The private equity group aiming to take BMC into private ownership has been successful. The $6.4bn deal, one of the largest in 2013 and led by Bain Capital and Golden Gate Capital, represented a 13% premium on BMC’s closing price prior to the initial purchase announcement (see here). Investor pressure forced BMC into the move but the origins lie in the technology shift to the cloud.
Although the company derives around 40% of its revenue from mainframe management solutions which produces steady business and delivers cash gains, demand for its network and server management products has suffered as organisations adopt cloud solutions, and more nimble competitors like ServiceNow with its on demand service management offerings and operational IT management and analytics provider Splunk move in on the market. CA Technologies (see here) and Compuware are facing similar problems and the closing of this deal will shift attention to their futures.
BMC’s plan under its new owners is to focus on managing applications running in the cloud and on mobile devices. This is the right direction but the change in ownership does not guarantee success, especially as the uncertainty over BMC’s future has pushed buyers into the hands of competitors. And there are more players, with less baggage, entering this already busy market segment. Loggly for example, (a direct Splunk competitor who provides cloud based log management), has just won $10.5m backing. BMC will need some significant restructuring to make headway in the cloud management market.