Deal Focus: IBM To Acquire Green Hat

January 4, 2012

IBM is back to its usual acquisitive pace, with the announcement it plans to acquire application testing software maker Green Hat. The purchase marks IBM’s first acquisition of 2012 and sixth acquisition since October. Privately-held Green Hat makes technology that allows developers to test their product in the cloud, rather than setting up an actual testing lab of hardware and software. Terms of the acquisition were not disclosed.

We wrote about the shift of application testing to the cloud last summer and noted IDC expects global testing services spend to grow to more than $19 billion by 2015 — so it is no surprise that IBM is taking advantage of the market’s growth opportunities. Green Hat’s software creates a virtual environment for software testing that simulates a wide range of IT infrastructure elements, without the constraints of hardware or software services. Green Hat will join IBM’s Rational Software business, and will offer users greater efficiencies when combined with its Rational Solution for Collaborative Lifecycle Management. It will also be offered through IBM Global Business Services’ Application Management Services (AMS).

The typical benefits of a cloud solution apply here — by using Green Hat’s solutions, a virtual test environment can be set up in a matter of minutes versus the weeks it generally takes for traditional set ups, and for a fraction of the cost. The acquisition extends IBM’s offerings for business agility and software quality, ultimately changing the way enterprises manage software development cost, test cycle time and risk.

While IBM’s acquisition pace petered off at the end of 2010 and beginning of 2011 (ironically, a particularly active period for the M&A market), the company managed to eek out eight acquisitions for all of 2011, totaling approximately $2.4 billion. It paid healthy sums and multiples for a number of these companies including DemandTec ($438.5 million; 5.0x revenue); Q1 Labs ($575.0 million; 8.8x revenue) and i2 Inc. ($500 milion; 5.9x revenue). Chances are IBM will resume its regular appetite for acquisitions in 2012: the company has said it plans to spend $20 billion on acquisitions by 2015.


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