Last week, PhillyDeals noted how Oracle Corp. has bought up three Philadelphia-area software firms -- Primavera Systems (construction management, Bala Cynwyd), Global Knowledge Software LLC (business process, King of Prussia) and AdminServer Inc. (insurance, Chester) -- since May.
That's not necessarily a bad thing, says Gregory Case, managing partner and tech-company watcher at $1.4 billion-asset LLR Partners, Philadelphia. "Primavera was a significantly-sized business, a profitable business, that had two good private equity firms backing it," he told me. "For Primavera, it was a good time to get a decent price from one of the handful of major buyers that are still active.
"There has not been a viable public market for software companies for a long time," Case said. "A more viable route is to find a strategic buyer like Oracle. That's the most dependable route for a software company."
And who wants to IPO anymore? "If you've bootstrapped a company with your bare hands and a checkbook, you might not want to be public. You don't want the expense, or the liability. You have cash. You're not buffeted by the vagaries of the public market. And you don't have to do all the things a public-company CEO has to do."
Like biotech companies -- which are selling out to Big Pharma instead of going public -- software is "intellectual-property driven. Software companies like Oracle and pharma companies like GlaxoSmithKline now outsource R&D, buy the products back, and move them to a new distribution channel."
Big buyers can be good for Philadelphia, Case said. "In some industries, acquiring companies may move jobs out of the area. But in a lot of businesses that are intellectual-property driven, the developers of the new drug or software are valuable to the owner. They can find other jobs pretty easily. You can't make them move out to California."
There are signs that at least one of Oracle's acquisitions plans to keep expanding in the Philadelphia area. "AdminServer continues to grow and invest in their space," said Chris Buccini of Buccini/Pollin Group, landlord for AdminServer at The Wharf at Rivertown, in Chester.