Onyx has received an unsolicited merger proposal from CDC.
CDC has proposed that the two companies be combined, with CDC taking a majority stake. Under the proposed deal, CDC would contribute all the assets of CDC Software, plus $50 million in exchange for a majority of Onyx’ common stock.
The combination would create a $250 million company with a 5,000-strong customer base that CDC believes would address customer concerns relating to Onyx’s long-term financial health, and enable it to leverage CDC’s net cash holdings and current market capitalization.
However, $250 million in annual revenue is still dangerous territory as far as vendor longevity is concerned because, although it provides a degree of financial security, companies of this size also attract the unfavorable attention of established large enterprise players such as SAP, Oracle, and SSA Global.
Although CDC has been active on the acquisition front, it has failed to capitalize on its acquisitions, and has been undergoing a major restructuring program. Its acquisition strategy has not borne much fruit so far due to a combination of factors including narrowing margins and the prevalence of custom ERP systems within the Chinese manufacturing mid-market that has been CDC’s primary target for its business applications.
CDC appeared to be taking the same strategic path as SSA, acquiring to broaden its portfolio and increase its revenue and customer base, but where SSA has invested in its acquired technology and worked to deliver integrated suites of applications, CDC has yet to outline a technology roadmap and its various software components are still largely autonomous.
As a mid-sized, pure-play CRM provider, Onyx has struggled to maintain financial viability and its long-term independence has to be in doubt, particularly in the light of the Oracle-Siebel merger and customer demand for CRM as part of an integrated business applications suite. However, it has moved into the area of process-based CRM and this strategy is showing signs of paying off.
Although there would be some benefits to a CDC-Onyx tie-up, it might not bring the size and stability Onyx needs and there are questions over CDC’s ability to bring its multiple acquisitions together.