On-demand supply chain management software vendor Click Commerce Inc. today announced that it has reached an agreement to be acquired by an industrial component and system manufacturer, in a deal valued at approximately $292 million. Under the terms of the deal, Illinois Tool Works (ITW) will pay $22.75 per share for all of Click Commerce's common stock, a healthy premium over the company's closing price last Friday of $17.95 per share. Both companies' boards have approved the transaction, which is expected to close in the fourth quarter, pending majority shareholder and regulatory approval, according to a prepared statement. ITW has no plans to change or interfere with Click Commerce's current business, noted John Brooklier, ITW's vice president of investor relations, in an interview with Managing Automation. The $12.8 billion, publicly held company's goal is to "provide [Click Commerce] with the tools to evaluate, optimize, and grow," Brooklier said. Click Commerce, which has been built through acquisition, originated with software for managing the demand chain. The company's software-as-a-service solutions now also address the needs of the product and service supply chains. Click Commerce's manufacturing customers include BASF, Eastman Kodak Company, Jabil Global Services, and Microsoft. Brooklier sees ITW's crtical mass -- the company employs 50,000 people in 700 business units located throughout 48 countries -- as key to enabling Click's continuing growth. ITW became aware of Click through a mutual contact, and ITW targeted the software vendor for its expertise in warehouse management, an area of "natural overlap," according to Brooklier. ITW then assessed Click Commerce's overall business fundamentals which indicated that the company is providing value to current customers -- for example, large automotive OEMs struggling to manage their supply chain networks -- and adding new customers, Brooklier said. Click Commerce has achieved solid growth over the last few years. The company, for example, posted revenues of $19.7 million in its second quarter ended June 30 -- a 48% year-over-year increase. These results represent Click Commerce's twelfth-consecutive profitable quarter, according to the company. For 2005, Click's revenues reached $59 million, yielding operating income of $14 million. This represented year-over-year growth of 128% and 210%, respectively, according to David B. Speer, ITW's chairman and CEO. As to why an industrial tool and component maker is buying a software company, "The business answer is pretty clear," according to Julie Fraser, industry analyst at Industry Directions (Boston). "ITW is buying a capability to provide more value-added offerings for [its] current customer base. This is the type of innovation that can change the playing field in favor of a maker of parts and tools. Click Commerce's ... capabilities can help ITW customers be more effective in the [businesses] for which they buy other ITW products." The two companies also share many of the same core industries served, and "the faster growth and higher margins of a software business can be a perfect complement to ITW's core product offerings," Fraser noted. "ITW has strengthened its hand as a supplier to other manufacturers with this move." This wouldn't be the first time a diversified manufacturer acquired a software vendor. It has been more than two years since 3M purchased supply chain execution vendor HighJump Software, in a similar sort of complementary transaction. At the time, according to HighJump, 3M was moving from being a provider of "products" to a provider of "solutions" for industry. Accordingly, Fraser sees a trend not in the purchasing of software vendors by manufacturing companies, but rather in manufacturers trying to incorporate value-added elements that complement their core offerings. In the case of ITW, Click Commerce software can provide support for planning and trading activities throughout the supply chain that ITW regularly engages in with its own manufacturing customers as well as its suppliers, Fraser noted. This means ITW has "a better chance of being in the right place at the right time," to offer support to its manufacturing customers for the same types of issues it faces as a manufacturer, Fraser said.