As companies try to find ways to cut costs, one popular approach is to leverage software. And an area that is getting lots of traction is supply chain management. Hey, it's worked for companies like Wal-Mart (NYSE: WMT), right?A leader in the supply chain software space is JDA Software (NASDAQ: JDAS). Well, now the company is going to get bigger; that is, it will purchase i2 Technologies (NASDAQ: ITWO) for $396 million. In fact, the deal will make JDA the world's largest player in the supply chain space.
As a combined entity, there will be more than 6,000 customers and annual revenues of $617 million, with EBITDA of $179 million. What's more, JDA will get a chunk of the discrete manufacturing market. For example, i2 has such customers as Dell (NASDAQ: DELL), GM and Caterpillar (NYSE: CAT).
While software acquisitions can be complicated, JDA has a strong track record. A few years ago, the company purchased Manuguistics and was able to not only get cost savings but even revenue synergies. Besides, JDA and i2 have spent extensive time working together already, which should help smooth the integration process. Keep in mind that the companies tried to merge a year ago, but got derailed by the financial crisis.
Ultimately, the JDA-i2 deal should help boost growth for awhile. However, it's going to get more difficult to find other deals to move the needle. Thus, it would not be surprising that JDA eventually sells out to a bigger player like Oracle (NASDAQ: ORCL). And, with its extensive supply-chain footprint, a deal would certainly be attractive.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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