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CRM Software Developer Chordiant Acquired by Pegasystems

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Posted March 16, 2010 By Larry Barrett     Feedback

The business process management software firm makes a splash in the customer relationship management space with $161.5 million purchase of Chordiant.

Business process management (BPM) software developer Pegasystems made a strategic move to broaden its product offerings with the proposed acquisition of Chordiant Software, a developer of customer relationship management (CRM) applications, for $161.5 million, company officials said.

Pegasystems (NASDAQ: PEGA) will pay $5 a share for all outstanding Chordiant (NASDAQ: CHRD) shares, a 31 percent premium above Chordiant's closing price on Friday that sent Cupertino, Calif.-based Chordiant shares skyrocketing up $1.17 a share to $4.98 in Monday afternoon trading.

Shares of Cambridge, Mass.-based Pegasystems rallied up $2.47 a share, or 7 percent, to $39.30.

Company officials said the merger will allow the newly combined company to expand its global customer base by jointly developing new applications for enterprise customers looking for integrated BPM and CRM applications in their new private and public cloud implementations.

"This combination creates a broader portfolio which will offer an expanded client base new capabilities to meet next-generation CRM needs," Pegasystems CEO Alan Trefler said in a statement. "We are excited to add Chordiant's technology and domain expertise to bolster our previously announced investment plans in BPM and CRM."

The acquisition is just the latest in a series of deals that has further consolidated the enterprise software space.

In December, IBM acquired privately-held BPM developer Lombardi and in January, Progress Software snapped up Savvion, another well-established, privately-held BPM vendor for $49 million.

BPM software choreographs multiple business processes and enables different applications and technologies employed in a distributed computer network to work together.

It's clearly a hot market. According to IDC, worldwide BPM software sales will grow at a compound annual growth rate of nearly 15 percent a year for the next four years—pushing the total market from roughly $1.7 billion in sales this year to more than $3 billion by 2013.

A Gartner report released last summer found that 55 percent of companies expect to increase their BPM spending by at least 5 percent in the next year.

A flock of upstart and recently acquired subscription- and cloud-based BPM providers has provided an affordable option for small and midsized businesses that have historically passed on expensive, on-premise BPM implementations undertaken by large enterprise companies.

Pegasystems said the purchase will likely be dilutive to its earnings in 2010 but will add as much as $0.03 a share in profits, on an adjusted basis, in 2010 and as much as $0.20 a share in 2011.

Chordiant, which counts the likes of Time Warner Cable, T-Mobile and the Royal Bank of Scotland among its customers, reported sales of more than $76 million last year.

The merger is expected to close in the second quarter of this year.

Larry Barrett is a senior editor at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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