<<M&A at a price
I recently asked Ray Lane, former Oracle executive and now a partner at blue-chip venture capital outfit Kleiner Perkins, why he couldn't find a buyer for SeeBeyond (SBYN: news, chart, profile), the integration software company he owns at quite a higher price tag than where shares are trading today.
He was just as perplexed, admitting that despite the recent rise in stock prices, it's still a buyer's market. "There is so much opportunity," said Lane, who scratched his head wondering why IBM (IBM: news, chart, profile) doesn't make that purchase. "IBM is seeing more deals than they can possibly sift through." There are up to 10,000 companies that will not have a liquidity event. Translation: they'll go out of business.
He said, prospective buyers want the best price and aren't willing to pay up. "Oracle (ORCL: news, chart, profile) should buy BEA Systems (BEAS: news, chart, profile)," he added. "But, Larry [Ellison] is too cheap."
So, what will it take to get consolidation going?
For that outlook, I sought the observations of Jeff Greiner, co-head of global technology at RBC Capital Markets. "The pace is picking up," he said, pointing to EMC's (EMC: news, chart, profile) purchase in early September of Prisa Networks, a provider of network management software for $20 million in cash. In October, NetIQ bought Pentasafe for $254.8 million in cash and stock. InterTrust (ITRU: news, chart, profile) was just scooped up this month by Royal Philips Electronics and Sony for $453 million in cash.
Greiner says that sellers or would-be consolidators are starting to stick their heads up from out of the foxhole, now that they've put their house in order. At the same time, sellers have also right-sized their shops.
What's not in place yet, however, is the need to acquire because it's happening, he said. In other words, consolidation begets consolidation, and typically companies won't feel compelled to make an acquisition unless rivals are forcing their hand. |
