LogMeIn is buying Citrix Systems’ GoTo online collaboration portfolio in a $1.8 billion deal that will create a larger company to compete with top-tier rivals in the market, including Cisco Systems and Microsoft.
The combined business will have more than $1 billion in revenue, almost 3,000 employees and more than 2 million customers worldwide, and will have the scale to better navigate its way through a rapidly changing business communications and collaboration space, according to officials with both companies. The merger also puts aside plans Citrix officials announced in November 2015 to spin out its GoTo business, which includes such well-known products as GoToMeeting, GoToAssist, GoToMyPC, Grasshopper and OpenVoice.
It will be combined with LogMeIn’s lineup of products—including LogMeIn Rescue, BoldChat, LastPass and join me—that enables users and businesses to access company systems remotely.
“We believe that together we can better serve the needs of our customers, while expanding our reach and accelerating product innovation to bring you more choice, greater possibilities and better business outcomes,” LogMeIn President and CEO Bill Wagner said in a letter to customers July 26. “In particular, we believe the GoTo and LogMeIn combination will be poised to disrupt and redefine the collaboration, engagement, identity and access management markets for our customers.”
The enterprise communications and collaboration space is evolving rapidly as vendors look to address emerging demands brought on by such trends as greater workforce mobility, bring-your-own-device (BYOD), the internet of things (IoT), the proliferation of mobile devices and the cloud. They also are under pressure from free services from the likes of Google and Microsoft.
In response, vendors in a market dominated by Cisco’s Spark and WebEx businesses and Microsoft’s Skype for Business are responding by changing business strategies and growing through acquisitions, including Nokia buying Alcatel-Lucent, Siemens Enterprise Communications becoming Unify and then being bought by Atos, and most recently Siris Capital buying Polycom for $2 billion. Mitel, which has been aggressive in pursuing acquisitions, had been on the verge of buying Polycom until Siris came in with a higher bid.
Companies also are rapidly changing their business models to address the shift by customers away from on-premises hardware-based solutions to cloud- and software-based offerings. ShoreTel has created its Connect common unified communications (UC) platform, Avaya is restructuring its leadership team and growing its services capabilities, and Lifesize—which earlier this year spun out of Logitech—has moved aggressively to the cloud.
Citrix was a player in the space with its GoTo products, but the company has been under pressure since last year by activist investor Elliott Management to restructure its business and return more money to shareholders. When Mark Templeton retired as president and CEO a year ago, the company also said it was reviewing the future of the GoTo business. A few months later, the company announced it planned to spin out the business and create a new company. In January, Citrix appointed Microsoft veteran Kirill Tatarinov as president and CEO.
In a statement, Tatarinov said that both “LogMeIn and GoTo have a shared goal of developing innovative solutions to exceed customer expectations by simplifying business and personal communications. Given that we have already been working towards a spinoff of GoTo, we expect this to be a smooth transition for the business.”
The deal will enable Citrix to focus on its other products, including XenDesktop and XenApps, and “accelerate execution of our strategy to provide the world’s best integrated technology services for secure delivery of apps and data,” he said.
According to officials with both companies, the deal—which is expected to close in the first quarter of 2017—will create a software-as-a-service (SaaS) business with a diverse product portfolio and greater resources to drive innovation. The merger has been approved by the boards of directors for both Citrix and LogMeIn.
The deal will be what is called a Reverse Morris Trust transaction, which will make it tax-free to Citrix shareholders. As part of that, Citrix has created a wholly owned subsidiary called GetGo that will hold the GoTo business and make it easier to sell.
LogMeIn’s Wagner will remain president and CEO of the combined company, which will be based in Boston, where LogMeIn is headquartered. The new company’s board will comprise five LogMeIn board members and four appointed by Citrix.