On Monday, both in their trading statement, and to their personnel around the world, the well known mid-range and enterprise accounting software company CODA announced that they are in the due diligence phase of being acquired by Unit 4 Agresso. Unit 4 is a Dutch software company formed in 1980 that merged with Agresso, a Norwegian software company back in 2000. From CODA's statement:

"CODA plc ("CODA" or the "Company") announces that on 18 December 2007 it received an indicative approach from Unit 4 Agresso N.V. ("Unit 4 Agresso") at 205p per ordinary share in cash for the entire issued and to be issued ordinary share capital of CODA (the "Approach"). The Approach is subject to a number of pre-conditions including the satisfactory completion of due diligence and financing.

The Board of CODA considered the Approach and concluded that a limited due diligence exercise should proceed. This exercise is at an advanced stage. There is no guarantee of any offer being made for the Company. Were such an offer to be made it is expected to be funded by Unit 4 Agresso's existing cash balances and debt finance. "

Listening to reports from the Dutch market, and to insiders saying how relaxed senior management looked explaining this news, I would be surprised if this deal isn't confirmed. CODA have been a likely acquisition target for a while, and I'm sure that as well as the excellent customer base, Unit 4 Agresso have been attracted by the recent Salesforce relationship and the fact that CODA have a Software as a Service approach announced and in development. To me it looks like they are paying a premium for the potential of that new product, although I've blogged before about the risks involved in execution of the SaaS strategy. As I said previously:

"This is the first new, green field development they (CODA) have done in 15 years, and they are doing it on Force.com, the renamed Salesforce Apex platform (which before that was the AppExchange platform). Apart from Salesforce's own applications, I don't know of any previous developments of this level of functionality using Force.com."

I understand Unit 4 have made other acquisitions to help enter the SaaS market before, which haven't worked out, so I'm sure CODA 2go is a big factor in their decision. However, back in the late 90s I was a partner of CODA when they were owned by another Dutch software company - Baan. During that period, many of us remember there were cultural differences and conflict between the Dutch management, their development centre and the CODA team in Harrogate. Unit 4 will need to take care on handling those aspects, particularly as they have development in Norway as well. On the operational side, CODA have a strong Benelux team which will have to be managed with care as the company's operations are integrated and rationalised with Unit 4 Agresso's home base.

I'd suggest CODA are a good fit for Unit 4 Agresso, as they have similarities of approach, tackle similar sizes of enterprises, have some overlap, but tend to focus on slightly different industry sectors and regional geographies. In the coming months I will be very interested to hear what they say about how they plan to rationalise their future product strategy. At the moment they are suggesting CODA will remain as a separate business, but it has been suggested that some rationalisation has already started.

CODA might have been a target of a consolidation company such as Infor, or the likes of SAP or Oracle, who would only have been interested in the maintenance revenues and the customer base. For the loyal CODA customer base, I believe Unit 4 is a better proposition, as there is more likelihood of some of the spirit and values of the brand being retained in the new combined company, although I'm very interested to see how the new positioning and naming will be presented. I mentioned that I was a CODA partner in the 90s which was at Science Systems, but I worked for CODA from 2000-2004, following Science System's acquisition of CODA from Baan on 1 April 2000. I wish my old colleagues at CODA well, and I hope this works out positively for them and the customers.