TechWeek: Pop Goes the Equity Bubble

There's also a relationship between rising equity dollars and increasing M&A activity: Formerly public firms are more likely to make acquisitions once they are freed from the tyranny of quarterly earnings reports. Frontrange, to cite just one example, was taken private two years ago by Francisco Partners.

Now the software company is back on the M&A stage, but as an acquirer. It recently purchased Germany-based Enteo to broaden its technology portfolio and get a foothold in the European market.

Who's Next?

If you don't have a multimillion-dollar bank account, profiting from the tech M&A boom isn't easy. But it's not impossible. Step one: Get a sense of what companies can and should makes acquisitions -- and why.

Brenon Daly, a financial analyst with The 451 Group, a technology research firm, says Hewlett-Packard(HPQ Quote), for example, hasn't done much in the enterprise content-management space and has lost opportunities to EMC, which snapped up Documentum a few years ago.

There's been speculation that a buy of Open Text(OTEX Quote) could be on CEO Mark Hurd's agenda, but Daly doesn't believe that will happen.

The smaller company has $400 million in debt, and late last year it acquired Hummingbird. Buying a company that probably has not finished digesting an acquisition could make the task of integrating it with H-P's much larger operations more trouble than its worth, says Daly.

A better bet might be Vignette(VIGN Quote), a long-established player in content management. A point in favor: Tom Hogan, who runs H-P's growing software unit, is a former Vignette CEO.

Security is another area that H-P will likely move on, particularly in response to IBM's(IBM Quote) 2006 acquisition of ISS and EMC's takeout of RSA.

Many of the remaining players are privately held, but McAfee(MFE Quote), wounded by the options scandal, would offer H-P expertise in both consumer and enterprise security. Bundling its own security software with its line of notebooks and desktops would be a natural play, says Daly.

One deal you probably won't see: an Oracle purchase of BEA Systems(BEAS Quote). Although Oracle CEO Larry Ellison used to talk about buying the middleware vendor, that talk has faded.

Ellison bragged that middleware sales soared by 82% during the just-reported third quarter; BEA grew new license revenue by an anemic 8% in its recent fourth quarter.

Although he didn't offer hard-dollar figures to prove it, Ellison said his company now books more middleware revenue than BEA -- and remember, middleware is pretty much all that the San Jose, Calif., company sells.

With numbers like that, why should Larry open his checkbook again?

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