In a marked expansion of its enterprise applications rollup strategy, Made2Manage Holdings Inc., the holding company of ERP vendor Made2Manage Software Inc., today disclosed an agreement to buy stand-alone CRM software vendor Onyx Software Corp. in a cash transaction valued at $92 million.
The deal trumps a hostile bid pushed by rival enterprise software consolidator CDC Software of Atlanta, which earlier this year sweetened its offer from $50 million to $80 million for Onyx of Bellevue, WA. In a prepared statement, Eric Musser, CDC Software's executive vice president of strategy, said his company remains committed to expanding its CRM and related enterprise software and service offerings through acquisition and organic growth, but did not address the status of CDC's bid for Onyx.
"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," Musser said.
A CDC Software spokesperson declined to say whether the statement meant that the Atlanta company had decided to end its bid for Onyx. Earlier public statements by Musser indicated that CDC had made what it believed was a fair offer and would move on if Onyx did not agree to its terms.
While awaiting Onyx's response, CDC acquired c360, a provider of Microsoft Dynamics CRM development tools and plug-in applications. CDC Software also owns Pivotal Corp., another CRM software vendor.
In an interview with Managing Automation, Jeff Tognoni, chief executive officer of both M2M Holdings and Made2Manage Systems, said he couldn't predict CDC's next move, but was confident his company's acquisition offer would move toward completion since it had the backing of Onyx's board -- unlike CDC's proposal.
In fact, certain members of Onyx's board and management team representing approximately 17.6% of the company's outstanding shares have already entered into voting agreements in support of the acquisition, Onyx and Made2Manage said in a joint statement. The deal is expected to close in the third quarter, pending approval by a majority of Onyx's shareholders, the two companies noted.
Investors of both Onyx and CDC appeared to applaud the deal for different reasons. The $4.80 per share offer was seen as a reasonable premium for Onyx's stock, which began the day trading at $4.71, up 54 cents from yesterday's close. Today's closing price of $4.68, was a 12% jump on what was a down day on Wall Street. CDC investors, meanwhile, didn't seem disappointed that the division of Hong Kong-based CDC Corp. had apparently moved on. The stock of its parent company closed the day at $4.54, up two cents on the day.
The acquisition of Onyx would represent an expansion of the M&A strategy of private-equity-backed Made2Manage, which over the last 20 months has purchased five companies that offer ERP applications to manufacturers in underserved micro-vertical markets. These markets include manufacturers of printed circuit boards as well as metals and wire & cable and engineer-to-order (ETO) products.
Onyx, Tognoni said, would be the linchpin in the next stage of the Indianapolis company's roll-up plan: to acquire undercapitalized CRM software vendors. It plans to continue targeting micro-vertical ERP vendors, as well. "We will be aggressively putting capital behind [Onyx] and moving forward with [a plan to advance] further consolidation in the CRM market," he said, "Onyx will be the platform that we do it with."
Made2Manage, Tognoni said, understands CRM very well since many of the ERP platforms it has acquired include basic customer management capabilities. Onyx's expertise is in supplying complex CRM systems to larger enterprises in the services sector -- health care, finance, and government. The company, which counts 1,300 customers worldwide, offers customer management, process management, and performance management modules under the Onyx Software banner.
While Onyx has carved out some market and mindshare among high-tech manufacturers, Tognoni doesn't envision cross-selling Onyx's CRM to Made2Manage's existing base -- at least initially. "We don't believe that's how you get value from this type of deal," he said.
Tognoni did acknowledge that some Made2Manage customers might be interested in Onyx's higher-end CRM software, which, like the company's original software, is built on a Microsoft .Net, Web services architecture. Any cross-selling would be opportunistic since Made2Manage's plan is to operate Onyx as a separate business unit, with its CRM software positioned as a best-of-breed offering, Tognoni said
Like earlier acquisitions, Made2Manage plans to support Onyx with capital, as well as business model and infrastructure support to enable the resource-deprived company to improve its internal operations and continue the build out of its applications software architecture, Tognoni said.
That is key to Onyx and its customers. The company has suffered through management turnover and market-share erosion wrought by on-demand CRM application services, such as those offered by salesforce.com and others. This has hurt Onyx's competitive standing and led to a perception that the company might not be a long-term survivor in the quickly consolidating CRM space.
"What we really bring, number one, is financial backing that should resolve in any prospect's mind any vendor viability issues," Tognoni said. Made2Manage's goal is to help Onyx improve across all major functions of business, starting with customer service. He noted that all companies -- not just Onyx -- can benefit from continuous customer care improvements. "Do this and customers want to do business with you, which drives [future] growth."
Made2Manange hasn't made any final decisions on the status of the Onyx management team or the rest of its workforce. Final decisions will be made over the next few weeks once Made2Manage's management team sizes ups Onyx's future business needs, Tognoni noted.
The deal, if concluded, would be Made2Manage's largest acquisition since the mid-market ERP vendor was taken private by Battery Ventures in August of 2003. The company's acquisition spree began in September 2004 when it purchased professional services purveyor ADS Information Systems. Since then, Made2Manage has acquired: DTR Software International (ERP for plastics processors), in August 2004; Cimnet Systems (ERP for printed circuit board manufacturers), in December 2005; AXIS Computer Systems (ERP for metals, wire & cable producers), in January 2006; and Encompix Inc., in March (ERP for ETO).
Prior to its acquisition of AXIS, the company disclosed that it had raised $50 million in debt and equity financing to fund its M&A aspirations. The equity financing came from Thoma Cressey Equity Partners, an investment firm that specializes in M&A roll-ups, which now holds a minority stake in Made2Manage Systems. Debt financing is provided by Harris Nesbitt, a banking unit of North American giant Bank of Montreal (BMO) Financial Group.