Is Open Source M&A Set to Go On a Tear?
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GigaOm has an interesting post up today on how technology mergers and acquisitions are back in favor. At the end of last year, I predicted that 2009 would be filled with many open source-related mergers and acquisitions. So far, the pace has been slower than I expected, although there have been some blockbuster-sized buyouts, including Oracle's $7.4 billion play for Sun Microsystems, and VMware's $420 million acquisition of SpringSource. Are we about to see open source-related acquisitions pick up significantly, and do we want to see that happen? Who is ripe for the picking?
The GigaOm post notes recent deals related to open source and deals that aren't, including Intuit buying Mint for $170 million, Adobe buying Omniture for $1.8 billion, a private equity syndicate buying Skype for $2 billion, and the $420 million VMware acquisition of SpringSource, among others. Indeed, it does look like M&A activity is picking up in the tech sector, and picking up in the open source arena.
Among several predictions for buyouts that may be imminent, the GigaOm post says "SugarCRM is going to be fancied by everyone from IBM to Red Hat." I have to agree with that. Customer Relationship Management has become a strong software category, primarily because of the tremendous success of Salesforce.com, and SugarCRM has become steadily more competitive with Salesforce, including launching an online hosted version of its product. I could easily see it being acquired.
I would add some of the small and very promising open source startups in cutting-edge categories to the list of likely acquisition targets. Eucalyptus Systems has a very smart management team, and a set of very solid ideas in the cloud computing space. As it increasingly allows companies to retain their investments in Amazon's cloud services while simultaneously allowing flexible on-premise cloud applications, I think some big companies may see a lot of value in it.
Red Hat has rumored to be an acquisition target for years, partly because of the way it has proven that support and services for FOSS can provide an incredibly dependable revenue stream. Its stock has risen in recent months, though, and the company has a near $5 billion market capitalization. I'm not so sure it's the same kind of buyout target that it was a few months ago, and that's probably a good thing, because Red Hat and Novell are now the only public companies focused squarely on open source with Sun Microsystems being swallowed up.
That said, Red Hat's model of support and services for free software is giving rise to startups built on the same model, and some of them are very promising. I think Cloudera, with its strategy of supporting Hadoop, could be a prime startup target for an acquisition. Along the same lines, Acquia, which provides support and services for the Drupal content management platform, is a startup that will almost surely flourish, and could be a target.
Some of the larger open source-related acquisitions that we've seen in recent years have worked out very well for the buyers. We'll see if M&A picks up on the open source front in the next several months. I'm betting it will, and that promising open source startups will be M&A targets.Â
