College graduates, For-Profit, International, Investors, Required, University & College - Written by Elbert Chu on Tuesday, August 9, 2011 7:05 - 0 Comments
SunGard HE and Datatel Tango in $1.78-billion Merger
by Elbert Chu
SunGard Higher Education Inc. and Datatel Inc. announced Aug 8, that pending U.S. regulatory approval, they will be merging into one behemoth education technology company. If the deal goes through as planned, the still-unnamed-company of 3,000 people will serve over 2,300 colleges, universities, foundations and state systems in 40 countries, or roughly 50% of the market (according to an Educause report).
Combined annual sales from the marriage will be somewhere in the neighborhood of $600M, putting pressure on competitors Campus Management, Jenezabar, and Oracle. Current Datatel CEO, John Speer, becomes CEO of the new company. Current CEO of SunGard HE, Ron Lang, becomes Vice Chairman of the board of directors. Likely to be finalized by March 2012 at the SunGard Summit.
Hellman & Friedman is the private equity firm purchasing SunGard HE from SunGard Data Systems Inc. to augment their 2009 purchase of Datatel for $570M. The companies both provide software to higher education schools that help manage complex administration solutions for enterprise resource planning, human resources, financial aid, student data, and mission critical after the “gainful employment” rules, recruitment and retention.
In a joint presentation, both Speer and Lang struck an upbeat tone, lauding the benefits of bigger is better. They promised more innovation, more collaboration, continued investment in existing products from each company.
Cause for Concern
Schools make sizable investments of cash and time into products like SunGard HE’s Banner, and Datatel’s Colleague. Once they commit to a system, administrators want to be assured many years of support and continued development. Understandably, this announcement is might make some schools squirm. Inside Higher Ed explains that the companies have many overlaps, and while a lot of cuts will be gutting redundant management, the schools are worried about the product lines:
For customers, the implications of Friday’s deal are not immediately clear. In the care of a private equity firm, the new company will probably not be allowed to carry a lot of extra fat, said Barbara Brown, president of EduServe International, a consulting firm that specializes in ERP software and is not attached to any particular company.
What to look out for:
Brown said she would advise her higher ed clients to be on guard against marginal changes in price and service over the next three to five years. To the extent that its private-equity overseers will be looking to build a lean operation and achieve economies of scale through the merger, the new company will probably be smaller than the sum of its parts, she said.
“Be cautious about signing new contracts, and make sure you’re in a position to negotiate new maintenance contracts,” said Brown. “[And] look at response time on help calls.”
Campus Technology has an interesting perspective from Nicole Englebert, of Ovum.
“…she doesn’t foresee cuts in the client services or support areas. “They don’t want to jeopardize their installed base. That would be insanity.”
Also left intact, she predicted: SunGard’s professional services. “That is something that has always set it apart from Datatel or Oracle or Campus Management. SunGard’s professional services are above and beyond. They truly have a professional services organization that the other firms could never really compete with.”
Deal presentation, and other details at SunGard HE mini-site.
Education-Technology Giants SunGard and Datatel Announce Merger: The Chronicle of Higher Ed
A Back Office Deal: Inside Higher Ed
Hellman & Friedman Builds $600M Software Platform With $1.78B Add-On: LBO Wire, Dow Jones
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