Wave of consolidation hits IT sector as downturn bites

A new round of consolidation looks set to hit the IT sector, with a rush of takeovers and mergers signalling that tough times are ahead.

A new round of consolidation looks set to hit the IT sector, with a rush of takeovers and mergers signalling that tough times are ahead.

In the latest deal, United States-based database giant Oracle has bought software group RuleBurst Holdings and its subsidiary Haley in a deal worth $150 million.

RuleBurst is chaired by Mathew Perrin, an entrepreneur and investor best known for running surfwear giant Billabong during its first years as a public company. Perrin and his wife Nicole, who are valued at around $150 million, are major shareholders in RuleBurst.

“It brings a lot of satisfaction to us that people that have supported the company though thick and thin have got a good result,” Perrin told The Australian Financial Review.

Two days ago, Melbourne-based IT company UXC made a $23 million bid for listed IT services firm Ingena.

UXC’s finance director Mark Hubbard believes UXC is getting Ingena at a very attractive price and expects the takeover deal will be approved by Ingena’s shareholders. UXC has already obtained commitments from around 63% of Ingena’s relatively small shareholder base.

Hubbard says UXC will stay on the lookout for more acquisitions, and expects uncertain financial conditions will accelerate the consolidation of the sector.

“We have quite a strong pipeline in our M&A activity and we’ve been quite an acquisitive company over our history.”

Like most IT companies, UXC is bracing for a slowdown in IT spending, with large corporate clients and governments set to trim their budgets as the downturn continues.

“At this point of time it’s a climate of great uncertainty and fear [in the industry]… We have very, very strong order books, but we have very cautious forecasts,” Hubbard says.

In another deal announced yesterday, Darwin-based IT firm CSG Group has acquired the managed services arm of collapsed telecommunications provider Commander Communications in a deal reportedly worth $30 million.

The eyes of the IT sector are also glued on Archer Capital’s takeover offer for financial software giant MYOB, which the Melbourne-based firm quickly rejected yesterday.