Tuesday, October 9, 2012

M&A in Threes

It often feels like consolidation of the middle tier of an industry happens all at once. When the first industry heavyweight makes a strategic acquisition, investment bankers, VCs, and entrepreneurs start salivating, knowing that other industry players are likely to react with defensive purchases of their own. Some recent examples at hand are health insurance for the Medicare and Medicaid programs, social CRM, human resources management software, IT services, and dynamic display ad optimization.

IT services - 16 months, $23.4Bn start to finish:

  1. HP acquires EDS in May 2008 for $13.9Bn;
  2. Dell acquires Perot Systems in September 2009 for $3.9Bn;
  3. Xerox acquires ACS in September 2009 for $5.6Bn.
Medicare and Medicaid health insurance - 10 months, $14.4 Bn:

  1. Cigna buys HealthSpring in October 2011 for $3.8Bn
  2. Wellpoint buys Amerigroup in July 2012 for $4.9Bn
  3. Aetna buys Coventry Health Care in August 2012 for $5.7Bn.

Social CRM - 3 months, $1.2Bn:

  1. Oracle buys Vitrue in May 2012 for ~$300M;
  2. Salesforce buys Buddy Media in June 2012 for $689M;
  3. Google buys Wildfire Interactive in July 2012 for $250M.

Human resources management software - 9 months, $6.6Bn:

  1. SAP buys SuccessFactors in December 2011 for $3.4Bn;
  2. Oracle buys Taleo in February 2012 for $1.9Bn;
  3. IBM buys Kenexa in August 2012 for $1.3Bn.

I'm not entirely sure why these waves seem to come in threes, but my guess is that it has something to do with the limited number of buyers who are big enough to take out the middle tier players, or in the case of social CRM, the number of interesting targets available. What do you think? Let me know in the comments.

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