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Hyland OnBase with Lexmark Perceptive Software? Say What?

4/25/17 – Update – Seems new rumors are back that Hyland may be buying the Lexmark software assets that include Perceptive and Kofax.  The rumor indicates that the purchase price will be about $1.5B.  In comparison OpenText acquired EMC’s ECD assets which included Documentum for $1.62B. 

4/30/17 – UpdateNew article with my thoughts on Kofax and other possible candidates.

My article originally published 2/22/16 is below.

Hyland OnBase with Lexmark Perceptive Software? Say What?

Rumor has it Thoma Bravo is looking to buy the Lexmark software division.  Thoma Bravo is a private equity firm that also owns a part of Hyland.  In the report it says that Thoma Bravo would be looking to merge the acquisition into Hyland.  Interesting.

First off, these are my personal opinions and not those of Big Men On Content (BMOC) as a whole, any other BMOC blogger, nor our affiliated companies past or present.  This opinion has been formulated based on my years in the industry along with what I’ve seen or heard in the news.

The ECM vendor acquisition space has been quiet and now it’s starting up again.  Xerox is spinning off BPO and EMC is part of a giant merger with Dell.  Now it’s Lexmark and Hyland?  As I stated last week, Lexmark announced it was looking to be acquired in October.  I personally thought that Lexmark would be great for Xerox, as a whole company.  Honestly, I didn’t see this coming.  So what do I think?

Caution! Slippery Conditions Ahead

I was taught some interesting lesson after the market crash of 2001.  There were a lot of candidates for acquisitions in the ECM market.  I learned a couple of key lessons.  Merging customer bases isn’t as easy as buying a competitor.  Great acquisitions are about technology and people.

Years ago, when I was doing acquisitions, I considered buying a competitor.  I quickly came to realize that you’re not immediately combining customer bases.  Customers choose their solutions based on both technology and company.   If they didn’t choose your solution the first time, it doesn’t necessarily mean that they will just happily move to your platform.  Some may even rethink their whole purchase, especially those early in deployments.  Then there is the question of what to do with the parallel platforms, because one developer can’t work on two code lines.

There’s a huge technology overlap with OnBase and Perceptive and Kofax.  OnBase as a repository is superior to Perceptive.  OnBase is mostly configuration, while Perceptive is customization.  The deployment strategy differences make this difficult.  Lexmark software also includes Kofax, which is on par with OnBase Advanced Capture and Hyland AnyDoc.  There’s really nothing new in technology here.  All this will do is leave the combined companies with two ECM platforms and three scanning platforms to integrate.

I think people are the most important part of an acquisition, because without people the technology won’t go very far.  OnBase is Miguel Zubizareta’s baby so there’s a vested interest there on the Hyland side of the house.  Meanwhile Lexmark’s Enterprise Software is led by Reynolds Bish who was CEO of Kofax.  A lot of Kofax people are driving the division.  Its two very different cultures and there’s going to be some clashes.

What if it happens?

Out of the Gartner Magic Quadrant Leaders the last two players to enter are looking to merge.  The combined company is still the smallest player, after EMC, IBM, Microsoft, OpenText, and Oracle.  But if Hyland really wanted this wouldn’t they be looking to acquire Lexmark rather than Thoma Bravo doing it for them?

As I’ve been saying a lot, Right now we will all just have to wait and see.

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