Almost every day it
seems that another corporate acquisition is announced. The December 19, 2006
“Top Story” on BusinessWeek.com “Deals of the Year, in a Year of Deals” by Steve
Rosenbush confirms that merger and acquisition (M&A) activity is at record levels:

“A near-perfect
set of conditions is set to drive mergers and acquisitions to a global record
in 2006, and dealmakers are optimistic that 2007 could be even stronger. Deal
volume for the full year won’t be available until 2007, but market researcher Dealogic
says global volume could well exceed the record of $3.3 trillion set in 2000,
the height of the tech bubble. It already has surpassed $3.7 trillion, and
likely will top $3.8 trillion by Dec. 31. That would be a 28% gain over last
year.”

Software M&A has always been a part of the industry
landscape. Lately, however, it seems that larger high-tech firms have been
gobbling up software vendors every week.

The business intelligence (BI), data warehousing (DW) and
data integration (DI) market (I’ll refer to these markets collectively as the
BI market for the rest of this blog) have experienced a particularly high level
of activity in recent years with all of the major vendors expanding their
product offerings though M&A activity. (And afterwards they integrate their
new products into ever increasing suite bundles.) Business Objects buying
Crystal, Hyperion acquiring Brio and IBM purchasing Ascential are just the tip
of the software M&A acquisition. It often seems like enterprise software companies
are playing a continuous game of acquisition PAC-MAN.

A few weeks ago I dusted off the crystal ball and suggested
that Hewlett-Packard (HPQ) should strategically move into the BI market through
acquisitions. They announced last week the purchase of a BI/DW consulting firm
and my guess is that is the start of a set of HPQ BI acquisitions. (Disclosure:
I have heard NO rumors substantiating this guess….it just makes sense from a
business perspective.) 

It is obvious and pretty much guaranteed that software
M&A activity will continue. High-tech firms will acquire software firms for
their technology, customers and talent (software engineers, consulting and
sales). Press releases will be issued almost daily that a “big fish” company is
pleased to be acquiring a “smaller fish” vendor for its great product(s) and
customers.

But you may never have heard of many or most of the acquired
companies. Some have very niche products or have only a few customers. What
types of M&A activities will actually impact the larger BI players? Who
will be the hunters and who will be the prey?

Let’s categorize the hunters:

1. The usual suspects are prowling
2. “Outside-the-box” players enter the fray
3. Private Equity expands its horizons
4. Mergers of equals

Stay tuned; I’ll explore each category in subsequent blog
posts.