The end-user IT advisory world got a lot smaller in January when Gartner, Inc. announced that they had entered into an agreement to purchase all of the assets of Meta Group for $162 million ($10/share). The only thing that we found surprising about the deal was the timing. Meta had announced last summer that it had retained investment bank Wachovia Securities to assist in looking at options for its future. We had expected Meta to go in the $150 million range, but had thought that it would be towards the end of the first half of next year. We believe that this acquisition will have a large affect on the marketplace as it narrows the options for technology buyers looking for advice and generates new opportunities for firms looking to supply them.
The 2003 acquisition of Giga, Inc. by Forrester Research had narrowed the number of what we at KCG call Deal Makers and Breakers (DMBs) to a three-horse race – Forrester and Meta at about $120-$125 million in annual revenues and behemoth Gartner at $856 million. Yesterday’s announcement leaves only two real choices for corporate IT buyers to turn to for advice on technology purchases – Gartner and Forrester. This isn’t because there are not a number of firms that offer technology analysis… there are. It is because there are very few firms that have invested the time and effort in building a business model, and most particularly a sales force, that caters and sells to the technology-buyer community. Most of the hundreds of “analyst firms” in the market cater and sell to those who sell technology, not buy it. The DMBs (Gartner, Forrester and Meta) are the only firms that have been successful in building that model.
We believe that this is a very shrewd move on Gartner’s part. Not only does it make it a binary choice in advisory firms, but we believe that it effectively shuts out any outside competitors from entering the DMB marketplace. As long as Meta was in play, a firm without the end-user/buyer business model could have bought one. Now, they can’t. This eliminates one of Gartner’s most significant long-term threats.
There will, of course, be issues with the acquisition. Because in many ways Meta was a near clone of Gartner, there is a significant overlap of clients, coverage, products, services and organization. We think it is unlikely that Gartner retains much of Meta’s workforce. Our bet is that only the analysts (around 100 at last count) and sales force are retained and that this will cause PR headaches for Gartner in their (and Meta’s) hometown of Stamford, CT. We also think that there will be some company culture issues with Meta employees (especially the analysts) that join Gartner because of Gartner’s much larger, more rigid management structure and bureaucratic organization.
Here is what we think will be the immediate impact of the deal:
Meta Clients – Obviously, current Meta clients have the most to lose in the deal. In Analyst Relations (AR), we all know we work with analysts, not analyst firms. Historically, the hardest thing for analyst firms to do when merging is to retain analysts (especially good and/or visible ones); therefore we think that there is a pretty good chance that you won’t be able to just still work with the analysts, for the same reasons. Another issue to be dealt with is current Meta contracts. If you have been following our advice not to enter into multi-year deals with the analyst firms, then you should be OK. We expect Gartner to make public very soon whatever transition plans they have for Meta customers (most of whom are also Gartner clients) to the Gartner fold. Our advice? Start now to work with your Gartner and Meta sales rep to manage the transition and make sure they know what you expect from them, don’t just sit back and wait.