Hyperion and Arbor Software, two of the leading specialists in onlinenew leader in the fast-growing market for financial ‘analytic applications’, reports John Stokdyk. analytical processing, have agreed to merge.
The merger will be accounted for as a pooling of interests, effected by issuing 0.95 of an Arbor share for each Hyperion share. On 22 May, the combined company’s market capitalisation would have been $1.3bn (#800m).
Hyperion’s annual sales of $270m overshadow Arbor’s $82m, which will be reflected in a four to three majority on the combined board and the ultimate ownership split, with Hyperion shareholders holding around 60% of the equity and Arbor shareholders owning 40%.
If the deal gains regulatory approval in August, the new company, Hyperion Solutions, will be set to dominate the emerging market for ‘analytic applications’, which allow managers to collect and examine figures from financial transactions almost as they happen.
Hyperion’s Enterprise is the acknowledged market leader for consolidation software and the company also produces planning and budgeting programs.
Its Spider-Man product allows this financial information to be distributed via the World Wide Web.
Arbor’s flagship product, the Essbase multidimensional database, is the underlying engine for many datawarehouse systems, and is built on top of financial systems from the likes of Lawson, IBM, PeopleSoft and Walker.
According to Matthew Goldsbrough, Hyperion’s European vice president for marketing, the two companies had discussed a possible merger for several months. As competitors, they each had a healthy respect for the other side.
He said: ‘Arbor has experience in datawarehousing and the OLAP market, and generally deals with IT people. We have more experience at the application end of the market with tools principally of interest to finance people. The combination gives us a range of things to go after.’
Analytic applications can be used for tasks such as sales and profitability analysis, budgeting and planning, performance measurement and financial reporting and consolidation. The market for such software was estimated to be worth over $800m in 1997 by International Data Corporation, which predicted it would exceed $2.6bn by 2001.
Growth figures such as these do not often escape the notice of US software giant Microsoft. The Windows developer is poised to throw its considerable weight into play later in the year when it introduces Plato, its own OLAP database server which threatens to undercut Arbor’s Essbase product.
Goldsbrough, however, denied the Hyperion-Arbor merger was a Microsoft-inspired defensive move. ‘Anybody starting to build analytical applications now with Plato is coming to the party rather late. We have a long track record of building dependable applications and Arbor has a good track record of building databases and interfaces.’
David Schou, European market analyst specialising in decision support tools, said IDC had only coined the phrase ‘analytic applications’ around 18 months ago. ‘This merger validates that market opportunity,’ he added.
Schou accepted there was a good fit between the two companies, but warned that they would need to overcome internal competition and blend the two sales wings. ‘Previously, Arbor and Hyperion sales reps have been calling the same accounts to sell budgeting solutions,’ said Schou.
‘They need to clarify their product offerings so users aren’t confused.
In future, they need to expand their analytic applications beyond financials and go into faster growing areas, such as sales and marketing.’
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