Method to the Madness

Yesterday kicked off a brisk week in billion-dollar merger activity with
two runaway announcements. Fairfax-based webMethods announced its $1.3 billion land-grab of Active Software
, when shortly after, word hit the Street of
Vignette’s stock-swap with OnDisplay
.


First off, webMethod’s deal looks
like the better of the two here. The software newcomer swaps a half share
for every Active Software share, and
some might think that’s a pretty fair shake. Well it is if you’re
webMethods. I’m not saying it’s highway robbery, but it’s a bargain to be
sure. So webMethods shareholders ought to relax.


By the look of the fallout, you’d think the company announced plans to
merge with one of Barry Diller’s tired properties. I suppose that’s to be
expected on this tech train wreck fueled by irrational exuberance. Only now
it’s minus the exuberance.


The deal wraps up in the third quarter of this year and has webMethods’
skipper Phillip Merrick at the helm of the new company, while Active’s top
banana Jim Green will come on as CTO and executive vice president.


WebMethods has staked its future on eXtensible Markup Language (XML), a
nascent standard for sharing data on the Web. The upstart has a worthy
footprint in business-to-business, making software that connects customers
and partners with real-time info delivery.


Now maybe Santa Clara-based Active Software execs saw something I didn’t,
but I’m thinking they should have played a little harder to get. Maybe some
fine dining and a movie!? Sure, the upstart’s stock price has fallen on
hard times, but the premium paid looks like a cheap date.


The middleware developer’s bread and butter is making software that allows
businesses to marry incompatible internal applications, enabling
integration between a wide variety of heterogeneous systems. The company
adopted a B2B spin by putting together systems that implement and automate
business processes across multiple applications.


A merger between these two would combine webMethods’ external integration
with Active Software’s internal integration without too much overlay.
During a raging bull market, both companies could have handily stood on
their own, but that was when the B2B buzzword still held some sex appeal.
Now it makes shrewd sense to put both under one roof.


The grim reality is that webMethods competes with more rivals than you
could count on fingers and toes. Consolidation wasn’t so much an option as
a necessity, and this buyout goes a long way in creating some wiggle room
in a crowded field of me-too competitors. Watch for this latest
announcement to send those same competitors into a tizzy trying to find a
dance partner of their own.


Any questions or comments, love letters or hate mail? As always, feel free
to forward them to [email protected].

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