Big Merger: What You Should Know
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The much-anticipated merger between Sirius and XM gets the green light. Plus: <a href="http://blog.wired.com/gadgets/2007/02/
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XM and Sirius feel the urge to merge.  What does the future hold for the former rivals?
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These are good times for diversified  U.S. manufacturers. So why aren&#039;t they doing more big mergers  and acquisitions?
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PORTLAND, Maine  - Mergers and acquisitions have  played an enormous role in the U.S. economy during the past  several decades, but sometimes the results have been bad for  consumers.  Similarly, consolidation in the mutual fund  business has sometimes hurt fund investors.
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When companies start talking about a âmerger of equals,â someone is usually getting the better deal. It is especially true in the proposed merger of XM and Sirius.
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Also: Lucatel merger to spur shakeout. Read these stories and more from around the Web on News.com Extra.
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This week saw three merger deals worth about $60 billion--including one that ranks as the largest software merger in history.
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(InfoWorld) - While consolidation can be a sign of a mature, slowing market, the M&A activity happening now, especially seen in context of this week's six-year Nasdaq Composite Index high, signals confidence in IT and prospects for growth. High-tech mergers and acquisitions hit a record number last year and the trend continues. Wednesday, Cisco Systems announcedÂ it will make a $135 million acquisition of Reactivity, a maker of XML gateway and security hardware to manage Web services. Tuesday,Â SAP said it would acquire Pilot Software, a supplier of strategy management software, while Wind River SystemsÂ saidÂ it bought FSMLabs' embedded Linux technology for real-time applications. SAP rival Software AG said Wednesday thatÂ it will be focusing on SOA products and services and plans acquisitions to broaden its product portfolio. Companies outside of traditional enterprise IT are also part of the M&A trend. Satellite radio operators Sirius Satellite RadioÂ and XM Satellite Radio Holdings, with total revenue of about $1.5 billion, announced Monday thatÂ they plan to merge. Though different sectors within IT are subject to unique market situations, globalization and trends in financing are the prime forces driving M&A, according to Eric Gebaide, managing director of Innovation Advisors, a New York investment firm. After the "general meltdown" in 2001, it's been hard for small companies, especially those under $75 million in revenue, to go public, Gebaide said. This makes them acquisition targets. "Another factor is the need to start having global solutions," Gebaide said. The globalization of technology is underscored by an Innovation Advisers study, based on using data sourced from Capital IQ, a division of Standard & Poor's, that shows that the total percentage of U.S.-based companies participating in M&A activity continued to decline to 51.6 percent from 57.9 percent in 2005. Overall M&A transactions hit a record last year: The total number of transactions in 2006 was 4,669, exceeding 2005's total of 3,455, and the 2000 total of 2,871 deals at the peak of the dot-com boom, according to Innovations Advisers. But the total amount of dollars spent on M&A last year was less than in 2000: $295.8 billion, while the 2000 transaction total was $490.3 billion. Company valuations are more reasonable now than in 2000. Recent deals show software companies are being valued at two to four times revenue, while service companies are valued at one to two times revenue, Gebaide said. Historically, these numbers are more normal then the valuations of the dot-com boom. Meanwhile, services companies are forecasting solid revenue growth this year -- a sign that users are investing in IT, Gebaide points out. The Nasdaq close on Wednesday, at 2518.42, was the highest in six years. On Thursday it closed up again, at 2524.94. Coming right after earnings season, this is another sign that confidence is high. Although overall global revenue growth in IT is expected to be modest compared to the dot-com boom --- most estimates peg IT growth this year at about 6.5 percent -- the expansion is likely to be more sustainable than it was seven years ago. Though the IT market may not be as exuberant as it was in 2000, many investors are certainly willing to settle for more stable, rational growth. Â
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It is common for a merger battle to involve a healthy dose of public posturing on issues such as price and logistics. But while such maneuvering typically plays out in the media, or during analyst forums, it&#39;s rare to see it happen in a courtroom.
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With merger and acquisition fever said to be waning, which deals will be the ones to work out?
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Two of the nation's most well-known companies today said they would combine to form the third-largest U.S. retailer.
