Higher-education software giants Datatel and SunGard Higher Education today announced plans to push forward with a merger after receiving clearance from the Department of Justice.
The two companies publicized the plans back in August, when the private-equity firm Hellman & Friedman LLC, which owns Datatel, said it would buy SunGard Higher Education for $1.775-billion. Now Datatel, under Hellman & Friedman, is seeking a $1.2-billion loan to finance the acquisition of SunGard, according to a Bloomberg article.
Trace Urdan, a financial analyst for the brokerage firm Wunderlich Securities, says this is a sensible merger that stands to strengthen both companies, but that it raises several issues for the college officials who buy the popular software packages for their campuses.
“Buyers are frustrated that there is this continual march towards consolidation in the industry,” Mr. Urdan said. “Historically buyers have loved Datatel, but maybe with this merger that will change.”
Ron Lang, chief executive of SunGard Higher Education, said in a statement that the merger will only help the companies better serve their customers.
“Our largely complementary products and services portfolios blend well, and our deep, shared commitment to our customers will continue to fuel the long-term relationships and innovative spirit we value so highly,” Mr. Lang said.
But as companies continue to merge in what is a finite market, buyer power is only diminished, Mr. Urdan pointed out, and competition among the vendors decreases.
The companies, which together employ over 3,000 people, plan to complete the purchase in the first quarter of 2012.