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Interview - WSO2 CEO Sanjiva Weerawarana on being acquired by major investor

Mark Chillingworth Profile picture for user Mark Chillingworth May 29, 2024
Summary:
WSO2 has received a $600 million cash investment to increase footprint, with focus on new technologies and IPO in five years time

An image of WSO2 CEO Sanjiva Weerawarana
(Image sourced via WSO2)

WSO2 has been acquired by Europe's largest venture capital firm EQT. Founder and CEO of the open-source API management, integration tools and identity access management (IAM) provider Sanjiva Weerawarana spoke to diginomica and analysts about the deal, the reasons for the sale and what it means now and in the longer term for customers. 

WSO2 announced on May 3, 2024, that it had signed a definitive agreement to be acquired by EQT and spoke to analysts and the media on May 22, 2024. Weerawarana said in a call to diginomica: 

The sale price was $600 million, and the deal is expected to be completed by the second half of July.

Its notes to analysts promised that there would be no change to the pricing at WSO2, thus avoiding the trend of price gouging. 

EQT has 242 billion Euros under management and is the third-largest global private equity firm. It was originally founded by the Swedish Wallenberg family. Within enterprise technology, EQT has investments in SUSE, the German open-source software house, Acumatica, the ERP provider and IFS, among many others. These investments will benefit WSO2, according to Weerawarana:

With our product structure, there are opportunities for us; IFS and SUSE are great opportunities for us.

Asked if EQT would consider a consolidation into an umbrella company akin to the Cloud Software Group that is now home to Tibco and Citrix, Weerawarana doesn't think that is likely: 

It is healthy to have a competitive relationship; it keeps us all honest, and it is better to have partners rather than a consolidated elephant that is hard to steer.

Immediate future

WSO2 will develop a new five-year plan for the business once approval has been given to the deal, and a new board of directors will be formed. Weerawarana said of this: 

I like their model, where they bring up to five independent directors. It is a healthy model as it is not the investor driving the board.

Weerawarana will be on that board, and he said he was not going anywhere following the deal. He assured customers that this deal was nothing more than a change in shareholders. Both parties say that as part of EQT, there will be a chance for WSO2 to become a much larger business. Part of that increase will be through acquisitions of technology companies, which Weerawarana said would be used to add new technologies to their product line, which will allow WSO2 to go in new directions. Acquisitions will also be used to gap fill, where WSO2 feels it needs to expand its range of software. 

Speaking to diginomica late last year, the CEO said an IPO was likely to take place in 2026; however, he now expects that to be at the tail end of the next five years, which he says is the only significant change in the business following the transaction. In the last financial year, WSO2 achieved revenues of $100 million, and Weerawarana confidently expects to double that with his new backers. A further benefit of the deal, he says, is that as well as the 49 technology companies EQT has invested in, it also has significant investments in healthcare, retail and logistics - sectors ripe for API, integration and identity access management led digital transformations. The deal is also expected to enable WSO2 to increase its Annual Recurring Revenues (ARR), Weerawarana said: 

We look forward to those C-level introductions. Our footprint in other markets will increase now. Currently, we do a lot of our sales remotely, so this will enable us to develop more local footprints.

Sri Lanka 

The EQT Asian division, which has an investment pipeline of $5 billion, led the acquisition of WSO2, and therefore, Weerawarana is confident that the business will remain committed to his native Sri Lanka under its new owners. He points out that IFS has its research & development (R&D) centre in Sri Lanka. He adds: 

We are committed to Sri Lanka for product innovation and R&D, which will remain there.

That said, WSO2 has decreased the scale of its presence in Sri Lanka and increased its presence in Bangalore, India, since the economic crisis and civil unrest that took place in the country during 2022. 

My take 

This deal is a timely reminder that Europe is a bigger player in the technology investment market than is often mentioned. Market watchers and some in the continent's political sphere feel Europe is falling behind the USA, but with a European firm boosting both local firms like SUSE and IFS, as well as international companies such as WSO2, this is good news. 

For WSO2, this deal is an opportunity to really grow. As demand for digital transformation remains high, API and integration management tools will be vital to increase connectivity and improve the flow of data. Global conflicts and talent competition are increasing the need for strong identity access management. So, all in all, WSO2 has the right tools for the market, its challenge will be to get known to C-level digital leaders, as the company doesn't have the brand strength in this vital community it will need to meet those financial targets. Let's see how that five-year plan pans out.

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