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Another One Bites the Dust - Gartner Acquires Burton Group
By Louise Garnett
January 7, 2010
Important Details: Gartner has announced that, on December 30, 2009, it acquired Burton Group for approximately $56 million in cash (approximately 1.9 multiple). Burton Group has around 41 research analysts, 40 sales and client service associates, and projected 2009 revenues of $30 million. The acquisition of Burton Group is expected to expand Gartner's product and service offerings, and increase its IT research market opportunity. The combination is also expected to drive operational efficiencies and cost savings. Gartner financed the acquisition using cash and borrowings under its existing line of credit. Gartner expects the acquisition of Burton Group to be accretive to its revenue, earnings and cash flow over time. The Company will provide additional information on the transaction on its fourth quarter 2009 earnings conference call. The Jordan, Edmiston Group acted as advisor to Burton Group in connection with the transaction. Layoffs of Burton Group administration are to be expected (as in cost reductions) with those functions already at Gartner. The main prized assets are the analysts and sales people. Although the 8K mentions that as part of the acquisition the Burton officers and directors will resign the entire management team including the main founders Jamie Lewis and Gary Hein will become employees of Gartner.
Implications: And so another shoe drops in the continuing saga of the larger mid-tier players in the IT Research competitive landscape being acquired. AMR (was #6 out of top 20 in revenue) was recently sold to Gartner (see Insights Gartner Enters into Agreement to Acquire AMR Research, Inc, December 2, 2009) and TowerGroup (was #12 out of top 20 in revenue) and was recently sold to Corporate Executive Board (see Insights The Corporate Executive Board Acquires TowerGroup October 26, 2009). Companies of any reasonable size ($20M+) are disappearing and it took 20+ years to build these companies to this size. AMR and Burton Group were both run by founders who are now cashing in. The IT user side of the market has now consolidated to the point there are not as many competitive alternatives. Other large companies focused on the IT professional include Forrester, IDC Insights, Info-Tech Research Group, Frost & Sullivan, Corporate Executive Board's IT business and Ovum. Ovum (Datamonitor) has been aggressive of late under new management (CEO Mark Meek) with a renewed vision of servicing IT professionals by vertical sector - the company held a big event in both New York and London explaining its new vision. The rest of the IT professional focused companies are very small with Enterprise Management Associates, Current Analysis (their new IT products coupled with recent pricing data partnership with Ideas International), TheInfoPro or specialty players all well under $5M in annual revenues. There continue to be alternatives but AMR and Burton in particular were strong IT end user players and will be sorely missed by those looking for or having done business with them to avoid Gartner.
Burton Group has been on Outsell's rising star list for several years and was identified as a strong player (see Burton Group: Successfully Cracking the IT User Research Market, September 9, 2008). Although positioned in the Gartner press release as a good lower IT tiered player, Burton had made strong progress with its IT1 product, growing that business strongly this last year. That service was a horizontal offering going after the CIO and higher targeted IT professionals with a strategy that was somewhat competitive to Gartner at lower price points. Burton has always been aggressive in its marketing campaigns as well with campaigns aimed at both Gartner and Forrester over the years. It has done very well over the last five years, growing by at least 20% most years.
The acquisition for Gartner is wonderful news for them. It takes yet another significant player who has focused on and grown the IT end user business to $30 million annual revenue into their hands and away from the competitors. Gartner is definitely making all the right moves. In 2009 Outsell identified Gartner as one of the top ten companies to watch (see Insights Market Research and IT & Telecom Research, Reports & Services: 2009 Market Forecast and Trends Report October 22, 2009). This acquisition is a feather in their cap right after AMR, which was another significant win for the company.
For buyers in the IT research industry this comes as another blow as many scramble to decide how to handle the new dynamics. Analyst Relations professionals are stressed to be once again ushered back to Gartner, which is seen as challenging to work with and continues to gain dominance in influence with buyers. Centralized purchasers have also had difficulty working with Gartner especially the last few years as Gartner moved away from enterprise deals. Once again they are faced with fewer choices and consolidation of their centralized buys. The IT users are generally happy with Gartner - they are the main target for Gartner which caters to them well (see IT Professionals' Information Use Habits, Preferences, and Satisfaction June 10, 2009). IT users are typically individual buyers of Gartner services and find good value in what Gartner has to offer.
Overall, when you think about how Gartner got to be so big it was through multiple acquisitions in earlier years. It may be 2010, and a new decade, but nothing is really new under the sun.