The deal, which includes 7.7 million shares of common stock and $12.6 million in cash, was prompted by customer requests for software that provided better communication with business partners.

"This will really make Documentum a very difficult vendor to beat in the marketplace," Dave DeWalt, Documentum's president and CEO said in a conference call with reporters and analysts.

Documentum, based in Pleasanton, Calif., competes against Vignette and Interwoven, among others, in the content management sector.

In addition to gaining a ready-made collaboration tool, Documentum picks up a company that is profitable and boast more than 1,000 customers including Deolitte Consulting, Hewlett-Packard and Sony.

Post-merger, privately held eRoom, based in Cambridge, Mass., will operate as a separate business division. Its current president and CEO Jeffrey Beir, will continue to lead as an executive vice president. eRoom has about 195 employees, which Documentum has about 950.

DeWalt said the companies' focus on similar markets (for example manufacturing, technology, life sciences) which should help it cross-sell and up-sell the products. Documentum and eRoom have had a working relationship as business partners and expressed optimism that the integration would be a smooth one.

Following completion of the transaction, Documentum will sell the eRoom products and its software, through the combined sales channels. Documentum plans to further integrate eRoom technology with the Documentum ECM platform.

For Documentum, the deal comes 11 months after its purchase of Bulldog Group, a Toronto-based digital asset management firm.

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