Update: Onyx Makes Play For CRM Rival Pivotal

Early Wednesday, Onyx Software made an unsolicited bid to buy rival Pivotal. The stock-for-stock transaction would be valued at about $2.25 per Pivotal common share, according to Onyx, Bellevue, Wash.

Onyx says its bid is worth about $58 million and represents what it calls a 26 percent premium over a deal announced last month in which Pivotal was to merge with Talisma, Seattle, for cash provided by venture capital Oak Investment Partners, a venture capital firm with stakes in both companies.

"We think our deal will let Pivotal shareholders participate in the upside going forward or if they want to sell get more money for their shares," said Patrick Angelel, vice president of marketing and alliances for Onyx.

"We're committed to this [CRM] market. Oak is a VC firm and will want to maximize its investment," he noted.

The Onyx proposal letter was submitted to Pivotal's board Wednesday morning. Angelel said. Onyx requested a response from Pivotal by 2 p.m. Friday. On October 8, the value of the Pivotal/Talisma/Oak Partners deal was estimated to be about $48 million.

A Pivotal spokeswoman said the company is weighing its options. "Pivotal received the offer at basically the same time it was released this morning," she noted. "The board will be meeting, hopefully today, to consider the proposal and will then issue a further response."

Both Onyx and Pivotal target mid-market customers with their CRM wares and both have struggled in the tech downturn and what is seen as a tighter market for CRM specifically.

"This is a great play for Onyx, I'm surprised they didn't do it sooner," said Ben Holtz, president of Green Beacon, a Watertown, Mass.-based CRM solution provider. "From a business perspective the two could become a neat midmarket player - who else is there in upper midmarket?"

On the downside, Holtz sees a problem in that Onyx is not fronting cash. "Putting two companies together who are struggling could mean more hemorraging before they can get it together."

Angelel maintained that a merged Pivotal/Onyx would be the second largest "pure-play CRM" company after Siebel Systems. San Mateo, Calif.

But that may be beside the point as other enterprise software players including SAP, PeopleSoft, and Oracle put more resources behind their own CRM efforts.

Onyx posted a slight pro forma profit its last quarter, but a loss under GAAP rules.

Just a month ago, Pivotal said it had signed on to be acquired by Talisma in a cash deal funded by Oak Investment Partners. Oak is a backer of both Talisma and Pivotal. Oak was to pay $1.78 in cash per Pivotal, in a deal valued at the time at about $48 million. That pact is still pending.

One CRM solution provider was not wowed by the deal. "I guess [this is] not unexpected. Even if they can pull this off, I think the odds of this all working together well are suspect... one plus one doesn't necessary mean two," he noted.