“It is the end of something and the beginning of something new.”
That’s how LogMeIn CEO Bill Wagner opened my recent conversation with him about the Boston company’s $1.8 billion merger with Citrix’s GoTo business. The deal officially closed Tuesday, giving the combined entity nearly 3,000 employees, more than 2 million customers and over $1 billion in annual revenue. Based on revenue, that makes it one of the world’s top 10 public software-as-a-service companies — a nice milestone for Boston with Wagner helming the combined organization.
“This is about building a sustainable growing company that is accelerating the pace of innovation, and we want to be the leader for the markets in which we compete,” Wagner said.
The merger, done through a Reverse Morris Trust transaction, gives a substantial update to LogMeIn’s portfolio, with products like teleconferencing service GoToMeeting and cloud telephone platform Grasshopper. Wagner said that while some products with similar functionality will remain separate because they serve different business needs, like GoToMeeting and Join.me, there will be some consolidation within the next year, particularly with overlapping remote access products.
LogMeIn’s merger with GoTo, which Citrix sought to divest to focus on its virtualization products, follows the company’s trend of making mergers and acquisitions to grow its product line, enter new markets and innovate. Founded in 2003 as 3am Labs, the company started with its RemotelyAnywhere remote access software and made several acquisitions through the years and its initial public offering in 2009.
Notable acquisitions include 2011’s Pachube, which became the foundation for LogMeIn’s Xively Internet-of-Things business, and 2015’s LastPass, a password management service. While LogMeIn’s Internet-of-Things business is still relatively small, the company believes its long-term success “will justify the hype,” as Wagner has previously said. LastPass, on the other hand, has already been a strong contributor to the company’s revenue growth and continues to have a strong reputation in the password management industry.
With the merging of LogMeIn and GoTo, Wagner said it was about addressing “two companies that were really spending a lot of money tiring to drive the same kinds of innovation.”
But for all the merger and acquisition deals the company has done, LogMeIn has also found success by continuing to develop its products. Its best example is Join.me, the company’s easy-to-use teleconferencing tool that has been its fastest-growing business for consecutive quarters.
For Wagner, the question of whether “to build or buy” revolves around how fast the company can get to market.
“In the markets in which we compete, time is our enemy.”
“In the markets in which we compete, time is our enemy, and we need to move and be aggressive as possible and move quickly,” he said.
That means mergers and acquisitions can make a lot more sense than in-house development in some cases, but it doesn’t mean the company still can’t innovate. Wagner said he only pursues M&A deals “where I feel like we can make the product and business model better.”
As an example, he pointed to LastPass and how LogMeIn decided to make its premium multi-device feature free for all users. He said the multi-device feature was the number one driver for converting users into paying customers, so while it will slow the company’s growth from a revenue perspective in the short-term, it will encourage more people to sign up for LastPass since all of its competitors charge for a multi-device feature. The long-term hope is that more people will come to rely on LastPass and eventually find reasons to pay for premium features, like the password manager’s enterprise version.
“We felt was a pretty bold move for what we thought was an early player in the space,” Wagner said.
‘If you make great software, the users of that software really do the selling for you.”
The example of how LogMeIn plans to monetize LastPass users fits into a broader trend: professionals bringing their own applications into the workplace, eventually convincing their companies to pay for a license and adopt the app across the entire workforce. Wagner said it has worked well for LogMeIn’s products like Join.me, and the reason it works is today’s professionals “aren’t willing to put up with friction” from bad software like Wagner used to when he was younger. In fact, he believes more sales can come from companies that learn about a new product from one of its employees.
“If you make great software, the users of that software really do the selling for you,” Wagner said.
It’s this kind of viral growth Wagner is banking on for LogMeIn’s future. But to make that happen, Wagner said LogMeIn has a lot of work to do in the next year, primarily with integrating the two businesses and workforces of LogMeIn and GoTo. One of Wagner’s biggest priorities now is making sure LogMeIn’s transition into its next chapter is smooth for employees.
“Ultimately, we are the sum of our employees, and if we get those things wrong, this is not going to work,” he said.