Oak contends that "when the shareholders of Pivotal review the details of the Onyx proposal, they will conclude that the benefits of accepting the cash and certainty of the Oak offer dramatically outweigh the risks associated with the conditional proposal from Onyx," according to a statement from general partner Fredric Harman. The Onyx deal is funded "with a speculative currency in the form of Onyx stock," he points out.

Painting Onyx as Distressed

Oak is urging Pivotal shareholders to take a close look at Onyx's recent public filings, which it says reveal "a distressed company facing a very uncertain future." The VC firm pointed out that the price of Onyx stock dropped significantly following the announcement of its proposal to buy Pivotal.

Stock price is a serious issue in any acquisition. But Onyx came in with an offer that it claimed represented a substantial premium over Oak's -- US$2.25 versus $1.78 per share. Erosion in Onyx's stock price could affect the ultimate value of its proposed stock-for-stock transaction. Oak also counters that Onyx's stock is highly volatile and thinly traded, making valuations difficult to establish.

Motivations in Question

Onyx and Pivotal are fierce competitors in the CRM mid-size enterprise space. That market dynamic calls into question Onyx's motivations, Oak claims. Since it was well known that Pivotal was looking for suitors for some time, the company asks why Onyx did not engage Pivotal in discussion about a deal rather than entering at the "11th hour" after an offer was on the table.

But even though Onyx's acquisition strategy might be questionable, a combined Onyx-Pivotal organization would be very interesting from a product perspective, CEO of CRM consulting firm Green Beacon Solutions Ben Holtz told CRMDaily. "We need a strong, upper mid-market player to create the standard of what excellence is in that marketplace," Holtz said. The combined entity would create opportunities not only for itself, but for other companies.

Thus, product and business goals may be operating at cross purposes in this case, Holtz concluded. Pivotal might rather have cash in hand, but the CRM industry would benefit from the development possible through a merged Onyx-Pivotal organization.

Whose Pockets Are Deeper?

Improving its financial stability -- and thus its ability to compete for the business of mid-size companies hesitant to buy from software vendors without long-term viability -- is a primary concern for Pivotal, CEO Bo Manning told CRMDaily. That made going with an investment partnership with plenty of cash on hand particularly attractive.

However, Onyx's status as a publicly traded company does offer an advantage, Onyx chief marketing officer Ben Kiker told CRMDaily. "We have the ability to tap public capital markets at any time," he said. "As a private company, Pivotal does not have the ability to do that.

In addition, Kiker claims that Onyx's investors "have far deeper pockets than Oak." He said that his company has demonstrated its ability to raise cash and, in that department, that Onyx has "a clear leg up over Pivotal."

For its part, Pivotal is staying quiet on the whole matter. Its board began meeting yesterday on the new developments and continues to do so today, spokesperson Leslie Castellani told CRMDaily. "Any good, responsible board is going to take time to do this kind of review," she said, adding that Pivotal will not be making any comment until that review is complete.