Informa has announced that it will purchase Datamonitor for £502 million: around $1 billion. It is an astonishing price, reflecting more than a ten percent premium over the firm's market capitalisation. In contrast, Forrester Research's capitalisation is currently $700 million.
However, not everyone thinks Informa may have over-paid. Jonny's feeling is that this "of course means they are getting a great package deal as Ovum and Butler - amongst others - are also in the bag".
Although Informa's investors have reacted positively, we will keep an open mind on the deal. Ovum itself is worth less than the premium over the market price that Informa has paid. To generate this much value from the purchase, Informa must have aggressive plans. At first glance, we don't see this move allowing the firm to move easily in Gartner's territory.
P.S. There's an excellent comment here that points out that the deal may not be mainly about the tech side of these companies. That's bound to be partly true. Even so, a ten percent premium is a lot of money. Informa will have to work hard to make it worthwhile.
Monday, May 14, 2007
Informa purchase values Datamonitor as worth more than Forrester
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11 comments:
My contact at Datamonitor believes that the biggest benefit will be that now they will be one of the "big boys".
However, bigger is not always better.
The question is not only whether Datamonitor is worth the price paid but the real test will be if Informa can rebrand the group to bring more value to their customers. If they want to compete with Gartner, the value is not just about better or more information but whether they can influence the buy side as Gartner does. This is still Gartner's biggest differentiator and it isn't about size, it is about brand.
Cannot see how this makes a Gartner buster - still same number of analysts in the same topic areas.
Can see a lot of cost cutting to come though at that price....
They've specifically said they won't try to cut costs and apart from combining back office functions, consolidating office space in the UK and abroad and getting rid of non-exec costs, there's not much to go - Datamonitor has always been run with a fair amount of cost-consciousness.
I disagree with the Datamonitor person who thinks this puts DM with the big boys - this may come in time but it is 12 months down the line at a minimum. The easiest win is to open up Informa's client base to Datamonitor content/analysts.
The far more difficult step is to look at content overlaps but in the short term I can't see Datamonitor's content or analyst levels rising above plan.
Also, why would Informa want to rebrand Datamonitor? Informa runs a large number of independent brands so the model is more likely to be that DM keeps its name.
It's definitely an interesting move and makes Informa a major industry analyst firm.
A rival to Gartner though? I'm not so sure. It could happen but Informa will need to invest significant amounts of money - and it will require at least one or two more big acquisitions.
Anon,
In the tech space, Informa has a track record of closing brands down. It merged ARC, EMC, Baskerville and Chorleywood to create Informa Telecoms & Media.
Fair enough, David.
As with all takeovers, I suppose they could rebrand. I just doubt there's much value in it for Informa, and they do run a number of parallel conference brands at the moment.
My personal feeling is that they'll focus on aligning the databases and sales operations, which is where the value of this acquisition is, long before they align the brands - and with Mike Danson staying for a year I don't think any rebranding, if it happens, will go on until after that.
I just don't see the extra $100m of vlkaue in that. Okay, there's a big saving from de-listing, but it can't be more than a million quid, can it?
The whole vendor landscape, across software (with SOA), services (with deals oriented by business results), and governance (with ITIL v3) is increasingly focused on approaches that bring business and IT much closer together. There are no grounds for believing that these major moves are the latest round of industry flam – rather, they are responses to real customer demands.
In the face of this, how can the analyst industry remain justified in sticking to a focus mainly on technology? Without wishing to lend weight to the notorious Nicholas Carr quote, the time will soon come when the vagaries of IT itself won’t merit so much of companies’ attention, as technology becomes homogenised and somewhat commoditised. And at that point, why would businesses want to pay for the in-depth advice on IT matters that they now do? Sure, IT will be seen as a critical platform for business, but only the innovative potential will provide any differentiation, and even then risks will need to be limited.
Seen in this context, the Informa deal may be the first sign of an understanding of the implications for the analyst industry. As well as the scale of the market it will allow the Datamonitor constituents to address, its integration of IT advisory IP with mainstream business information could be a compelling sell in the near future – if Gartner & co maintain the view that IT is so special that organisations should look at it in isolation, they could look remote from customers’ needs.
Caveat: I work for Datamonitor
My view is slightly more long term. If you consider what the key elements are of a successful analyst business model are, and then apply them to the Informa Group you can see that they 'potentially' fare very well.
1) Research (Informa and Datamonitor have great scale here)
2) Events (Informa and to a lesser extent Butler have expertise here)
3) Advisory (Ovum, Butler and [a few Datamonitor analysts] are great here)
4) Market (Ovum have positioned themselves superbly within the Telco space, DM within Healthcare)
Obviously success is not guaranteed. Informa must retain the key analysts as well as ensure that they don’t change what works well at Ovum and DM (ie Consulting and Reports). Where does this leave us? I still believe that handled correctly the sheer scale and size of Informa enables them to be a credible competitor to Gartner. In a world where I am regularly hearing the demand to speak to someone else beside Gartner this is a welcome move.
My post backs up this point.
To what extent do the IT analyst components (e.g., Ovum, Butler) even figured into the M&A calculation? Both Informa and Datamonitor have more business outside the IT markets. This M&A event could simply reflect the consolidation in the business news/intelligence markets, e.g., Thomson and Reuters.
While we here are all focused on the IT analysts, alas the rest of the world does revolve our little niche. ;->
I agree with Carter - you are all looking thru the wrong end of the telescope. Informa and DM are both information providers across many sectors where tech is simply a sub-horizontal. The days of Gartner et al are numbered simply because the days of technology led change are disappearing rapidly.
I 'fess up - I work for an media company that has a research group focused on the use of technolgy within a particular sector. It's our research, events and publishing business combined that make us successful not that we happen to be good analysts :0
Hi!
I just wanted to update you regarding a rather shocking decision from Informa PLC in which they have closed down Dubai,India and Manchester offices. In the process they have fired about 500 employees.
This news could have a massive impact on their stock value and thus they've kept it under wraps. I would request you to investigate and publish a full report on the same.
Thanks & Regds,
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