Enterprise search company Autonomy has announced it will acquire its competitor Verity for approximately $500m (£300m).
The deal joins two leaders in the market for software to manage corporate data, which has recently seen increasing competition from Google.
Autonomy chief executive Mike Lynch called the deal a "transformational acquisition" and said it will create better products for their combined 16,000 customers. Autonomy's customers include Astra Zeneca, BBC, British Aerospace, Nokia, Shell and Vodafone.
Verity chief executive Anthony Betancourt said the companies' products are already complementary and that they already share customers.
David Mitchell, practice leader for analysts Software@Ovum, called the deal a "necessary move" as it gives the two mid-sized companies "the scale to invest in R&D and innovation".
Competitors such as Google already have the capital to be formidable foes in the search market. "A key defence is to acquire scale yourself," Mitchell told ZDNet UK sister site silicon.com.
Analysts have commented that Cambridge-based Autonomy is paying a premium for California-based Vertiy — a 30 percent rise over yesterday's closing share price — but it could be worth it for the revenue boost. Autonomy says it expects to see earnings double in the first year as a combined company.
Autonomy raised about half of the sale price through a rights issue and says after the deal (which is expected to close later this year) it will have a cash balance of at least $65m.
Lynch will remain chief executive of Autonomy and Verity's Betancourt will become CEO of Autonomy's US division, called Autonomy Inc.