Verint to Acquire Witness Systems in $1B Deal

Verint Systems has entered into a definitive agreement to acquire Witness Systems for US$27.50 per share in an all-cash deal that will total roughly $1 billion.

The transaction is expected to close in the second quarter, pending approval by regulators and Witness Systems stockholders.

The combined product and service offerings of the two companies will offer several synergies to customers of both firms, Paul Stockford, chief analyst with Sattletree Research, told CRM Buyer.

Rounding Out Offerings

For starters, Verint, which provides analytic security and business intelligence software, needed a workforce management application to round out its offerings, he said. This, of course, is Witness Systems' core functionality. Witness Systems also recently acquired a customer survey application -- a business line Verint does not have.

Once the acquisition is complete, Witness Systems will be able to move more quickly into the verticals it has been targeting -- primarily retail and banking. "Security monitoring is an important aspect of banking," Stockford noted.

Witness Systems also did not have a clearly defined strategy for speech analytics, whereas Verint is actively pursuing this category with a product portfolio that includes data mining, he continued.

In addition, the two offer complementary approaches to performance management, Stockford stated. "Verint's offering is primarily consultative, service-based. Witness, by contrast, is very product-centric," he said.

Finally, the two firms' partnerships, which run the gamut from Avaya and Nortel to British Telecom, also align well.

Handling the Overlaps

Quality monitoring is the one area that overlaps between the two firms, with both firms' products competing head-to-head, he noted.

For Verint, the acquisition will markedly improve its overall customer share. Beyond that, however, it is unclear what the firm will do with its two distinct offerings.

Integration is one option, Stockford said. So is maintaining both lines as separate strategies, either in the medium term or even indefinitely.

"At some point, though, they will have to spell out what they intend to do for their respective customer bases," he commented.

Once the acquisition is complete, the company intends to turn its attention to this issue, Ryan Hollenbeck, vice president of corporate marketing for Witness Systems, told CRM Buyer.

"We will announce a road map for product development in the future after we receive the necessary regulatory approvals," he stated, adding, "both companies have a history of supporting their customers and existing platforms."

Supportive Feedback

Customer feedback about the acquisition generally has been supportive, Hollenback noted.

"We have a big set of technology in workforce optimization and they have a strong product line in actionable intelligence. Customers can see they will benefit from the synergies," he stated, adding that the acquisition is indicative of the industry convergence in these two areas.

Additionally, beyond the function line comparison, Witness and Verint also share the same larger strategy , Hollenback commented.

"Both companies have their roots in the contact center but have spent more time recently developing the back office and enterprise solutions. With us, it was our push into branch banking. For them, it was their development of speech analytics," Hollenback said.

An Uncertain Path

As is the case with all acquisitions, however, many customers are likely to worry about the uncertainty of the applications' future in which they have invested.

Competing firm Autonomy was first out of the gate with a migratory application, called Witness Protection Program, for customers that might wish to move to the firm's Intelligent Contact Center. Autonomy already has much of the functionality that the merging companies will offer, Autonomy President and CEO Scott Shute told CRM Buyer.

Verint expects to fund the transaction through a $650 million debt financing commitment provided by Lehman Brothers, Deutsche Bank and Credit Suisse; a $293 million preferred stock investment by Comverse Technology (Nasdaq: CMVT), the 57 percent shareholder of Verint; and existing cash of the combined company.

On a fully diluted basis, the total enterprise value of the transaction is approximately $950 million, excluding Witness' cash.