Last month, Pivotal's board of directors rejected the $58m (£33.6m) all-stock buyout proposal from Onyx, a competing maker of customer relationship management (CRM) software for mid-sized companies. The proposal countered an agreement Pivotal entered into in October to merge with customer service software maker Talisma for $48m in cash, in a deal financed by venture capital firm Oak Investment Partners.
However, Pivotal's board postponed shareholder votes to approve the Oak deal on two occasions and said earlier this week that it is now considering a "superior transaction" in the form of a $53m stock and cash offer from Chinese-owned CDC Software. Pivotal had previously rejected the CDC bid, saying the offer was too risky, and urged its shareholders to vote in favour of the Talisma deal.
Onyx executives maintain that Pivotal refused to consider a merger between the two companies, even as it pursued possible deals with a number of other competitors. However, Pivotal's board of directors cited several reasons for rejecting the Onyx offer, which represented a 26 percent premium over Oak's competing bid. Among the directors' concerns about Onyx were the volatility of its stock, its inexperience with large mergers, its lack of profits, and pending shareholder litigation against it.
"It is unfortunate that Pivotal denied their shareholders the opportunity to pursue the Onyx acquisition proposal that many industry observers saw as a superior offer for shareholders and good for the industry," Onyx chief executive Brent Frei said in a statement.
Pivotal could not be reached for comment.
In addition to abandoning its merger offer, Onyx announced a migration program directly targeting Pivotal's customers. Under the terms of the program, Pivotal CRM users can trade their existing software licences for Onyx's latest CRM package, on a one-for-one licence exchange basis.
Pivotal also cited high costs as a reason not to merge with Onyx. In addition to paying a $1.5m breakup fee for cancelling the deal with Oak, Pivotal would have to integrate a slew of overlapping software products with Onyx.
Talisma, Pivotal and Onyx all specialise in CRM applications for mid-sised companies, which is a market that has fallen dramatically over the last two years, leaving many companies looking for new ways to remain viable. Microsoft's entry into the low end of CRM market also has spurred concern among the industry's smaller companies regarding the current competitive landscape.
