This article is written by Ishita Raghav, pursuing a Diploma in M&A, Institutional Finance and Investment Laws (PE and VC transactions) from Lawsikho.com.
Table of Contents
Whilst Covid-19 has caused tremendous loss to many industries around the world, the technology sector still continues to boom and how. Technology has proved its worth in some record-breaking mergers, corporate restructuring and buyouts even in this economy. The technology sector in 2020 still promises to hold the capacity to earn customer’s loyalty and revenue, both at the same, time. Other industries might be rethinking on its financing terms, but finance pool in technology, with M&A deals, is back on track. The shift in customer demands during the coronavirus has no detrimental effect on this sector. Following are few of the many case notes that reiterates this fact.
BMC acquires Compuware
The global leader in software, BMC acquires a Detroit based software mainframe company, Compuware for 2 billion dollars around March 2020. Compuware is a perfect example of rebuilding and starting over a company. As till 5 years ago, Compuware was having difficulty in standing up with its product. With efficient leadership guidance, the company soon expanded its portfolio in products and vendors list.
Houston based BMC applied artificial intelligence in delivering cloud management and digital-based automation, which basically assists in detecting and solving complex problems accurately. The acquisition will promote BMC in its current operations by adding sophisticated tools of compliance software and data system.
Salesforces acquires Vlocity
The most predicted deal waiting to come in light would be that of Salesforces acquiring Vlocity. The deal closed at 1.33 million US dollars. The new startup, Velocity specializing in CRM platform- Customer Relation Management, a system engaged in producing efficient sales data such as average length of a sale cycle to complete, provides guidance in shortening the sales cycle, further producing comparative analysis of various sales agents and amount of time to close targets. The innovative style of Vlocity appears to be very assuring in the tech industry, so much so that, before this buyout, Salesforces belonged as an active and major investor in the Vlocity company.
Salesforce can look forward to reaching Vlocity’s pool of customer, keeping a special focus on Deutsche Telecom, British Gas and even utilize services of its various technology linked partner firms like Deloitte, Accenture, Adobe and the like.
Moody’s acquires Regulatory Data Crop (RDC)
January 2020 got Moody’s corporation to acquire Regulatory Data Corporation (RDC), a firm established in providing services of due diligence and know-your-customer (KYC) in New York. The deal is reported to be closed at 700 million dollars.
Interestingly, Moody’s previous acquisition of Bureau Van Dijk (BVD) in 2017 had made the company a global leader in the compliance sector. Moody’s standing in the financial market can be assessed by the fact that it is one of the ‘Big three credit rating agencies’, the other two being S&P Global rating and Fitch Group.
What does the deal have both the companies? With RDC’s unique proprietary data sets and artificial intelligence backed technology along with BVD’s precise information portfolio, Moody’s can become an industry expert by aiding its customers to make an informed decision whilst also educating them about various KYC risk and related red flags, at higher speed and accuracy. As for the RDC, the company can now have Moody’s wide client coverage of financial institutions, corporations, and government organizations.
Kronos & Ultimate Software
The biggest merger in the Human Capital Management (HCM) can be said to be that of Kronos and Ultimate Software. The companies are the biggest players of HCM in the economy. Both the companies have their underlying artificial intelligence tools to keep their business strong, Knoros work with AIMEE and Ultimate works Xander.
However, together they can provide “full 360 views if an employee” i.e. the Ultimate’s Ulti Pro HCM will work with Kronos’s Workforce Dimensions will have the capacity to raise $3billion revenue from the market. The newly formed company People Inspired will operate under controlling shareholder Hellman and Freidman, a premium private equity firm that a proud record of raising $50 billion capital.
Koch Industries & Infor
February of 2020 brought news of Infor, a global cloud software leader to be completely acquired by Koch Equity Development LLC, a subsidiary of Koch Industries Inc for around $13 billion. Both the companies enjoyed legal relations with each other since 2017 wherein Koch Industries was not just a customer but also invested in the latter. Now, Kocher Industries, Americans largest private company has concluded a definitive investment agreement to buy out the remaining shares of Infor from its secondary investor, Golden Gate Capital, who founded and promoted Infor 18 years ago. Interestingly, Infor will continue to work with its current management team at its present headquarters office. Previously, Infor had infused $4 million in its product design for industry-specific usage that can be helpful to 68,000 customers around the world. The other financial terms of the transactions are kept under wraps.
