OpenText Picks up Global360

Scott Francis
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In a surprise (to me) move, OpenText has acquired Global360:
Waterloo, Ontario – 2011-07-13 – OpenText (NASDAQ: OTEX, TSX: OTC) announced today it has acquired Global 360 Holding Corporation, a leading provider of process and case management solutions. The acquisition continues OpenText s expansion into the fast growing business process management (BPM) market, adding to its technology, talent, services, partner and geographical strengths, as well as giving the company important new capabilities in dynamic case management. Merger Agreement The transaction purchase price is approximately $260 million (1), subject to customary purchase price and holdback adjustments. Global 360 has generated approximately $90 million in trailing twelve months revenue and is profitable. The transaction has closed in the first quarter of fiscal 2012 and is not part of the fiscal 2011 fourth quarter and year-end results of OpenText. The management team of OpenText will provide further information regarding the future plans of the combined company when it provides fiscal year-end results on August 10, 2011.
A press release in June 2011 claims 30% revenue growth YoY for Global360’s BPM unit for the quarter, but I can’t find any references to the baseline revenue # for either the company or the BPM unit. So, given that OpenText just acquired MetaStorm, what will they do with Global360?  The press release points to leveraging their strengths in Dynamic Case Management and the Microsoft BPM ecosystem. OpenText says they’ll continue on with roadmaps for MetaStorm and Global360.  But the questions flying on Twitter yesterday were references to indigestion, concern over merger issues, and doubt about how these products fit together. The question I have is whether this is truly a software acquisition or a financial management acquisition.  In the latter, you simply acquire the company to capture their customer base and maintenance revenue stream – and then cross-license and work off the maintenance while slashing all costs. In the former, the new acquisition not only benefits from your bigger sales channel, but also helps you sell more of the product you already have into a new customer base.    Too early to tell what the real rationale is, or whether it is simply that they didn’t get what they were looking for in the MetaStorm acquisition. Others commented that Global360 was one of the last of the original pioneers of the space (actually, it was the successor organization to eiStream, which was one of the original pioneers).  The number of viable commercial BPM suites seems to be declining even as the market is growing, which seems counter-intuitive.  I think that partly this is a function of lower ASP (average selling price) in enterprise software, and lower valuation multiples (these companies aren’t getting big multiples on revenue and growth as they might have in the 90’s).  That leaves them vulnerable to being acquired by someone big enough or determined enough. Not to mention, these firms have taken big VC or PE stakes, and those guys want their money out so they can put it back to work elsewhere. We’ll keep an eye out for updates on this acquisition and report back.  But given how little coverage the OpenText-MetaStorm combination received, I’m not sure how much coverage to expect this time around.