Want to Buy a Company? Make it a SaaS Provider!

M&A activity for 2011 is off to a bang and, interestingly, SaaS vendors seem to be the most coveted acquisition targets.
Written by Brian Sommer, Contributor

Colleague Dr. Katherine Jones starts the year looking at SaaS in the growing acquisition environment.

Week One of the New Year – and what appears prescient of future acquisition mania has already started. Today, Qualcomm Inc. announced that it will acquire Atheros Communications, in a move that is apparently creating unhappy shareholders and stirring commotion by their legal counsel.

But the software providers in the human capital management world have been busy as well. Continuing the trend to swoop up any company dealing with learning, SumTotal, which last year acquired SoftScape, added GeoLearning, an LMS vendor to its growing fold. It follows in the footsteps of Taleo, which acquired Learn.com last year. Geolearning is (or perhaps, “was”) an alliance partner with SuccessFactors; the two companies shared several impressive client wins. Evantage, an Oslo elearning company, partners with SuccessFactors in Europe; it remains to be seen whether the new GeoLearning owner will put a damper on further business ventures with SuccessFactors domestically. While SuccessFactors currently focuses on improved business execution, both it and SumTotal play mightily in the talent management arena. (See the October 14, 2010, posting on this site on SaaS–based elearning entitled “The year that learning becomes strategic.”)

In a play to expand its existing security portfolio, Sourcefire, Inc., is acquiring Immunet, which provides cloud-based anti-malware technologies. It leadership cites the acquisition as enabling Sourcefire to accelerate its cloud initiatives, adding an advanced cloud platform for delivery of malware protection and extending the company's real-time detection and prevention leadership to the cloud. End-of-year acquisitions may have gone unnoticed in the holiday rush – for example, data warehouse company Terradata acquired Aprimo, one of only a few SaaS marketing management programs. The intent, apparently, is to link Terradata’s business analytics with Aprimo’s marketing solutions to further derive actionable data for improved marketing and sales success.

What is significant is that in the software acquisitions is that the companies acquired provide software-as-a-service or “cloud” solutions rather than on-premise applications. Companies looking to expand their footprint, capture larger markets, or glean a larger client base are looking at SaaS providing companies to acquire. The reasons may be several: they are companies already committed solely to a SaaS strategy; they recognize that product integration with their current solutions may be easier with a SaaS solution; the applications they desire are only available as cloud solutions; or perhaps it is in recognition that the delivery channel for the future is software-as-a-service. Whatever the reason, I predict both the increase in SaaS deployments in the customer base in 2011, and the continued interest in acquiring SaaS providers. Following the upsurge in retail at the end of 2010, shopping for compatible companies is on the uptick as well for the year ahead.

Editorial standards