BMC Software has signed a definitive agreement to be acquired by a private investor group led by Bain Capital and Golden Gate Capital together with GIC Special Investments Pte Ltd (“GIC”) and Insight Venture Partners (collectively, the “Investor Group”).
Under the terms of the agreement, affiliates of the Investor Group will acquire all outstanding BMC common stock for $46.25 per share in cash, or approximately $6.9 billion.
This is one of the largest M&A operations in a long time. Significantly, it has been prepared for quite some time, which culminated in a restructuring a month ago, by which the five product groups operating under BMC Software became one. Instead of having several categories reporting their gains (or losses) we have now one happy family where the gain of one member balances the loss of another.
We have also a unique opportunity to have these former product lines working together for a better integration of BMC Software solutions with a corollary prospect of having more R&D investments in previously “weak” categories. Being free of the short term mandatory “good results to satisfy the street” will also participate in building a better BMC Software.
Although fourth quarter results were below the Street expectation by a hair (-$.06 per share and -.04% in Revenue), BMC Software bookings grew 14% from a year ago, with an encouraging result for ESM which was up 9% from a year ago.
Over the past ten years, BMC Software has made its mark on the IT Management Software (ITMS) market, and is today only second to CA Technologies. From what we can see, the privatization of BMC Software provides an opportunity to invest into the future of ITMS and to become a serious contender for first place in the years to come.
For BMC customers, this sounds like very good news. There is, of course, a flip side: we can expect that streamlining the operation will lead to weeding some dead wood products, which of course may be a problem for some of us. This is one area where the future BMC will have to tread carefully.
The future of BMC can take many paths, including persisting the company in its complete state (sans the aforementioned "dead wood" products), selling it wholesale to another technology company (unlikely, but possible), or breaking up the company and selling the parts. This latter scenario is plausible and is the prevailing speculation in the marketplace, however it is just that - speculation. The likeliest future path for BMC is to make no material changes to the business. The Investor Group will do some trimming, but they will not disrupt the company's growth trajectory. That would be foolish - and these investors are not fools.
In short, Forrester sees little risk to BMC customers over the next year. After that it is again purely speculation. Watch the new management's actions to determine future directions.
Ignore the rhetoric from BMC's competitors about BMC's future because the only people who know the future of BMC will be the new owners - and even they don't yet quite know.
Posted by Jean-Pierre Garbani
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