Enterprise application market sees 550 M&A deals, valued at $74 billion

Business continuity demands, regulatory requirements such as those embodied in Sarbanes-Oxley, and the process of globalization have made the enterprise application market especially lucrative. This market has witnesed continuous consolidation as merger and acquisition activities reached a new milestone of 550 deals with an aggregated value of at least $74 billion between 2004 and 2006, according to a new IDC study. The consolidation ushered in a new set of mega-ERP vendors as well as vertical-industry powerhouses, in the process redrawing the sector’s competitive landscape by transforming relatively unknown entities into permanent fixtures with billions of dollars in recurring revenues as well as hundreds of thousands of customers.

Key findings of the IDC study:

* Deal volumes and valuations are likely to increase during the next three years as enterprise applications vendors and investors are waiting to capture the perfect window of opportunity either to dominate a particular market segment or cash out to yield outsized returns.

* The number of merger and acquisition transactions in North America has been holding steady since 2004, suggesting that there will still be plenty of deal opportunities in the United States — the world’s largest applications market — given its fragmented nature, abundance of private equity capital, and a growing desire among the established players to leapfrog competition through strategic acquisitions.

* As deal activities continue unabated in Asia/Pacific, Europe, and Latin America, the future makeup of the enterprise applications vendors will be dominated by truly global players capable of addressing the needs of their customers in several geographic areas. The consequences for the procrastinators, or for those that choose to sit on the sidelines, may be dire, as a wrong business decision may well make it impossible for many of them to recover lost ground.