NetSuite was acquired by Oracle (ORCL) for $9.3 billion, LinkedIn (LNKD) will be acquired by Microsoft (MSFT), who outbid Salesforce.com, for $26 billion. And that’s just weeks before it outbid others for Demandware in a $2.8 billion acquisition.
Merger and acquisition activity in the technology sector is hot. So the logical question is, “Who’s next?” Here, we offer a list of the hottest tech companies out there.
My friend Jorge, an analyst with a major Spanish bank, said, “Periods of high M&A [activity] have historically preceded crisis and bubble disaster. The problem is that since 2009, the traditional indicators have not been working. However, I found a good algorithm explaining 66% of the movements for crude oil. Basically, the equity market was following oil in absence of any other good or positive economic reference out there, but even that should be falling apart again. M&A is totally fueled by zero interest rates. If Jorge is right, and I believe he is, we have a perfect storm.
No wonder the M&A market is so hot.
M&A activity will likely fall under public companies and pre-IPO companies that are growing fast.
This company, which recently went public, has something which makes it a very good acquisition target: A unique enterprise product that bridges the gap between telco (voice) and cloud technology. Twilio, with a favorable $3.6 billion market cap, does what none of the big enterprise cloud players can do: Voice.
This makes them an immediate target for various strategies.
Potential buyers: Offensive (Salesforce, Microsoft, IBM); defensive (Cisco, Nokia, Ericsson, Huawei, ZTE)
Estimated price: $5 billion
This target is very hard to predict and it’s even harder to pick a clear pursuer. In the past Tableau was a dominating power in the analytics space, but since last year when Microsoft brought Power BI — which is well integrated with rest of new cloud and on premise Microsoft systems — Tableau got a very tough competitor. Many die-hard Tableau fans still say it’s the best of breed solution out there, but IT budgets are not decided by who has the best solution. There is also an ongoing consolidation in the business intelligence market. Qlik Technologies was acquired by private equity firm Thoma Bravo for $3 billion. Informatica did successfully go through a leveraged buyout, withdrawing from the public market for $5.3 billion last year. So, we never know what will happen. Tableau is a name to watch.
Potential buyers: Defensive (Microsoft, SAP, Oracle, IBM); offensive (Salesforce)
Estimated price: $6 billion.
This is one of the fastest growing platforms in the world and there are many firms that need a stronger cloud business, as well as cloud players that need to protect their territory. Logical buyers here are companies that either need to improve their cloud offerings, like SAP, Oracle or Microsoft, or defend existing territory, like Salesforce.com. Other logical buyers are service organizations include IBM, HPE and Fujitsu. Another possibility is CA Technologies (CA), because ServiceNow disrupts areas they traditionally dominate.
Potential buyers: Defensive (Salesforce, CA); offensive (Microsoft, Oracle, SAP, IBM, HPE, Fujitsu)
Estimated price: $15 billion.
After NetSuite, this is the hottest enterprise solution out there. Oracle, Microsoft, Salesforce and SAP need to either acquire or stop PEGA. This will be a new bidding war; if PEGA goes to Oracle, it could result in a new cloud empire. Oracle Cloud + NetSuite + PEGA is a dangerous combination, as would be combining PEGA with Microsoft Dynamics PG (formerly PEGA), especially now that Microsoft launched Dynamics 365. SAP PEGA with SAP HANA also makes a lot of sense. To Salesforce.com, PEGA is a defensive strategy. IBM and HPE are less likely to join the race because this will be a pure solutions play.
Potential buyers: Offensive (Microsoft, Oracle, SAP); defensive (Salesforce)
Estimated price: $10 to $15 billion
Number five is a sector, not a specific company, because the next big consolidation must happen in the Cyber Security space. The four firms most ripe for the picking are FireEye (FEYE), Palo Alto Networks (PANW), CyberArk (CYBR) and Fortinet Inc. (FTNT). Cisco (CSCO) is sitting on piles of cash doing stock buybacks; Intel (INTC) is looking for a growth driver; Symantec Corp. (SYMC) is competing with Intel and Microsoft (MSFT) as likely suiters. IBM and Hewlett Packard (HPE) are also in the mix. Something must happen here.
Potential buyers: Defensive (Cisco, Intel, Symantec); offensive (Microsoft, IBM, HPE)
Estimated price (range): $5 billion to $25 billion