Event
On 5 August 2011, affiliates of the private equity firm Hellman & Friedman announced that they have signed a definitive agreement to acquire SunGard Higher Education from SunGard Data Systems for $1.775 billion. The affiliates plan to combine SunGard Higher Education with one of Hellman & Friedman's portfolio companies, Datatel, and operate both businesses as a single company focused on the higher education market. Datatel's current CEO, John Speer, will lead the combined company while SunGard Higher Education’s CEO, Ron Lang, will be the vice chairman of the board of directors. Hellman & Friedman did not announce where the combined company would be located.
Analysis
Combining SunGard Higher Education with Datatel will create a large company with a huge customer base and two viable product portfolios that cover most of the varied sizes and levels of complexity in educational institutions. Hellman and Friedman, which already owns Datatel, is handling this combination; thus, it already has a substantial presence in the higher education market. (The merger will not include SunGard Data Systems' K-12 business, which SunGard Data Systems will retain.) In addition, combining the two companies will:
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Leverage their strengths in research and development (R&D).
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Enable institutions to access a broader solution portfolio, including the combined products and services of both Datatel and SunGard Higher Education.
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Provide a strong revenue stream, which will help fund the company's international expansion into untapped ERP markets.
SunGard Higher Education's Banner product and Datatel's Colleague product are market leaders with a strong following; thus, an interchange of concepts and codes could potentially enhance both suites. Though the two companies' cultures and technologies differ, their focus, staffing and long-term client relationships are similar, which should ease their integration. Both companies have stated that their goals include blending intellectual capital and R&D for the common development of like functions, which could lead to increased functionality. In addition, Gartner expects continued head-to-head competition in the international market between Oracle's Campus Solutions and the current SunGard Higher Education's Banner Digital Campus.
Both Datatel and SunGard Higher Education have a large amount of contract value in maintenance streams and, in the near term, are unlikely to make any moves that would jeopardize it. However, until the combination is complete, competitors may try to take advantage of confusion among both vendors' current and prospective customers to compete for new or renewed business. Higher education customers might also turn their attention to open-source back-office offerings from the Kuali Foundation.
Nevertheless, in the long run, Gartner does not expect market share to shift significantly in North America as a result of this deal, as many viable competitors remain, including Oracle's PeopleSoft Enterprise Campus Solutions, Jenzabar's CX and EX suites, Campus Management's CampusVue, ComSpec's Empower and Three Rivers' CAMS. In addition, Blackbaud's suite is expanding into the market for smaller four-year institutions. In the international market, many of the new company's competitors serve multiple countries (for example, SAP and Agresso) or offer country-specific solutions (such as HIS in Germany, which provides both a student- and back-office-based suite).
