The Largest Tech Buyout … Ever
The Mercury News reports on the largest tech buyout, ever. Silver Lake Partners and other private equity firms are acquiring SunGard Data Systems, a risk management software company, for $11.3 billion.
Sungard has been the leader in the risk management software category, but you couldn’t call it dominant. There is a typical VC 2×2 with expertise and complexity to build as one axis, and size of the vertical as the other. This category has high expertise requirements with a relatively small size, which leads VCs to naturally shy away. The market has, however, had consistent growth through boom and bust. This $3 billion revenue company underperformed in the midst of growth opportunities in an increasingly risk-centric world and could be highly strategic for other enterprise software vendors.
Jeff Nolan has a great post on Consolidation in the enterprise software markets:
…Pick a vertical or a platform stack layer and there will be at least 1-2 dominant vendors and a handful of hanger ons, and even the largest vendors in the space have a hard time displacing a vertical leader. The investment required to build a vertical from the ground up is too great, it’s much more cost effective to acquire a dominant vendor and use the maintenance base to pay off the acquisition.
While I have been away from this market for some time, it seems that Silver Lake has acquired a great company to roll-up (including SarBox companies?) and flip.
He also writes Ross Mayfield’s Weblog which focuses on markets, technology and musings.