Apologies for the poor pun, it's the evening before the Easter break (public holidays on Friday and Monday here in the UK) and I'm feeling festive.
So, it's finally happened. For those of us with the dubious title of "industry watcher" it's not a particular surprise to see webMethods acquired. We'd heard rumours for some time that the company might be readying itself financially and organisationally for a sale. Clearly the 25% price premium that Software AG (SWAG) plans to pay in purchasing the company at $9.15 a share represents a good deal for its shareholders, as webMethods' stock had got stuck around $7 for quite some months.
But what is a surprise (to me at least) is the buyer.
For one thing, we're used to big industry whales swallowing small specialist minnows: this is one medium-sized software company buying another medium-sized software company. SWAG's 2006 full-year revenue totalled in the region of $500m. webMethods has a different financial year to SWAG, but its revenue in the equivalent period totalled roughly $200m.
There's one particular feature of the two companies' income statements which is shared: both companies make more money from software maintenance than they do from selling new product licenses. Both companies are living more off their past success than their current success (although the balance seems as if it could be tipping the right way in SWAG's case).
Software AG is a company with a long history as a middleware company, but it's not a glorious one. It scored huge success in the 1970s with the ADABAS DBMS and 1980s with the Natural language and development environment, but none of its more recent infrastructure product developments - EntireX (object and message broker), Tamino (XML database/integration platform) and Bolero (Java app server) have penetrated far beyond its established loyal customer base. What's interesting, though, is that with new SWAG products Centrasite (SOA registry/repository) and Crossvision (BPM, ESB, legacy integration, composite application development) now on the market, the webMethods acquisition certainly doesn't look like one to be based around technology. There's a hell of a lot of technology overlap.
So this acquisition appears to be more about acquisition of customers and "mindshare" in complementary regions. Despite a US subsidiary with a long history (which started off independently, was bought by its parent in 1988, then spun off through a venture buy-out in 1997, and re-purchased in 2001), SWAG's visibility in North America is not high (any of our US readers heard of EntireX, Tamino or Bolero?). Despite webMethods' reorganisations which have cut back the size of its European operations over the past years, it seems to retain very high recognition in North America.
What will I be watching? I'll be watching to see what happens to products and people as the two companies come together. Given the huge portfolio overlap, from a product and technology - and ultimately a customer - standpoint, this will be a difficult integration to pull off.
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