ECM Companies: And Then There Was One...

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 |  Includes: AUTNF, OTEX, VIGN
by: 451 Research: Inorganic Growth

by Brenon Daly

With the US government having blessed on Friday the pending marriage between Open Text (NASDAQ:OTEX) and Vignette (VIGN), the only remaining obstacle in the $310m pairing is a vote by Vignette shareholders next month. And we expect pretty quick approval of the offer from Vignette’s long-suffering shareholders, who had seen their shares lose half their value in the half-decade preceding Open Text’s move. Over that same period, Open Text stock had gained about 16%, handily outperforming the 15% loss posted by the broader Nasdaq Index. (Share price is important in this transaction because Open Text is paying roughly one-third of the bill for Vignette in equity. Open Text stock is up nearly 10% since the deal announcement.)

If, as expected, Vignette shareholders sign off on the sale in their July 21 vote, the deal would mark the second major enterprise content management (ECM) vendor taken off the board in 2009. In January, Autonomy Corp (OTC:AUTNF) announced a somewhat unexpected move into ECM by shelling out $775m in cash for Interwoven. That transaction closed in mid-March. The recent pairings continue a trend of major consolidation in the ECM market that started back in 2003, with EMC buying Documentum for $1.8bn. IBM, Oracle (NYSE:ORCL) and Hewlett-Packard (NYSE:HPQ) have also announced ECM deals of their own, pushing the announced value of acquisitions in the sector to $9.4bn since January 2002.

For those of you keeping score at home, the one notable enterprise software company that hasn’t made an ECM move of its own is SAP. Of course, SAP just happens to be the largest partner for Open Text. So if the German giant does look to make a buy, we have a pretty good idea of who it might call.