Fast-growing Portland tech company Smarsh said Wednesday that it will combine with a California competitor called Actiance, but the two privately held businesses will retain their own names and continue to operate independently for at least the next several months.
Also Wednesday, Smarsh disclosed that Southern California private equity firm K1 Investment Management had quietly acquired a majority stake in the Portland business last year. K1 announced Wednesday it has also acquired Actiance.
The companies and K1 did not report terms of their transactions.
Smarsh and Actiance archive electronic communication for legal and regulatory compliance. The combined company will employ more than 500 and generate annual revenues well over $100 million, according to Stephen Marsh, Smarsh's founder and chief executive. He said each company is growing by at least 30 percent annually.
Smarsh brings 230 employees to the deal, according to Marsh. Smarsh and Actiance haven't yet worked out the details of their combination, he said, or whether they will eventually unite under a common brand.
That's unusual. Merging companies usually have a plan for integrating their organizations.
Regardless, Marsh said he expects Smarsh's Portland site will continue growing after the transaction.
"We've got expertise in town that we're not really in a position to move or get rid of," Marsh said. "We're continuing to hire and continuing to grow here."
Smarsh had been owned previously by a different investment firm, Toba Capital, and before that by Dell. K1 has also invested in another Portland legal compliance company, Zapproved.
Smarsh said that K1 bought its previously undisclosed stake in the Portland business in January 2016. Shortly after that, Brian Cramer joined Smarsh as its president and chief operating officer. He had previously held executive roles in two other companies in K1's portfolio, Granicus and ChiroTouch.
Bringing Smarsh and Actiance together creates a stronger company, one better able to compete in an expanding market, according to Cramer.
"Growth is a requirement in this case," he said.
Companies, government agencies and other large organizations have a growing need to archive their electronic correspondence to meet regulatory standards and prepare for potential litigation. It's a task that's grown more complex as workers shift beyond email to text messaging, Twitter and online productivity apps such as Slack.
Cramer said the combined company will be able to archive more than 100 communications tools.
"Between Actiance and Smarsh, we are far more equipped to handle that," he said.
And Marsh said the larger organization will be better positioned to compete as big companies shift their archives from their own servers into massive, off-site data centers known as the cloud. That's going to create enormous activity in the archiving industry, he said, and combining the businesses now gives Actiance and Smarsh a chance to position themselves ahead of the curve.
"I'd rather do that on the earlier side of these migrations," Marsh said, "than later."
-- Mike Rogoway; twitter: @rogoway; 503-294-7699