Mergers and acquisitions in the Canadian software and computer services industry rebounded in 2004, according to the annual report by CATAAlliance. The number of mergers rose 40 per cent, from 45 to 61, while the value soared 115 per cent, from $1.3 billion to $2.8 billion.

Once again, Canadian

software companies bought more foreign firms than foreigners bought Canadian, 21 versus 18. The value of the deals was also higher, $1.4 billion versus $1.2 billion. The largest deal was CGI’s $756 million acquisition of American Management Systems. The largest foreign acquisition was MultiPlan Inc.’s purchase of BCE Emergis’ US health business for $276 million.

Canadian companies also acquired other Canadian firms, 22 in number. The total value was $178.8 million, an average of only $8.1 million, suggesting a strong bargain-hunting element in this activity.

“Consolidation is clearly a trend in the global software industry,” said Dave Paterson, National director, public affairs, of CATAAlliance. “The slower pace of revenue growth in the software industry has prompted companies to pursue growth through acquisitions strategies. Symantech’s $13.5 billion acquisition of Veritas, and Oracle’s prolonged $10.3 billion pursuit of PeopleSoft are prominent examples.”

Companies also continue to acquire technology, which they need. “Cognos bought Swedish company Frango AB to strengthen the financial analysis capabilities of its market leading business intelligence software,” said Paterson. “Even Microsoft does it, despite its huge R&D budget. It bought Giant Company Software Inc., in fact a tiny company with just 12 employees, to get its anti spyware technology.”

“The trend will continue in 2005. Revenue growth remains a challenge, and the stock market is rising, which always stimulates acquisition activity”, said Paterson.

Share on LinkedIn Share with Google+