M2M Holdings Mines Onyx
Midmarket CRM vendor Onyx Software will be acquired, but not by Chinadotcom (CDC), the parent company of Onyx rival Pivotal. Instead, Onyx unveiled today that it has signed a definitive agreement to be acquired by M2M Holdings in an all-cash deal valued at about $92 million, or $4.80 per share. The acquisition, expected to close in the third calendar quarter, is subject to approval by holders of a majority of Onyx's outstanding common stock. Certain Onyx directors and officers representing about 17.6 percent of the company's outstanding shares have already entered into voting agreements in support of the acquisition.
M2M Holdings is a privately held company jointly owned by venture capital firm Battery Ventures and private equity investment firm Thoma Cressey Equity Partners. M2M's primary asset is Made2Manage Systems, an enterprise software and services company, and on the deal's close Onyx will operate as a separate business unit of Made2Manage.
Not surprisingly, Onyx sees the deal as a positive move for those within its ecosystem--its shareholders, customers, potential customers, and partners. For example, taking Onyx down the path of becoming a private company offers its shareholders liquidity at a premium over its recent stock-trading prices, while helping the company realize substantial savings in costs associated with being public, according to Todd Chambers, Onyx CMO. With strong financial backing "we have a lot more capability behind us to be able to execute against our stated strategy, which would include M&A and many other things," he says.
Benjamin Holtz, CEO of Green Beacon Solutions, a consultancy that provides implementation services for CRM, ERP, and marketing automation technologies, says that Onyx will be much better off without the overhead of being a public company. "Not being public relieves a lot of reporting and compliance requirements, and stock price can often be misinterpreted in sales cycles. Onyx can focus on what is does really well--have a great product and services, and sell software."
Onyx has had to contend with enterprise CRM players moving downward and on-demand players staking their claim in the midmarket space. The deal also marks the latest chapter in the Onyx-Pivotal story. In November 2003 Onyx made an offer to acquire Pivotal a little more than a month after Oak Investment Partners submitted its own bid. A few days later Onyx announced it was extending its Pivotal acquisition offer past its original deadline, but after both Oak Investment Partners and Onyx dropped out of the bidding war, Pivotal announced that CDC subsidiary CDC Software would acquire it.
Fast-forward to December 2005, with CDC announcing an offer to acquire majority share of Onyx, complete with heated public exchanges via press release. Onyx eventually turned down that proposal, but CDC Software presented another proposal bid to Onyx's board of directors in March 2006, almost two months after Onyx's prior rejection.
Chambers couldn't comment specifically on the decision to accept M2M Holdings' bid and not CDC's, but he did reveal that the details of the decision process would be outlined in a soon-to-be-released proxy statement. In April Onyx announced that it had tapped Piper Jaffray as an independent financial advisor to assess and analyze the vendor's options.
CDC doesn't think the deal will affect its ability to serve customers. "CDC Software remains committed to expanding its CRM and related enterprise software and service offerings through both acquisition and organic growth," says Eric Musser, executive vice president of strategy. "Today's news has no impact on our strategy or our mission to deliver the best, world-class applications to meet the needs of customers around the globe."
"M2M will be a better corporate parent for Onyx customers than CDC, which is currently focused on developing enterprise software opportunities for the domestic Chinese market," says George Goodall, a research analyst at Info-Tech Research Group.
The deal is part of ongoing consolidation in the enterprise software space, according to Goodall. "It has run rampant in sectors like ERP as evidenced by last month's merger of two consolidators: SSA Global and Infor, and is heating up in CRM and BI," he says. While Goodall sees the deal as good news for customers, he notes that "the merger of M2M and Onyx is the story of two small vendors huddling together for survival."
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