Does the Citrix-Tibco merger lack synergy?
Wall Street banks completed the sale of USD 8.55bn in loans and bonds backing the leveraged buyout of Citrix Systems Inc. Despite banks reportedly losing up to USD 600m1https://www.ft.com/content/ceff8fd1-a3ef-4bce-9955-59a74bc0d226 in the sale, attention now returns to the potential merger between the business software company and Tibco Software. If no other challenges occur, the deal could be completed by September 30, a recent SEC filing2https://www.sec.gov/ix?doc=/Archives/edgar/data/877890/000119312522248803/d400999d8k.htm revealed.
The potential merger has not been without its controversies, with reports of some investors questioning the lack of synergy between the two companies, whilst insiders believe it could create “one of the world’s largest software companies.”3https://otp.tools.investis.com/clients/us/citrix/SEC/sec-show.aspx?Type=html&FilingId=15516325&CIK=0000877890&Index=10000
As the deal reaches a decisive juncture, this M&A Watch draws on expert insights from a former executive at Citrix to examine what Tibco can add to Citrix, and the future of Citrix’s project management software Wrike.
Our specialist told Third Bridge Forum that ostensibly there are “no obvious synergies” between Citrix and Tibco. However, the person said Tibco could help Citrix convert legacy and Citrix Virtual Apps and Desktops (CVAD) customers to its cloud and subscription services. About three-quarters of Citrix’s Workspace revenues are generated through subscriptions, but that “needs to be” at 100%, according to the specialist. Well below half of the company’s revenue comes from the cloud (44%), and that percentage should be at 80-100%. With work to do, Citrix could be aided in its cloud conversion efforts by Tibco’s “value selling arm” as well as its messaging and process automation tools, we were told.
“Citrix has a huge legacy base and Tibco has the tools, hopefully, to get that legacy base in the cloud, otherwise, what are these two companies doing together?”
The specialist expects a “pretty radical” restructure if the merger is completed. They foresees cuts in Citrix’s sales and services department, and a possible sale of its App Delivery and Security segment. Together, this represents thousands of employees, according to the specialist. Citrix will also likely “call the shots” on any decisions, the specialist told us, given its revenue is 3-4x the size of Tibco.
Wrike, bought by Citrix for USD 2.2bn in 2021, could also be sold off as part of the merger’s restructuring, we heard. However, the specialist said it does not make sense to sell the business given the investment expense and the unlikelihood of recouping comparable consideration if sold.
The specialist did not say how long such restructuring could take, but believes current customers are unlikely to walk away from either Citrix or Tibco whilst in progress. The expert told us Citrix has a “huge legacy base” with plenty of goodwill, which is likely to give the company “leeway.” Instead, the merger could be leveraged to secure existing customers with contracts for both companies via a combined deal or long-term contract.
If concluded, the success of the Citrix-Tibco merger will ultimately be determined by Tibco’s ability to migrate Citrix legacy users into the cloud, the specialist said. It is “on Tibco” to make it a success, the expert told us, and if it cannot, they questioned “what… these two companies [are] doing together?”
For more human insights on Citrix and Tibco, click on the transcripts below.
Related Transcripts
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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