Reports: Citrix Considering Leveraged Buyout As Activist Pressure Mounts

Citrix Systems, facing pressure from investors to make major changes to its business, is considering a leveraged buyout by private equity firms, according to reports from Merrill Lynch and DealReporter.

Sources familiar with the matter told CRN that Citrix is aiming to become a smaller, more cloud-focused company, and that going private would enable it to make this transition on its own terms.

It's unclear which private equity firms Citrix may be talking with, whether a deal will be struck or when that might happen. But Citrix partners told CRN such a scenario wouldn't be surprising now that activist investor Elliott Management has taken a 7.1 percent stake in the vendor and is pushing for sweeping changes.

Citrix's senior leadership was made aware of the need for change long before Elliott came onto the scene, according to sources close to the company.

[Related: Partners Want Citrix To Heed Elliott Management's Call For Change]

Citrix's board, in fact, hired $15 billion U.S. consulting giant Deloitte LLP to conduct a global analysis of its business more than two years ago, and the report was delivered in January, the sources told CRN, speaking on condition of anonymity.

Deloitte said in the report that Citrix had become overly diversified from acquisitions it made over the years, and recommended that Citrix divest non-core businesses, sources said.

Deloitte also called for Citrix to lay off employees, though the extent of the cuts it recommended is unclear, said the sources. There has been intense debate at the board level with regard to Deloitte's recommendations, sources said.

Citrix did not respond to requests for comment. A Deloitte spokeswoman told CRN the company has a policy of not commenting on clients or client projects.

Two executives who've joined Citrix in the past year are in charge of implementing the moves that Deloitte recommended in the report, said the sources.

The first is Geir Ramleth, who joined Citrix last December as senior vice president and chief strategy officer, sources said. The other is Carlos Sartorius, a four-year Citrix veteran who took over as senior vice president of worldwide sales and services when 15-year Citrix veteran Al Monserrat left, sources said.

Citrix did announce plans to cut 900 jobs in January, and sources told CRN in April that the Fort Lauderdale, Fla.-based vendor was mulling a sale or spinoff of its online services subsidiary, which includes its GoToMeeting Web conferencing and GoToMyPC remote access apps.

Citrix has also seen a large number of senior executives depart in the past six months.

Elliott, in a letter sent to Citrix's board earlier this month, said it wants the vendor to reorganize its sales and marketing teams, winnow down its base of channel partners, cut R&D funding for non-core products and buy back shares, among other actions.

Given the ongoing turmoil at Citrix, major changes could be the only way to get the vendor back on track, one partner told CRN.

"On one hand, activists are going to stir a lot of things up and that will certainly be disruptive to the channel," said the partner, who didn't want to be named. "However, Citrix is currently a ship without a rudder, or at least that is a general feeling I get from people. So which is worse, disruption or stagnation?"

PUBLISHED JUNE 25, 2015