Merger of LogMeIn and Citrix’s GoTo Business Creates a Force to be Reckoned With

Aug 01, 2016

LogMeIn and Citrix’s GoTo Business have announced that they are merging to form a combined entity which will be among the world’s top 10 SaaS companies with $1B in anticipated annual revenue and more than two million customers around the globe.

The process started last November when Citrix announced its decision to spin off its GoTo line of products. It subsequently created an independent unit GetGo to better position the GoTo business for sale. GetGo’s assets include all GoTo businesses (GoToAssist, GoToMeeting, GoToMyPC, GoToTraining, GoToWebinar), Grasshopper, and  OpenVoice audio services. ShareFile remains with core Citrix due to its enterprise integrations and fit with the larger strategic portfolio.

The transaction is described as a Reverse Morris Trust merger which seems to be a complex process where a parent company sets up a subsidiary it wants to sell in a tax-efficient manner. The parent company (in this case Citrix) spins off the subsidiary (GetGo) that it wants to dispose of and then merges it with a target company to create a merged company. Citrix shareholders will own 50.1% of the new entity. The new entity following completion of the deal will become a subsidiary of LogMeIn whose executives will run the new company. Targeted close is expected to be in 6 months during first quarter of 2017.The deal is roughly valued at $1.8 billion based on LogMeIn shares to be issued to Citrix shareholders.

Key Takeaways

This is a win win deal for both sides. When Citrix announced its intent to spin off the GoTo business, GoTo’s future was largely uncertain. The circumstances under which GoTo was put up for sale were nothing short of dramatic as Citrix came under intense pressure from investor activist firm Elliot Management to focus on its core competencies and cut costs. With an anticipated revenue of $680 million in 2016 from the GoTo unit, Citrix is getting ~3x price-to-sales ratio which is a pretty good deal given the circumstances. Once considered a disruptor and the fastest growing company in the conferencing and collaboration space, Citrix’s GoTo collaboration services have seen a slowdown in recent quarters. While it continues to gain market share, the gains are not of the same magnitude as in previous years. Emergence of alternatives especially free and lower priced solutions (Google Hangouts, Skype for Business, Zoom etc.) has increased the competitive pressure creating the perfect storm for major upheavals in the market. The S-4 that will be filed by LogMeIn later this quarter will have a better insight into individual performance of the GoTo business as a standalone.

For LogMeIn, this deal can be a significant game changer. After the merger is complete, the company will triple in size to become a force to be reckoned with in the fast growing enterprise communications and collaboration market Moreover, it allows LogMeIn to have less dependence on its remote access business, which is a mature and relatively slower growing market. In addition, with a substantial overlap in product portfolio and operations, the combined company will see significant synergies from optimizing existing sales and marketing spend, integrating facilities and infrastructure, and eliminating duplicate costs. As Citrix’s CEO Kirill Tatarinov put it, "First and foremost, this transaction is about synergies". The company expects to deliver $100 million of synergies as part of this transaction, $65 million of which will be realized within the first 12 months.

Here’s our take on the upside potential for LogMeIn’s collaboration business:

- In the collaboration market, where industry heavyweights Cisco and Microsoft have been the dominant players, this deal gives LogMeIn a diverse product portfolio and reach that puts it in the big league. In the  web conferencing and online meetings market in particular, where  LogMeIn's and GoToMeeting compete, the combined company will have an estimated 24 percent market share making it a more formidable competitor to market leader Cisco, which has a dominant 45 percent market share.

- and GoToMeeting are competitive products. Though there is a significant overlap between the two,  the GoTo unit will allow LogMeIn to fill gaps in its product line. More and more customers are asking for a single solution for their telephony, collaboration and large online event needs. The Grasshopper business, which Citrix acquired last year, offers cloud-based telephony. It will be interesting to see how that business is integrated with the core collaboration services. The other additions to LogMeIn will be the toll-free conference calling via OpenVoice and webinars via GoToWebinar along with purpose-built vertical market solution GoToTraining that is designed for training/eLearning use case.

- LogMeIn’s collaboration business has a heavy North America focus. GoToMeeting on the other hand has a strong and fast growing presence in EMEA and APAC. Frost & Sullivan estimates that more than 35% of GoToMeeting and related services business comes from EMEA and APAC which provides an excellent international market opportunity to LogMeIn. In the US market, LogMeIn which is based out of Boston will now have access to an established sales and marketing presence on the West Coast where the GoTo unit is located.

- From a branding perspective, Citrix has traditionally had a great brand in the enterprise while the freemium nature of many LogMeIn products is an attractive entry point for individuals and small businesses.  However, in the online meetings market, GoToMeeting has predominantly seen success with SMBs which have also been the mainstay for There is a significant overlap between the two meeting products both in feature set and in the target markets they address.  Theoretically, while running these two as separate brands with different price points could give LogMeIn better market coverage, it could also lead to confusion for customers and sales teams. It seems reasonable to expect that the two meeting products will merge over time. It remains to be seen which UI and software code as well as branding LogMeIn will settle on for its collaboration product.

Summing up, we believe LogMeIn has made an excellent move. The collaboration market continues to see ongoing consolidation. The market for team collaboration is getting increasingly crowded and only the strongest are likely to  survive. We expect to see further shakeout and emergence of a few strong players. Frost & Sullivan has recognized as the fastest growing online meeting product for the last two years. On the other hand, has a very small market share given the size of Cisco, Citrix and Microsoft in this space. This deal creates a larger name and presence for LogMeIn. If executed swiftly and efficiently the merger could put LogMeIn on an even more accelerated growth track and may cause more than a few ripples in the competitive landscape.


Category : Cloud, Enterprise

Roopam Jain


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