Concerto Gains a New Aspect
Concerto Software is acquiring rival Aspect Communications in a deal valued at $1 billion in cash that will create the world's largest contact center solutions company. Privately held Concerto will pay $11.60 per share of Aspect, amounting to a 3.6 percent bonus for stockholders. The acquisition, subject to approval by Aspect shareholders and the SEC, is expected to close by September 2005. Aspect will effectively become a privately held company as a result of the transaction, which is being handled as a merger due to the similar size of the two organizations.
"This is not an entirely surprising move, given that the contact center market in North America and Western Europe is relatively mature," says Drew Kraus, research director for contact center and converged communications applications at Gartner. "It's expected to see industry consolidation, and companies working to expand the breadth of their product suite to provide tightly integrated, complete solutions, rather than lots of individual point solutions. It's also not surprising to see companies grow market share through acquisition to provide them with a larger installed base into which to sell the broader application suite."
Concerto has made a number of recent acquisitions. "[This] can sometimes be a bit of a red flag, but the company has a strong methodology for integrating new businesses and will likely make this integration happen smoothly," Kraus says. Last year, Concerto's acquisitions included CenterForce, Melita, Positive Software, and Rockwell FirstPoint. Concerto itself was formed in 2002 by the merger of outbound calling-solutions developer Davox and contact-center suite vendor CELLIT. Aspect had focused its efforts in 2004 on organic growth through new versions of its flagship products, according to Brian Gentile, the company's senior vice president and CMO.
Growth in the Asia-Pacific region over the past four years has taken the region's contact center industry from near zero to $30 million, according to Mike Sheridan, Concerto's vice president of marketing strategy. Gentile adds that industry analysts project 20 to 30 percent growth in contact center spending in the next four years. Concerto earned $189 million in revenue for fiscal 2004, while Aspect brought in $370 million. The combined entity is expected to rake in $600 million this year. "We've been talking through this merger for a number of weeks," Gentile says. "The deal makes good sense for our customers, beyond the financial aspect."
The companies have competed directly in the automatic call-distribution market, but each brings other strengths to the table. Concerto's other focus areas include unified contact-center software and outbound dialing; Aspect has concentrations in workforce management and performance analytics. "There is some overlap between the companies' product sets that needs to be rationalized, but overall the combined entity has strong, although not market-leading, market share in the contact center space, and their combined product sets will be among the broadest in the industry," Kraus says.
Some parts of the companies' joint future are still unclear. It's not known yet whether there will be a name change, or exactly how the diverse product lines will fit together. "We're good at recognizing new capabilities and bringing them into our offering," Sheridan says. "Customers are looking for an evolutionary path with contact center products. We'd like to see the code streams come together, but we won't force it." However, both companies pledge that as they move toward closing the acquisition they will communicate with customers constantly to make certain the result is beneficial to them.
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