OpenText eyeing significant acquisition driven growth: CEO

Wed Dec 9, 2015 6:19pm EST
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By Euan Rocha

TORONTO (Reuters) - OpenText Corp OTC.TO, one of Canada's most valuable technology companies, plans to roughly double its revenue and cash flows in the next few years largely through acquisitions, its Chief Executive Mark Barrenechea said on Wednesday.

"When we look out over the next three to four years, we are looking to spend $3 billion in acquisitions, and we typically buy revenue at a 2 times multiple, so that would be $1.5 billion of acquired revenues," Barrenechea said during an interview in Toronto.

"If you just use the low end of our target margin range of 34 percent that $3 billion in acquisitions will double the cash flow of the company," he said.

The acquisition-driven growth will likely be funded largely through existing cash flows and debt, said Barrenechea, noting the company is currently generating about $600 million in cash flow annually.

OpenText says its customers include around 90 percent of the Fortune 500 companies, and adds that it has about 10 percent of a $25 billion enterprise information management (EIM) market.

It competes with the likes of IBM (IBM.N: Quote), as well as EMC Corp EMC.N, Hewlett Packard Enterprise (HPE.N: Quote) and others to sell software to companies to automate their business processes. OpenText revenue has nearly doubled from about $1 billion in 2011 to $1.85 billion at the end of its last fiscal year in June 2015.

The Waterloo, Ontario-based business software maker, which last month unveiled a major upgrade to its suite of data management tools, plans to stay focused on deals in the EIM space.

"We pretty much know what we want to buy within the EIM sphere, the art form is making it actionable," Barrenechea, who has led the company for nearly four years.   Continued...