In February, German systems integration specialist Software AG revealed it had set aside a war chest of $920 million for acquiring companies that could expand its product offerings and customer base. Matt Durham, the company’s Reston, Va.-based vice president of market development, was tasked with the job of finding the right matches. On April 5, Software AG announced it had struck a deal to acquire WebMethods, a Fairfax, Va.-based rival in the systems integration and service-oriented architecture (SOA) arena, for $546 million. Software AG had $601 million in revenue in 2006, while WebMethods earned $209 million.
Baseline contributing editor Mel Duvall spoke with Durham about the deal and what it would mean for customers moving forward.
Baseline: In February, Software AG said it was on the hunt for acquisitions. Was WebMethods already in your sights?
Durham: One of my key jobs is exactly this, to work on deals. We had been looking at WebMethods on different levels for a long time, and very seriously for several months. Very certainly, prior to that news coming out [the February disclosure], we had been looking at them.
Q. Why? What makes WebMethods a good fit for Software AG?
A. It’s a combination of things. Number one, WebMethods has an incredibly loyal and satisfied customer base. That’s a great asset–one that differentiates any company from its competitors. Number two, although Software AG has a great global presence–we’ve been in the U.S., in Northern Virginia, since 1972, and the largest portion of our global revenue comes from the U.S.–it’s not as big as we think it could be or should be. WebMethods has a great presence in this market, and that was a big driver of the logic behind the deal. The third thing is, WebMethods has some very interesting, exciting products and thoughts about where those products should go, and we think those products and those thoughts dovetail very nicely with ours.
Q. What holes in your own portfolio will WebMethods help you fill or round out?
A. WebMethods has a process-centric approach to solving customer problems, and that has been very effective for them and their customers. We tend to have a more data-centric approach. So, in a sense, they’re looking top down and we’re looking bottom up. To be more specific, WebMethods has made their mark by understanding how companies can best leverage enterprise applications and repeatable business processes. So, a big part of WebMethods’ value proposition has been determining how customers can most efficiently leverage those business processes across multiple silo-ed applications.
Our approach has traditionally been from a bottom-up perspective. Our tradition has been taking custom-developed applications–both ones we’ve built and ones that our customers have built–understanding the development environment and tying those applications together. On a simpler level, WebMethods has been great at tying together large enterprise applications like Oracle or SAP, and we’ve been great at tying together applications customers have written themselves. Together, we can address the broader needs of our customers.
Q. How will the two organizations be merged? What will be the impact on the WebMethods Fairfax office?
A. We want to be really clear to the employees and customers of both companies. We expect there will be very little change going forward. To be blunt, we don’t have any plans to go in and whack WebMethods. We want to retain as much of the company as is reasonably possible. Obviously, there are some back-office implications … but in terms of the areas that are critical to the customer, we want to retain that. Another thing we want to be clear about is product support. WebMethods has a comprehensive support plan for customers on its older products, and we want to continue to support those products.
Q. You had a war chest of about $920 million in February. This still leaves quite a bit of money on the table. Are more acquisitions in the wings?
A. Absolutely. We have an active [mergers and acquisitions] team and they’re still looking. We made an acquisition two weeks ago of our Israel distributor [for $62 million], and we’ve gone direct into a couple of markets over the past several months where we previously operated indirectly. From a product perspective, there are some areas of great interest to us–areas in the SOA space such as SOA security, testing and modeling. Also, there are some areas in the business process space that we find very intriguing. And then there are also the future topics–stuff that hasn’t really emerged yet in the market, but might be areas that could generate a lot of interest in the coming years, like extreme transaction processing. So, we definitely have our eyes on different opportunities.
