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After two days of consideration, Onyx Software (Nasdaq: ONXS) rejected CDC's unsolicited offer to buy a majority stake in the company.
"Onyx is not for sale, and we consider the matter closed now," Robert Craig, director of analyst and public relations, told CRM Buyer.
On Wednesday, CDC, a Hong Kong-based company that has acquired Pivotal and Ross Systems over the last two years, approached Onyx's shareholders with a stock-and-cash offer in exchange for the majority of Onyx's stock. In addition to putting up its software assets, it would have provided US$50 million in a transaction that would have given it 70 percent to 80 percent control over the new company.
"Essentially, it was not a good deal 
for Onyx as a company and for Onyx's shareholders," Craig said. "We would have had to issue a huge number of shares, and the net effect would have been grossly diluted shareholder value."
The Pivotal Point
CDC has not improved Pivotal's operations in the year-and-a half since its acquisition, Craig asserted. "There has been tremendous turnover there."
Indeed, as analysts mulled over the impact a CDC-Onyx linkup would have on the market and the respective companies, Pivotal's progress -- or stagnation, depending on one's point of view -- has come under scrutiny.
When CDC acquired Pivotal, it promised to invest in its customer and tech support -- areas that had been on the decline. The acquisition was also viewed as positive because it promised investment in the technology stack.
Pivotal has improved in performance and operation since the acquisition, Rick Marquardt, president of CDC Software, told CRM Buyer.
"I am not sure everyone has spent time understanding the issues here," he said. "Since we acquired Pivotal, its customers have seen investment in the tech layer and improvements in tech support. We have spent more on marketing at the industry-specific level, and the question of financial viability that potential customers used to ask is no longer an issue. We have been successful in developing new, name accounts and in expanding Pivotal into international markets."
What's more, Pivotal has taken advantage of "tremendous cross-selling opportunities with Ross Systems," Marquardt pointed out.
Gaining Customer Trust
However, not everyone is convinced by the argument that when Pivotal started out with CDC, it was lagging so far behind in customer and tech investment that it would not have been possible to advance the company any further.
"I am keeping an open mind, but if they haven't been able to turn Pivotal around in a year, maybe there are some other issues that [CDC] has," Rebecca Wettemann, vice president of Nucleus Research, told CRM Buyer.
"Running a successful software company is more than maintaining a tech portfolio. You have to gain the customers' trust and show you are able to deliver an enterprise-wide value proposition," she argued.
It is not clear whether CDC will continue to pursue Onyx. Speaking before Onyx rejected its offer, Marquardt said the company is always looking for additional acquisition opportunities.
"The market is consolidating, which is why [an acquisition of Onyx] would be good for both companies. We could provide a strong presence in the CRM space."
Organic Growth
Onyx intends to continue on the path it was on prior to the CDC offer, Craig said. The company is looking to beef up its marketing capabilities -- arguably the weakest component of its software suite -- either through an OEM deal or an acquisition.
It will also roll out point-release upgrades in the coming weeks, including additional CTI (computer telephony integration) functionality and additional analytics functionality. Within a few weeks Onyx will announce an extension of its wireless capabilities for iMode, Craig noted.
The next major release is expected during the first half of the year, he said, but it is doubtful that there will be any significant enhancement to its marketing suite in that release. "That will probably happen in a separate release once we make an acquisition or form a strategic relationship with a best-of-breed vendor in that area," Craig said.
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