Canadian Software Mergers and Acquisitions on the Rise: Survey

Canadian software companies are not only surviving but aggressively striving forward, according to a recent survey conducted by the Canadian Advanced Technology Alliance (CATAAlliance) on mergers and acquisitions (M&A) within the software marketplace.

Conducted in late 1999 by CATAAlliance executive director David Paterson, the survey showed acquisitions by Canadian software and computer service companies rose by nine per cent in 1999, to 48 per cent overall.

“These figures are very significant in that they demonstrate this great, worldwide M&A phenomenon has not passed Canada by,” Paterson said from his Ottawa office. “It’s only [early] February and already there’s been $2.5 billion worth of acquisitions of foreign software companies by Canadian companies.”

Of the mergers and acquisitions made by Canadian firms in 1999, 27 acquired companies were Canadian, and 21 were foreign – based in either the U.S., France, Germany, Australia, Italy and the U.K. The total value of the Canuck-induced acquisitions is estimated at $1.2 billion. In comparison, foreign companies purchased 19 Canadian software companies in transactions valued at $2.4 billion during the same period.

“Canadian companies are competing in the global economy,” Paterson remarked. “If you (as a company) attempt to do all things yourself, you’ll fail…[Canadian companies] have adopted the buyer’s strategy as a route to enter new geographical territories and to offer new products and technologies.”

Canadian firms can also take solace in the fact that the Securities and Exchange Commission in the U.S. has proposed to end the use of pooling of interests accounting in 2001 – an advantage American companies have enjoyed over their Canadian counterparts in the acquisition game.

Paterson cited the federal government as one ingredient in the overall health of the Canadian software industry.

“We’ve been critical of them (the federal government) in the past, nonetheless…the federal government has been a major contributor to the successful environment for research and development,” he said. “Research and development is critical in that you can’t just keep up success based on being merely one step ahead of the competition.”

Paterson said his survey was based on the M&As that the CATAAlliance was made aware of through a series of networks including those announced in the daily newspapers.