Migrated from eDJGroupInc.com. Author: Greg Buckles. Published: 2010-07-02 07:09:04Format, images and links may no longer function correctly. The Daegis acquisition by Unify caught my attention this morning as I was coding the latest batch of news and blogs from the eDJ search engine. After the 2009 slump, I expect to see a string of consolidation and acquisition within the eDiscovery market. Knowing some of the talented folks at Daegis (including some of the best of SPI), I did not expect them to be acquired for a 1.5 multiplier. That was a shocker. Daegis reported $24 million in revenue with a healthy 27% profit for fiscal 2009. That was pretty good for last year. So why did they accept $38 million in cash, notes and stock? They are advertising it as a merger and taking the Daegis name, which indicates that they are going after the corporate eDiscovery market as opposed to the corporate archive or database support market. If that seems confusing, consider that Unify specializes in database management and migration software. Unify  acquired AXS-One for $8 million in stock last June. AXS-One seemed to be struggling in the archiving market, which has been consolidating for a while.

The story around the acquisition is that the new company will be positioned to offer integrated archiving through production to corporations. The Daegis consulting team and DocHunter will certainly give them a well supported review and production offering, but legal search and collection from an archive is much more than connecting to an API. I am afraid that I have to disagree with the Ferris Research blog’s assertion that the marriage of case management and archiving is a new story.  Autonomy, Symantec, EMC and others have long since added corporate discovery components to their archives. I hope that the Daegis team can drive eDiscovery workflow and legal requirements into the integration development and bring some new synergy to the market.

No one questions that we are in a consolidating market and last year certainly accelerated the trend. Pure play service providers who have been riding high on per-GB pricing have fallen on hard times. But I think that innovative providers who have invested in developing their own IP like Daegis, Planet Data, Lateral Data and others should be able to transition from service to software if they play their cards right. I am disappointed with the Daegis multiplier, but the true value of deals like this are better evaluated after a year or so.

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