Hoping to deepen its cloud capabilities, Open Text Corp. has agreed to buy the Atlanta-area cloud data-management company Liaison Technologies Inc. for US$310-million.
The Waterloo, Ont., software company announced the all-cash deal with its fiscal first-quarter 2019 results Wednesday afternoon. Open Text has focused much of its growth on acquisitions in recent years, and as the enterprise information-management company pushes more of its offerings into the cloud, its M&A focus has followed suit.
In July, chief executive Mark Barrenechea told The Globe and Mail that “we could comfortably put US$1.5-billion of cash to work quickly if the right opportunity or opportunities were in front of us.” While the Liaison acquisition is less than a third of that, it will expand Open Text’s capabilities and markets in the enterprise space; Liaison helps customers manage and integrate data sets, with a focus on health care and life sciences. Open Text’s biggest acquisition to date was the US$1.62-billion purchase of Dell Technologies Inc.'s enterprise content division in 2016.
Liaison did not respond to an interview request before publication Wednesday, and Open Text said Mr. Barrenechea would not be available. But on a conference call with analysts, the Open Text CEO said that “as our customers digitize and integrate their global value chains, Liaison is a powerful transformation agent” that will complement its existing business lines. Liaison has 475 employees and about 4,000 global enterprise customers, the company said.
The first fiscal quarter is often the company’s softest. Open Text made a profit for the quarter of US$36.3-million, or 14 U.S. cents a share, down less than 1 per cent from the year-ago quarter. As the company moves to a cloud-based model, it has also been expanding its recurring-revenue streams from cloud services and subscriptions and customer support. That recurring revenue totalled US$520-million this quarter, up 6 per cent year-over-year.
Its total revenue was US$667-million, falling below analyst consensus of US$689-million. Shares were volatile after the Liaison acquisition was announced, and were down nearly 3 per cent at US$32.40 in aftermarket trading on Wednesday.
Open Text’s share price has fallen by nearly a quarter since it last reported financial results in August, at which point the company gave an update on a long-standing dispute with the U.S. Internal Revenue Service, which by then totalled US$725-million including taxes, penalties and interest. “We continue to strongly disagree with the IRS position and intend to vigorously contest the proposed adjustment to our taxable income," chief financial officer Madhu Ranganathan said in August. The company said Wednesday that there were no updates on the matter.
Open Text said the Liaison transaction will close in the next 90 days.