SUSE Ownership Moves to EQT as Linux Vendor Gains More Autonomy

Investment firm EQT Partners is buying SUSE, the open source and Linux vendor, for $2.5 billion, ending almost four years of ownership by Micro Focus and giving the enterprise Linux company a chance again to operate as a standalone business.

The acquisition by EQT is the fourth involving SUSE since 2004, following its purchase in 2004 by Novell, a 2010 acquisition of SUSE and Novell in 2010 by Attachmate, and a 2014 acquisition of Attachmate and its SUSE division by Micro Focus.

Under the deal, which was announced Monday, SUSE will operate on its own instead of under a corporate umbrella, while having an investor that will help the company continue its business growth and open-source mission. The acquisition is subject to regulatory approvals and those from Micro Focus shareholders. Expect it to close in the first quarter of 2019.

Nils Brauckmann, SUSE’s CEO, said the deal will allow the next chapter in the company’s development to continue as it gets an infusion of energy and capital.

“Together with EQT we will benefit both from further investment opportunities and having the continuity of a leadership team focused on securing long-term profitable growth combined with a sharp focus on customer and partner success,” said Brauckmann. “The current leadership team has managed SUSE through a period of significant growth, and now, with continued investment in technology innovation and go-to-market capability, will further develop SUSE’s momentum going forward.”

Johannes Reichel, a partner with EQT, said that the investment company was “impressed by the business’ strong performance over recent years as well as its strong culture and heritage as a pioneer in the open-source space.”

Michael Miller, the president of strategy, alliances and marketing at SUSE, told Channel Futures that the acquisition will help the company turn around its past experiences, where it had become buried under Novell’s name and became a product line instead of having its own strong identity.

“When Attachmate acquired Novell, they wanted to bring SUSE back as a top-line brand,” providing money to add staff and increase acquisitions, said Miller. That investment and independence from Attachmate will now be furthered by EQT, he said.

Michael Miller

Michael Miller

“I think this partnership with EQT is part of a logical next step,” with SUSE “evolving from being an independent business unit with strong support from a partner company, to actually being an independent company,” said Miller. Most of the leadership team at SUSE has remained the same over the past seven years, he added.

The EQT acquisition is being done “to accelerate and increase the investment to compound the value of SUSE as a business,” said Miller. “EQT is not looking to squeeze the cost structures and extract the profits out of the business.”

Instead, the purchase will provide capital to build the company up and add strategic acquisitions that will drive additional growth and innovations, he said.

The investment is coming now from EQT because “they’ve observed that there is clearly some excitement going on in the IT technology space” and that SUSE has compelling open-source technologies and products with which to compete, he said.

“If you’ve got a trend that’s happening and real and not just hype or buzz, then it’s a good time to compete,” said Miller.

Asked how SUSE intends to increase its business in the same markets as open source and Linux leader Red Hat, Miller said the company is a respected and good competitor.

“When you have a big trend like this one, more than one vendor is going to be successful if you position yourself well,” he said. “We are ready to do that.”

Enterprise customers and channel partners should not see any major changes in doing business with SUSE as the acquisition is completed, added Miller.

“Our intention is to provide a high degree of continuity in our relationships with our partners and the open-source community. We work very closely with the channel and with all those partner ecosystems.”

Al Gillen, an analyst with IDC, told Channel Futures that while SUSE has certainly had multiple ownership changes since 2004, this latest acquisition will likely be a good one for the company and its customers.

“Other than Novell, which tried to co-opt the SUSE portfolio to become Novell products, every subsequent owner has let SUSE be SUSE, which means this latest acquisition is not really disruptive in many aspects,” said Gillen. “And freeing SUSE from Micro Focus and its legacy software mindset is not a bad thing; although, SUSE was really allowed a great deal of freedom to operate independently as part of Micro Focus. I don’t think any enterprise clients will have any real concerns here.”

Another analyst, Rob Enderle, principal at Enderle Group, agreed.

“Ownership changes can introduce uncertainty but, as executed, this is more a funding change with better oversight,” said Enderle. ” EQT has a decent history of managing properties and, once the acquisition settles, SUSE appears to be in better shape with regard to controlling their own destiny than they were.”

Short-term issues could include the transition period, which could “be painful for both the employees of SUSE and SUSE customers, due to uneven funding during that time,” said Enderle. “But once the acquisition settles, I expect corporate buyers will be pleased with the result.”