The year is not over as Descartes Systems Group and OpenText announce acquisitions.
OpenText
OpenText (a Waterloo, Canada, based company) has been on an interesting acquisition track1 over the last few years, building out a company that provides the platform for information management and inter-enterprise communications, including BI, Enterprise and B2B Integration, BPM, and Document Management. But their acquisition of GXS2 at the beginning of the year put them squarely in the supply chain market, managing EDI/B2B integration,3 which includes communications, electronic invoicing, product data management (catalogue and trading partners sharing of digital assets);4 and other shared information required for today’s trading partner management world.
This gave GXS a new home, which, along with many of the major, but older EDI providers who once operated as stand-alones, faced a shrinking revenue future5 as young and more nimble (and less expensive) EDI and AS2 players came along, and new cloud solution providers developed and used other options to managed their B2B communication.
To finish off 2014, OpenText made an offer to acquire Actuate6 in a cash deal to buy the entire outstanding shares. This adds to the ‘text’ part of the OpenText portfolio as well as to B2B sharing, with a document management suite whose products are designed around digital document standards for sharing between trading partners.
Descartes Systems
Descartes, also a Waterloo, Canada, headquartered company, just closed a value-pack deal acquiring Pentant and e-customs, two UK-based trade management solutions companies. As Descartes acquired Customs Info earlier in the year, you may wonder why more customs applications? I did. Speaking to Descartes and their customers, one can learn a lot about the world of global trade and customs compliance.
Each country’s customs organization has its own filing system. And the requirements for trade management/filing for importers, brokers and freight forwarders in the UK and EU are quite different than within the NAFTA countries. Thus connectivity to the UK’s (the 6th largest economy in the world) central revenue & customs system (called CHIEF) provides an automatic filing system for import compliance and for paying of customs duties. Pentant has the filing system for the EU ICS (the European Union Import Control System) for declaration, cargo security and clearance processes.
Pentant provided many additional capabilities of interest to Descartes. Beyond CHIEF integration, they have applications specifically designed for the cargo/carrier community such as inventory management at facilities (ports/wharfs, as carriers disembark cargo; freight forwarders’ warehouses and systems; terminal and inland freight facility operators; couriers/parcel carriers; and intermediary warehouse and distribution facilities) as goods wait for their next leg on the journey. Pentant also has an export management solution, an area that the overall global trade community will focus on next, after they get their import house in order.7
Another of Descartes’ goals here is to continue to provide and grow the largest logistics and trade network in the world (Descartes GLN). At last count Descartes had about 172,000 connected companies. These acquisitions will add thousands more. As Descartes acquires new companies, their first integration effort is to link up the customers they acquire into the GLN.
Why two deals at once? Pentant and e-customs shared some common investors who saw the opportunity to make somewhat of a packaged deal. The total deal here is about $9 million, which Descartes can easily pay for in cash, as they continue to generate sales, profits, and quarterly cash. In the last few months Descartes’ overall success has replenished much of their acquisition war chest of ~$150M which they went to the financial markets for earlier this year. So they still have a lot of cash for future acquisitions — which they will do.
Both OpenText and Descartes are performing well, have cash, and are acquisitive companies. But as they told me, don’t show up with wild ideas about your valuation if you have any inkling or desire8 that they might make a good parent company.
More on acquisitions at Investing.
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1 OpenText acquisitions include: Hummingbird, Vignette, GXS and others. For more on OpenText — Return to article text above
2 Which they paid $1.17 billion for! — Return to article text above
3 EDI, XML, AS2, FAX, mapping and translation — Return to article text above
4 An area GS1 has weighed in on to provide a standard for sharing catalogues, graphics, and documents between retailers and their brand suppliers. — Return to article text above
5 Such as Sterling Commerce, now part of IBM — Return to article text above
6 For more on Actuate solutions — Return to article text above
7 ACE, the US’s automotive filing system, has an importer compliance deadline in 2015 with exports in 2016. — Return to article text above
8 You can read about what investors look for in Desirable? on the ChainLink site.
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