Visa & Plaid Technologies
Silicon Valley’s startup, Plaid, provides a way for companies to connect with their user’s bank accounts. Plaid is proud to have customers like Venmo, Coinbase and Gemini. Visa, on the other hand, along with its competitors, was an early investor in Plaid. Visa considers the purchase of Plaid for $5.3 billion will be a fruitful outcome for the coming years and can prove to provide up to 100 basis points to the company’s net value by the year 2021.it can further help the card company in wiring transfers around the globe and connect companies to receive and send funds quickly. A deal like this, between two giant financial companies, can be a wake-up call for traditional banks to reconsider their views on customers impact on FinTech.
Insight Partners & Veeam Customer data management is getting useful for companies globally and currently, there is a lot of transactions of acquiring hybrid clouds. It is this place where data is stored, managed and replicated across mediums. Switzerland’s Veeam works in data backup and recovery and could achieve revenue of $1billion in the year 2018-19. Insight Partners closed the deal to buy Veeam for $5 million by acquiring Veeam. Insight partners is a private equity firm, mostly investing in high technology projects. Till date, the company holds the record of investing in more than 300 companies worldwide with $20 billion assets.
ServiceNow & Passage AI
The drive of ServiceNow to reach globally is what brought it to buy deep learning-based company, Passage AI. The deep learning-based model developed by Passage AI has the capacity to learn many languages, can prove to be very useful for ServiceNow to reach to non-English speaking customers. ServiceNow has been previously acquired many AI-based tools, like FriendlyData, Attivio, Qlue and even Loon systems. ServiceNow’s fascination toward artificial intelligence was first seen when it brought coding-free chatbots in the market which could act as virtual assistants for users. The companies have not disclosed the deal terms.
AMN Healthcare & Stratus Video
On January 2020, AMN Healthcare service, a San Diego based organization announced its acquisition of Stratus Video for $475 million. Earlier Stratus was owned by a private equity firm, Kinderhook and later the company merged with its competitor, InDemand Interpreting. The combined strength of both companies made an annual revenue of $100m USD in the year 2019. The attractive feature of the deal was that Stratus is a provider of video interpretation services in real-time, both in person as well as on audio calls. The company provides this exquisite service to 1600 clients, mostly in healthcare units, community hospitals and home health providers.
The variety and feasibility of this service were realized by AMN which is a comprehensive set of healthcare professionals and procures healthcare executive search, vendor management and recruitment solutions. This transaction can be considered expensive for AMN as it has borrowed capital from the credit market to fund the acquisition. However, AMN believes that with the usage of Stratus Video, it can enter into the virtual market as well.
F5 Networks & Shape Security
America’s F5 is a leading provider of security in digital technologies and other applications. Shape Security, on the other hand, provides service of prevention from online frauds and automated attacks on the system. In February 2020, F5 went ahead to acquire Shape Security for $1billion.
Together they can provide end-to-end solutions to applications, minimize infrastructure. F5 believes that the acquisition can speed up the business and revenue can be increased by 70% till next year. The offices will remain in their respective places and the count of employees are not changed for the sake of convenience of business.
Even though every country is hit by recession due to Covid-19, in India, telecommuting and IT sector has shown progress by 7.1% as told by IT minister, Ravi Shankar Prasad. Similar data can be analyzed for companies globally for it looks like pandemic is not enough to curb progress in IT sector. This year showed mergers and acquisitions of technology sectors with promising future and revenue.
The reason technology sector is able to show continuous progress is also because, the sector constantly looks for innovation and new ideas, it adapts to new possibilities comfortably. Mergers takes this setup even further, as companies in similar line of activities can merge their assets to provide even better services and competitors can cut their losses and strive in the economy, giving a win-win outcome to both the companies and their customers (even potential customers).
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.
LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: