A new era in the corporate history of SirsiDynix, one of the corporate giants of the library technology industry, has begun. After more than eight years of ownership, Vista Equity Partners has sold SirsiDynix to ICV Partners, with Vista retaining and company executives acquiring minority stakes in the company. While it is too early to assess how new investment owners will shape the direction of the company going forward, it is clear that SirsiDynix remains a major force in the industry with a very large number of libraries relying on its success.
SirsiDynix, along with other Ex Libris, Innovative Interfaces, and Follett Corporation, ranks as a giant in the industry, which also includes dozens, if not hundreds, of mid-sized and small companies. Each of these four companies has earnings in the range of $100 million and develops strategic technology products for libraries. However, they follow quite different business strategies and serve distinct profiles of customers according to type and geographic region. Globally diverse, SirsiDynix supports customers in more than 70 countries.
The acquisition of SirsiDynix by ICV Partners brings to close a fairly dramatic chapter in the history of the library technology industry. In 2006, prior to being acquired by Vista Equity Partners, SirsiDynix was still working its way through its merger. Both Dynix and Sirsi Corporation were large and complex companies with multiple products under their charge through their own development efforts and via previous acquisitions. Any of a variety of courses of action seemed possible.
San Francisco-based Vista Equity Partners acquired SirsiDynix from Seaport Capital in January 2007 in a deal with an estimated value of around $260 million. Vista is generally known to follow a “playbook” that outlines an aggressive approach to business integration and operations, which centers on product consolidation and cost reduction. The acquisition of SirsiDynix was made on the premise that considerable savings could be achieved through focusing the efforts of the company on a single platform.
The initial aggressive business strategy executed by Vista Equity Partners proved not to be a great match for the library technology industry, or at least for this particular scenario. The abrupt change in product strategy led to decreased confidence in the company, not only for the Horizon product that was initially abandoned, but also for libraries using Symphony. The absence of a new-generation product in a time when libraries generally felt that their current products were not living up to expectations also proved problematic. In recent years, SirsiDynix has deviated from the more austere version of the Vista playbook, channeling more resources into product development, support, and marketing. These efforts have paid off in terms of increased customer satisfaction, retention, and stronger sales.
SirsiDynix has been able to forge a path forward by making adjustments to its initial product and business strategies. Reasserting its commitment to Horizon has slowed the pace of libraries moving to competing products. More importantly, the development of the BLUEcloud suite provides a path forward that leverages existing ILS implementations, avoids the need for short-term migration, and demonstrates the ability to deliver products based on current technology trends. Vista’s aggressive business integration has paid off in terms of building a more centralized company able to efficiently deliver support and develop new products. The more positive performance in the last few years is likely a factor in the Vista’s ability to sell this long-overdue investment.
ICV Partners was founded in 1998 under the name Inner City Ventures as a minority-owned private investment company. The company continues to operate as a certified Minority Business Enterprise. ICV Partners manages a pool of assets totaling $440 million, considerably less than the $14 billion currently managed by Vista Equity Partners.
No information has been released regarding the value of the transaction. As with other acquisitions of this type, it is likely that it includes both direct investments by ICV Partners as well as bank loans, usually structured as senior debt and secured by the assets of the company. Executives in the company have also contributed to the equity of the transaction, which ensures continuity in the management of the company and indicates that the new owners are not likely to replace the incumbent management team.
It is interesting to consider the sale of SirsiDynix by Vista to ICV Partners in the context of other possibilities could have happened but didn’t. This transaction did not result in additional consolidation, but was a simple transfer of ownership. Had SirsiDynix been acquired by one of its competitors, there would have been another potentially painful round of product consolidations in an arena where the available options have become uncomfortably narrow. The company also was not acquired by an entity in an adjacent industry, such as the acquisition of Geac by Infor or Talis by Capita, both companies with broader interest in business solutions for the public sector. OCLC has been on a streak of acquiring ILS companies, though none approaching the size of SirsiDynix. These theoretical possibilities may not have been practical options given that further industry consolidation may cross the lines of what might pass regulatory approval or push what libraries might tolerate in terms of narrowness of technology choices. Relative to possible outcomes, the sale of SirsiDynix to ICV Partners does not seem to bode toward disruption in the industry.
While ICV Partners remains an unknown quantity in the library technology industry, it opens new opportunities for SirsiDynix to pursue strategies that may go outside the repertoire of its previous owners. Any new investor enters the industry with the benefit of observing the strategies that have previously proven successful in the industry and those that haven’t. It will be interesting to observe how SirsiDynix navigates its course under its new ownership.
Note: This blog post includes excerpts from the February 2015 issue of Smart Libraries Newsletter, which presents a longer and more detailed account of the acquisition of SirsiDynix by ICV Partners, along with additional background and perspective.