Autonomy to acquire Interwoven in $775 million deal

U.K. enterprise search and e-discovery vendor Autonomy has entered an agreement to buy Interwoven, maker of content management software, in a deal valued at about $775 million, the companies said Thursday.

The deal is expected to close in the second quarter. Combined, the two vendors will have more than 20,000 customers and will constitute "the largest company dedicated to the legal information management industry," according to a statement.

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Autonomy sees a growing market for e-discovery due to increased litigation and recent regulatory changes, which have "heightened the need to capture and understand information," such as employee communications, the companies said.

Forrester Research has said e-discovery spending will grow to more than $4.8 billion by 2011, up from $1.4 billion in 2006.

Meanwhile, Interwoven's software is in use at 1,200 top law firms and supports 100,000 Web sites, extranets and intranets, according to a statement.

Autonomy plans to swiftly integrate Interwoven's portfolio with its own, but is also "committed to supporting ongoing development of all their products," said Autonomy's chief marketing officer, Nicole Eagan.

The companies already have a close partnership and therefore will complete a significant amount of the integration work by the time the transaction is closed, she added.

One industry observer and Autonomy shareholder praised the pending acquisition.

"Web content management and search are obvious bedfellows," said Richard Holway, a tech analyst based in the U.K., in a blog post Thursday. "Secondly, Interwoven's strongest sector is legal -- again a great fit with Autonomy, which has made its reputation in compliance and disclosure."

Analyst firm The 451 Group said in a blog post that the deal would leave stand-alone content management vendors such as Vignette "in an even worse position."

Autonomy has made a number of acquisitions in recent years, such as its 2007 purchase of archiving and e-discovery vendor Zantaz for $375 million. The spree has Autonomy "looking more and more like a mini-Oracle every day," the unsigned 451 Group post said.

But Autonomy hasn't done as good a job of integrating acquired products as vendors like Oracle, and technology buyers should "use a great deal of caution when considering Autonomy as a 'suite' vendor for the foreseeable future," CMS Watch analyst Alan Pelz-Sharpe said in a blog post.

Overall, Autonomy is at a sort of crossroads, according to Pelz-Sharpe.

"The firm has bought a number of very good products, and made some very smart moves over the years, but they have reached a point now where they either become/remain a holding company with a marketing-level integration story, or they commit to the hard work of building out an holistic business, one that is more than the sum of its parts."

But Eagan disagreed with such assessments, saying that Autonomy's financial performance of late "speaks for itself. ... The companies we acquire tend to flourish."