IBM to Acquire DemandTec to Expand Cloud-Based Analytics for Smarter Commerce

IBM (NYSE:IBM) and DemandTec (Nasdaq:DMAN) have announced a definitive merger agreement for IBM to acquire DemandTec in an all cash transaction of approximately $440 million. The acquisition of DemandTec will extend IBM’s Smarter Commerce initiative by adding cloud-based price, promotion and other merchandising and marketing analytics to help companies better define the best price points and product mix based on customer buying trends.

Organizations are struggling to meet the demands of rapidly shifting customer buying patterns in the era of mobile and social networks. This new digital marketplace requires companies to be highly responsive to consumer demands on the fly. Whether it’s setting and executing the right pricing strategy or the ability to automatically adjust pricing based on online and offline data, being able to rapidly shift to market changes has become a key competitive advantage for global businesses.

IBM estimates the market opportunity for Smarter Commerce at $20 billion in software alone. Extending these capabilities to the cloud gives organizations immediate access to consumer information, providing instant return on investment.

DemandTec delivers cloud-based analytics software that enables businesses to examine different customer buying scenarios, both online and in-store. As a result, companies can spot trends and shopper insights to make better price, promotion, and assortment decisions that increase revenue and profitability.

By gaining a quick and accurate analysis of consumer trends, for example, a retailer can predict how consumers will respond to a price change before making that critical decision. A brand manager can adjust the marketing mix for a product to better drive sales in the grocery channel. A merchant and supplier can work together to understand how one shopper segment differs from another to craft the best merchandising plan. By understanding shoppers across channels, companies can adapt more quickly to rising customer demands.

“IBM Smarter Commerce is redefining how brands buy, market, sell and service their customers in ways that their customers want,” said Craig Hayman, General Manager of Industry Solutions at IBM. “Bringing science to the art of pricing and promotion is a big part of this strategy, and the combination of DemandTec and IBM will help marketing and sales executives in retail and other industries drive more revenue and increase profitability.”

“DemandTec has unprecedented capability to improve customers’ price and promotion tactics on a stand-alone basis and connect retailers and manufacturers for collaborative planning through the cloud,” said Dan Fishback, President and Chief Executive Officer of DemandTec. “IBM Smarter Commerce is the perfect fit for DemandTec. IBM is the only provider of price and promotion offerings within a rich solution set that supports companies’ buy, market, sell and service processes.”

Consistent with IBM’s Smarter Commerce strategy, IBM will continue to support and enhance DemandTec’s technologies and clients while allowing them to take advantage of the broader IBM portfolio. DemandTec will be integrated into IBM’s Software Group, which is a key driver of growth and profitability for IBM.

DemandTec is based in San Mateo, Calif. and has more than 350 employees, with additional offices in Minneapolis, London, Paris, and Bangalore.

The acquisition is subject to DemandTec shareholder approval, applicable regulatory clearances and other customary closing conditions. It’s expected to close in the first quarter of 2012.