Tangoe Dances With Takeover Bids
Enterprises using Tangoe’s TEM and IT lifecycle management platforms likely have questions as the vendor considers some big changes.
Indeed, Tangoe soon may vote to approve acquisition proposals from institutional investors Marlin Management Company, and Clearlake Capital Group and Vector Capital Management. Clearlake and Vector submitted a joint bid; all three firms already own Tangoe shares and each wants to own the remainder. Marlin has offered $7.50 per share while Clearlake and Vector say they are willing to pay $7. This all comes as Tangoe battles declining stock prices and a possible NASDAQ delisting, downfall stemming from the many acquisitions the company has struggled to integrate over its 17 years.
For its part, AOTMP, which has provided guidance and other services to Tangoe, has recommended the board turn down both proposals. “While we have a very limited view and certainly aren’t aware of all the circumstances, we do not believe the transaction would be good, first, for the enterprise buyers; and second, we believe there is significant opportunity for growth in revenues and shareholder value that can be capitalized on,” CEO Tim Lybrook wrote in a January email to Tangoe. “You are just getting started with your turnaround plan, and with proper execution we believe Tangoe can bring significantly more value to the current shareholders over the next 24 months.”
To be sure, the entire telecom/IT/mobility management sector faces execution and scalability challenges. Previous integrations have failed as a result. The industry needs a model for success, one that includes the ability to expand market share, before it marches ahead with more consolidation. In Tangoe’s case, in particular, a deal could slow the company’s results during the regrouping process. AOTMP research analysts agree. “The process of integrating companies, technologies managed services and customer support teams could stunt innovation and customer experience in the near-term,” said Timothy C. Colwell, senior vice president at AOTMP.
As for the proposals at hand, Colwell remains somewhat skeptical about the outcome. “The TEM market has a poor track record of merging acquisitions into a single, unified company with the implosion of Vercuity backed by One Equity Partners being the most notable,” he said. “One exception in the space is Clearlake’s formation of Calero Software by merging Movero, PINNACLE and Veramark in 2013, which has been effective in the market and for customers by most accounts. Integration is an expensive and resource-intensive process if that is the end goal for an acquisition. It would likely take 24-36 months to determine if the acquisition were successful.”
For now, Colwell recommends enterprises manage their relationships with Tangoe.
“Building a strong relationship with a vendor is always prudent and, when an acquisition is possible, leveraging that relationship before/after an acquisition event is beneficial,” he said. “Do not wait and see what will happen, particularly if relationship challenges are present – resolve them now.”Tangoe, meanwhile, needs to ensure it’s “providing undisputed business value for each
Tangoe, meanwhile, needs to ensure it’s “providing undisputed business value for each customer,” Colwell said.
“Communicate with customers and share what can be shared as things unfold. Lack of communication creates uncertainty and business partnership requires communication with meaningful messages. Don’t ignore or suppress market chatter.”
Scott Lawrence, director of research and business analytics for AOTMP, added that transparency from Tangoe ‘is the key to all of this’.“Communicate with customers proactively in terms of any potential transaction that may occur,” he said. “If it does, ensure customers know what to expect and any potential impact that might be involved.”
If Tangoe goes through with an acquisition, it still will be the largest TEM vendor. But that does not mean enterprises should think of the company as the sole option for fixed and mobile management services.
“Big does not equate to best in this market and there is no clear market leader,” Colwell said.