Fifteen-Month Buyout Frenzy Creates New Generation of Powerhouses in the Enterprise Applications Market, IDC Finds
FRAMINGHAM, MA – APRIL 21, 2005 – Between January 1, 2004 and March 31, 2005 the enterprise applications market saw at least 191 reported buyout deals worth more than $30 billion among 2,500 enterprise applications vendors, a newly released IDC study reveals. These consolidations are impacting every vertical industry, as newly formed industry powerhouses extend into specific or adjacent verticals in the effort to establish supremacy in an industry segment.
"It's a classic case of an arms race to prepare for the future of the high-tech industry," said Albert Pang, research director for IDC's Enterprise Applications Research. "More than $30 billion has been spent on vendor acquisitions since January 2004, and the quickening pace of buyout activities will embolden certain companies while weakening others in the blink of an eye."
The new generation of industry leaders are gaining powerful tools, such as substantial recurring revenue, global reach, and combined customer lists, forcing rivals to compete on new, more demanding terms. Many vendors who remain stagnant during this period of rapid consolidation may find themselves cornered in the middle of an industry niche, segment, or product category without any upward mobility.
Over 87% of the 191 deals had a direct impact on North America with international vendors buying up U.S. vendors to expand into the market, while domestic vendors expanded through numerous acquisitions. Twelve percent of the deals primarily affected European vendors while the Asia/Pacific region accounted for a single transaction. The largest deal involved a team of private equity investors while the majority of deals came from lower-profile vendors. Bidding wars will become increasingly common as private equity firms, hedge funds, and institutional investors continue to purchase enterprise applications vendors of all sizes.
The IDC study, Consolidations of Enterprise Applications Vendors Alter Software Industry in 15-Month Buyout Frenzy (IDC #33219), analyzes the wave of mergers and consolidations that swept through the enterprise applications market between January 2004 and March 2005. This study provides detailed information and analysis on the specific acquirers, the vendors acquired, and the types of applications and technology assets purchased. Additional data points include announced dollar amounts of the transactions, number of customers being affected, and regional and vertical industry dimensions of the deals.
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