We covered two small acquisitions in the ECM realm this week (for 451 Group clients, our TechDealmaker service has (or will have shortly) the full deal analysis reports), Open Text’s purchase of the file format viewing division of Spicer Corp. for $12m and Hyland Software’s Liberty IMS buy for an undisclosed sum.
Neither of these deals, which are both small, is all that interesting in and of itself. Open Text is getting a bit of technology to view CAD files, large schematics and other large and complex files without having the software used to create those files installed locally. This is a good addition to Open Text’s line, particularly as it looks to sell more vertically-customized apps in markets like energy and construction. Hyland has purchased a small competitor in the SMB market, mostly to expand its customer base in a few key verticals.
What is interesting about these deals, aside from the fact that they closed on the same day at a time when acquisitions aren’t exactly booming, is that they both come from independent ECM vendors looking to carve niches for themselves in a market increasingly dominated by the likes of IBM, Microsoft, Oracle and EMC (though Hyland is majority-owned by PE firm Thoma Cressey Bravo). Both have indicated that there will be more acquisitions ahead as they look to secure their positions and future acquisitions by both vendors are likely to be more of the same.
Open Text and Hyland operate on different scales — Open Text’s revenues in calendar year 2007 were $677.8m while Hyland’s were $104m. Open Text is also securely in the enterprise market while Hyland plays more at the mid-tier and in the SMB market, though the two do compete sometimes in government accounts and for accounts payable apps.
Hyland appears to be more aggressively on the acquisition trail at the moment, noting as part of the Liberty IMS announcement that plans are to “more than double our size in the next three years” via both inorganic and organic means. But Open Text has also indicated repeatedly that it will do ‘tuck-in’ technology buys, like the Spicer acquisition.
Open Text and Hyland aren’t the only independent ECM vendors remaining nor the only ones likely to make acquisitions in the near future. Interwoven and Vignette are also here. Both made technology buys in the past year, Interwoven bought multivariate testing vendor Optimost for $51m last October and Vignette parted with just $7m for the assets of video delivery service Vidavee in April. These buys indicate that these two are more interested in Web content management (WCM) at the moment, even though both have broader product lines, and future buys will most likely continue to fill out WCM portfolios. This is in contrast to Hyland and Open Text, who are both likely to stay more to document management, records management and BPM-related acquisitions. But none of these vendors is likely to make a major buy.
That said, these vendors themselves are perennial potential acquisition targets. Thoma Cressey Bravo may be fattening Hyland up for an eventual sale, but it will likely look to consolidate more of the mid-tier ECM market first. But the others – Open Text, Interwoven and Vignette – could themselves be up for grabs by giants like SAP or HP. In either case, we’re far from done with ECM acquisitions.
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