OpenText is acquiring Micro Focus for $6.0 billion. The deal's valuation is roughly 6.3 times Micro Focus' pro forma trailing 12 months (TTM) adjusted EBITDA.
Ironically, the deal surfaces roughly three years after OpenText said it did not plan to acquire Micro Focus. As of August 2021, OpenText said software valuations were still too frothy to consider big M&A deals. Fast forward to August 2021, and the Micro Focus deal checks in as a value play. Indeed, Micro Focus shares are down nearly 50% over the past 52 weeks, Seeking Alpha indicates.
This is technology M&A deal number 755 that ChannelE2E has covered so far in 2022. See more than 2,000 technology M&A deals involving MSPs, MSSPs & IT service providers listed here.
OpenText Buys Micro Focus: Potential MSP and Security Implications
Micro Focus has a large, enterprise software portfolio. But there are also MSP and cybersecurity implications here.
For instance, OpenText already owns Webroot and Carbonite -- which promote cybersecurity and data protection solutions to MSPs and VARs in the SMB sector. OpenText has also partnered with Blackpoint Cyber to offer MDR services.
On the flip side, Micro Focus owns a range of cybersecurity tools.
For example:
- 2022: CyberRes, the security business owned by Micro Focus, acquired Debricked, an open source toolkit provider that helps customers to secure their software supply chains. More recently, CyberRes partnered with Google Cloud to enable secure cloud analytics with data privacy.
- 2020: Micro Focus acquired Atar Labs, a security orchestration, automation, and response (SOAR) technology software provider, in 2020.
- 2019: Micro Focus acquired security analytics platform provider Interset.
Those Micro Focus cyber tools might come in handy as OpenText continues to scale its own cybersecurity business and related MSSP and MDR services.
The M&A deal will also come with challenges. Indeed, Micro Focus has had some business turbulence over the years, including the bumpy deal to buy HPE's software assets in 2018.
OpenText CEO Perspectives, 'Cost Synergies'
Still, OpenText is touting the business combination. In a prepared statement, OpenText CEO & CTO Mark J. Barrenechea said:
"We are pleased to announce our firm intention to acquire Micro Focus, and I look forward to welcoming Micro Focus customers, partners and employees to OpenText. Upon completion of the acquisition, OpenText will be one of the world's largest software and cloud businesses with a tremendous marquee customer base, global scale and comprehensive go-to-market. Customers of OpenText and Micro Focus will benefit from a partner that can even more effectively help them accelerate their digital transformation efforts by unlocking the full value of their information assets and core systems."
OpenText expects to complete the deal by the end of Q1 of calendar 2023. It sounds like the buyout could involve some job cuts. The clue: OpenText expects "cost synergies of $400 million, including Micro Focus' previously announced cost savings program of $300 million (net of inflation), as well as $100 million in additional cost synergies," the buyer said in the M&A announcement.
I don't believe Micro Focus was quoted in the announcement.
