Synacor and Qumu Agree to Merger, Creating Global Leader in SaaS-Based Collaboration Software

All-Stock Transaction to Enhance Financial Scale; Estimated $70 Million of Software Revenue with $50 Million Recurring Provides Strategic Opportunities to Accelerate Revenue Growth, Increase Operating Efficiencies and Open New Sales Channels

Synacor, Inc., a cloud-based software and services company serving global video, internet and communications providers, device manufacturers, governments and enterprises, and Qumu Corporation a leading provider of tools to create, manage, secure, distribute and measure the success of live and on-demand video for the enterprise, announced plans to combine in an all-stock transaction.

Merger of Collaboration Software Leaders Will Provide Opportunities to Accelerate Revenue Growth, Open New Sales Channels

Merger Rationale and Highlights

• Strategic Collaboration product fit that brings together Qumu’s Enterprise Video platform with Synacor’s Cloud ID Identity & Access Management platform, and the Zimbra Email & Collaboration platform.
• Improves operating scale and strengthens global presence with the combined business expected to generate more than $120 million in annual revenue on a pro-forma basis with an estimated $70 million of software & services segment revenue, $50 million of which would be recurring, and about $50 million in continuing portal & advertising segment revenue.
• $4 – $5 million in annualized operating synergies expected in the first fiscal year following closing that include overlapping public company costs and various operating expenses.
• Accelerates Qumu’s go-to-market strategy via Synacor’s 1900+ Channel-Partners and strengthens cross selling opportunities.
• Qumu’s Global 2000 and Fortune 500-heavy customer base, including the world’s largest companies and most valuable brands, complementing Synacor’s base of more than 4,000 Business, Government, Service Provider, Content Provider, and Publisher customers.

The merger, which is expected to close in mid-2020, creates a global SaaS-based collaboration software-focused business with significant operational synergies and cross selling opportunities.

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Management Commentary

“This is a strategic and highly synergistic combination that creates operating software scale and accelerates growth,” said Himesh Bhise, CEO of Synacor. “Together with Qumu, we will be a software-focused business with about $50 million of high-margin recurring revenue, positioned in the attractive Collaboration product segments of Email, Identity, and Video, with an enviable customer base that spans Enterprise, small and medium business, Government, Service Providers, Content Providers, and Publishers. Our portal and advertising business will continue to meaningfully contribute to Synacor’s top and bottom line, as we benefit from the expanded scale and scope of our software and services segment. This is an exciting day for the employees, customers, and shareholders of Qumu and Synacor.”

“With Synacor having an extensive network of more than 1,900 distribution partners and an established base of more than 4,000 customers, the merger will immediately accelerate our go-to-market efforts,” said Vern Hanzlik, President and CEO of Qumu. “As the demand for enterprise collaboration solutions continues to expand, we believe there will be a significant opportunity for us to position a combined email, video and identity offering to reach a much wider cross-section of the enterprise market with a scalable, highly secure and extensible solution for cloud-based and hybrid deployments.”

Combined Business Financial Overview

The combined company is expected to have over $120 million in annual revenue on a pro forma basis. This will include an estimated $70 million in software revenue, about 70% of which is recurring, and approximately $50 million in revenues from Synacor’s portal and advertising business. This is based upon the mid-point of Synacor’s current Full-Year 2019 guidance adjusted to exclude revenue related to ATT.net as previously disclosed and adding Qumu’s preliminary and unaudited Full-Year 2019 results.

The deal is expected to be accretive on both an adjusted EBITDA and adjusted EPS basis in the first fiscal year after close with expected annualized operational synergies of $4 – $5 million and excluding purchase accounting adjustments.

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Transaction Details

The transaction is structured as an all-stock deal. Under the terms of the merger agreement, each share of Qumu common stock issued and outstanding as of the effective date of the merger will be converted into approximately 1.61 shares of Synacor common stock. After closing, Synacor common stock, including the shares issued in the merger, will trade on the Nasdaq under the ticker “SYNC”.

Upon closing, Synacor stockholders are expected to own approximately 64.4% and Qumu shareholders are expected to own approximately 35.6% of the stock of the combined company.

Leadership and Governance

Post close, Himesh Bhise will continue as Chief Executive Officer and Tim Heasley as Chief Financial Officer of Synacor. Vern Hanzlik, the CEO of Qumu, will join Synacor as Chief Revenue Officer, Software & Services.

The Board of Directors of the combined company will consist of seven directors – three directors to be appointed by Synacor, two directors to be appointed by Qumu and Synacor CEO Himesh Bhise. The reconstituted Board of Directors will conduct a search to identify a new, seventh independent director with software and SaaS experience who is anticipated to serve as Chairperson of the combined company.

Timing and Approvals

This transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close mid-2020, subject to obtaining required approval from the stockholders of both Synacor and Qumu, and satisfaction of other customary closing conditions.

Canaccord Genuity is acting as financial advisor and Gunderson Dettmer is acting as legal advisor to Synacor. Stifel Financial is acting as financial advisor and Ballard Spahr LLP is acting as legal advisor to Qumu.

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