SOFTWARE AG | ANNUAL REPORT 2012 144 Acquisitions Through selective acquisitions, we are expanding our tech- nological product range and continuing to build up our global presence. The uncertainty of future market and technology trends means that there is a risk associated with determin- ing the right target companies. In order to be closer to emerging technological developments, our chief marketing officer and the head of the M&A department were moved from Darmstadt to San Francisco, California. Due to the high number of globally leading IT companies and the prevalent startup culture in that region, Software AG is actively involved in quickly identifying and exploiting future trends in the IT sector. Furthermore, there is a risk that the compa- nies acquired will not be integrated successfully. The associ- ated challenges include the integration of the product port- folio, the processes, the organization, the human resources, and the different corporate cultures. In order to successfully integrate the acquired companies, we have defined safe- guarding processes for the time prior to and after acquisition. Pre-acquisition phase: Prior to a takeover, an intensive review is conducted to ascertain whether the technologies of the company in ques- tion effectively expand Software AG’s product portfolio, how market access and market penetration will change, and what synergy potentials can be realized. Every acquisition is pre- ceded by a precise analysis of the financial condition of the target company. Moreover, the question of whether its cor- porate culture is compatible with ours is explored. ETS product line Our traditional ETS product line is in an advanced stage of the product life cycle, which presents the risk of weakening revenue in this product area. Our stabilization strategy for this business is based in part on the option to extend cus- tomers’ existing licensing rights to generate new sales rev- enues. This option cannot be repeated arbitrarily after con- tracts have been adjusted. This raises the risk that ETS license revenues in certain core countries could decrease rapidly. The steady trend of customers switching from mainframes to the less-expensive open systems platforms also increases the risk of weakening maintenance revenues. Software AG is countering these risks with the following measures: • Process improvements through the BPE product portfo- lio support ETS modernization, thereby increasing the product line’s life cycle. • New sources of revenue are being tapped by the steady expansion of the ETS product portfolio through add-on products. • A global maintenance and support business unit was established in 2012. This unit is responsible for global coordination of all measures necessary to stabilize main- tenance revenue from the ETS business. The measures taken are likely to have a stabilizing effect on revenues for this product line, so only a moderate slowdown in sales in the single-digit range is expected.