Do Informatica's Exec Severance Upgrades Portend Acquisition?

Informatica (INFA) revealed in an 8-K filing with the SEC that the company has beefed up the severance agreements with three of its key executives: CFO Earl Fry, EVP-Poducts Girish Pancha and EVP-Worldwide Field Operations Paul Hoffman. There new agreements amend their severance deals to include their annual on-target bonuses, commission and variable earnings assuming company performance at 100% of target. That seems routine; but maybe it isn’t.

What makes this interesting is the fact that Informatica, a provider of business intelligence software, is a frequent subject of takeover speculation. Patrick Walravens, an analyst at JMP Securities, notes that “companies often put these agreements in place when they are anticipating a possible sale.” He provides four examples of software companies that sold within months after making similar changes in severance agreements with change of control provisions. Previous examples:

• Visual Sciences: Made comparable severance changes on August 2, 2007. Acquired 86 days later.
• Maungistics: Severance changes, September 27, 2005. Acquired 392 days later.
• Siebel Systems: Severance changes, May 20, 2005. Acquired 112 days later.
• Vastera: Severance changes, December 3, 2004. Acquired 34 days later.

Walravens has an Outperform rating and $20 target on the stock.