Verint Systems Inc., one of Long Island's largest and fastest-growing software companies, has reached an agreement to buy a Silicon Valley competitor for $514 million.
The pending purchase of KANA Software Inc. from private equity firm Accel-KKR marks the second-largest acquisition to date for the Melville-based company. The move would add key capabilities to the data-analysis software that Verint sells to corporations, allowing them to mine emails and web-chats to gauge customer relations.
"KANA really has some innovative technology," said Ryan Hollenbeck, Verint's senior vice president of marketing. "It's going to create not just greater scale for us -- but greater reach as well."
Shareholders welcomed the news, as Verint stock rose more than 9 percent to close at an all-time high of $46.32. Daniel Ives, an analyst who follows the company for FBR Capital Markets in New York, said the deal has the makings of a masterpiece, involving the right technology, at the right time, for the right price.
"Verint has done a great job getting their house in order, achieving solid growth in a tough IT spending environment," Ives said. "And now they do what I would view as a Picasso-like acquisition."
Verint, founded in 1994, produces programs that sift through oceans of data from telephone calls, video steams and other sources to pinpoint security threats, measure productivity and more. The software is used by government agencies and businesses in about 150 countries, including 80 percent of Fortune 100.
As big data has mushroomed into big businesses, Verint's sales have followed, climbing 25 percent since 2009, to $840 million for the fiscal year that ended in January 2013.
This year, sales are estimated to hit $906.7 million, according to analysts polled by Bloomberg News. And once KANA is aboard, Verint's annual revenue could top $1 billion, Ives said.
"That's been the magic number," he said. "Once you get over that $1 billion, a whole different set of investors start to look at it."
Verint plans to finance the purchase with about $100 million in cash, $300 million in loans and $114 from a revolving credit line.
The Long Island company plans to absorb KANA's roughly 800 employees into its workforce of about 3,200. The deal is expected to close by the end of April.
KANA was founded in 1996 and taken private in 2009 for $41 million by Accel-KKR, based in Menlo Park, Calif. The company has about 900 customers, including some it shares with Verint.
"So much of their software is complimentary to what we offer," Hollenbeck said. "We think that is really going to help us to offer a greater portfolio to the combined customer base."