Is Open Text open for a deal?

Contact: Brenon Daly, Kathleen Reidy

If Autonomy Corp’s $775m purchase last week of Interwoven came out of left field, we suspect the next major enterprise content management (ECM) deal will bring together a buyer and seller much more familiar with each other. As it stands now, Open Text is kingpin of the stand-alone ECM vendors. (The market capitalization of the Canadian company is almost 10 times larger than that of poor old Vignette, which we heard in the past was on the block.) Open Text is slated to report its fiscal second-quarter results Wednesday afternoon.

Most of the big software vendors have already done their ECM shopping, starting with EMC’s purchase of Documentum more than a half-decade ago. More recently, IBM and Oracle made significant purchases. And now we can add Autonomy to the list of shoppers, despite the company having downplayed the importance of content management in the past. (Apparently, it was important enough to Autonomy for it to ink the third-largest ECM deal.)

So who might be eyeing Open Text, which currently sports an enterprise value of $1.7bn? The obvious answer – and one that’s been around for some time now – is SAP. The German giant is Open Text’s largest partner, reselling four different products. Competitively, we don’t see Autonomy’s purchase of Interwoven affecting business much at Open Text, much less acting as a catalyst for any deal with SAP. (With its focus on the legal market, Interwoven only really bumped into the Hummingbird products that Open Text picked up when it bought the fellow Canadian company in mid-2006.) Still, SAP has already made one multibillion-dollar move to consolidate the software industry, acquiring Business Objects for $6.8bn in October 2007. If it looks to make another Oracle-style play, we guess Open Text would be at the top of the list.

Largest ECM deals

Date Acquirer Target Price EV/TTM sales multiple
October 2003 EMC Documentum $1.8bn 6x
August 2006 IBM FileNet $1.6bn 2.6x
January 2009 Autonomy Corp Interwoven $775m 2.8x
August 2006 Open Text Hummingbird $489m 1.6x
November 2006 Oracle Stellent $440m 2.9x

Source: The 451 M&A KnowledgeBase