I recently mentioned Click Commerce Inc. (CKCM) and just a few weeks later, it caught a takeover bid which puts the stock at a 40% premium from where it was mentioned on August 22. With large IT companies sitting on so much cash, they could very well be looking to put it to work buying one of these companies. The key element is a profitable company with good prospects, little debt and experienced management.
CKCM 1-yr chart:
When it comes to software, I can't stress enough the value of having experienced management. In the highly niche, sophisticated and competitive software market experienced management is the difference between a deal maker or breaker. Product life cycles are very short in the software industry, so if you're buying a software company, you're buying into the people running it.
Here a list of software companies that fit the bill:
Bottomline Tech. (NASDAQ:EPAY) - Electronic banking is a growing market, and EPAY has demonstrated they can be profitable in this space. The CEO has been with the company since 1996 & the COO since 1998.
Covansys (OTC:CVNS) - Profitable software smallcap with a CEO who has stuck with it since 1985.
Moldflow Corp. (MFLO) - Makes computer aided engineering software. I think this company would better complement Illinois Tool Works core businesses than CKCM, but then again, I thought someone like Oracle (NASDAQ:ORCL) would have bought CKCM. CEO has been with the company since 1997.
Pegasystems (NASDAQ:PEGA) - Probably the highest risk stock of the four, but also has the most committed CEO who has been with the company since 1983. With a market cap of 286mm, but an enterprise value of only 159mm, it could easily be taken over by one of its many impressive partners.