The Largest Tech Buyout … Ever

    March 28, 2005

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.

There is a different kind of Barbarian at the Gate, as buyout firms are producing more IPOs than VCs.

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.

Source: Silver Lake leads acquisition of SunGard, largest tech buyout ever

Ross Mayfield is CEO and co-founder of Socialtext, an emerging provider of Enterprise Social Software that dramatically increases group productivity and develops a group memory.

He also writes Ross Mayfield’s Weblog which focuses on markets, technology and musings.