UNIT4 Living in Change: Acquisition With a Human Face?

unit4-logo.jpgYesterday it was widely announced that a private equity firm, Advent International, has reached an agreement with UNIT4 to buy out all UNIT4 shares and take the vendor private. As Reuters noted, this move would help the Dutch company "speed up expansion without the pressures of being listed on the stock market."

I have a few thoughts on the subject.

First, any public company typically experiences pressure in two opposite directions. One is the pressure of its shareholders to continuously demonstrate as much profit as possible and, consequently, pay more dividends to the owners of its shares. To this end, the company's intentions are obvious—to get more payback from money spent as soon as possible. The other pressure is to uphold the company’s interests and objectives as a business—to provide its customers with better service and better products, reinvest more into the company, and divert financial resources from being paid as dividends to shareholders. Private companies supposedly care less about short-term profitability and are more concerned with strategic, long-term, and consistent business development and, certainly, the value the company provides to its customers. Following this logic, I believe that UNIT4’s retreat from open market is a positive change overall.

Second, in general any company's transformation, whether it is an acquisition, merger, or separation, is potentially a huge shakeout for the business. This is doubly disturbing in the software business, which has an incredible sensitivity to even minor strategy changes as customers are in a deep dependency relationship with business software vendors. Hopefully, this won’t be the case with UNIT4, as both the vendor and the investor intend to continue to support the same strategy that UNIT4 currently has in place and to maintain the existing corporate identity, culture, and brand. In other words, Advent isn’t interested in amending UNIT4’s unique differentiations as a vendor of change-friendly business software. Moreover, according to the company’s press release, Advent is promising to keep existing employees and support long-term UNIT4 projects such as transition to a cloud-based software model, investment in FinancialForce.com, expansion in markets where it already has a presence, and a few others.

Finally, I don’t think it is a coincidence that a new CEO, Jose Duarte, was introduced just a few months prior to the deal. I would assume that UNIT4’s top management has some idea of what was to come, and it's likely they were looking for a new top manager with good connections within the investment community.

It will be extremely interesting to see how things will work out for UNIT4 as a private company and what kind of changes will be implemented in the nearest future. I hope the company keeps the bar high and doesn't lose its uniqueness and value while pursuing growth and greater market share.
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