Forrester Grabs Giga as Research Sector Shrinks

Bulking up to compete against Gartner Inc., Forrester is buying Giga Information Group for $60 million cash.

“This deal will consolidate the industry,” George Colony, Forrester’s chairman and CEO said in a conference call this morning. “This is important as companies cut back IT research to the top to or three providers.”

Giga brings 900 clients, many in government and financial services, sectors where Forrester has not focused. Giga’s research is also geared toward IT executives, rather than marketers, a distinction that has helped it weather the slowdown.

Colony scouted Giga twice before but shied away, partly because of the price, but also because the company was losing money. But with the arrival of executives who “taught them how to make a buck,” Colony said he became more merger-minded.

There were no competing offers for Giga, although other companies have been said to have discussed a possible buy previously.

The companies also have similar cultures and research methodologies, Colony said. Plus, being separated by only a few blocks in Cambridge, Mass.’s Kendall Square, will facilitate a smooth integration.

Specifics for melding the two operations are in progress, however, no details will be released until the transaction closes. Pending shareholder approval, papers could be signed by the end of February.

Though Forrester hasn’t done an exhaustive analysis, Colony estimates that about half of Giga’s clients also use research from Gartner, the Stamford, Conn.-based firm that boasts more than 10,000 clients.

For Giga and its investors, the sale will bring three times the current stock price. Giga’s largest shareholders, founder Gideon Gartner (17 percent) and investment bank W.R. Hambrecht & Co. (15 percent) favor the sale.

Gideon Gartner will play no role in the management of the combined company, Colony said. The MIT graduate helped shape the IT research industry when he founded Gartner Group in 1979. He later left the company in a dispute over coverage philosophy and founded Giga in 1996.

The IT research and analysis industry exploded along with the Internet in the late 1990s. Firms expanded their coverage and staffs to help technology buyers and marketers make sense of new technology and craft business plans to take advantage of it.

Like other sectors that became dependent on its client’s access to venture capital and IPO dollars, firms had to cut back after 2001. In fact, Forrester made several cost-cutting moves, including laying off nearly a quarter of its staff in January 2002.

Others sold their assets. For example, in August, this publication’s parent, formerly known as INT Media, paid $250,000 for the remaining assets of Jupiter Media Metrix’ research and events businesses. Subsequently, INT Media changed its name to Jupitermedia Corp.

Editor’s note: In some instances, Jupitermedia Corp.’s Jupiter Research arm competes with Forrester, Giga and Gartner.