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SSA Global, a provider of software that powers companies’ customer relationship and human resources management systems, on Monday became the latest enterprise software group to be taken private.
It announced a $1.4bn deal to be acquired by Infor Global Solutions.
Infor, which is controlled by Golden Gate Capital and Summit Partners, the private equity groups, said it would pay $19.50 a share in cash for SSA, a premium of 25 per cent above Friday’s closing price for SSA shares.
SSA’s shares jumped more than 22 per cent to $19.04 by midday trading in New York.
The deal will add to Golden Gate’s growing stable of enterprise software companies. In November, Golden Gate announced a $1bn deal to acquire Geac, a Canadian software group specialising in financial and supply chain management systems.
Enterprise software has emerged as a favourite target for private equity groups working in the technology sector.
“We are seeing increased consolidation in the marketplace,” said Judy Sweeney, an analyst at enterprise software research group AMR Research. “[Private equity groups] are looking for financial gains by assembling these companies for economies of scale.”
Silver Lake Partners, another Silicon Valley buyout group, last year said it would buy Serena, an infrastructure software provider, for $1.2bn.
Last March, Silver Lake and six other private equity groups announced a deal to buy SunGard, a financial services software group, for $11.3bn in one of the biggest private equity deals of all time.
Enterprise software is viewed as a mature business, with little growth in new customer accounts.
However, many enterprise software companies see steady or even growing inflows of cash from providing maintenance and other services to existing clients.
Because Wall Street tends to value enterprise software groups based on new deal flow, many private equity groups consider the sector to be chronically undervalued, and some have been taking advantage of what they see as an opportunity to capture lucrative cash flow.
Jim Schaper, Infor’s chairman and chief executive, said the combined companies would have $1.6bn in annual revenues.
SSA and Infor said they expected the deal to close in the third quarter. SSA Global was advised by Schulte Roth and Zabel LLP and JPMorgan Securities. Infor was advised by Kirkland & Ellis LLP.