A 2007 deal done in 2009

Contact: Brenon Daly

In many ways, Autonomy Corp’s surprise purchase of Interwoven looked more like a 2007 deal than any transaction of a more recent vintage. In fact, both the purchase and the valuation line up almost exactly with acquisitions of public companies in 2007. Specifically, Interwoven’s enterprise value (EV) of $704m matches almost exactly the median EV of $701m for companies acquired in 2007. And Autonomy’s purchase values the content management vendor at 2.8x its trailing 12-month (TTM) sales, compared to 2.6x TTM sales for deals in 2007.

The Autonomy-Interwoven transaction stands out even more coming off of 2008, when public company deals took a hammering. The median EV/TTM sales multiple got cut nearly in half last year, falling to 1.4x from 2.6x in 2007. Meanwhile, the median purchase price sank to $159m from $701m.

Public company M&A

Year Median deal size Median EV/TTM valuation
2008 $159m 1.4x
2007 $701m 2.6x
2006 $393m 2.1x
2005 $346m 2.3x

Source: The 451 M&A KnowledgeBase

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

Mr. Fixit sells again

Contact: Brenon Daly

Known as a turnaround guy for most of his career, Joe Cowan didn’t actually have too much fixing up to do at his latest posting as chief executive of content management vendor Interwoven. After he took over Interwoven’s top post in early April 2007, the business hummed along with sales growth in the mid-teens and solid profitability. Under Cowan’s leadership, shares of Interwoven dropped just 9%, less than one-quarter the decline posted by the Nasdaq over that same period. And never mind the southbound performance of shares of rival Vignette.

Cowan’s work at Interwoven stands in sharp contrast to earlier postings at Baan and Manugistics, scandal-tainted companies with declining sales and heavy losses. However, the end result of most of his engagements has been the same: a sale of the company. As a testament to the difference in the relative health of the two most-recent exits that Cowan has helped broker, consider that Interwoven is getting valued at twice the price-to-sales multiple of Manugistics. Viewed another way, Interwoven sold for almost 19x EBITDA, compared to closer to 13x EBITDA for Manugistics. We understand that Cowan will be staying on at acquirer Autonomy Corp after the close of the deal, at least for a bit.

CEO Joe Cowan: A tale of two exits

Date Target Acquirer Deal value Price/TTM sales
April 2006 Manugistics JDA Software $211m 1.4x
January 2009 Interwoven Autonomy $775m 2.8x

Source: The 451 M&A KnowledgeBase