by Yogesh Gupta

Going, going, gone

Apr 20, 2016

M&As are the new normal of the technology world, but the brisk pace might be a bad sign.

The Lexmark sale is not the usual ‘one of many acquisitions’ in the technology world.

The printer giant Lexmark, reportedly on the block for a couple of years, surprisingly attracted a good deal of $3.6 billion. Interestingly, it was not bought by another competing printer company but by a consortium of China’s Apex Technology, PAG Asia Capital and Legend Capital Management. Lexmark, which had at its core its hardware business of manufacturing printers, was in the recent past focused on business software and digital document management services, and that could be the one of the reasons that attracted the consortium of Chinese investors.

Technology M&A reached an all-time high in 2015 with $313 billion in deals announced, up 82 percent compared to the $171.6 billion announced in 2014 as per a PwC report.

2016 looks set to record another high in tech M&A—the month of April (and year of 2016) appears to be a month of acquisitions as Polycom got gobbled by Mitel and Brocade acquired Ruckus within the space of two weeks.

Polycom acquisition by Canada-based Mitel opens up the unified communications and video conferencing space. A decade ago, Cisco, Tandberg, Polycom, Nortel and Lifesize were the tough competitors. After the acquisitions spree in the space, it’s a game of Cisco versus Avaya versus Logitech versus Mitel. Is the video conferencing market shrinking or expanding?

The consolidations make much sense in a ‘not so good’ economic climate, controlled IT budgets and changing technology landscape. Acquisitions are an easy and viable route for many companies, but the number and occurrence of M&A increasing across the spectrum of security, networking, UC, services, cloud and every new (or potential) tech domain is a worrying factor.

M&A in Security: Welcome to insecure world of security

Aruba was picked up by HPE in January this year. Brocade went aggressive, buying datacenter automation startup StackStorm and Ruckus Wireless in March and April of 2016 respectively. Networking giant Cisco acquired Synata, Leaba Semiconductor and ClicQ technologies in March 2016 and Jasper Technologies at the beginning of the year.

Acquisitions in a well-planned and non-disruptive manner are a real boon, but excessive consolidation is a mammoth challenge for CIOs.

Acquisitions in a well-planned and non-disruptive manner are a real boon for OEMs’ employees, end customers and the partner ecosystem. However, excessive OEMs’ consolidation is a mammoth challenge for CIOs and decision makers buying IT. The technology blueprint today is spread over months and years. The unified architecture, cloud era, apps, SDx and IoT call for CIOs to align more with ‘here-to-stay’ technology OEMs.

For channel partners, the ‘unfriendly channel’ acquiring company means a serious business loss. Many years of relationship-building and OEM brand push goes for a toss if the deal don’t take off in the interest of all stakeholders.

Also Read: Dell-EMC merger to quiver channels equilibrium

There’s no secret sauce on how to cope with M&A frenzy than adapt rapidly to the unexpected (or expected) merger. A spread portfolio of different OEMs can be an unmanageable and costly affair for CIOs. And for most channel companies, it is impossible to engage and invest with more OEMs in the anticipation of some getting acquired eventually.

All major OEMs have their shopping baskets partly full this year—SAP acquired Roambi, which specializes in mobile BI and analytics; Oracle acquired Ravello Systems to strengthen its cloud story and Microsoft bought Xamarin, while Intel acquired Replay Technology, to name a few.

Private equity firms have turned active in tech M&A, particularly in the past couple of years. Blue Coat by Bain Capital, Mphasis by Blackstone, Riverbed by Thoma Bravo, BMC Software by Bain Capital and Golden Gate Capital are a few instances. Most have turned into private entities from public listed companies.

It’s a fast changing and an ever-evolving technology era. Place your bets on the roulette of technology OEMs for the winners who will spin your business to prosperity.