BMC goes private: The enterprise guard changing picks up

As vendors like BMC and Dell step aside---at least from the pressure of earnings releases---next-gen enterprise players like Workday go public in a changing of the enterprise guard.

BMC Software went private in a deal that values the company at $46.25 a share, or $6.9 billion, in what appears to be a march by legacy software vendors to duck out of the public eye.

According to BMC, the company will sell out to Bain Capital and Golden Gate Capital with GIC Special Investments Pte Ltd and Insight Venture Partners.


The company, which makes infrastructure management software, said its board approved the deal and now can invest in more strategic opportunities.

BMC has pivoted from mainframe management software to cloud and IT management applications. The game is to position BMC as a management player in hybrid physical and virtual data centers that are also connected to the cloud.

Now let's zoom out a bit. Dell also plans to go private in a controversial deal so it can revamp and become more of a software and services player. Dell's chore: Be more than a PC maker.

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BMC and Dell won't be the first legacy software and hardware companies to go private. We're likely to see a run on going private deals because interest rates are low, these companies have good cash flow and need to restructure out of the public eye. The playbook for going private goes like this: Big fish investor such as Elliot Management, which now owns 9.6 percent of BMC, buys a stake, makes noise and pushes for a deal to enhance shareholder value.

Add it up and there's a changing of the guard. For many of these legacy vendors, it's unclear where the profit pools will go. Cloud computing is disruptive to the hardware and software businesses. If your business is running physical data centers what happens when the music stops?

These companies aren't dumb. As vendors like BMC and Dell step aside---at least from the pressure of earnings releases---next-gen enterprise players like Workday go public. In five years, the top 10 enterprise players will look very different in mind- and marketshare.



Regarding BMC, Cowen analyst Gregg Moskowitz said in a research note:

We find the takeout offer (less than a 2% premium to Friday’s $45.42 closing price, and only 14% higher than when Elliott Management had first disclosed a 5% stake on May 14, 2012) very underwhelming, although also emblematic of fundamental and competitive challenges faced by the company.

BMC isn't alone. The run on going private is just about to kick off.