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The acquisition of IT analyst firm Meta Group by the larger firm Gartner is just the latest variant of consolidation in the business-technology industry, but it could mean significantly less choice for IT leaders looking for analytical research and consulting.
The $162 million cash acquisition revealed Monday will leave just two mega research firms in Gartner and Forrester Research, with IDC as a third potential choice, says Anthea Stratigos, CEO of Outsell Inc., which provides consulting services to information service providers such as research firms and publishers.
The squeeze on IT budgets over the past several years, along with the growth of the Internet as an often free information resource, has led to decreasing revenue for information service companies in general in the past few years. "The market has been flatlining, and it's been difficult for these firms," Stratigos says. "This is an opportunity for Gartner to buy growth, cut cost in operations and administration, and improve profitability." Gartner reported $638 million in revenue through the first nine months of this year, up 4% from 2003, but its net income dropped 30% to $12 million.
Many IT managers come to rely on the specific analysts covering a technology sector or business issue important to them, and they'll be most concerned about what happens to that person after the acquisition. Fallout could come in an "exodus" of analysts from the consolidated firm, Stratigos cautions. "I don't think there would be a management-planned [reduction in analysts], but when something like this happens analysts often leave become they don't like the new management or just the cultural aspects of the new company," she says.
According to Gartner, the addition of Meta's sales team will enhance Gartner's ability to increase revenue in coming years. The combination will also drive operational efficiency given the complementary nature of the two companies, Gartner says.
Gartner CEO Gene Hall, in a statement, noted both that firms are based in Stamford, Conn., and share complementary business models, which will ease the integration of Meta's offerings into Gartner's service portfolio. "The acquisition will make Gartner a strong company with increased opportunities for growth and greater resources to offer clients," Hall said. Gayl Doster, co-chair of Meta's special board committee, said in a statement that the merger would provide a greater depth and breadth of expertise to help meet the combined companies' business goals.
Gartner has 76 offices around the world; Meta maintains 52 locations.
The merger, which has the blessing of both companies' boards, must be approved by Meta stockholders and regulators. The deal is expected to close in the spring. The investment bank Perseus Group provided financial advice to Gartner on the deal; Wachovia Capital Markets LLC acted as Meta's financial adviser.