Updata Capital Reports on Robust Information Technology M&A Market

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Firm Ranked in Top 10 by The 451 Group, Completes 18 Deals in 2006, Sees Continued Strength in Activity for 2007

This level of activity, together with recent and planned professional hires, reflects Updata's major role in the current IT consolidation wave which we expect will continue through 2007.

Updata Capital (http://www.updata.com), a leading M&A advisory firm focused exclusively on the information technology (IT) industry, commented today on its activity in 2006 and outlook for 2007. Updata Capital was ranked by independent technology industry analyst company, The 451 Group, in its "Tech M&A Banking Review 2006" as one of the top ten technology dealmakers, based on number of deals, among a list that otherwise principally comprised larger, multi-industry investment banking firms. The report also credits Updata with top rankings for number of deals in the application software, infrastructure software and IT outsourcing sub-sectors. The firm completed 18 transactions in 2006 and has a strong backlog of engagements expected to close in the first half of 2007.

"After several years of moderate growth in IT, we see our results as one of several indicators of an improving IT M&A market and buyer confidence," said Ira Cohen, Managing Partner of Updata Capital. "This level of activity, together with recent and planned professional hires, reflects Updata's major role in the current IT consolidation wave which we expect will continue through 2007."

Larger Cap Buyers Lead the Way in Application Software M&A

"The current momentum in M&A is mainly driven by large software vendors making acquisitions to fill product gaps, attack a vertical or consolidate a particular sub-sector," said Greg Ager, Partner at Updata Capital leading the Enterprise Application Software practice. "Private equity groups have also added fuel to the fire, accounting for more than 15 percent of all enterprise application software M&A deal volume and over 45 percent of deal value for 2006." Ager added, "With convergence taking place across many related IT sectors and the need for scale combined with the availability of capital and a healthy economic outlook, we think 2007 will be even more active than 2006."

The 451 Group ranked Updata as the number-four dealmaker in application software by transaction volume in its recent report. Updata advised on six enterprise software transactions in 2006:

  • Accenture (NYSE: ACN) acquired Updata client NaviSys to incorporate its industry-leading life insurance technology platform into Accenture's insurance practice.
  • CA (NYSE: CA) engaged Updata in the divestiture of its visual simulation software unit, Multigen-Paradigm.
  • CA acquired Updata client MDY to help CA fulfill its clients' company-wide compliance, corporate governance and legal discovery requirements.
  • Business Objects (NASDAQ: BOBJ) acquired Updata client Firstlogic as a part of its long-term enterprise information management strategy.
  • IBM (NYSE: IBM) acquired Updata client Palisades Technology Partners to enhance IBM's financial IT consulting services and technology offerings.
  • Updata advised Finetre Corporation in its acquisition by Ebix (NASDAQ: EBIX), to establish leadership in the insurance industry's annuity exchange market.

IT Security Leads Infrastructure Software M&A; Updata Leads Deal Volume

"We had a record-setting year serving our infrastructure software and IT security clients," said Don More, Partner at Updata Capital who directs the Infrastructure Software practice. "Acquisitions of IT security and other infrastructure companies continue to be driven by several key themes - large IT vendors racing to control as much of the infrastructure 'stack' as possible; criticality of security and compliance related offerings to growth and stack domination; security pure-plays expanding portfolios to ward-off competition from broad infrastructure vendors; Street support for M&A; and need for IT security expertise in attractive verticals such as government." More added, "In IT security alone, Updata announced six M&A transactions in 2006, with several more under term sheet. To our knowledge this is more than any other investment bank during the same period, underscoring our unparalleled domain knowledge and relationships built over two decades."

