OpenText and GXS: Complex Transaction, Complex Combination [PRO]

In one of the more complicated financial transactions in the software industry, OpenText recently announced it was buying EDI and B2Bi integration specialist GXS. On many levels, the complexity of the deal itself – which includes a financing commitment of $800MM in debt, $265MM in cash and $100MM in equity – is a good metaphor for the complexity of the two organizations’ solutions portfolios and mishmash of capabilities. But the more immediate question that customers, competitors, and the broader market should ask is whether the combination will create a truly next generation application, connectivity, and platform standard (more on this in a minute) or primarily focus on up-selling and cross-selling tools from the IT belt and general margin synergy. Note: we think the two activities are virtually impossible to achieve with the same execution strategy given OpenText’s no-margin-for-error Wall Street “Operating Model.”

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