December 5, 2012

Riding the Big Data M&A Wave

Ash Seth – Analyst, MergerTech


Global year-to-date IT spending on Big Data products has surpassed $28 billion, and is expected to top $34 billion in 2013 according to a new report from Gartner.  To put that number in perspective, that’s enough money to buy iPad Minis for the entire population of Mexico, fill the gas tank of every car and truck in North America, or buy a foot long sandwich from Subway for every single person on earth.

Astonishingly enough this figure excludes powder deployed on the buying spree for Big Data assets by IT Services giants like SAP, Oracle, Salesforce, and Microsoft, as well as mid-market and niche players looking to add capabilities and win more enterprise level deployments.  Particularly in Silicon Valley there is a large ecosystem of startups that are specializing in incubating advances in Big Data capabilities including social network analysis and content analytics.  Potentially, they could really eat into the multi-billion-dollar market for business intelligence software, currently dominated by IBM Cognos, SAP’s Business Objects, and Oracle Hyperion.

So naturally the large players have spared no expense in buying these technologies from successful startups looking to scale their products.  At least for now, it is far more economical for companies to acquire analytics capabilities than build them in-house.  This reality has driven an abundance of M&A activity even in the mid-market range such as VMware’s purchase of Cetas Software in April to last month’s pickup of Kitenga by Dell.

Pat Gelsinger, COO of storage giant EMC says he foresees big data spending continuing to grow at 15-20%+ per year.  EMC and virtually every IT conglomerate, including IBM, Oracle, HP, Dell, Salesforce, SAP, and Hitachi is investing heavily in both creating new Big Data products and on M&A deals ranging from as little as $10 million all the way to the multi-billion level.  Also in on the hunt for acquisitions are Private Equity firms and VCs, including Accel and IA Ventures who both launched $100 million Big Data funds this year.  Accel earlier participated in an $84 million Series A round of predictive analytics provider Opera Solutions at a staggering half-billion dollar valuation.  GE and Indian IT services giant Wipro have also recently announced they both intend to spend over $1 billion each on analytics acquisitions over the next eighteen months.

Just this morning, Indian IT vendor MphasiS is announced it buying US based data analytics company, Digital Risk, for US$200 million in an all-cash deal.

2013 will be a good time for profitable Big Data startups to catch the M&A wave, while it is still strong.