Software company Informatica Corp., known among CIOs for its enterprise data integration platform, is going private....
The $5.3 billion acquisition by European private equity firm Permira and the Canada Pension Plan Investment Board was announced April 7, with the deal expected to close in either the second or third quarter of 2015.
Before CIOs begin retooling their data governance strategies, analysts said the decision might turn out to be a good thing for Informatica customers, enabling the company to maintain independence as it transitions to a more cloud-centric business model while shielding it from the scrutiny and the financial pressures of Wall Street.
"Our current guidance for CIOs is to sit tight and watch carefully for the strategy to evolve," said Ted Friedman, an analyst at Gartner Inc. "We are not recommending anyone to de-invest, because it's possible that the buyout can be a positive thing."
The strategic direction Informatica takes remains to be seen, but in a press release announcing the acquisition, the buyers made it clear that the cloud, data and analytics will play a dominant role. "We are very excited about the company's ongoing transition to cloud and subscription-based services as well as its continued pursuit of four separate billion dollar market opportunities in cloud integration, master data management, data integration for next-generation analytics, and data security," Brian Ruder, a Permira partner and co-head of the firm's technology sector team, said in the April 7 press statement.
The potential benefits
Ted Friedmananalyst, Gartner Inc.
Informatica, founded in Redwood City, Calif., in 1993, has been providing cloud-based data governance products for years now, but going private could provide the company with the latitude it needs to more firmly reorient itself in that direction, Friedman said. As a publicly traded company, Informatica would likely have struggled to transition its revenue stream from a traditional software licensing model to a month-to-month model "where the recognition of revenue happens over a more elongated period of time," Friedman said. "Going private will enable Informatica to shift to a cloud and subscription pricing direction without feeling the brunt of profitability."
Boris Evelson, a business intelligence (BI) analyst at Forrester Research Inc., agrees that the news could very well be a good thing, especially for the BI community. Independent BI vendors rely on partnerships to provide data integration and data preparation capabilities, but when smaller vendors are gobbled up by bigger ones, it's not unheard of for the tools to be taken out of the partnership ecosystem, he said. By going private, Informatica will likely remain independent and continue providing those capabilities to BI vendors through strategic partnerships.
The potential drawbacks
The Informatica deal calls to mind another recent acquisition, analysts said. Last fall, Tibco Software Inc., an infrastructure and business intelligence software company, was taken private by Vista Equity Partners for $4 billion. Tibco and Informatica share similarities in terms of company size and even product offerings, Friedman said. Because Informatica's strategy is still unknown at this point, Friedman pointed to the Tibco acquisition as a potential model of things to come. "It's something for Informatica customers to keep an eye on," Friedman said.
Specifically, Tibco's new owners appear to be choosing to retain some of the company's product offerings while decommissioning others, Friedman said. In the press release, Permira, one of Informatica's buyers, highlighted four product lines as strategic going forward: cloud integration, master data management, data integration for next-generation analytics, and data security (an area Informatica is not well known for). All four product lines are critical to the modern business, but Friedman said he was surprised the buyers didn't go broader by mentioning information governance, which would have extended the umbrella to, for example, data quality, what has traditionally been a strong product area for Informatica.
Still, Friedman said, without more information, one can't know where Informatica is headed. "And in the absence of more facts and evidence, Informatica customers should watch carefully -- even push Informatica and its potential new owners, but this is not time to panic and jettison investments," he said.
Informatica goes private. Last fall, Hortonworks went public. Read more here.