CRM software company Pivotal has accepted the bid from the Hong Kong-based company CDC Software.
Pivotal turned down a bid from Oak Investment Partners and an unsolicited acquisition offer from Onyx Software before making CDC - a division of Chinadotcom - the big winner.
After accepting CDC's bid, Pivotal was given a $2m loan from Chinadotcom used to pay for business transactions including working capital requirements.
Initially, the CDC bid was rejected by Pivotal despite the cash premium offered. Pivotal had claimed CDC's offer did not represent a better value for Pivotal shareholders and customers because of the significant risks associated with the condition-laden proposal. However, CDC offered to speed up its own due diligence process and Pivotal agreed to negotiations with the company.
Following the completion of the transaction, Pivotal said the "strategic combination" will allow it to grow in areas such as technical support where it will increase employment by up to 40%, resuming the expansion of its research and development department and resuming its acquisition programme.
The company will operate as a distinct business unit within CDC software and will focus on its traditional method of offering CRM software to midsized enterprises globally.
Part of the $2m Pivotal received from CDC will pay a $1.5m break fee to Talisma, as per the agreement the companies had in place.
Karen Smith, a research director with Aberdeen Group, said that "both Pivotal and Onyx needed to do something to survive and keep the market from slipping away from them".
She added that the CDC acquisition gives Pivotal new opportunities and financial backing - especially to target emerging Asian markets and powerhouse global enterprise buyers of CRM.
Smith noted that although this acquisition will be good for Pivotal, the company will have to be on guard against its competitors.
"PeopleSoft, SAP and Siebel are strong enterprise players moving downstream into Pivotal's sweet spot and Microsoft CRM, Best Software CRM and Salesforce.com are moving upstream," she said. "As the enterprise players move down and the SME players move up, Pivotal and Onyx risk being pushed aside."
Both companies expect the transaction to finish in February.
Lindsay Bruce and Carly Suppa write for ITWorldCanada.com