General Comments on the Recent OpenText Acquisition of Recommind Announcement
The acquisition appears to be one that will provide OpenText with advanced analytics technology and expertise that can be used to expand the capabilities of its enterprise information management solutions (integration over time) and to immediately enhance its current offering portfolio (addition of Recommind offerings).
The purchase appears to be one achieved by OpenText at an economical price point as it is expected to generate up to $80M of annualized revenue at an acquisition cost of $163M. The purchase provides OpenText with:
1) Access to Recommind Analytics and SaaS Technology (Strategic Goal)
2) Access to Recommind Analytics and SaaS Expertise (Strategic Goal)
3) Access to Recommind Installed Base of Enterprise Clients (Tactical Benefit)
These ‘access’ points appear to be similar to the ones Microsoft targeted with its acquisition of Equivio in January of 2015 for approximately $200M.
If past actions are a predictor of future actions, it would appear that current Recommind offerings would at the very least begin to be branded as OpenText offerings (e.g. Daegis Acquisition, November 2015). Additionally, given the apparent strategic center-of-gravity of the acquisition (technology and expertise), the long-term viability of current Recommind product offerings probably will be dependent on performance in the marketplace. However, it appears reasonable to conclude that the assimilation of Recommind by OpenText as an action that will make it tough for Recommind as we know it today to continue as a dominant player in the data management and review space. This conclusion is based more on the attributes of acquisitions than any issue with Recommind technology or expertise.
With the increased market awareness and understanding of automation and machine learning coupled with the data-driven need for analytics technology and expertise, it seems reasonable that investments and acquisitions like this will continue to touch the area of eDiscovery. Publicly we see investments from the venture capital community in the field of eDiscovery automation (e.g. Logikcull, Everlaw, CS Disco). Anecdotally, many eDiscovery providers are investing in direct or indirect relationships with eDiscovery automation providers to allow for the delivery of solutions ranging from Technology-Assisted Review (task automation) to self-service, full eDiscovery platforms (process automation). This investment in automation, or said in a different way, investment in efficiency, is a trend that should continue given the challenges facing eDiscovery end users (e.g. budgetary constraints, increasing volumes of data, inadequate technology) and the business opportunity presented to those solving those challenges.
Additionally, It appears that the pace in which eDiscovery-related companies are making strategic investments and acquisitions to both expand their own technology capabilities and increase their revenue streams in the first six months of 2016 is similar to the same time frame in 2015. However, it does appear that recent activities by larger companies are weighted more toward increasing their access to technology and technology-related expertise than toward just acquiring access to installed bases and distribution networks. The OpenText acquisition of Recommind would seem to follow this trend.
Selected Additional Reading:
- OpenText Acquires Recommind for $163M – Bloomberg Law (Gabe Friedman) June 2, 2016
- OpenText Buy Recommind – Fire Sale or Safe Exit for Investors? – The eDJ Group (Greg Buckles) June 2, 2016
- Guest Post: No Surprises on Either Side as OpenText Acquires Recommind – LegalIT Insider (Chris Dale) June 6, 2016
- Conversation: What Does The Recommind Acquisition Mean to eDiscovery and Legal Tech? – Above the Law (Zach Abramowitz) June 7, 2016
- OpenText’s New Purchase: A Requiem for Recommind? – ILTA KM (Joshua Fireman) June 7, 2016
- OpenText and Recommind: The Changing Face of eDiscovery – ACEDS (Jason Krause) June 9, 2016