5 Mega Acquisitions of Open Source Companies

Being an open source company, one of the challenges we face is explaining people a few basic concepts about open source. “No it’s not the same as non profit”, “Yes, you can defend your assets”, … These are some of the answers we need to repeatedly provide.

Can you sell an open source company

One of the misconceptions that are more rooted in logic are about selling open source companies. Once you try to analyze the potential acquisition as a build vs. buy decision it seems like the build option will be much easier for the potential acquirer as the code is already out there.

Open source success: large acquisitions

Open source companies get acquired for hundreds of millions of dollars despite not having any real way to protect their code base from being copied.

MySQL acquisition by Sun Microsystems

The largest acquisition of an open source company to date. in January 2008 Sun Microsystems announced they will buy MySQL for 1 Billion Dollars. At the time MySQL was one of the most common database choices for Web2.0 startups and was the ‘M’ in the all open source LAMP stack.

VMware buys SpringSource

This $420M deal was announced by VMware on August 2009. SpringSource was a provider of Platform as a Service solutions that can be either self hosted by enterprise customers or cloud hosted for web applications.

JBoss acquired by world’s biggest Linux distributor Red Hat

In 2006, one of the earliest acquisitions of open source companies occurred when one of the companies behind Linux, Red Hat bought JBoss, a middleware provider. The deal was estimated at $420M with a combination of stock and cash.

Citrix acquires XenSource

Citrix systems, which at the time specialized in remote access management made a move in August 2007 towards the virtualization space and acquired an open source company by the name of XenSource. The deal was valued at $500 Million and positioned Citrix in competition with VMware. Here is a link to the announcement.

Zimbra getting purchased by VMware

Zimbra is a really special case. It’s an open source company that got bought 3 times. In 2007 it was Yahoo who paid $350M for it. In 2010, VMware decided to start expanding from virtualization into other IT area and acquired Zimbra from Yahoo Inc. Zimbra’s last purchaser was Telligent who bought it from VMware – here is the announcement.

Why pay so much for publicly available sources

While the biggest acquisitions have been in the Enterprise IT space, there are many other smaller companies that got purchased for slightly smaller amounts and came from different spaces. The one thing that is common to all of them is that they all have different assets beyond their code base. It could be domain expertise, strong customer base or a huge user data base. At the same time, if you try to analyze mergers and acquisitions of closed source companies you will discover that very few of them are driven by a need to own the code base.
I hope this list will help those of you who are considering opening their sources. If you are reading this article, it’s likely that you are already convinced this is a good move but you might need the ammo to convince others so feel free to use this as reference.
If I missed a major acquisition that you think I should add to the list feel free to share in the comments or tweet me @y_nizan.

 

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