The 451 Group ranked Updata as the number-two infrastructure software dealmaker by transaction volume. Updata infrastructure software transactions in 2006 include:

  • Compuware Corporation (NASDAQ: CPWR) acquired Updata client Proxima Technology, a major business service management software vendor, enabling Compuware to enhance its ability to visualize and manage delivery of IT from a business perspective.
  • Allen Systems Group (ASG) acquired Updata client Diversified Software Systems, integrating Diversified's mainframe automation solutions into its enterprise workload management platform.
  • IBM acquired Updata client Consul, adding data governance and compliance management capabilities across mainframe and distributed environments to its security management solutions.
  • Updata advised SurfControl (London: SRF) in its acquisition of BlackSpider, a provider of on-demand managed security services.
  • Updata advised Perimeter Internetworking in its acquisition of Breakwater Security, a managed security services vendor.
  • Process Software, a unit of HALO Technology Holdings (OTCBB: HALO), acquired Updata client Tenebril to add anti-spyware capabilities to its suite of enterprise security products and services.
  • Updata advised Select Business Solutions in its acquisition by private investment company, Avantcé Software.

Strategic Combinations Drive a Strong Year in IT Services M&A

"The commercial global IT services markets made a strong showing in 2006. Updata's IT Services market indices outperformed the NASDAQ in all sub-sectors, except Government IT Services which began to see value contraction as Federal budget concerns dominated the news," said John MacDonald, Partner at Updata Capital leading the IT Services practice. "IT Services M&A announced deal value reached $24.2 billion in 2006 and is poised to build on this performance in 2007."

The 451 Group ranked Updata as the number-three IT outsourcing dealmaker by transaction volume. Updata advised on six IT services transactions in 2006:

  • EMC (NYSE: EMC) acquired Updata client Internosis, extending EMC's capabilities to build and deliver tightly integrated application infrastructure solutions for Microsoft environments.
  • Accenture acquired Updata client Random Walk Computing to expand its custom software integration and development capabilities for financial institutions.
  • Updata provided a fairness opinion to INVESTools (NASDAQ: IEDU) with respect to its pending merger with thinkorswim, combining a leading investor education firm with a top-ranked online brokerage platform.
  • Updata advised Protiviti, a division of Robert Half, in its acquisition of Enspier Technologies, an IT security consultancy with expertise in identity management.
  • Updata assisted Command Information in its merger with Digital Focus, creating the largest and fastest growing pure-play IPv6 solutions provider.
  • Updata advised Tokyo-based ABeam Consulting in its acquisition of Qorval Integrated Solutions to strengthen its approach in the North American market.

About The 451 Group's "Tech M&A Banking Review 2006" Report

The report titled, "Tech M&A Banking Review 2006," from The 451 Group - a technology industry analyst company focused on the business of enterprise IT innovation - covers all technology-related M&A transactions announced between January 1, 2005 and June 30, 2006 that involve the purchase of 51 percent or more of targets based in the U.S. The report is intended to be used as a practical tool to help executives, board members, VCs and attorneys identify appropriate sector-experienced bankers for their buy- or sell-side engagements. M&A data for the report comes from the 451 M&A KnowledgeBase - a transaction database service that combines the most-granular and best-categorized set of data on mergers and acquisitions in the technology industry with analytical insight from the 451 analyst team.

About Updata Capital

Based in Red Bank, New Jersey and Reston, Virginia, Updata Capital, Inc. is a leading investment banking firm specializing in mergers and acquisitions for the IT industry. Since 1987, Updata has advised on nearly 400 transactions for e-commerce, infrastructure, financial technology, telecommunications, e-services, software, IT services and security software firms. For the past five years, Factset's Mergerstat has ranked Updata Capital among the top 10 advisors for the computer software, supplies & services industry. Updata Capital is an affiliate of Updata Partners, a venture capital and private equity firm that invests in early and growth stage information technology software and software-based services firms. For more information, please visit http://www.updata.com

Editor's Note: The 451 Group's report, "Tech M&A Banking Review 2006" referenced above, is an independently-produced report that was neither sponsored by nor otherwise funded directly by Updata. The report and its entire contents are the sole property of The 451 Group, copyright 2006, and are reproduced here by permission. The entire contents of this report are available at http://www.the451group.com.

For more information contact:

Robin Dvorak

rdvorak @ updata.com


Updata Capital® is a registered trademark of Updata Capital, Inc. All other company or product names listed herein are trademarks or registered marks of the respective owners.


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