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OK, so M&A is hot and companies are spending big sums of money, but what is motivating them. Why do they buy and what do they buy. In the end it is about need; need to grow, need to compete, need to service customers. More than ever before, we are seeing PLM companies buy on need. So exactly what are these companies buying? Overall, the acquisitions made by primary PLM players over the last 3 years can be broken down into two main areas: applications and software development tools. Motivated by technical need and customer demand, approximately 25% of acquisitions were of software development tools for new technologies, specifically Social, Cloud, and Mobile. With virtually all major players participating, they found it easier to take advantage of the innovation of young start-ups to provide tools to extend their existing applications, build their next generation platforms, and integrate existing applications with new technology applications. Clearly though, the vast majority of acquisitions over the past 3 years (75%) were of end user applications. And while the range of applications was quite diverse,
CAD/CAE/Composites (Design), manufacturing management and human resource domains topped the list, accounting for one-third of all applications acquired, with other significant application areas including AEC, Business Analytics, ECAD, and CAM. Once again, cloud and social computing played a significant role in acquisition strategy, this time in the application arena, with almost 40% of applications carrying a significant concentration in these new technologies. The moral of the story, you might ask? Find a sufficiently large need and fill it. Be unique. Set up barriers to entry. Large vendors cannot do everything and will pay for clear differentiation, rare domain expertise, and an ability to address their customer needs. Industry leaders will pay a premium for the scarcity value of rare domain expertise and hot technologies to maintain that leadership. For more detail on this and other trends check out our recent M&A in PLM report. Check back soon as I examine how the first quarter turned out for M&A in PLM.