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A new report from Forrester Research declares that the wave of mega-acquisitions in the software industry is over for now, though big vendors will continue to snap up smaller firms as they round out their portfolios.&quot;We do expect more consolidation to occur, but predict that the acquisitions of&#160;Business Objects by SAP,&#160;Cognos by IBM, and&#160;Oracle&#39;s renewed bid for BEA&#160;will be the last hurrahs in this cycle for super-sized acquisitions within the software industry of vendors with more than $1 billion in revenues and deal sizes of $5 billion or more,&quot; analysts R. &quot;Ray&quot; Wang and Andrew Bartels said in the report.The analysts noted that the market could see hardware vendors like Cisco make major software buys, but said such scenarios do not constitute software vendor consolidation in the traditional sense.Three major factors will staunch the flow of megadeals, they argued.Citing projections showing double-digit growth in global software revenue for 2007 and 2008, Wang and Bartels argued that vendors will not need to grow through large purchases in the immediate future, and will instead choose &quot;organic growth and spot acquisitions&quot; to satisfy shareholders.Second, the credit crunch caused by the subprime mortgage meltdown is making it harder to borrow large sums. And thirdly, there are simply fewer large ISVs to buy, the analysts noted. They identified 18 large independent software vendors that are potential targets and said many of those can be eliminated because of &quot;poor fit with strategy, financial or business questions, high price, or other considerations that stymie acquisitions.&quot;IBM will be the most aggressive with acquisitions and may go after packaged applications, a field it has largely avoided to date, according to the report.&quot;The most likely scenario involves smaller acquisitions of key ISVs building on Websphere. But if IBM makes a move for packaged apps to compete with Oracle, top apps targets could include IBM partners like Infor, IFS, Lawson, or even SAP. Industry-specific targets could include Amdocs, Deltek, and Primavera Systems,&quot; the authors state.Wang said he was comfortable making this prediction despite IBM&#39;s insistence that it has no designs on packaged applications. &quot;Last year, they spent the whole year saying they were never going to buy a BI vendor,&quot; Wang said, referring to IBM&#39;s deal to buy Cognos.As for Oracle, it will buy companies tied to middleware and vertical business applications, according Forrester. &quot;We expect Oracle to make midsize bets in key verticals like project base solutions (e.g., Computer Methods International or CMiC, Manhattan CenterStone), financial services (e.g., Temenos), retail (e.g., Escalate), and telecom, utilities, and public services (e.g., SunGard).SAP will make small purchases to flesh out NetWeaver, according to the analysts. These may include vendors of user interface tooling, master data management software and business process management products, they said, citing SAP&#39;s recent buy of Yasu Technologies, which makes a business rules engine, as evidence. &quot;Additional acquisitions could come from existing partners like AmberPoint SOA Management, F5, Magic Software Enterprises, OpenText, Savvion, and Worksoft,&quot; they added.Among the big four players, Microsoft will be &quot;the least active&quot; in terms of acquisitions, according to Forrester. &quot;Expect the Redmond giant to make selective acquisitions that do not conflict too much with its ecosystem strategy,&quot; they wrote. Possible targets include &quot;middleware solution providers like VisionWare in the customer data integration space, Riversand Technologies in the personal information manager space, and Web 2.0 specialists that enhance its Information Workplace platform.&quot;Software executives offered mixed reactions. Tom Hogan, senior vice president of HP&#39;s software division, said his firm will likely continue to acquire companies, but is focused more on organic growth. Last year HP spent about 70 percent of its roughly $3.5 billion research and development budget on software, according to Hogan.&quot;That&#39;s a lot of internal R&amp;D that should ... generate commercially viable software over the next couple of years,&quot; he said. &quot;If you want to really hit the home run for shareholders, you build it yourself. When we can&#39;t build it because we don&#39;t have the DNA or the time, then we will turn to strategic M&amp;A.&quot;Executives at smaller vendors offered other takes. Informatica, a data integration vendor, is competing with the likes of IBM but enjoying strong growth, reporting this week that its 2007 revenues rose 21 percent to $391 million. CEO Sohaib Abbasi said mergers and acquisitions in the software industry should be examined beyond the size of a given deal.The pace of consolidation is much more aggressive in established categories like business applications, he noted. &quot;At the other extreme is emerging categories such as software as a service, where there is no consolidation to speak of.&quot;Informatica is doing well thanks to the relative newness of its space, he said: &quot;We are in the very early days of the data integration market. Half of our deals are uncontested.&quot;Patrick Durbin, CEO of the portfolio-management-software company Planview, said in a recent interview that his privately held firm, which has 450 customers, has &quot;critical mass&quot; and can survive as an independent.Durbin&#39;s firm partners with various companies, including Microsoft. He couldn&#39;t say for sure what would happen if it or another firm came knocking: &quot;The moment I tell you I&#39;ll never sell is the moment someone&#39;s going to back up a truck with a boatload of money.&quot;
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What you should know before you start messing with small stocks.
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Do big trucks and big buybacks spell big opportunity?
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With merger and acquisition fever hitting new highs, which deals will work out?
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The man behind the country&#39;s biggest retail merger is best known for being secretive - and successful. By JEFF HARRINGTON, Times Staff Writer.
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Two law firms on opposite coasts are discussing a merger that would create one of the nationÂs largest corporate legal advisers.