS.

IBM wrapped up a $1.4-billion purchase of Kenexa, which provides services to enable organizations to recruit new employees and manage talent via social media and collaboration.

Oracle also focused on a plan to enter the marketing SaaS arena with social networking capabilities in the final quarter last year. That centered on its plans to buy Eloqua, which aids businesses in monitoring sales and marketing initiatives, including data gathered from social networks.

The flurry of activity has led Ernst & Young to predict that cloud and SaaS deals will continue this year, with established, older software companies seeking to catch up in this space to keep up with rapid consumer adoption of SaaS and the cloud.

“Even as technology companies are rapidly adapting to the needs of specific industries, companies in other industries are rapidly adapting to the evolving possibilities that technology enables,” as per the report. “And to help them adapt, non-technology companies are increasingly targeting technology companies for M&A.”

Joe Steger, a member of Ernst & Young's global transaction advisory services, noted that non-tech companies entering the cloud and SaaS computing arenas should be careful about the rapid pace of technology and business and the constant upkeep demands required to stay competitive.

Companies playing in these sectors should focus on retaining their core engineering and software development teams and making sure they are happy and challenged.

Edited by Braden Becker

MSPToday Contributing Editor

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