CA Picks Up Rally Software for $480 Million, Adds to Agile, DevOps Offerings

CA Technologies (CA) plunked down $480 million, or $19.50 a share in cash to acquire Rally Software (RALY), a Boulder, CO-based provider of a cloud-based Agile development platform. CA called the acquisition a strategic move to bolster its Agile and DevOps portfolio and a “significant milestone” to help its customers in the “application economy.”

Boards of both companies have approved the deal, which is expected to close in CA’s FQ2 2016 or before September, 2015. CA said that less than 5 percent of Rally’s customers overlap with its platinum accounts, providing the vendor with cross-selling opportunities. Rally’s sales force, consultants, Agile coaches and freemium go-to-market model focused on developers come along with the deal.

Rally, which employs about 500 people, posted FY 2015 sales of $88 million. In the past three months, the company’s stock has bolted 59 percent to close Friday, May 29 at $19.42 a share. Rally’s market capitalization stands at $498 million. CA, which finished FQ4 2015 with some $2.8 billion in cash, said it will fund the deal from operating cash flow. The vendor expects Rally to add up to two percentage points of revenue to its sales totals for FY 2016, officials said.

CA chief executive Mike Gregoire said Rally’s cloud-based technology maps to CA’s DevOps and Management Cloud offerings.

“We view today’s announcement as a strategically compelling combination that strengthens CA’s ability to take advantage of the disruption software is creating to traditional business models in today’s ‘application economy,’ he said. “With applications driving every facet of business, the need to quickly develop high quality code that provides immediate return on investment is driving the adoption of agile development. The sentiment in corporate boardrooms is that (1) every business is in the software business, and (2) all companies must become adept at developing applications or perish,” said Gregoire.”

“At CA we fundamentally believe the fastest businesses to convert ideas to software to loyal users will own the future,” he said. “This conviction is shared by Rally…” said Gregoire.

Rally and CA have an existing, four-year customer relationship in which CA has “been able to successfully adopt the scaled agile framework and meaningfully improved our development organization,” he said.

Tim Miller, Rally chairman and chief executive, said the “powerful combination of Rally and CA will help our combined customers to better navigate changing markets, improve performance and deliver value faster while accelerating the pace of disruption and developing a competitive advantage through technology.”