OTC:CC - Understanding Why Open Text Acquired Micro Focus Helps In Valuations
Summary
- Canadian-based Open Text's shares suffered from a downside of 20% when it announced the deal to acquire the U.K.'s Micro Focus.
- It could be because the merger synergies are not immediately obvious.
- To make sense of it all, one has to consider that the acquirer is an ECM company while the target develops software, which means two completely different business activities.
- Given its track record, Open Text has the qualities needed to make it all work and its cash-generating capacity should help repay the enormous debt incurred.
- Therefore, it is a Buy, while Micro Focus is a Hold, but still, one should remain focused on fundamentals amid market exuberances based on low inflation prints.
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Understanding Why Open Text Acquired Micro Focus Helps In Valuations