Proving that just because the year is winding down, M&A activity is not, on Nov. 11, enterprise information management leader OpenText announced it would purchase backup and security firm Carbonite for $1.42 billion.
The acquisition is expected to complement OpenText’s security and cloud offerings, adding Carbonite’s data protection and endpoint security solutions to OpenText’s constantly expanding portfolio. Most recently, OpenText acquired Liaison Technologies, a provider of cloud-based information integration and data management solutions, and of course in 2016 made a couple of huge moves in its acquisition of a number of customer communications management and customer experience management and cloud assets from HP, as well as its $1.62 billion acquisition of Dell EMC’s enterprise content division, in which it added Documentum to its portfolio.
A constant theme through many of OpenText’s strategic moves and acquisitions has been the cloud — in fact, in June the firm announced an expanded strategic partnership with Google Cloud. OpenText named Google Cloud its preferred enterprise cloud partner and said it would serve containerized versions of several products, including Documentum, on Google Cloud Platform, as well as using Google Cloud to enable multi-layered global disaster recovery services.
Carbonite, then, offers a few logical additions to the OpenText portfolio. Carbonite was for many consumers the first foray into cloud backup, debuting as an inexpensive backup option for end users and small businesses looking to prevent data loss in hard drive crashes or other disasters. (It was named for the fictional substance used to freeze Han Solo in “The Empire Strikes Back,” which is one of the better origin stories in the software industry). In 2018, after reporting FY 2017 revenues of $240 million, it announced the acquisition of fellow cloud pioneer Mozy from Dell, where it had landed after Dell’s landmark EMC acquisition. And earlier this year Carbonite acquired endpoint security vendor Webroot for $618 million.
The latter acquisition was indicative of changing trends in the storage and security landscape, as data breaches proliferated and security became a necessary component of cloud backup. OpenText’s Carbonite acquisition, as well as its just-announced partnership with Reveille Software, demonstrates just how critical data breach monitoring and detection is for any company dealing with information and data management.
Carbonite had been shopping itself around, with several private equity firms said to be in the mix — PE Hub reported KKR & Co. and Evergreen Coast Capital were finalists. Bids were expected to be $19 a share, valuing the company at a little more than $1.1 billion — OpenText’s $1.42 billion offer equals $23 a share. The Webroot acquisition appears to have been less than smooth for Carbonite, which quadrupled its debt with a $550 million loan to make the purchase and reported disappointing second-quarter earnings. Carbonite reportedly was seeking to finalize a deal before announcing its Q3 earnings on Nov. 12.
OpenText expects the acquisition to have a positive impact on its 2020 financials. “We entered Fiscal 2020 with a solid balance sheet and we are off to a strong start with the announced acquisition of Carbonite as part of our Total Growth strategy,” said OpenText EVP & CFO Madhu Ranganathan in a press release. “Once integrated, we expect to increase our annual recurring revenues, deliver strong cloud growth, and expand cloud margins and adjusted EBITDA. The resulting growth in cash flows will enable us to maintain a healthy balance sheet, deliver strong earnings, and continue to deliver consistent growth in dividends to shareholders.”
OpenText expects Carbonite’s data protection and end-point security solutions to complement security offerings in data loss prevention, digital forensics, endpoint detection and response; and to add to OpenText’s cloud business.
OpenText plans to commence the offer within 10 days of the announcement, and for the transaction to close within 90 days pending approvals.