As though the Ektron story we have been following over the last week hasn’t been convoluted enough, we started hearing rumors yesterday that the deal actually includes another component. The company could be merging with Stockholm-based Web-content management vendor EpiServer as part of the deal.
The story, if it turns out to be accurate, underscores some of the problems that enterprise startups are having in areas that are becoming increasingly commoditized, forcing them into consolidation plays as a path to growth.
CMS Wire first reported the rumor yesterday. We’d been hearing the same thing ourselves but have been unable to confirm it.
An EpiServer spokesperson would neither confirm nor deny the rumour. “Thanks for reaching out, however, I have no comment,” the spokesperson said in an email.
For what it’s worth, Ektron president Tim McKinnon told CMS Wire he didn’t know anything about a merger, but given his denial of the Ektron sale on Friday and subsequent backtracking, it’s hard to know what to believe.
To give some context here, both of these companies make web content management systems (WCM), enterprise software that helps manage a company’s web and digital presence. WCM is currently very much in flux as the industry shifts from a pure web focus to a broader multi-channel view, with a bigger emphasis on mobile devices and native apps. And this is especially important today as companies see mobile apps and digital transformation in general as a competitive differentiator.
What’s more, the WCM industry is becoming increasingly commoditized as companies share a common set of functionalities. As such, it’s becoming difficult for vendors to differentiate themselves in a highly competitive marketplace. When an industry commoditizes like this, mergers and acquisitions tend to follow.
Ektron is based in the US with headquarters in Nashua, NH, while EpiServer’s headquarters are in Stockholm, Sweden, but in spite of their different locations they have a lot in common. They are each owned by private equity firms, Ektron’s primary owner being Accel-KKR, while EpiServer’s is IK Investment Partners. In addition, both make .NET-based web content management systems.
Ektron customers include Microsoft, NASDAQ, Walmart, National Geographic and John Hancock Long-term Insurance. EpiServer customers include Pizza Hut, GlaxoSmithKline, Kellogs and British Telecom.
Against this backdrop, several industry sources have told us that a merger of the two companies could make sense, especially since they fill in gaps in one another’s markets.
“EpiServer has a strong presence overseas and has never established a good foothold in the US. Vice versa is true for Ektron,” an industry insider with knowledge of both companies told us.
They added that EpiServer’s owner, private equity firm IK Investment Partners, doesn’t own any other technology companies, and they said the purchase never really fit the IK product portfolio. Dumping EpiServer would make sense in that context.
Another industry insider told us that EpiServer was the stronger product technically, but they had some market gaps Ektron could fill. “They have really good architecture and technology. Solid channel. Bad sales and marketing, especially in the US,” the person said.
They added, the challenge would be the migration path for the product that survives, but this person believes the market needs this kind of consolidation because, as they said, “there are too many vendors with very little technical differentiation.”
But a third industry insider wasn’t so sure it was such a great match, saying, “The only thing I can think of is that they would try to move the Ektron customers over [to EpiServer].  No way that’s happening. Completely different systems,” they said.
This story started last week when we heard rumors that Ektron had been sold. Ektron refused to comment at the time, then released a press release on Friday saying Accel-KKR had made an equity investment in the company. When we talked to company president Tim McKinnon he told us straight out there had been no sale and it was purely funding.
Shortly after that conversation, however, a document was leaked online that clearly showed there was in fact a sale, and in a subsequent conversation with McKinnon, he admitted to TechCrunch that the company had indeed been sold to Accel-KKR.
At the same time, McKinnon also told us that the company would come back as a new entity and new stock would be issued in which Accel-KKR would be a stockholder. The leaked document said Accel-KKR owned 100 percent of this new entity, but McKinnon said it would be less than that, although he couldn’t say exactly how much. It’s possible this new entity could include both companies if the rumor turns out to be accurate.
One source suggested that perhaps Friday’s PR snafu had to do with the complication of adding EpiServer to the deal. Ektron was limited by how much it could say, so it simply tried to make it look like an equity investment instead of a sale. That’s all speculation though, and we will have to see how this shakes out in the coming days.
Ektron received $4.5M in Series C funding in June, 2013 from CEI Ventures as well an undisclosed investment from Accel-KKR last April.  IK Investment Partners bought EpiServer outright in 2010.
Update: We are hearing chatter this evening that EpiServer will be purchased by Accel-KKR, but that it’s possible the two companies will remain separate entities in spite of this. While it’s still possible the two could be combined at some point, just because two similar companies are owned by the same firm is no guarantee they will be combined.
Update 12/8/15: Swedish business paper, Dagens Industri is reporting  IK Investment Partners has sold Stockholm-based EpiServer to Accel-KKR. and the sale has been confirmed by IK Investment Partners officials. Terms were not disclosed. The story is in Swedish and behind a pay wall, but a reporter from the publication sent me a translation by email. EpiServer has confirmed the deal, but much like Ektron last week, the company is stopping short of calling it a sale in their official announcement, instead referring to it as an “growth equity investment. This is what Ektron called it last week until a document appeared online indicating it was clearly a sale.
