It often takes a few big deals to jump-start the cycle. We call these deals Mega Deals, and in times of economic turmoil (see: now), these mega deals act as a catalyst for change in the software M&A environment. The term mega not only refers to the financial size of the deal, but also and perhaps more importantly to the strategic implications of the merger. Oracles recent acquisition of Sun is exactly the kind of deal were talking about.
But, it takes more than just one big Oracle acquisition to fuel the fire. In fact, our research shows that over the past 15 years, M&A activity turnarounds are generally preceded by a concentration of several mega deals a trend that quickly begins to trickle-down to small and midsize private deals. To get more info and statistics on that subject, download our monthly M&A Flash Report May2009.
So the question stands: Who will be next?
Strategically speaking, social networking has become a greatly hyped and potentially very profitable option to the right buyer. In this case, the purple elephant in the room comes in the form of social phenom, Twitter. With year-over-year growth North of 2500% (not a typo), and monthly visits in excess of 55 million, the three year old company is currently the fastest growing social platform in the world. The value Twitter brings to an acquirer would vary depending on who that buyer may be: real-time search, the likes of which make Google envious; keyword advertising that could build explosive sales for Amazon; recommendation engines that would transform Apples iTunes market.
Beyond Twitter, the social networking world has a number of potential targets on the horizon that are sure to excite both social and enterprise M&A.
+ Facebook has gone in-and-out of talks over the past 18 months (may even go IPO)
+ Ning holds 2nd place for user-base growth.
+ LinkedIn remains private as the social network of choice for the enterprise.
+ Xing remains an active European competitor to LinkedIn, traded on the Frankfurt Stock Exchange.
+ Friendfeed doesnt have the same following as the rest, but may have the most advanced API of the bunch.
Despite the various acquisition options, finding the business model and the business synergy is still the biggest issue for potential buyers. As weve seen with Ebay/Skype, Google/YouTube, or NewsCorp/MySpace just because the user-base is there doesnt mean the money is guaranteed.