Fewer M&As in 2008 as Software IPOs Dried Up, CompTIA SoftwareCEO Annual Report Reveals
The special report concludes software firms must shape up and prepare to be acquired or go under in 2009.
Software mergers and acquisitions plummeted dramatically in 2008 and the well ran dry for software initial public offerings (IPOs). These are the conclusions of a special report released this week by software industry portal SoftwareCEO.com, part of the Computing Technology Industry Association (CompTIA).
The seventh annual report reveals that technology mergers and acquisitions (M&As) around the world dropped to $290 billion in 2008, down one-third from a year earlier. There were only six tech-related IPOs in 2008, down from 27 the year before.
Of 14 software firms that had announced IPOs going into 2008, only one managed to follow through during the year: ArcSight. Based in Cupertino, Calif., ArcSight lost $2 million on 2008 revenues of just over $100 million, similar to most software IPO firms in their first year.
“It’s always challenging to run a successful software company, but the second half of 2008 was especially tough,” says Robert Biddle, publisher of SoftwareCEO. “Neither investors nor customers want to part with any money in this economy.
“In 2009, software companies need to protect their core value and be prepared to sacrifice everything else,” Biddle says. “Any companies that aren’t viable risk being acquired or going out of business.”
The special report from CompTIA’s SoftwareCEO also includes 12 specific tips on how software firms can remain viable through 2009, or else prepare themselves to be acquired at the highest possible valuation.
This year promises to be difficult for any software firms that rely on venture capital. √Ç†In a recent survey of the National Venture Capital Association, 96 percent of respondents say they expect it will be harder for new companies to get funded in 2009, and 59 percent expect to see less investment in software. About three-quarters of those surveyed don’t expect the IPO market to re-open until 2010 or later.
One thing the software sector can’t count on is a bailout from Washington. “Software firms never get a bailout, and we’re not asking for one,” notes Biddle. “In fact, we’re encouraged by the new administration’s more enlightened outlook on science and research. Many software executives are excited by President Obama’s calls for giant strides in healthcare and clean technologies, and we want to be part of that progress.”
For a complete copy of the report, visit http://www.softwareceo.com/attachments/softwareceo/com020309.aspx.