Will the Citrix-Tibco merger create enterprise magic? Vista clearly thinks so

Private equity firm Vista Equity Partners has finally found a suitable match for Tibco: it has teamed up with Evergreen Coast Capital (a unit of Elliot Management) to buy Citrix Systems for $16.5 billion.

The deal, which represents a roughly 30% premium on Citrix’s value, aims to combine the two companies to create a legacy enterprise tech powerhouse. But will the combination produce something more useful for customers, or a conglomeration that doesn’t really fit well together?

Citrix is best known for its desktop virtualization products, and it’d be fair to presume it did pretty well when the pandemic hit and companies had to shift employees to remote work. Having the ability to deliver work desktops in one package to at-home workers would seem to be a good feature to have these past couple of years.

It will be all about execution, and we will see in a few months if Vista and Elliott are undertaking a go-forward and growth strategy, or if they will save costs and ‘milk’ the install base. Holger Mueller

But it’s not been tearing up the scoreboard with growth recently. Its status as a public company gives us visibility into its financial performance (including its mediocre earnings report released today), and as we’ll see, its lackluster growth likely makes it more of a takeover target.

Citrix’s new partner Tibco provides tools and infrastructure to manage and analyze data. But it launched in 1997, and the analytics market has evolved dramatically since then. There’s also way more competition and more data to manage thanks to the market-shift towards machine learning. Tibco has had to find a way to change with its market, having been born in the era of free AOL CDs.

Citrix was itself founded in 1989, long before the cloud changed the way companies deliver software, and many years before companies shifted to subscription-based revenue models. Both companies had to dramatically change their approach to the way they do business in recent years.

We don’t have much data on Tibco, but we do know that Vista was looking for a buyer for the company, which it bought for $4.3 billion in 2014.

It’s hard to know what became of that, but we do know now that Vista has decided to create a much larger enterprise company to deliver two seemingly different sets of services — virtualization and data analytics.

Can these two companies combine to make something better?

A look at Citrix’s financials

While we no longer have windows into Tibco’s financials, Citrix’s latest earnings results show a somewhat slow-growing company in the midst of a transition towards subscription-pricing and away from support incomes.

In the fourth quarter of fiscal 2021, Citrix generated revenue of $851 million, but that top line was up just 5% from a year earlier. The company’s profit fell slightly, though, to $112.1 million, but as the quarter included restructuring charges, and a huge tax benefit, it’s hard to compare the results directly.