Opentext to acquire Micro Focus

Opentext have announced the cash acquisition of Micro Focus in a US$6B transaction expected to be finalised in Q1 2023.

On completion, the revenue and operating scale is stated as a combined total addressable market (TAM) of US$170 billion

Firstly, lets take a look at the Terms of the Acquisition (all figures approximate)

• Total purchase price of $6.0 billion, inclusive of Micro Focus' cash and debt
• Total purchase price is 2.2x Micro Focus' pro forma TTM revenues(1)
• Total purchase price is 6.3x Micro Focus' pro forma TTM adjusted EBITDA(4)
• Expected 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
• Targeting to be on the OpenText operating model within 6 quarters of closing
• Expect meaningful expansion of cloud revenues, adjusted EBITDA and cash flows in Fiscal 2024
• All-cash consideration for the Acquisition to be funded by $4.6 billion in new debt, $1.3 billion in cash, and a $600 million draw on our existing revolving credit facility
• The Announcement can be found at https://investors.opentext.com. This press release should be read in conjunction with, and is subject to, the full text of the Announcement.
• The Acquisition is expected to close in the first quarter of calendar 2023, subject to the satisfaction (or, where applicable, waiver) of the conditions set out in Appendix 1 to the Announcement.

... all very interesting, but what might it mean to us as customers?

Well if you've ever been involved in an audit with either of these organisations you would have first hand experience of their approach best summed up in one word - aggressive, so at least they're both well aligned on one core practice.

And as we know, any merger or acquisition tends to generate a lot of audit interest and activity as a quick 'revenue win' to expedite and boost returns from such sizeable change and investment.

So if you are a client of either Opentext or Micro Focus it would seem timely to review your licensing position in detail, ie. collect:

• evidence of your entitlements (PoE's, PO's, Invoices)
• current deployment figures (fully accounted, ie. extrapolated metrics etc)
• contracts, addendums, and any variances that have occurred over time

If you detect any discrepancies deal with them as a priority (remembering of course that there are likely footprints across your IT landscape  over a good period of time), so remediate knowingly and accordingly.

Also review your renewal dates and plans - if it falls into or around Q1/Q2 2023 it might serve well to request a renewal quote early to use as a comparison should the actual transaction occur under any new conditions or contracts.

And as we've said before, keep an active watch on the Account Exec's/Managers you have with these two vendors - where changes are communicated it can be a pretty reliable indicator that there might be an audit letter in the post.

So once again, a market shift that means its time to review, validate, confirm and ... prepare!