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Merger Mania: The Software Industry Sees Several Multi-Billion Dollar Deals This Year

This year is shaping up to be a busy one for the software industry, with a bevy of mergers and acquisitions happening in cybersecurity and software as a service markets.

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The big incumbents including IBM, Cisco and Microsoft are spending billions of dollars to expand their offerings and enter new software markets. The flurry of deals dovetails with the heightened activity in global M&A which is forecasted to reach a record-setting $4.8 trillion this year.  Big tech companies are being driven to make deals as a way to enter new areas, protect current assets and to overhaul their business models to pursue growth.

Take Blackberry, which is the latest to make a software buy as one example of a company that is pursuing growth through deals. Aiming to beef up Internet of Things security, Ontario-based Blackberry inked a $1.4 billion all-cash deal to acquire Cylance, one of the leaders in applying artificial intelligence to security software in the middle of November. In announcing the deal with Cylance, Blackberry said its technology will complement its entire product line and help it realize its vision of Enterprise of Things, which enables businesses to securely transmit sensitive data between endpoints. The way BlackBerry sees it IoT is emerging as one of the most important developments with ten million “new things” added daily.

Microsoft’s $7.5 billion acquisition of GitHub in June was aimed at bringing its developer tools and services to new audiences and well as empowering existing developers that use GitHub. SAP is also on the hunt for growth, using acquisitions to meet that end. In November, it made its second-largest acquisition ever, acquiring Qualtrics, the survey company for $8 billion. SAP stepped in to acquire the fast-growing startup just as it was readying its initial public offering. Qualtrics, which makes money from subscriptions and research on demand that customers can tap for feedback is expected to end the year with revenue of more than $400 million and projects a forward growth rate of more than 40%, said SAP when announcing the deal. Other deals including Cisco’s acquisition of Duo Security in August for $2.4 billion while Broadcom paid $18.9 billion in July for CA Technologies and Twilio acquired SendGrid, the email technology company in October for $2 billion.

The biggest deal in the software market to date and the third largest for the technology sector ever was IBM’s $34 billion purchase of Red Hat, announced in October. When announcing the $190 a share deal, IBM’s Chief Executive Officer Ginni Rometty called it a game changer that  “changes everything about the cloud market.” According to IBM with the purchase, it will become the leader in the hybrid cloud market.  “Most companies today are only 20 percent along their cloud journey, renting compute power to cut costs,” said Rometty at the time.  “The next 80 percent is about unlocking real business value and driving growth. This is the next chapter of the cloud. It requires shifting business applications to hybrid cloud, extracting more data and optimizing every part of the business, from supply chains to sales.” With a few more weeks left in the year, there’s still time for more software deal making.