Thursday, April 02, 2009

Article Overview - Fragmented e-discovery space to see spike in deal making

Here is an interesting article by Bijoy Anandoth Koyitty posted on Reuters about how acquisitions will play a part in the growth plans of some of the larger companies in the e-discovery space. You can click on the heading above to view the entire article. A few key exerpts....

BANGALORE (Reuters) - In mid-2000, as the dotcom boom was peaking, executives of information protection firm Iron Mountain Inc noticed an interesting trend while doing PC back-up and e-mail archiving for their clients.

Customers were increasingly demanding a system that would help them search and retrieve documents from complex file back-ups for producing as evidence in litigation, internal investigations and regulatory inquiries.

Nine years since, the technology, known as electronic discovery, has spawned a highly fragmented $3 billion industry, and the bigger players are now eyeing acquisitions to broaden their customer base.

"There are many smaller players with revenue, but not many with critical mass. Some have decent products. So the business is ripe for consolidation," Sidoti & Co analyst David Gold said.

In the nascent years of e-discovery, Iron Mountain responded to its customers by offering existing solutions. Later, in 2007, when it found that time was ripe for serious investments, it got aggressive with the acquisition of e-discovery firm Stratify.

Along with Iron Mountain, several other companies like FTI Consulting, Epiq Systems and Guidance Software and privately held firms such as consulting giants Ernst & Young, KPMG, Deloitte and PricewaterhouseCoopers, are competing for a bigger share of the market.

In the last five years, the market saw as many as 18 acquisitions, according to technology research firm Gartner.

Recent ones include business advisory firm FTI Consulting's deal for Attenex and Seagate Technology's acquisition of MetaLINCS.

Larger players such as IBM, EMC Corp and Symantec Corp operate in the technology platform solution segment of e-discovery.

... Analysts believe it is important for companies to focus on acquisitions that are technology specific and build a complete platform at this point in time, than go in for roll-up acquisition that targets a rival's turf.

Companies will not be able to gain considerable market share through roll-up acquisitions presently because of the fragmented market, and any such action would be a "very risky process," analyst Mark Schappel of Benchmark Co said.

"We will consider acquiring technology that rounds out our core capabilities and integrates well with our technology," Guidance Software CEO Victor Limongelli said.

... The years that followed saw regulations getting stringent on e-discovery and an amendment in December 2006 made it mandatory to include electronically stored information in initial disclosures.

"E-discovery is something that organizations have to do these days, regardless of other technological investments," said John Bace, an analyst with Gartner.

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