Belly up to the acquisition bar, boys.

Enterprise applications software makers gorged on acquisitions this year, filling their plates with billion-dollar megamergers and niche deals to round out their portfolios.

U.S. software mergers amounted to 656 deals this year, according to Thomson Financial's latest figures through November.

Oracle led the way in high-profile acquisitions, from closing its controversial and hard-fought $10.5 billion purchase of PeopleSoft to announcing its $5.8 billion acquisition of former rival Siebel Systems.

But Oracle didn't stop there. It also announced about a dozen other strategic acquisitions, from retail software maker Retek to logistics and transportation management software maker G-Log.

The software merger mania that erupted this year came as players tried to bulk up in revenue size as a means to achieve double-digit profit margins, investment bankers said. With acquisitions, software vendors hoped to dramatically increase revenues at a disproportionately higher rate than costs, given the industry's reputation for low manufacturing costs.

Others pointed to an industry ripe for consolidation, given the number of players in what had been a fractured market post venture capital funding boom in the late '90s and early 2000.

SAP, the industry's largest enterprise applications vendor, also had an unusually busy year.

"It's been a long time coming," said James Mackey, SAP's head of corporate finance. "We see a lot of nice assets out there that would be consistent with our strategy and easy to integrate into our (products) quickly. Also, software is evolving and that makes it easier to integrate them without having to rewrite the code base."

TomorrowNow, a support services company for former PeopleSoft and J.D. Edwards customers, proved to be a strategic acquisition as it put SAP in the services businesses.

The remaining nine SAP acquisitions, however, focused on companies and technology that were complementary to its product line and easily integrated, Mackey said. Those deals included Lighthammer Software Development, an analytics company for the manufacturing industry, and retail software maker Khimetrics.

SAP either closed or announced a total of 10 acquisitions this year--the most ever in its 33-year history, said Mackey. Last year, for example, SAP engaged in just three acquisitions.

BEA Systems, meanwhile, was another applications vendor caught up in merger mania this year. The middleware company acquired database development tools maker SolarMetric last month, adding to its stable of roughly half a dozen acquisitions it announced or closed this year. Plumtree Software, a portal software company, topped BEA's acquisitions list with a $200 million price tag.

Keeping an eye toward the New Year, industry players do not anticipate fewer mergers in the enterprise software applications market.

"I think consolidation will continue," Mackey said. "SAP's market share in applications is less than 20 percent, so there are still a ton of companies out there that may want to be part of a bigger and better company."

--Dawn Kawamoto

2005 Highlights

BEA buys Incomit to beef up telecom software

In its first of many acquisitions this year, the company acquires a telecommunications development tools maker.

Oracle takeover: It's a wrap

After 18-months of public bashing by the CEOs of both companies, Oracle closes its $10.5 billion acquisition of arch-rival PeopleSoft.

SAP buys PeopleSoft support firm

SAP snags support/services firm TomorrowNow, in a move to steal Oracle's newly acquired PeopleSoft and J.D. Edwards customers.

Oracle outbids SAP for Retek

SAP initiated the buyout, but Oracle followed with a counter offer. After three rounds, Oracle won with a $650 million bid.

SAP to pick up Lighthammer Software

SAP acquires Lighthammer Software Development, as it seeks to bolster its position in the analytics software market.

Business Objects to buy SRC Software

Business Objects seeks to fill out its data analysis packages with SRC's financial planning and budgeting applications.

Oracle sweeps up Siebel

The $5.8 billion deal marks the second largest transaction for Oracle this year, as it scours the merger landscape to fill its portfolio holes.

Siebel, Oracle workers express merger jitters

Employees of both companies express concern over their ability to retain their jobs in a post-merger environment.

Oracle acquisition mill pulls in G-log

Oracle continues its buying spree, snapping up transportation and logistics management software vendor G-Log.

BEA acquires M7

The acquisition of developer M7 aims to bolster BEA Systems' portfolio of open source tools, particularly Eclipse-based tools.

BEA snaps up small data-access company

BEA Systems acquires database development tools maker SolarMetric, maker of Kodo, which eases the writing of certain Java server programs.

SAP to acquire Khimetrics

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Behind the headlines

• AJAX spurs Web rebirth for desktop apps
• Microsoft to standardize Office formats
• Software: No longer business as usual
• Microsoft rolls out first Office 12 beta
• RightNow targets Siebel customers
• Gates: We're entering 'live era' of software
• Microsoft eyes making desktop apps free
• Business Objects to add open source
• Salesforce CEO: Deal is a thumbs-up for on-demand
• Research points to CRM rebound