Buyers and Tech M&A

Dennis Howlett does a good job summarizing what I like to say about technology buyers and their  lack of influence on M&A in the industry. At least, pre-transaction. Carl Icahn who invested a float of less than a billion for a few months has way more influence today on the future of BEA than its customers which have spent over $ 10 billion with it over the years.

But hey, that's our system...boards have to put investor interests over those of everyone else's ...and my 401K mutual funds have benefited from at least some of this M&A.

Having said that the erroneous view in a number of tech vendors is buyers do not mind tech M&A. In fact, a journalist called me earlier in week and said he had polled CIOs and they are not worried about all the M&A activity. My response: They really should not be overly concerned - because most technology markets are still reasonably fragmented as I wrote here and here. Plenty of technology companies generating revenues and shareholder value through technology magic, not financial engineering.

Post-transaction, though, buyers do get their say. And prompt statements like "Thanks for being PeopleSoft, Siebel AND Oracle licensors or Lotus, Tivoli AND DB2 licensors or WAN, mobile and voice customers...here's your volume discount."

CIOs also see much of M&A as "Mature and Aged". There is a reason why license revenues of so many acquired companies drop off after the transaction is done. CIOs know many of the transactions are financial and the parent is primarily buying maintenance streams.  And that is a cue to start negotiating lower maintenance, look for third party maintenance and start planning for sunset of the acquired company products. 

And asking louder about that volume discount.