The rumors have been thick for weeks, but today the announcement finally came through that Hyland is to acquire Alfresco. So first things first, no surprise at all that Alfresco has been acquired. Bought by private equity firm TH Lee in 2018, Alfresco was always an odd fit in their broader portfolio. But credit where it is due, over just two short years, TH Lee and the Alfresco team have improved the company significantly both operationally and financially. They also made a smart move in acquiring Chicago based services firm TSG. Two years to flip a firm may seem short, but the nature of private equity is to get a return on your investment and move on – they achieved that and have done so.
The second thing to consider is the new home for Alfresco, with Westlake, Ohio based Hyland. Quite frankly, it seems on paper at least the perfect fit. However, both are ECM, DPA vendors. There is not that much overlap in terms of customers and a lot of synergy for future growth. Hyland certainly benefits from getting a more modern and open-source platform, along with a top-notch services team (TSG) that is based in the midwest. That should help Hyland both with Alfresco customers and also unseat legacy Documentum (now OpenText) customers. Combined this deal should take Hyland’s revenue to around $1B.
The price has not been disclosed, but off the record, estimates tell me that TH Lee has made a tidy profit on their investment and that Hyland has not overpaid. Nor was there a lack of suitors, over half a dozen we believe. However, as always, it is essential to note that no M&A transaction is without tears. Alfresco ran a long and steady race as an independent championing open source ECM, and that in some ways now comes to an end. There will be changes to the organization, some voluntary, some not. Some in the open-source community will decry (with some justification) the loss of Alfresco to a much more traditional software firm. It will take six months or more to see how things settle, but the fact is that PE firms buy and then sell, so this was going to happen sooner rather than later, and there were far worse exit options than to end up in the Hyland fold.
Finally we should note that Hyland just recently closed a deal to acquire an RPA vendor (you can read Connie’s analysis of that here) and a blockchain startup earlier this year. Also, that PE firm Thoma Bravo has a controlling interest in Hyland….. it is a deal that we will watch with interest and surely be writing more about as it fully unfolds!
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